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

RHB Research Institute

RHB Equity 360°

12 July 2010 (Motor, B-Toto, Mah Sing; Technical: Titan, Axiata)

Top Story : Motor – First growth year of a new 3-year cycle Overweight
Sector Update
Tan Chong : Fair value raised to RM6.16/share (previously RM5.26) Outperform
UMW : Fair value reduced slightly to RM7.50 (previously RM7.52) Outperform
MBM : Fair value increased to RM5.31 (previously RM5.04) Outperform
Proton : Fair value is maintained at RM5.50 based on stripped down book value Outperform
- We believe it is now the best time to invest in local motor stocks as the motor sector is currently into its
second year of a new 3-year cycle that has started in 2009.
- We believe the replacement cycle for motor vehicles, widely believed to be 5-7 years, may have
accelerated in recent years as: 1)Buyers may have been enticed by more new models; and 2) Car owners
may have realised that the re-sale values of their new cars can only be maximised if the cars are replaced
within three years given the shortened product life cycle of new models now.
- We project Malaysia’s total industry volume (TIV) to jump +9.5% (previously +8.9%) in 2010, followed by a
decent +4% (previously 2.8%) growth in 2011.
- We believe our new TIV projection of 587,698 units in 2010 is achievable as TIV for the first five months in
2010 of 247,072 already made up 42% of our full-year forecast.

Corporate Highlights

Berjaya Sports Toto : Not likely to reduce 4D first prize pool Market Perform
Visit Note
- As a result of the 2%-pt hike in pool betting duty announced on 1 July, we understand the NFOs are in
discussions with one another to decide on their next course of action. Contrary to the many media reports
circulating currently, we believe the NFOs will lobby for a reduction in the 4D prize pool for the secondary
prizes (20 prizes in all) and not for the first prize. This is premised on the view that a reduction in the first
prize pool is likely to result in a reduction in sales volume, as the most important indicator for punters to
decide on their bets is usually the size of the first prize and not the secondary prizes.
- Although we continue to assume an unchanged prize pool, we are now reducing our sales per draw growth
assumption to 5% (from 7%) for FY11, to reflect management’s more conservative outlook of 4-6%.
- We have revised down our forecasts by 0.7-2.4% for FY11-13 after taking into account: (1) lower sales per
draw growth projection of 5% yoy (from 7%) for FY11; (2) adjustment of our borrowing payment/repayment
schedule to take the MTN issuance into account; and (3) higher net dividend payout projections of 90-95%
(from 80-85%) p.a..Post-earnings revision, we reduce our DCF-based fair value to RM4.35 (from RM4.45).
However, we maintain our Market Perform recommendation, given the estimated 6-7% p.a. dividend yield.

Mah Sing : Acquiring three land parcels in the Klang Valley for RM276m Outperform
News Update
- Mah Sing is acquiring three land parcels in the Klang Valley, i.e. residential in Kinrara, commercial in
Sungai Buloh and Industrial in Bukit Jelutong, with a total area of 155 acres for RM276.1m that are
expected to fetch a total GDV of RM1,092m.
- Assuming a PBT margin and tax rate of 20% and 25%, the projects will fetch RM163.8m net profit over the
next five years, or an NPV of RM124.2m or 14.9sen/share based on a discount rate of 10%. We are
positive on the latest development.
- Maintain Outperform, FV = RM2.09

Technical Highlights

Daily Trading Strategy : The index to remove the 1,335 June’s high soon…
- Undoubtedly, the recent sharp technical rebound has turned the FBM KLCI’s technical landscape to a more
positive tone, especially after forming a bullish confirmation candle at above the 10-day SMA of 1,313 last
Friday.
- Plus the continuous improvement in the local and overseas trading sentiment, the FBM KLCI is poised to
 take out June’s high of 1,335.31 soon, before advancing further towards 1,350.
- More encouragingly, trading activities have increased albeit at a slower pace, as rotational buying
momentum has included the lower liners. It was previously only centred amongst the bluechips.
- Post-World Cup, in our view, will see the return of retail participation if the market sentiment remains
encouraged.
- If the average daily turnover reaches the 800m-1.0bn shares mark, the current recovery strength on the
FBM KLCI will increase visibly amid an increase in trading appetite.
- Also, the sustainability of the current recovery will largely hinge on global investors’ response to the US’
second quarter earnings reporting season, which will kick off beginning this week.

Daily Technical Watch: Titan – Further rally to RM1.85 and RM1.98 possible if momentum continues…
- 10-day SMA: RM1.55
- 40-day SMA: RM1.404
- Support: IS = RM1.68 S1 = RM1.51 S2 = RM1.35
- Resistance: IR = RM1.85 R1 = RM1.98

Weekly Trading Idea : Axiata – It could retest RM4.40 and RM4.80 in the near term… Bargain Buy
- Strategy: Sell into strength near RM4.40 and the UTL of RM4.70.
- Resistance: IR = RM4.00 R1 = RM4.40 R2 = RM4.80
- Support: IS = RM3.70 S1 = RM3.30 S2 = RM2.85
- Exit: Cut loss if it falls below the 40-day SMA near RM3.82.

Commodities & Currencies – Further Weakness In The US Dollar Is Seen This Week …
- Light Sweet Crude Oil futures (Crude): Must remove 40-week SMA near US$78 to convince more upside.
- Crude Palm Oil futures (CPO): Still face significant resistance near 10-week and 40-week SMAs at
RM2,420 and RM2,469, near RM2,500.
- Ringgit (RM)/US$: The medium-term outlook of the ringgit will remain bullish, against the US dollar.
- Japanese Yen (JPY)/US$: A likely reversal of the previous buying momentum on yen, against the US$.
- Euro Dollar (EUR)/US$: The downswing could accelerate further, if the pair fails to regain 0.80.
- US Dollar Index (DXY): The index should remain weak this week.

Bulletin Board

Co/Sector News Impact Recom

Consumer - The WHO has released proposals to ban Negative, although this may not necessarily be N
Tobacco ingredients or additives tthat enhance the overall pushed through as cigarette manufacturers and
taste in cigarettes. (Financial Daily) tobacco farmers would be lobbying against the
issue. We believe there will continue to be more
of such guidelines affecting the tobacco industry
in the future, given the health issues related to
smoking.
Oil & Gas Petronas identified a damage point on a The pipeline damage is believed to be relatively N
production pipeline operated by Newfield minor, but this goes to show that accidents do
Peninsula as the source of the oil sheen, sighted happen in oil & gas producing areas.
last week near offshore platforms 240km off the Nevertheless, the fact that Petronas made an
east coast of Peninsular Malaysia. The damage announcement goes to show just how jittery the
was attributed to a marine vessel unrelated to market may be to such occurrences.
Newfield. In response, Petronas shut down
pipelines from offshore platforms working in the
area but reopened the unaffected pipelines
owned by Petronas Carigali and Exxon Mobil on
Saturday. Repairs were in progress for the
Newfield pipeline and the joint emergency and
spill response teams were sent in to clean up the
patches of oil. (Bernama)
 Hartalega Following the dismissal of the patent infringement Positive. At least 70% of its revenue is derived OP, FV =
claims by Tillotson Corp in the US, Hartalega is from US and we expect the company to maintain RM9.29
optimistic that its key export market will continue its position as one of the leading nitrile glove
to see significant growth as it reasserts its makers with a 25% market share.
dominance in the US’s nitrile glove market
(Financial Daily).
Kencana Announced that it had been awarded a RM10.1m Positive although this is considered a very small UP, FV =
lump sum contract from Petronas Carigali for contract for the company. With a burn rate of RM1.27
hook up and commissioning work for the RM300m per quarter, we believe there may be
Samarang field located offshore Sabah. The earnings risk for FY11 if the company is slow to
work is expected to be completed by 1Q2011. secure larger contracts.
(Bursa)

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Bolton First and final dividend of 3 sen less 25% tax 10-Aug-10 8-Sep-10

Going “ex” on 13 Jul

Voir Holdings Sub-division of shares on the basis of 1-into-2 13-Jul-10 -
Guan Chong Interim dividend of 1.5 sen less 25% tax (1.125 sen net) 13-Jul-10 22-Jul-10
Sealink International Final single tier dividend of 4 sen 13-Jul-10 30-Jul-10
Tradewinds Final dividend of 5% less 25% tax 13-Jul-10 30-Jul-10
Marco Holdings First and final dividend of 0.5 sen less 25% tax 13-Jul-10 30-Jul-10
Crest Builder First and final dividend of 4 sen less 25% tax 13-Jul-10 6-Aug-10

...For more details, see individual reports attached

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad (previously known as RHB Sakura Merchant Bankers
Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The opinions and information contained herein are based on generally available data believed to be reliable and are
subject to change without notice, and may differ or be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be construed as
an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall
give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The securities discussed in this
report may not be suitable for all investors. RHBRI recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The
appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts any liability for
any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing investment banking and financial advisory services. In the
ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of
customers, in debt or equity securities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors, officers, employees and agents of each of them. Investors
should assume that the “Connected Persons” are seeking or will seek investment banking or other services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s
previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect information known to, professionals in other business areas of
the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based upon various factors, including quality of research, investor
client feedback, stock picking, competitive factors and firm revenues.

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.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended securities, subject to the duties of confidentiality, will be made
available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the actions of third parties in this respect.