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

RHB Research Institute

RHB Equity 360°

3 August 2010 (PLUS, Semicon, Notion Vtec, Unisem, Axiata, AMMB; Technical: MPHB, KNM)

Top Story : PLUS – Expecting strong 2QFY12/10 performance Outperform

Results Preview
- We believe 2QFY12/10 results will likely to come in stronger (both yoy and qoq), thanks to the encouraging
growth registered at PLUS’s core expressways in 2QFY12/10 (+10.5% yoy and 5.8% qoq).
- Based on an actual traffic volume of 4,069.9m PCU-km registered at PLUS’s core expressways in
2QFY12/10, we believe PLUS will likely to register a net profit of RM321.7m in 2QFY12/10.
- This means PLUS’s 1HFY12/10 net profit is likely to come in at RM620.8m, which is 50.6-50.7% of our full-
year forecast and the full-year market consensus.
- DCF-derived fair value is RM4.33 (based on WACC of 7.7%).

Sector Call

Semiconductor : Jun chip sales narrows mom Neutral

Sector Update
Unisem : Forecasts cut, fair value lowered to RM2.31 Market Perform
MPI : Maintain forecasts and fair value of RM6.80 Market Perform
JCY : Forecasts cut, fair value lowered to RM1.32 Market Perform (down from OP)
Notion Vtec : Forecasts cut, fair value lowered to RM2.07 Underperform (down from OP)
- Yoy chip sales growth of 42.6% continues to narrow (vs. 48.6% in May and a high of 58.4% in Mar), even
though it marked the ninth monthly gain on yoy basis. Similarly, chip sales of US$24.9bn grew by 0.5%
weaker than May’s on a mom basis gain of 5.2%.
- Samsung warned of weaker margins and earnings growth which in our view has been affected by the
uneven global economic recovery. The company highlighted further concerns of lower chip demand
especially for its television sales and mobile phones, exacerbated by increasing competition throughout the
industry as well as China’s tightening policy may affect consumer spending.
- TSMC, the largest contract chip maker reported its best sales in its 2QFY10. However, this suggests that
the chip market cycle may be approaching its peak. According to reports, irregular double-ordering and
several lower-than-expected earnings by several chip players indicates a potential sequential fall in
4Q2010. Already, TSMC is guiding for a slower growth in its 3QFY10 revenue of 3-5% qoq vs. 13.9% qoq
in the 2QFY10.
- In our view, uninspiring U.S. consumer data and the lingering Euro debt crisis has painted a cloudy picture
going forward for consumer electronics demand. In addition, a sharper-than-expected economic slowdown
in China may also impact consumer demand. We thus maintain our Neutral stance on the sector.

Corporate Highlights

Notion Vtec : Not as good as hoped Underperform (down from OP)

Results Preview
- We believe 3QFY9/10 results (to be announced on 5 Aug) are likely to be worse than expected due to
higher costs incurred from the RM80m expansion of the 2.5” Hard-Disk Drive (HDD) baseplate capacity
and lower revenue after adjusting for the weaker US$ vs. RM.
- Western Digital and Seagate recently guided that lower-than-expected HDD demand caused by EU debt
problems and slow US recovery has been compounded by capacity oversupply in the industry. Aggressive
competition has thus resulted in falling prices and diminishing margins.
- We have cut our FY9/10-12 EPS forecasts by 21.1%, 36.2% and 47.4% respectively, after factoring in 10-
15% lower sales and lower margins.
- Although the camera segment remains resilient and will provide some support to revenue growth, the focus
will likely remain on the negative outlook for PC sales growth and the oversupply of HDDs. Our fair value
has been cut to RM2.07 based on our new forecasts and target FY9/11 PER of 8x (vs. 10x previously).

Unisem : Looking beyond the near-term guidance Market Perform

Briefing Note
- Management highlighted that Unisem is on track to register its best earnings to date after reporting a strong
1HFY10. Unisem expects 3Q revenue to increase by 5-8% qoq (vs. 9.2% qoq in 1Q10) driven mainly by
strong demand for wafer bumping technology i.e. WLCSP and legacy packages i.e. PDIP and SOIC.
Furthermore, management expects 90% capacity utilisation rate going into 3Q10 (vs. 85% in 2Q10).
- Unisem highlighted it is currently running new projects for its higher-margin Micro-electro-mechanical-
systems (MEMS) packages and System-in-Package (SiP). While production volumes for these packages
are still low, we understand Unisem expects stronger contribution given it has already qualified for Borsh,
Akustica, Melexis and Kontel. The packages are expected to contribute significantly to revenue in 1QFY11.
- We have increased our FY10 revenue growth forecast to 47% (vs. 40% previously) to reflect stronger-than-
expected demand for QFN and module packages as near-term visibility remains positive. Nonetheless, we
are less optimistic about longer-term earnings given the recent spate of negative guidance from industry
players which also reflect our view that the global economy is entering a period of slower growth. We have
thus cut our FY11-12 EPS forecast by 1.9-11.5% p.a.
- Our fair value has thus been lowered to RM2.31 (from RM2.36) based on unchanged 11x FY11 EPS).

Axiata : XL continues to improve Outperform

Company Update
- 1HFY10 core net profit came in above expectations, at 61.8% of our and 59.9% of the consensus full-year
estimates. The variance against our forecast came largely from: 1) lower-than-expected infrastructure
expenses; and 2) lower-than-expected finance costs.
- Given the better set of performance and relatively stable competitive environment ahead, management
raised its FY10 guidance for both revenue growth and EBITDA margin from 15% and mid-40’s to above
20% and ~50%.
- Management expects to resume paying dividends from FY11, and a formal dividend policy will be
announced by end-FY10.
- We are raising our FY10-12 net profit forecasts for Axiata by 7.0-15.3%, largely to reflect an upward
revision in our forecasts for both XL and Dialog post release of their 2QFY10 results.
- SOP fair value is raised by 4.9% from RM4.53 to RM4.75 after: 1) updating our valuation parameters; and
2) rolling forward the base year from FY10 to FY11.

AMMB : Proposed dividend reinvestment plan Outperform

News Update
- AMMB yesterday proposed to undertake a dividend reinvestment plan (DRP) that gives shareholders of
AMMB the option to elect to reinvest their cash dividend in new AMMB shares.
- The Board will have absolute discretion to determine whether the option to reinvest will: 1) apply to a
dividend declared; and 2) the proportion of such dividend that the option to reinvest will apply to.
- The issue price of the new shares is the higher of: 1) the par value of AMMB shares; and 2) not more than
10% discount to the 5-day volume weighted average market price (VWAMP) prior to the price fixing date.
- Worst case, i.e. the board decides to apply this plan to 100% of FY11-12 cash dividends (based on our
projections) and all shareholders elect to accept the dividends in shares, we estimate FY12-13 EPS could
be diluted by 3% and 6% respectively, while FY12-13 ROE could be diluted by up to 60bps. However, both
its Tier-1 and RWCAR capital ratios for FY12-13 could be boosted by between 53bps and 56bps.
- In our view, the actual impact of the DRP is unlikely to be as dilutive (for EPS and ROE) as illustrated
above as we believe the board would likely adopt a moderate approach in an attempt to balance near-mid
term aspirations (e.g. ROE targets) with the preservation of capital while for shareholders, we think their
decision would depend on the magnitude of the discount to the VWAMP as well as their view on AMMB’s
share price outlook.
- Fair value of RM6.60 (target CY11 PER of 15x) and Outperform call maintained.

Technical Highlights

Daily Trading Strategy : We remain bullish on the FBM KLCI…

- Based on the increased short-term participation amongst institutions and retailers, as well as the FBM
KLCI’s ability to scale to a fresh year high yesterday, we remain bullish, though the chart shows a “star-like”
candle on Monday. Technically, the candle suggests a possible pause or retreat today.
- In our view, as long as the index sustains at above the recent bullish breakout point of 1,350 and the
 supportive 10-day SMA, any pullback will be viewed as a temporary setback.
- In other words, any short-term weakness will offer a chance for bargain hunters to reopen their positions for
a further rally ahead.
- To conclude, the FBM KLCI’s current bullish uptrend should persist towards the 1,390 important upside
target in the near term.
- And the upswing will resume, if it ekes out beyond yesterday’s high of 1,368.43.

Daily Technical Watch: MPHB – Extended upside to above RM2.20 if buying support continues…
- 10-day SMA: RM2.01
- 40-day SMA: RM2.014
- Support: IS = RM1.97 S1 = RM1.80 S2 = RM1.60
- Resistance: IR = RM2.20 R1 = RM2.43

Short-term Trading Idea : KNM – Great chance to roll into a fresh technical rebound… Trading Buy
- Strategy: Trading Buy for a chart breakout of RM0.54 high.
- Target: IR = RM0.54 R1 = RM0.69 R2 = RM0.85
- Support: IS = RM0.50 S1 = RM0.385
- Exit: Cut loss if the stock falls to below RM0.50

Bulletin Board

Co/Sector News Impact Recom

Power With a total capacity of 2,400MW from Bakun
expected to be fully operational by end-2012 and
another 944MW added from the Murum dam by
end-2013, industry players think there could be a
power glut in Sarawak. This is especially given
the lack of firm commitments from industries to
take up the power. (StarBiz)
Plantations US agribusiness group Bunge Ltd is actively
scouting for palm plantations in Indonesia and
Malaysia to cater to Asian demand led by India
and China. But Bunge has not earmarked the
size of the land or investments for this project
yet, given the limited availability of greenfield
land as well as existing players who would be
willing to partner. (Reuters)
Water Pengurusan Aset Air Bhd (PAAB) sealed a deal
with the Perlis government to take over RM203m
worth of water-related assets (based on 1x book
value) in Perlis. Perlis is the fourth state after
Negri Sembilan, Malacca and Johor to have its
assets and liabilities acquired, and the next
states to consolidate their water industries are
Kelantan, Perak and Terengganu.
While bringing power to Peninsular Malaysia OW
could help elevate the glut, this is unlikely to take
place given that plans are afoot to plant up
another 2,000MW in capacity by 2015-16 and a
total of 6,000MW by 2020. TNB’s management
had also previously said that plans to import
electricity from Sarawak and the undersea cable
project are unlikely to materialise, at least over
the mid-term, i.e. before 2020.
Positive, as this complements our view that in the N
long term, CPO prices will continue to be
supported by stable demand growth especially
from China and India. We believe Bunge is likely
to look for land in Indonesia or even Africa, as
has been done by Wilmar and Sime Darby, given
the fact that there is not much suitable greenfield
land left in Malaysia to be developed.
Neutral, while the talks on water sector N
restructuring are still ongoing, we believe it will
still take a while before the water restructuring in
Selangor could materialise, given the
complicated (both operating and ownership)
structure of water assets in Selangor.

PAAB’s CEO Datuk Ahmad Faizal Abdul

Rahman said discussions between all parties in
Selangor (including Federal and state
governments) are ongoing. (Starbiz)

Important Dates
 Company Entitlement details Ex-date Payment date
New entitlements
Opcom Holdings Single tier interim dividend of 1.5 sen 13-Aug-10 26-Aug-10
Asia Poly Holdings Final tax exempt dividend of 0.25 sen 26-Aug-10 13-Sep-10
Amanah Harta Tanah PNB Interim income distribution of 3.6 sen 16-Aug-10 27-Aug-10
LTKM Single tier special dividend of 2% + final dividend of 5% 7-Sep-10 7-Oct-10

Going “ex” on 4 Aug

Gamuda Second interim dividend of 6 sen less 25% tax 4-Aug-10 18-Aug-10
Cycle & Carriage Bintang Interim dividend of 5 sen less 25% tax 4-Aug-10 24-Aug-10
UOA REIT Interim income distribution of 4.19 sen taxable + 0.96 sen tax exempt 4-Aug-10 30-Aug-10

...For more details, see individual reports attached

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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.

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