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

RHB Research Institute

RHB Equity 360°

11 June 2010 (Motor, Telecom, 10MP; Technical: HSL)

Top Story : Motor (Autoparts) – Autoparts Sector Expanding Into Asean Not Rated
Sector Update
APM – Fair Value at RM4.70 on 11x FY10 PER
NHF – Fair Value at RM2.52 on 7x FY10 PER
Delloyd – Fair Value at RM3.48 on 7x FY10 PER
- The revised NAP policy and the AFTA agreement which came into full effect early this year are expected to
open up more opportunities for the local autoparts companies.
- APM is still highly dependent on local OEM as 79% of their revenue comes from the local OEM and
replacement (REM) markets. The company however sees a brighter year ahead as its sister company Tan
Chong expands into smaller-engine segment and into Indochina.
- NHF is currently the market leader for the distribution of alternative automotive replacement parts in
Malaysia.
- Delloyd is a premier autoparts and components manufacturer heavily reliant on the domestic OEM market
which currently contributes to 73% of its total automotive segment revenue. Delloyd has expanded further
into the Indonesian market with new sales contracts to supply door mirrors to PT Honda since June 2009.
- We believe the autoparts sector has positive earnings outlook on the back of: 1) strong industry’s TIV
growth ahead; and sustained strengthening of the RM against US$ and Yen which would help to reduce
the costs of imported materials. Using consensus forecasts, we value APM at RM4.70/share based on 11x
FY10 PER, NHF at RM2.52/share based 7x FY10 PER and Delloyd at RM3.48/share based on 7x FY10
PER.

Economic Highlights

10MP : No Easy Task In Shifting To High Income Economy Under the 10MP
Economic Highlights (published 11 Jun)
- The focus of the 10MP will be on shifting the economy to a high value-added and high income economy,
via an increase in productivity, which will result in TPF contributing 38.5% of the growth target.
- It would also focus on the 12 NKEA Ato generate economic growth during the plan. To reduce the
vulnerability of the country to external shock, an important strategy under the plan will be to promote
domestic demand to become a major driver of growth.
- This will be done through energising the private sector as stated in one of the Strategic Reform Initiatives
(SRIs) under the New Economic Model (NEM).
- Whilst driving domestic demand is important but the domestic market is just not big enough, in our view, to
sustain a robust economic growth, implying that it would be a challenge for the Government to achieve the
6.0% per annum real GDP growth target set under the plan.
- As it stands, Malaysia has not been able to achieve the economic growth target set in the last three
Malaysia plans due to economic crises and poor execution of the measures proposed in promoting private
investment.

IPI : Industrial production slowed down in April

Economic Highlights (published 10 Jun)
- Industrial production slowed down to 10.1% yoy in April, after a rebound to +14.2% in March. This was due
to a slowdown in manufacturing production and electricity output. These were, however, mitigated by an
increase in mining output during the month.
- The slowdown in April’s industrial and manufacturing production sends a first signal of a slower real GDP
growth in the 2Q. We expect real GDP growth to soften to 7.8% yoy in the 2Q, from the strongest growth of
+10.1% in a decade in the 1Q, as exports moderate.
Sector Call

Telecoms : Digi And Celcom Explore Network & Infrastructure Collaboration Overweight
Sector News Update
- Celcom Axiata and Digi yesterday signed a MOU to explore a long-term network and infrastructure
collaboration, and the three major segments covered under the MOU are: 1) operations and maintenance;
2) transmission and site sharing; and 3) radio access network.
- - We believe the collaboration would allow Celcom to expand its capacity requirement in city areas at lower
cost given that Digi tends to have a stronger presence in urban areas. Also, Celcom’s network cost has
been around 9.6% of revenue since 4QFY09, which could suggest that some form of collaboration would
be required in order to squeeze out further savings.
- We believe the collaboration would allow Digi to achieve better capex and opex efficiencies, especially as it
expands its 3G coverage, and thus could help alleviate margin pressures from mobile broadband rollout
and handset subsidies, among others.

Technical Highlights

Daily Trading Strategy: Negatively Biased View On The FBM KLCI Maintained …
- Backed by a steady bargain-hunting support, the FBM KLCI managed to overcome profit-taking pressure
and inched higher to form a small positive candle yesterday.
- The candle has neutralised the earlier negative sign from a “hangman-like” candle.
- Coupled with the improved momentum readings, as well as the overnight rally on the Wall Street, the index
has the potential to move towards the previous technical gap at 1,290.51 – 1,300.44 and the tough 1,300
psychological resistance soon.
- But upon a successful closure of the technical gap near 1,300, sellers could still reemerge to cap near-term
upside, in our opinion.
- Therefore, before a decisive removal of 1,300 with strong daily turnover of above 800m – 1.0bn shares
mark, we are keeping our negatively biased view on the FBM KLCI’s near-term recovery prospects.
- A higher resistance is seen near the 40-day SMA of 1,316, while immediate support is seen at the 10-day
SMA of 1,286.
- As a result, we maintain our “sell into strength” strategy.

Daily Technical Watch: Hock Seng Lee – A penetration of RM1.54 and RM1.59 is needed to fend off instant
profit-taking risk …
- 10-day SMA: RM1.416
- 40-day SMA: RM1.465
- Support: IS = RM1.25 S1 = RM1.08 S2 = RM0.94
- Resistance: IR = RM1.54 R1 = RM1.87 R2 = RM2.25

Bulletin Board

Co/Sector News Impact Recom

FBM KLCI MAS will replace Nestle on the FBM KLCI The review appears to have been done earlier -
following the semi-annual review. (FTSE Bursa than scheduled. Nestle has been removed as it
Malaysia) did not meet minimum liquidity requirements
during the review period. MAS will be added with
an index weight of around 0.49%.
Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Sinotop Holdings Renounceable rights issue on the basis of 10-for-1 24-Jun-10 -
Malayan United Industries Issue of Class A3 ICULS in place of interest for Class A1 ICULS 28-Jun-10 -
Malayan United Industries Issue of Class A3 ICULS in place of interest for Class A2 ICULS 28-Jun-10 -

Going “ex” on 14 Jun

Scomi Group Loan stock interest of 4% for ICSLS 14-Jun-10 24-Jun-10
Evergreen Tax-exempt interim dividend of 2 sen 14-Jun-10 29-Jun-10
Far East Holdings Final single tier dividend of 15 sen 14-Jun-10 30-Jun-10
Delloyd Ventures First & final tax exempt dividend of 6 sen 14-Jun-10 1-Jul-10
BP Plastics Holdings First and final dividend of 3 sen tax exempt 14-Jun-10 5-Jul-10

...For more details, see individual reports attached

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