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

RHB Research Institute

RHB Equity 360°

24 August 2010 (WTK, Affin, AFG, Media Prima, TM, QL, Proton, CBIP, MPI; Technical: Mudajaya)

Top Story : WTK – Gaining momentum Outperform (up from MP)

Visit Note
- WTK produced around 113k m3 logs in 2QFY10, which was flat qoq (115k m3 in 1QFY10), but down by
17.5% yoy. This was mainly attributable to the poor weather conditions that persisted into the second
quarter, which is seasonally a high log production quarter.
- Management has seen log selling price climb up gradually to about US$165/m3 in mid-Aug.
- Management indicated that plywood sales volume increased by 20% qoq in 2Q10, which we think is due to
demand steadily coming back from its main export market, Japan. We understand that utilisation rate has
picked up and average selling prices were also higher across its range of plywood products.
- We have cut our FY10 earnings forecasts by 12.8% mainly due to the lower log supply and revised
RM/US$ assumptions, although this is partly offset by higher average selling price assumptions for its log
and plywood products. We have also adjusted our FY11-12 forecasts (-5.3% and +4.5% respectively) to
reflect the stronger RM but more importantly, higher log and plywood price.
- We have thus raised our fair value to RM1.60 (from RM1.25 previously) based on unchanged target PER of
12x and after rolling forward our valuation base year to FY11 (from FY10 previously). Hence, we upgrade
our call on the stock from market perform to Outperform.

Corporate Highlights

Affin : Loan growth momentum appears sustainable Outperform

Briefing Note
- Management, in our view, appeared optimistic that the group would be able to sustain the strong loan
growth seen thus far with the focus appearing broad-based, i.e. business banking, SMEs and consumer.
Pipeline for loan applications and approvals remains strong and this should bode well for the group ahead.
- Notwithstanding the strong loan growth, management was optimistic that asset quality would not be
compromised, thanks to its risk management framework that the group has in place.
- We clarified with management regarding the RM30m provision for a legal suit made in the 2Q10 results.
The case is currently under appeal, but should Affin lose the appeal, management said that another
RM18.2m would need to be charged to the income statement. We are keeping our numbers unchanged as
we had imputed a more conservative credit cost assumption of 38bps for FY10 (vs. 1H10: 13bps).
- Management indicated that there could be more collaboration ahead with BEA and this could include areas
such as the trade business, training for staff and capital market deals.
- No change to forecasts. Fair value of RM4.10 (target CY11 PER of 12x) and Outperform call maintained.

AFG : New CEO’s presence starting to be felt Outperform

Briefing Note
- While the key areas identified to drive growth ahead were largely unchanged, i.e.: 1) fee income; 2) wealth
management; and 3) enhance cross-selling, conspicuously missing from the list was the “koop” loans
segment, which was replaced by extracting synergies from the various businesses. Potentially, this reflects
the new CEO’s conservatism towards the unsecured consumer financing segment.
- The group’s medium term (3-5 years) targets were also largely unchanged from the previous briefing.
However, AFG did not provide any loan growth target, which was “above-industry” previously. Apart from
that, management also did not provide any deposit growth target but maintained their mid-term LD ratio
target of around 80% (from 89.6% currently).
- From the briefing, we sensed that there could be a potential shift in AFG’s lending direction ahead towards
the SME segment, with less emphasis on segments such as “koop” loans as well as mortgages (pricing
pressure due to competition). Similarly, notwithstanding management’s LD ratio target above, management
stressed that AFG does not plan to grow its deposit base at any cost.
- Our FY11-13 net profit forecasts have been raised by up to 2.9% mainly after we lowered our credit cost
projections to 36bps p.a. from 47-50bps previously.
- Fair value raised to RM3.50 from RM3.40 based on target CY11 PER of 13x. Maintain Outperform.
Corporate Results

Media Prima : 2Q10 earnings aided by strong recovery in adex Outperform

2QFY10 Results/Briefing Note
- 2Q10 core net profit of RM36.7m was below our and consensus expectations with 1H core net profit of
RM59.3m accounting for 34% and 38% of our and consensus expectations respectively. The key variances
were: 1) lower-than-expected EBITDA margins; and 2) higher-than-expected effective tax rate.
- Qoq, revenue grew 22% will all segments reported growth (TV:+26% qoq; radio: +17.2% qoq; Outdoor:
+14.1% qoq). Coupled with higher associate profit, offset by a higher effective tax rate, 2Q10 core earnings
grew 17.6% qoq.
- NSTP reported 1H10 core net profit of RM33.5m (vs. RM7.7m in 1H09) as revenue rose 12% and further
aided by lower newsprint cost as operating expenses was 16% lower yoy.
- We have lowered our FY10-12 earnings forecasts by 5.2-19.2% largely to reflect lower EBITDA margins
and higher effective tax rate assumption.
- Our fair value is lowered to RM2.57 (from RM2.80) (fully diluted), based on unchanged target FY11 PER of
15x. Our Outperform call on the stock, however, remains unchanged.

TM : No commitment on capital management yet Market Perform

2QFY10 Results/Briefing Note
- 1HFY10’s core net profit of RM196.9m accounted for 44.6% of our full-year estimates, which we consider
to be within expectations.
- As expected, TM declared an interim gross DPS of 13 sen, which translates to a gross yield of 3.6%.
- TM’s UniFi packages have so far registered a take-up of 9,200 customers and management is positive that
the take-up rate would accelerate in the coming months.
- Management did not provide any firm commitment to pay shareholders in excess of its minimum dividend
policy but more clarity should be forthcoming by end-FY10 after a decision is made on the US$250m debt
due end-2010.
- We have retained our fair value of RM3.55, which is based on a required net yield assumption of 5.5% on
the minimum RM700m dividends.

QL : Earnings surged 20% Outperform

1QFY11 Results
- 1QFY03/11 net profit of RM26.8m was in line with our and consensus expectations, accounting for 22% of
our and consensus full year estimates respectively. We consider this to be in line as seasonally, 1Q has
always been the weakest followed by the 4Q.
- QL yesterday purchased 23.29% of Lay Hong for RM11.55m which translates to RM1.05/share. Lay Hong
is mainly involved in the production of eggs, broiler farming and feedmill activities.
- No change to our forecasts for now, pending management clarification on its strategy for Lay Hong. The
additional earnings will not significantly impact our fair value for QL.
- Maintain Outperform with unchanged fair value of RM4.90, based on target PER of 14.5x CY11.

Company
Quarter
Result
Results Comment And Changes To Forecasts
Recom

Proton
1Q11
In line
1QFY11 net profit accounted for 23% and 27% of our and consensus full-year estimates on the back of stronger unit sales and
better product mix. No change to forecasts.
OP, FV = RM5.50

CBIP
 2Q10
In line
Expect a seasonally stronger 2H. No change to forecasts.
OP, FV = RM4.05

MPI
4Q10
Above
MPI’s 4Q results, after stripping out an impairment loss and a deferred tax writeback, were above our and consensus estimates.
No change to forecasts pending analysts briefing today. Maintain fair value of RM6.80 based on 11x FY11 EPS.
MP, FV = RM6.80

Technical Highlights

Daily Trading Strategy : Expect some profit-taking activities…

- The FBM KLCI successfully challenged the 1,400 psychological threshold yesterday, but the closing with a
possible “hangman” candle points to a strong possibility of a negative reversal today.
- Also, the “extremely overbought” short-term momentum indicators suggest the current rally could be in for a
retracement if the market moves into a profit-taking mode after recording a “hammer” candle plus seven
days of positive candles.
- To prevent this technical pullback, the FBM KLCI must sustain its gains at above 1,400 today with another
positive candle on the chart.
- Moreover, daily turnover must stay at least above 800m shares to maintain the recent upbeat sentiment.
- As a result, investors may wish to lock in their short-term profits in anticipation of a correction to neutralise
the overbought momentum.
- Chart resistance is seen at 1,450, followed by the all-time high of 1,524.69, while its key support levels are
at 1,400, 1,390 and the 10-day SMA of 1,375.

Daily Technical Watch: Mudajaya Group – Attempting to launch a technical rebound from RM4.10 soon…
- 10-day SMA: RM4.239
- 40-day SMA: RM4.874
- Support: IS = RM4.10 S1 = RM3.60 S2 = RM3.10
- Resistance: IR = RM4.80 R1 = RM5.25 R2 = RM5.55

Bulletin Board

Co/Sector
News
Impact
Recom

Timber
South Korea has decided to defer its anti-dumping duties on Malaysian plywood products, reversing its earlier decision to slap
punitive duties ranging from 5.11-33.81%. A formal ruling would only be made within the next five months pending further
investigation by the South Korean Trade Commission.
Positive as this would provide some short-term relief for plywood exporters to South Korea, although we reckon that there will be
negative impact if the ruling turns out to be unfavourable. We note that the companies under our coverage which would be affected
by this ruling include Jaya Tiasa (OP, FV = RM4.90).
N

Timber
Norway’s state pension fund has excluded Samling Global from its investments due to “extensive and repeated breaches” of
regulations of its activities in Sarawak and Guyana. It concluded that the company’s forest operations in the rainforests of Sarawak
and Guyana contribute to illegal logging and severe environmental damage.
Negative as this could spark off addition investigation by environmental NGOs on all Malaysian timber companies in future. Timber
 companies will have to be more vigilant in ensuring that their logging activities are in line with environmental guidelines.
N

Important Dates

Company Quarter Expected Results Date

EON Capital 2QFY12/10 Week beginning 23-Aug
IOI Corp (tentative) 4QFY6/10 24-Aug
Parkson 4QFY6/10 24-Aug
Sino Hua-An 2QFY12/10 24-Aug
Sunway 2QFY12/10 24-Aug
Allianz 2Q FY12/10 25-Aug
Axiata 2QFY12/10 25-Aug
Freight Management 4QFY6/10 25-Aug
IJM Plantation 1QFY3/11 25-Aug
IJMCorp 1QFY3/11 25-Aug
KNM 2QFY12/10 25-Aug
Kossan 2QFY12/10 25-Aug
MCIL 1QFY3/11 25-Aug
Petra Perdana 2QFY12/10 25-Aug
Wah Seong 2QFY12/10 25-Aug

Company Entitlement details Ex-date Payment date

New entitlements
Tai Kwong Yokohama Share split on the basis of 1-into-2 3-Sep-10 -
Telekom Malaysia Interim gross dividend of 13 sen less 25% tax 3-Sep-10 24-Sep-10
Elsoft Research Tax exempt interim dividend of 10% 6-Sep-10 22-Sep-10
Sunway City Interim dividend of 31 sen less 25% tax 7-Sep-10 7-Oct-10
Boustead Holdings Second interim single tier dividend of 10 sen 14-Sep-10 28-Sep-10
Dayang Enterprise Interim single tier dividend of 5 sen 14-Sep-10 30-Sep-10
See Hup Consolidated Final dividend of 5.4% less 25% tax 15-Sep-10 8-Oct-10
UMW Holdings Interim single tier dividend of 10 sen 17-Sep-10 7-Oct-10
Lii Hen Industries Second interim single-tier dividend of 3.0% 21-Sep-10 15-Oct-10
NCB Holdings Interim dividend of 7 sen less 25% tax 27-Sep-10 13-Oct-10

Going “ex” on 25 Aug

AL-Hadharah Boustead REIT Interim Income distribution of 3.8 sen 25-Aug-10 9-Sep-10

...For more details, see individual reports attached

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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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