PP 7767/09/2011(028730)

12 October 2010
Corporate Highlights

Malaysia
RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
Se ctor Up dat e Company No: 233327 -M

MARKET DATELINE 12 October 2010

Plantation
Recom : Neutral
The Contagion Effect – How Much More Can It Go? (Maintained)

Table 1 : Plantation Sector Valuations

Fair EPS * EPS growth PER P/NTA P/CF GDY
FYE Price Value (sen) (%) (x) (x) (x) (%) Rec
(RM/s) (RM/s) FY10 FY11 FY10 FY11 FY10 FY11 FY10 FY10 FY10
KLK Sep 17.70 22.05 124.4 131.4 42.1 5.6 14.2 13.5 2.9 13.5 3.7 OP
IOI Corp Jun 5.58 6.75 33.6 34.9 28.3 3.8 16.6 16.0 3.1 14.7 3.0 OP
CBIP Dec 3.73 4.60 52.7 55.1 21.6 4.4 7.1 6.8 1.4 6.2 4.6 OP
First Resources Dec 1.20 1.40 8.8 10.2 30.1 15.1 9.4 8.2 1.7 9.2 2.7 OP
Sime Darby Jun 8.70 9.40 48.6 49.9 9.0 2.6 17.9 17.5 2.4 12.9 3.6 MP
IJMP^ Mar 2.65 2.56 16.1 14.8 2.0 -8.2 16.5 17.9 1.7 14.2 2.3 MP
Genting
Plantation Dec 8.14 7.40 46.3 44.5 17.5 -4.0 17.6 18.3 2.0 15.7 1.6 UP
Sector Avg 19.9 3.0 16.5 16.0 2.6
^ FY10-11 valuations refer to those of FY11-12 *Normalised

♦ Disappointing production, spike in exports. Malaysia’s CPO production Chart 1. CPO vs soyoil and rapeseed
fell in September by 2.7% mom to 1.56m tonnes, while exports rose by oil prices
US$/tonne

significant 21.2% mom to 1.47m tonnes. On a yoy basis, production was CPO Soy Oil Rapeseed Oil

slightly higher, rising 0.3% yoy, while exports rose by a larger 10.9% yoy.
1,700

1,500

Despite the significant jump in exports, the reduction in production, 1,300

slightly higher imports and lower domestic use caused closing CPO stock 1,100

levels to remain relatively flat at 1.708m tonnes in Sept (from 1.704m 900

tonnes in Aug). As a result of the flat CPO stock levels, stock/usage ratio 700

in Sept was also relatively flat at 9.18% (from 9.12% in Aug), in line with 500

the 7-year average of 9.1%. 300

♦
100

Contagion effect. CPO prices shot through the roof yesterday to close at 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

Chart 2. CPO vs crude oil prices

a high of RM2,900/tonne. We believe the reasons for this are threefold: (1)
160 1400

a contagion effect from the spike in soyoil, corn and rapeseed oil prices on 140 Correlation factor of 1200

8 Oct; (2) demand rebalancing activities as the discount between CPO

0.9x in 2007
narrowed to 0.75x in

C P O s p o t p r ic e s (U S $ /to n n e )
C r u d e o il p r ic e s (U S $ /b a r r e l )

120
1H08, and rose again 1000

versus soybean oil and rapeseed oil has widened considerably again; and
Correlation factor started to 0.95x in 2H08.
100 normalising to 0.7x from Dec-
08, but rose again from Sep- 800

(3) impact from spike in crude oil prices to above the US$80/barrel mark
09 onwards to close to 1x,
80
before falling back to around
0.7x currently. 600

again. We continue to maintain our belief that CPO is going to be relied

60

400
40

upon more and more to fill the gap of the other vegetable oils, and should 20 200

there be any disappointment in the production of CPO, due to unforeseen 0 0

weather circumstances and the like, this would likely result in an even
O c l- 0 0

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O c l- 1 0
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A p n -0 4

A p n -0 5

A p -0 6

A p n -0 7

A p n -0 8

A p n -0 9

A p n -1 0
J a t- 0 0

J a t- 0 1

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J a t- 0 6

J a t- 0 7

J a t- 0 8

J a t- 0 9

0
J u 00

J u 01

J u 02

J u 03

Ju 4

J u 05

J u 06

J u 07

J u 08

J u 09

J u 10
t- 1
r- 0
r-

r-

r-

r-

r-

r-

r-

r-

r-

r-
n
Ja

Crude Oil (US$/barrel) CPO (US$/tonne)

larger-than-expected spike in CPO prices. However, as global CPO

stock/usage ratio estimates are expected to be relatively flat in 2011, we
believe that the contagion impact on CPO prices could be capped given the
as yet unaffected fundamentals of CPO demand and supply. In addition, as
we believe there are a lot of financial and speculative factors at play
currently, the downside risk is also higher. As such, should there be any
positive news flow surrounding soybean and rapeseed output in the near
term, this could cause a pullback of these competing oil prices, which could
potentially result in a pullback of CPO prices as well.
♦ Risks: (1) a significant change in crude oil price trend; (2) weather
abnormalities; (3) change in emphasis on implementing global biofuel
mandates and trans-fat policies; (4) significant changes in trade policies of
vegetable oil importing or exporting countries; and (5) a sharper-than-
expected global economic slowdown. Hoe Lee Leng
♦ Forecasts and Investment case. No change to our forecasts and our (603) 92802184
Neutral recommendation on the sector. Top pick remains KLK. hoe.lee.leng@rhb.com.my

Please read important disclosures at the end of this report. Page 1 of 7

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 12 October 2010

Monthly Statistics

♦ Disappointing production, spike in exports... Malaysia’s CPO production fell in September by 2.7% mom to
1.56m tonnes, while exports rose by significant 21.2% mom to 1.47m tonnes. On a yoy basis, production was slightly
higher, rising 0.3% yoy, while exports rose by a larger 10.9% yoy. Despite the significant jump in exports, the
reduction in production, slightly higher imports and lower domestic use caused closing CPO stock levels to remain
relatively flat at 1.708m tonnes in Sept (from 1.704m tonnes in Aug). Production levels seem disappointingly low,
given that it is supposed to be a peak production month, possibly due to labour shortage problems. However, based
on feedback from the plantation companies we cover, production is expected to pick up more strongly in October,
with October likely to be the peak production month for 2010. On the export front, we believe the jump in exports
was due mainly to the upcoming festive season. Most notably, the mom increase in exports was to Bangladesh
(+202.8%), China (+206.7%), Egypt (+23.6%), Iran (+187.1%), Pakistan (+17.5%) and the EU (+31.8%); offset
by a decrease to Benin (-14.2%), India (-4.3%), UAE (-1.6%), Ukraine (-29.3%) and the US (-5.6%).

♦ … resulting in flat stock levels and flattish stock/usage ratio. As a result of the flat CPO stock levels,
stock/usage ratio in Sept was also relatively flat at 9.18% (from 9.12% in Aug), in line with the 7-year average of
9.1%.

Table 2: Monthly CPO Statistics

('000 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10
tonnes)
Opening
stocks 1,579.3 1,974.5 1,934.6 2,239.3 2,003.2 1,789.2 1,655.7 1,622.6 1,562.3 1,451.2 1,405.7 1,704.2
Imports 73.3 47.4 153.8 139.4 50.5 35.4 105.3 110.6 60.3 89.6 82.2 85.5
Productn 1,984.0 1,595.6 1,520.1 1,321.0 1,156.8 1,387.2 1,306.2 1,385.4 1,419.8 1,518.8 1,606.6 1,562.9
Total
supply 3,636.6 3,617.5 3,608.5 3,699.7 3,210.5 3,211.8 3,067.3 3,118.6 3,042.5 3,059.5 3,094.5 3,352.6
Exports 1,478.5 1,501.5 1,224.4 1,461.7 1,294.9 1,396.9 1,285.5 1,365.6 1,444.0 1,469.8 1,211.3 1,467.7
Domestic
use 183.6 181.4 144.9 237.3 126.3 159.1 159.3 190.7 147.4 183.9 179.0 176.8
Total
offtake 1,662.1 1,682.9 1,369.2 1,699.0 1,421.3 1,556.1 1,444.7 1,556.3 1,591.4 1,653.7 1,390.3 1,644.5
End mth
stocks 1,974.5 1,934.6 2,239.3 2,000.7 1,789.2 1,655.7 1,622.6 1,562.3 1,451.2 1,405.7 1,704.2 1,708.1

Productn
YTD 14,450.8 16,046.3 17,566.4 1,321.3 2,478.1 3,865.4 5,171.6 6,557.0 7,976.9 9,495.6 11,102.2 12,665.1
Mom (%) 27.4 (19.6) (4.7) (13.1) (12.4) 19.9 (5.8) 6.1 2.5 7.0 5.8 (2.7)
YoY (%) 20.1 (3.8) 2.5 (0.7) (2.6) 8.7 1.6 (0.7) (1.8) 1.8 7.4 0.3
YTD (%) (1.0) (1.3) (1.0) (0.7) (1.6) 1.9 1.8 1.3 0.7 0.9 1.8 1.6

Exports
YTD 13,149.2 14,650.7 15,875.0 1,461.7 2,756.6 4,153.6 5,439.1 6,804.7 8,248.7 9,718.4 10,929.8 12,397.5
Mom (%) 11.8 1.6 (18.5) 19.4 (11.4) 7.9 (8.0) 6.2 5.7 1.8 (17.6) 21.2
YoY (%) 10.7 10.2 (24.2) 8.0 3.0 10.8 7.7 11.0 12.8 1.0 (8.1) 10.9
YTD (%) 5.8 6.2 3.0 8.0 5.6 7.3 7.4 8.1 8.9 7.6 5.6 6.2

Stocks
Mom (%) 25.0 (2.0) 15.7 (10.5) (10.7) (7.5) (2.0) (3.7) (7.1) (3.1) 21.2 0.2
YoY (%) (5.6) (14.6) 12.3 9.3 14.3 21.2 25.5 13.9 3.0 5.5 20.3 8.2

Source: MPOB, RHBRI

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 12 October 2010

Recent Developments

♦ Contagion effect. CPO prices shot through the roof yesterday to close at a high of RM2,900/tonne. We believe the
reasons for this are threefold: (1) a contagion effect from the spike in soyoil, corn and rapeseed oil prices on 8 Oct;
(2) demand rebalancing activities as the discount between CPO versus soybean oil and rapeseed oil has widened
considerably again; and (3) impact from spike in crude oil prices to above the US$80/barrel mark again. We highlight
these issues below.

♦ Firstly, the contagion effect. We believe the spike in corn and soybean prices was due to relatively bullish numbers
being released from the USDA on Friday, 8 Oct, which indicated that the latest forecasts for US soybean production
was 3.41bn bushels, 1.9% below consensus estimates, while corn production was forecasted to come in at 12.7bn
bushels, 2% below consensus estimates. Besides positive news from the US, in Brazil, the government's crop supply
agency Conab said the 2010/11 soybean crop was estimated at between 67.6-68.9m tonnes, which is not much
different from the 68.7m tonnes harvested last season. This is considered disappointing due to the fact that planted
area for soybeans is actually expected to grow by 1.3-3.1% yoy, which means that yields from this crop are expected
to be weaker due to less than optimal weather. In Germany and Ukraine, rapeseed supplies also continue to be tight,
as unfavourable dry weather conditions continue to plague planting activities. We note that in the last month, soyoil
prices have risen by 4% mom, while rapeseed oil prices have risen 8% mom. Notably, on 8 Oct itself, soybean prices
spiked up by 6.2% while corn prices shot up by 6.0% in just one day.

♦ Still too early to tell if estimates will materialise. While we believe it is still too early to tell if these estimates on
US and Brazilian soybean production will actually materialise, given the volatile weather conditions, we note that
conversely in Argentina, there has been negative news flow regarding its soybean crop, due to favourable rainfall in
September and the high prices of soybeans leading to larger-than-expected plantings. As a result of this, Oil World
recently raised its forecasted soybean crop for Argentina to 52-53m tonnes in 2011 from 51m tonnes previously.

♦ Gap between CPO and competing oils widened… As a result of the increase in soyoil and rapeseed oil prices,
CPO prices have also risen in the last month, albeit not as much as soyoil and rapeseed oil, by 1.4% mom. As the
increase in CPO prices was not as much as the increase in the substitute oils, the gap between CPO and soyoil and
rapeseed oil has therefore widened further in the last month. The discount between CPO and soyoil is now
US$188/tonne (from US$157/tonne last month), significantly above the average historical levels of US$100/tonne,
while the discount between CPO and rapeseed oil has widened further to US$223/tonne (from US$152/tonne last
month), back to being above the historical average of US$200/tonne (see Charts 1 & 3).

Chart 3 : Discount between CPO and Soyoil and CPO and Rapeseed Oil in US$

690
660
630
600
570
540
510
480
450
420
390
US$/tonne

360
330
300
270
240
210
180
150
120
90
60
30
0
-30 Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct-
03 03 03 03 04 04 04 04 05 05 05 05 06 06 06 06 07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10

CPO v soyoil CPO v rapeseed oil

Source: Bloomberg, RHBRI

♦ ... resulting in demand rebalancing activities in China... Although there has not been any change to the
fundamental demand and supply scenario for CPO, we believe CPO prices rose as a result of the competitive

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 12 October 2010
advantage gained due to the widened discounts, and demand rebalancing started happening, particularly in the price-
sensitive countries. We note that this is already being seen in China, whose CPO imports from Malaysia rose 207% in
September. We believe that this phenomenon may not last for long, however, should CPO prices rise to less
competitive levels. Also, recent news from the state-backed China National Oil and Grains Information Centre
revealed that China has completed 62.7% of its autumn grain harvest slightly faster than last year, and that unofficial
estimates project a slightly larger autumn crop this year. If this does come true, demand from China could normalise
in the near term.

♦ … but not in India. We note that despite the large price discounts between CPO and its competitor oils, India did not
increase its imports last month, despite the festive period being around the corner. We believe this is due to the fact
that recently, farm and trade officials in India said that rapeseed output in India's top producing state is likely to jump
45% this year, cutting cooking oil import needs by at least 5% or 500,000 tonnes in 2011. The area under cultivation
for rapeseed is likely to rise as good monsoon rains has given the soil moisture, particularly in Rajasthan, which
produces half of the country's total output. The State farm department said the oilseed crop was expected to be sown
on 3.2m ha in 2010, up 45.5% yoy from 2.2m ha in 2009, while higher domestic prices were likely to encourage
farmers to plant more rapeseed this year.

♦ Impact from spike in crude oil prices to above the US$80/barrel mark again. The third reason for the rise in
CPO prices, we believe, is the spike seen in crude oil prices to touch above the US$80/barrel mark again. Over the
last month, crude oil prices have risen 9.4% from September’s average of US$75.55/barrel to US$82.66/barrel
currently. As expected, this has also had an impact on vegetable oil prices in general, particularly as biofuel demand
continues to gain momentum on the back of government mandates being implemented. We note however, that based
on current crude oil prices and RM:US$ exchange rate, the theoretical value of CPO prices, assuming a historical
correlation factor of 0.7x (where crude oil price = 0.7x CPO price) is between RM2,597-2,759/tonne.

Table 3 : CPO and Crude Oil Price Correlation

RM: US$ rate 2.90 2.95 3.00 3.05 3.10 3.15 3.20 3.25 3.30 3.35 3.40 3.50 3.55
Crude Oil Price
(US$/barrel) CPO Price equivalent (RM/tonne)
40 1,215 1,236 1,257 1,278 1,298 1,319 1,340 1,361 1,382 1,403 1,424 1,466 1,487
45 1,367 1,390 1,414 1,437 1,461 1,484 1,508 1,531 1,555 1,579 1,602 1,649 1,673
50 1,518 1,545 1,571 1,597 1,623 1,649 1,675 1,702 1,728 1,754 1,780 1,833 1,859
55 1,670 1,699 1,728 1,757 1,785 1,814 1,843 1,872 1,901 1,929 1,958 2,016 2,045
60 1,822 1,853 1,885 1,916 1,948 1,979 2,011 2,042 2,073 2,105 2,136 2,199 2,230
65 1,974 2,008 2,042 2,076 2,110 2,144 2,178 2,212 2,246 2,280 2,314 2,382 2,416
70 2,126 2,162 2,199 2,236 2,272 2,309 2,346 2,382 2,419 2,456 2,492 2,566 2,602
75 2,278 2,317 2,356 2,395 2,435 2,474 2,513 2,552 2,592 2,631 2,670 2,749 2,788
80 2,429 2,471 2,513 2,555 2,597 2,639 2,681 2,723 2,764 2,806 2,848 2,932 2,974
85 2,581 2,626 2,670 2,715 2,759 2,804 2,848 2,893 2,937 2,982 3,026 3,115 3,160
90 2,733 2,780 2,827 2,874 2,922 2,969 3,016 3,063 3,110 3,157 3,204 3,299 3,346
95 2,885 2,935 2,984 3,034 3,084 3,134 3,183 3,233 3,283 3,333 3,382 3,482 3,531
100 3,037 3,089 3,141 3,194 3,246 3,299 3,351 3,403 3,456 3,508 3,560 3,665 3,717
105 3,189 3,244 3,299 3,353 3,408 3,463 3,518 3,573 3,628 3,683 3,738 3,848 3,903
110 3,340 3,398 3,456 3,513 3,571 3,628 3,686 3,744 3,801 3,859 3,916 4,032 4,089
115 3,492 3,552 3,613 3,673 3,733 3,793 3,853 3,914 3,974 4,034 4,094 4,215 4,275
120 3,644 3,707 3,770 3,833 3,895 3,958 4,021 4,084 4,147 4,210 4,272 4,398 4,461
Source: RHBRI

♦ Positive impact for CPO overall, but downside risk is rising. We continue to maintain our belief that CPO is
going to be relied upon more and more to fill the gap of the other vegetable oils, and we estimate CPO’s share of
global oils and fats consumption to rise to as high as 28% in 2011, from 23% in 2005. As such, should there be any
disappointment in the production of CPO, due to unforeseen weather circumstances and the like, this would likely
result in an even larger-than-expected spike in CPO prices. As it stands, global CPO stock/usage ratio estimates are
expected to be relatively flat in 2011, at 15.5% (same as 2010), which means that while CPO prices would continue
to be affected by the anticipated bullish trend of the other vegetable oils, the increase could be capped given the as
yet unaffected fundamentals of CPO demand and supply. In addition, as we believe there are a lot of financial and
speculative factors at play currently, the downside risk is also higher. As such, should there be any positive news flow
surrounding soybean and rapeseed output in the near term, this could cause a pullback of these competing oil prices,
which could potentially result in a pullback of CPO prices as well.

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 12 October 2010
Forecasts

♦ CPO price forecasts maintained. No change to our forecasts as we maintain our CPO price forecasts of an
average of RM2,500/tonne for CY2010, RM2,700 for CY2011 and RM2,500 for CY2012.

Risks

♦ Main risks include: (1) a significant change in crude oil price trend resulting in significant movement of CPO and
other vegetable oils prices; (2) weather abnormalities resulting in an over- or under-supply of vegetable oils; (3)
change in emphasis on implementing global biofuel mandates and trans-fat policies; (4) significant changes in trade
policies of vegetable oil importing or exporting countries; and (5) sharper-than-expected global economic
slowdown.

Valuations and Recommendations

♦ NEUTRAL sector call unchanged. No change to our Outperform recommendations on IOIC, KLK, First
Resources and CBIP, our Market Perform recommendations on Sime Darby and IJMP and Underperform
recommendation on Genting Plantations. We maintain our NEUTRAL recommendation on the plantation sector as
a whole.

Table 3. Valuation Bases

Fair Value
Company (RM/share) Valuation Methodology

Genting 7.40 Target 16x PER CY11 earnings.

Plantations
CBIP 4.60 Target PER of 7x CY11 for the oil mill engineering division and 13x CY11 for the plantation division.

IJMP 2.56 Target 16x PER CY11 earnings.

IOIC 6.75 Target PER of 17x CY11 for the plantation division, 11x CY11 for the manufacturing division and 12x
CY11 for the property development and investment property divisions.

KLK 22.05 Target PER of 17x CY11 for the plantation division, 11x CY11 for the manufacturing division, 12x CY11
for the property division and zero value less potential provisions for the retail division.

Sime Darby 9.40 15% discount to SOP comprising: target PER of 17x CY11 for the plantation division and 12x CY11 for
the energy & utilities, heavy equipment, property, motor and other small divisions.

First S$1.40 Target 11x PER CY11 earnings.

Resources

Source: RHBRI

Table 4: Impact of every RM100/tonne increase in CPO price

Genting Plantations +5-7%
KLK +4-6%
IJMP^ +5-7%
IOI Corp +3-5%
Sime Darby +4-6%
First Resources +8-10% (for every US$50/tonne increase)
CBIP +2-4%

Source: RHBRI

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 12 October 2010

Chart 4: KLK Technical View Point

♦ The share price of KLK rebounded from a steep
downtrend after touching a low of RM6.30 in Oct
2008.

♦ The rebound, powered by the supportive uptrend

on the 10-day and 40-day SMAs, had helped the
stock to recover most of its lost ground in the 2008
downtrend.

♦ In fact, with a consolidation formed within the first

six months of 2010 at between the support of
RM15.40 and a resistance of RM17.00, the stock
has actually gained a stronger signal for further
uptrend going forward.

♦ As it finally removed the tough resistance at

RM17.00 recently, it rolled out a solid extension of
the uptrend and closed at a fresh multi-year high of
RM17.70 yesterday.

♦ Chalked up with another bullish candle and a fresh

rebound on the 10-day SMA from the RM17.00
level and the 40-day SMA, the stock is due to
remove the all-time high level of RM17.80 soon, in
our view.

♦ As such, we remain bullish on the uptrend and

expect the stock to chart new territory with the
current upswing soon. The current outlook will be
threatened only if it drops to below the RM17.00
level unexpectedly.

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The opinions
and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or be contrary
to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be construed as an
offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any manner whatsoever
and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons may from time to time
have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of
persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy
will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts any liability for
any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB Group
may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity securities or loans
of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other services
from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based upon
various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

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

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 12 October 2010

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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