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

RHB Research Institute

RHB Equity 360°

20 August 2010 (Kencana, Carlsberg, Jaya Tiasa, HL Bank, PLUS, Dialog, YTLP, YTLC, WCT, MISC;
Technical: AMMB)

Top Story : Kencana – A better tomorrow Market Perform (up from UP)
Visit Note
- 4QFY06/10 results likely good at RM41m given that management has guided for a 15% yoy growth in net
earnings for FY10. This would be in line with our RM131.4m FY10 forecasts.
- KM-1 to commence operations by FY11. Management confirmed that the KM-1 is already with Petronas
Carigali S/B (PSCB) and once approved as fit-to-work (targeted by mid-Sep) the commencement of the
project will bump up revenue by RM150m p.a and could lift net earnings by RM42-52.5m p.a.
- Management expects the award for the SOGT to be announced by Sep, and we understand there are in
total eight other short-listed candidates. Indicative valuations for the project are at RM2-3bn.
- Kencana is now focusing on brownfield services (hook-up and commissioning (HUC) and offshore
maintenance) and offshore support vessels (OSV) chartering services.
- On firmer indications that KM-1 will begin working in Sep, we are raising our FY11-12 EPS forecasts by
22.7% and 24.1% respectively after factoring in the PCSB contract.
- We have turned positive on Kencana, on the back; 1) the prospective earnings uplift from the start-up of
KM-1; and 2) their focus in expanding its services range. We thus upgrade our call on the stock to Market
perform, with an upgraded share price of RM 1.56 based on an unchanged 13x FY11 PER).

Corporate Highlights

HSL : Close to clinching a road job worth about RM100m? Outperform

Company Update (published 19 Aug 2010)
- We understand from sources that HSL is close to clinching a road job in Sarawak worth about RM100m.
- We also understand from sources that a flurry of new road jobs is expected to be awarded ahead of the
coming Sarawak state election.
- The submission for tender for at least nine new road jobs has closed in recent months. In addition, notices
of tender have also been issued for another six and will be issued for four more over the immediate term.
These 19 road jobs are believed to be worth about RM100m each.
- No change to our forecasts that assume HSL to secure RM600m worth of new contracts p.a. in FY10-12.
- Fair value is RM1.95. Maintain Outperform.

Carlsberg : Focus on premium segment going forward Outperform

Briefing Note
- 1H FY12/10 results appear to justify Carlsberg’s decision to utilise its cash last year to purchase Carlsberg
Singapore Pte Ltd (CSPL). For the 1H, CSPL contributed RM28.7m to PBT, on the back of RM136m
contribution to turnover translating to PBT margin of 20.7%.
- One of the key growth areas that Carlsberg is targeting is the premium beer segment, namely Lun Heng’s
imported brands such as Corona, Hoegarden, and Asahi, together with Carlsberg’s Tuborg. Premium beer
accounts for 10% of the overall market based on volume.
- Management indicated that the current rise in prices is not an immediate issue as they have already
secured the raw materials for FY10-11 and some for FY12.
- We maintain our Outperform call with fair value of RM6.03 based on unchanged WACC of 9.2%.

Jaya Tiasa : Plantation division to drive earnings Outperform

Visit Note
- We understand poor weather condition has continued into the current quarter, pushing down Jaya Tiasa’s
logs production. Labour issues due to stricter government policy on foreign workers also contributed to the
production decline. This has caused a tight supply of logs and driven up prices.
- We gather from industry players that the increase in export quota from 40% to 50% has been extended by
the Forest Department by another year to Jun 2011, which is positive news for Jaya Tiasa.
- We understand that utilisation rate for its plywood division is now about 60-70%, and Jaya Tiasa is now
making-to-order as opposed to making-to-warehouse. Pricing wise, according to industry sources, plywood
 selling prices have increased gradually by 5-10% qoq in USD term, which we think is relatively sustainable.
- Going forward, Jaya Tiasa’s oil palm plantation division will be contributing a significant portion of the
earnings, boosted by a sharp increase in FFB production owing to increasing mature hectarage.
- We revised our FY4/11-12 EPS forecasts slightly by 1.2% and -2.2% respectively after adjusting for lower
logs production lower plywood sales volume, higher CPO production and higher oil extraction rate.
- We have trimmed our target price to RM4.90 (from RM4.95 previously) based on unchanged target PER of
12x CY11 earnings for the timber division and 12x CY11 earnings for the plantation division.

Hong Leong Bank : Earnings momentum gaining traction Outperform (up from MP)
4QFY10 Results/Briefing Note
- 4QFY06/10 results beat both our and consensus expectations. The key variances were: 1) lower-than-
expected LLP; and 2) lower-than-expected effective tax rate of 16.6% (vs. our assumption of 22%).
- 4Q10 pre-tax profit rose 33% qoq and 66% yoy mainly due to lower LLP (-87% qoq; -95% yoy, aided by
higher writebacks) and stronger contribution from its associate (+115% qoq; +101% yoy).
- QoQ and yoy loan growth were 3.2% (3Q10: +3.2%) and 8.3% (3Q10: +8%) respectively, underpinned by
business banking.
- Unadjusted NIM expanded by 9bps qoq and 22bps yoy, which we believe reflects: 1) the two OPR hikes in
1H2010; and 2) lower funding cost.
- Overheads remained under control, leading to CIR falling to 43.8% (3Q10: 47.3%; 4Q09: 45.3%).
- As at end-Jun ‘10, HL Bank’s gross and net NPL ratios as well as LLC stood at 1.9%/1.2%/117%
respectively while core capital ratio remained healthy at 15.5%.
- As expected, HL Bank declared a final gross DPS of 15 sen (4Q09: 15 sen), which brought the total gross
DPS for FY10 to 24 sen (FY09: 24 sen).
- We raised our FY11-12 net profit forecasts by 11-14.8% on the back of the better-than-expected results.
- Fair value raised to RM10.70 from RM9.20, based on unchanged target CY11 PER of 15x. Following the
earnings revision above, our recommendation has been upgraded to Outperform from market perform.

Other Corporate Results

Company Quarter Result Results Comment And Changes To Forecasts Recom

PLUS 2Q10 In line No change to forecasts. Maintain DCF-derived fair value of RM4.33. OP, FV =
RM4.33
Dialog Group 4Q10 In line 12MFY10 net earnings of RM116.1m achieved 96% of our FY10 OP, FV =
estimates (RM120.4m) and 104% of consensus net profit estimate RM1.30
(RM111.8m) No change to forecasts. Maintain fair value of RM1.30
based on 15x FY06/11 PER for the core operating business.
YTLP 4Q10 Above YTLP’s full-year results beat our and consensus expectations. The key MP, FV =
variance was a “below-the-line” item, i.e. lower-than-expected interest RM2.20
expense. We have raised our FY11-12 net profit forecasts by 6.4% p.a.
mainly after we lower our interest expense projections by around 23%
p.a.. Fair value raised to RM2.20 from RM2.15 after an update for the
full-year results but Market Perform call remains unchanged.
YTLCement 4Q10 In line No change to forecasts. Indicative fair value has been lowered by 2.9% OP, FV =
as we roll forward our valuation base year from CY2010 to CY2011 RM5.35
WCT 2Q10 In line 1H net profit eased 15% yoy as lumpy overseas jobs were already at UP, FV =
the tail-end. No change to forecasts. Maintain fair value of RM2.30 RM2.30
based on 14x fully-diluted FY12/11 EPS.
MISC 1Q11 In line 1Q net profit jumped 83% yoy on reduced container liner losses. No UP, FV =
change to forecasts. Maintain fair value of RM8.07 based on “sum of RM8.07
parts”.

Technical Highlights

Daily Trading Strategy : Strong resistance zone at 1,390 – 1,400…

- In line with our expectation, the FBM KLCI has reached the key resistance target of 1,390 yesterday. We
had set the target since the index successfully removed the 1,350 breakout point in Jul 2010.
 - In our opinion, judging from the current upbeat technical readings, the index is ready to hit the 1,400
psychological level as soon as today.
- For a longer-term view, if the index manages to penetrate the resistance zone of 1,390-1,400, it will see
follow-through rally to 1,450, before marching towards the all-time high of 1,524.69.
- However, as pointed out by the grossly overbought condition on the short-term momentum readings, we
maintain that 1,390-1,400 will remain as a significant resistance to the FBM KLCI’s extended uptrend.
- Meanwhile, we expect buying interests to centre around the core heavyweights and the active mid-caps
counters on steady bargain-hunting activities.
- To turn negative from the current scenario, the index must fall below the 10-day SMA of 1,367 and the key
breakout point at 1,350.

Daily Technical Watch: AMMB – A potential rally towards RM5.94 - RM6.50 if it secures at above RM5.50…
- 10-day SMA: RM5.29
- 40-day SMA: RM5.13
- Support: IS = RM5.50 S1 = RM5.30 S2 = RM4.84
- Resistance: IR = RM5.94 R1 = RM6.50 R2 = RM7.40

Bulletin Board

Co/Sector News Impact Recom

Media Prima Media Prima plans to focus on tie-ups with
foreign media companies as part of its overall
growth strategy. However, the company would
not be making overseas equity investments
anytime soon (StarBiz).
Positive. Recall that Media Prima foray in the OP, FV =
Philippines had resulted in them having to write RM2.80
off a portion of its investment last year
(approximately RM31m). These tie-ups could
potentially help to reduce Media Prima’s content
cost by way of sharing the content as well as
reaching a wider range of viewers.

Important Dates

Company Quarter Expected Results Date

EON Capital 2QFY12/10 Week beginning 16-Aug
AFG 1QFY3/11 Week beginning 16-Aug
Maybank 4QFY6/10 20-Aug
UMW Holdings 2QFY12/10 20-Aug
Affin 2QFY12/10 Week beginning 23-Aug
Media Prima 2QFY12/10 23-Aug
MPI 4QFY6/10 23-Aug
Proton 1QFY3/11 23-Aug

Company Entitlement details Ex-date Payment date

New entitlements
Tomypak Holdings Share split on the basis of 1-into-2 1-Sep-10 -
Tomypak Holdings Bonus issue on the basis of 1-for-4 1-Sep-10 -
Oriental Food Industries First interim tax exempt dividend of 2 sen 2-Sep-10 17-Sep-10
PLUS Expressways Single tier interim dividend of 7.5 sen 2-Sep-10 24-Sep-10
LNG Resources Interim tax exempt dividend of 1 sen 3-Sep-10 21-Sep-10
Paramount Interim div of 11% tax exempt + 4% less 25% tax 6-Sep-10 17-Sep-10
WCT Interim dividend of 5 sen less 25% tax 6-Sep-10 23-Sep-10
Tomypak Holdings Tax exempt interim dividend of 1.4 sen 9-Sep-10 1-Oct-10
Classic Scenic Interim tax exempt dividend of 8% 3-Nov-10 16-Nov-10

Going “ex” on 23 Aug

Excel Force MSC Bonus issue on the basis of 1-for-2 23-Aug-10 -
United Kotak Final tax exempt dividend of 6 sen 23-Aug-10 9-Sep-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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