Market Dateline PP 7767/09/2010(025354)

RHB Research Institute

RHB Equity 360°

4 October 2010 (Construction, property, BAT; Technical: Zelan, Genting Msia)

Top Story : Construction – Continues to ride on news flow Overweight

Sector Update
- Construction stocks will continue to be buoyed by news flow from: (1) The infrastructure development for
the Greater KL National Key Economic Area (NKEA) under the Economic Transformation Programme
(ETP), particularly, the RM36bn MRT project; (2) The RM7bn Ampang and Kelana Jaya LRT line extension
project; (3) Other public and PFI projects under the 10MP; and (4) Federal land deals.
- We are raising our indicative fair value for MRCB by 28% from RM1.94 to RM2.49 largely to reflect higher
margins from its KL Sentral property project.
- Maintain Overweight for the construction sector. Our top “tactical” pick is Gamuda (Trading Buy, FV =
RM4.51) while “value” pick is Sunway (Outperform, FV = RM2.35).

Sector Call

Property : Still in hot flavour Overweight

Sector Update
- While we believe tighter rules will be imposed on the property sector, any new measures are likely to be
moderate as the Government would not want to dampen the whole sector. In line with our view, the PM
recently indicated that new measures are likely to target home buyers who own more than two houses. We
think the overall impact on the property sector would be moderate, as: i) Young people are typically first or
second home owners; and ii) Buyers who own more than two homes are generally more affluent.
- There are still a few strong catalysts to drive demand for properties going forward: i) Faster growth of
young demographics to drive big-ticket purchases i.e. homes and motor vehicles; ii) Low mortgage rate as
commercial banks continue to offer discount to BLR; iii) Aggressive promotions/incentives being offered by
developers; iv) Strengthening in ringgit that encourages foreigners participation; and v) Property is a
preferred vehicle to hedge against inflation.
- Based on our analysis on the relationship between young population growth and ARPP (Average
Residential Property Price), ARPP will continue to hold well over the next 2 years until 2012/13. Apart from
the driving forces for demand mentioned above, given the increasingly higher replacement cost for
landbank borne by developers, as well as stable building material prices, property prices for primary market
will be supported even though developers’ margins remain the same.
- Although property stocks, on average, have done quite well in 3Q2010 (+14.1%), in our opinion, valuations
are still attractive at the current level. While developers such as SP Setia, Mah Sing, Glomac, and Suncity
are generating record sales, P/B for many property stocks are still below their 2 stdev level or their previous
peak in 2007-08.
- Top picks: IJM Land (OP, FV = RM3.00), Mah Sing (OP, FV = RM2.06) and Suncity (OP, FV = RM5.48).

Technical Highlights

Daily Trading Strategy : Poised for a more sustainable technical rebound…

- Though the market appeared slow on its recovery strength, it has, nonetheless, managed to crawl to above
the 10-day SMA of 1,465 on Friday.
- This will refresh the short-term trading sentiment if it can continue to trade at above the SMA.
- Plus the robust daily volume of between 800m and 1.0bn shares, the benchmark is poised to stage a more
sustainable technical rebound this week.
- Coupled with the sustainable buying interests on lower liners, it should be able to reengineer a retest to the
recent high of 1,479.59 in the near term.
- A decisive breakout from the high will end the recent consolidation phase, and resume the previous
uptrend mode. This will also lead to a rebound on the weakening trend of the 10-day SMA.
- Overhead resistance is at the technical gap at 1,490.50-1,497.64 followed by the all-time high level of
1,524.69.
- Its immediate support is at the 10-day SMA, and a critical level at 1,450.
Daily Technical Watch: Zelan – Likelihood of a resumption of strong buying support…
- 10-day SMA: RM0.6795
- 40-day SMA: RM0.6772
- Support: IS = RM0.64 S1 = RM0.50 S2 = RM0.445
- Resistance: IR = RM0.73 R1 = RM0.83 R2 = RM1.03

Weekly Trading Idea : Genting M’sia – Possible reversal from recent downswing… Bargain Buy
- Strategy: Bargain buy near RM3.40 for a recovery rally ahead.
- Target: IR = RM3.60 R1 = RM4.06 R2 = RM4.60
- Support: IS = RM3.40 S1 = RM3.20 S2 = RM2.96
- Exit: Cut loss if it falls to below the RM3.20 support.

Commodities & Currencies – US Dollar on a stronger bearish trend…

- Light Sweet Crude Oil futures: Poised to retest Aug’s high of US$82.97 and next strong hurdle at US$87.
- Crude Palm Oil futures (CPO): The strong buying support to persist.
- Ringgit (RM)/US$: The pair is expected to breach 3.07 soon.
- Japanese Yen (JPY)/US$: We remain bullish on the yen’s technical outlook.
- Euro Dollar (EUR)/US$: The pair is trading in a technical bear trend.
- US Dollar Index (DXY): The technical outlook on the index has clearly turned more bearish

Bulletin Board

Co/Sector News Impact Recom

IOIC IOIC has bought back US$11.65m of its US$
zero coupon exchangeable bonds due 2013 from
the market. These bonds would be subsequently
cancelled. Out of the total US$600m bonds
initially issued in 2008, there is US$454.8m
outstanding currently. (Bursa Malaysia)
Carlsberg Intends to introduce two new premium beer Positive, although we note that these imported OP, FV =
brands in the market within the next year. (The international beer brands like Hoegaarden, Stella RM6.03
Star)
Faber The Financial Daily today reported that a number
of alternative bids have been received for the
provision of non-medical support services for
Sabah and Sarawak government hospitals. (The
Edge)
Kenanca/ Oil The Edge weekly newspaper reported that
and Gas Kencana is poised to take over Labuan Shipyard
and Engineering, a wholly-owned subsidiary of
Umno-linked Realmild. The Edge was however
Positive. This is not the first time IOIC has bought OP, FV
back and cancelled its bonds, and is not likely to RM6.75
be the last, given its cash hoard of RM3.1bn.
Minimal impact to our earnings as a result of this
cancellation.
Artois and Budweiser (which it already has in its
portfolio) does not add much to its top or
bottomline, and only brings more variety to its
portfolio of brands, which will help it increase its
on-site market share.
This will likely be viewed negatively for Faber, OP, FV =
which currently has the concession for 79 RM3.82
government hospitals in six states, including
Perak, Penang, Perlis, Kedah, Sabah and
Sarawak. 47 out of the 79 hospitals are in Sabah
and Sarawak. However, we maintain our view
that the concession is likely to be renewed on the
back of: 1) continuous effort by Management to
improve its services; 2) Faber’s 14-year track
record and technical expertise; and 3) service
benchmarks are consistently met without any unit
price increase. If the concession is not renewed,
our “worst-case” SOP valuation will fall to
RM2.23, i.e. 42% below the current share price
but we see little risk of this happening.
Positive. We believe around RM1.2bn out of the MP, FV =
RM3.8bn contracts mentioned by the Edge are RM1.80
for jobs in East Malaysia. However, we note that
the company’s current yard capacity is
 uncertain if Kencana will be leasing the underutilised even with RM800m worth of
fabrication yard from Realmild or taking over the contracts. We look forward to more details,
existing lease (RM7m) from Ministry of Finance pending further discussion with management.
(MOF). The article mentioned that Kencana is
trying to beef up its facilities to qualify for a
RM3.8bn contract to be awarded by Petronas. At
this juncture the company only has a yard in
Lumut, Perak. (The Edge)

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
LB Aluminium First and final tax exempt dividend of 1.75 sen 2-Nov-10 19-Nov-10
TAS Offshore Single tier final dividend of 2 sen 8-Nov-10 6-Dec-10

Going “ex” on 5 Oct

United Malacca Final div of 11 sen less 25% tax + 4.5 sen TE + 9.5 sen single tier 5-Oct-10 26-Oct-10

...For more details, see individual reports attached

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