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

RHB Research Institute

RHB Equity 360°

4 March 2010 (Faber, Banks, TNB, Star, Adventa; Technical: Jaks)

Top Story : Faber – More growth from IFM business Outperform

Briefing Note
- Faber’s FY09 earnings were significantly boosted by the Integrated Facilities Management (IFM) business
in UAE, especially from the “low-cost housing” and infrastructure facilities contracts which started
contributing in Nov-09. We understand the “low-cost housing” contract has been extended for another year,
and we expect the infrastructure facilities contract to be extended in due course.
- Although Faber’s India IFM business contributed only RM20m revenue in FY09, the earnings outlook is
positive given the full-year contribution from the hospitals segment (via its jv with Apollo Group) as well as
the Hyderabad International Airport. The company will also be tendering for the New Delhi airport contract
which is expected to be awarded by Oct-10.
- As for its property segment, the company currently has unbilled sales of RM30m and is currently on track to
launch three property projects this year with an estimated GDV of RM495m. Sales from these launches will
likely boost FY11-12 earnings.
- Faber reiterated that it had submitted its application for a renewal of the Government concession in Oct-09.
A reply is expected in Oct this year. Management declined to comment on media reports that the company
may buy Pantai Medivest, the second concessionaire.
- We have raised our FY10 and FY11 earnings forecasts by 18.0% and 24.0% respectively. We introduced
our FY12 numbers. Our indicative fair value has been raised to RM3.30 from RM3.01.

Sector Call

Banks : CY4Q09 report card – Record breaking streak Overweight

Sector Update
- CY4Q09 reporting season above expectations for three consecutive quarters albeit at lower magnitude.
- Aggregate net profit at record on the back of record net interest income, second highest level of non-
interest income and lower LLP which were more than sufficient to offset record overheads.
- Asset quality and annualised gross and net NPL formation improved.
- Raised forecasts immediately after the results. Most significant upgrade by RHBRI was Maybank while
consensus cut HL Bank forecasts substantially. RHBRI forecasts are now largely in line with consensus.
- Maintain Overweight rating on the sector.
- Top pick is Maybank. We also like CIMB, AMMB and Public Bank for big cap exposure. AFG, EON Cap
and RCE Cap are also rated as Outperform. Affin is rated Market Perform and HL Bank is Underperform.

Corporate Highlights

TNB : Tariff decision deferred, for now Outperform

News Update
- According to Business Times, the Government has deferred announcing an increase in electricity tariffs
pending a programme to educate the public on the need to raise rates.
- We believe investors would be disappointed by (yet again) another delay. Originally scheduled for end-
2009, the tariff review was delayed in Jan ’10 and appears to be delayed again.
- However, a silver lining is that a tariff increase appears to be on the cards, but it’s just a matter of timing. At
this stage, however, it is unclear whether the electricity tariff increase would be in relation to the base tariff
hike or for higher fuel costs, e.g. natural gas.
- While a tariff increase for higher natural gas price would be earnings neutral to TNB, a base tariff hike,
however, could help provide a nice lift to TNB’s earnings and help cover rising capacity payments for
Jimah. We estimate that every 1%-pt increase in tariffs could raise our FY11 net profit projection by 5-6%.
- We see TNB as a key beneficiary of an improving economy. Demand for the months of Nov and Dec had
picked up again, registering growth of +12.2% yoy and +7.6% yoy while industrial demand for Nov ’09 rose
11.1% yoy, the first positive monthly yoy growth since Sept ’08.
- No change to our earnings forecasts and indicative fair value of RM9.50 (target CY10 PER of 14x).

Star : JV with Jaks to develop PJ land Market Perform

News Update
- Star has entered into a jv agreement with Jaks Island Circle, a 51%-owned subsidiary of Jaks Resources to
develop mixed residential and commercial development, comprising three office towers and a 15-storey
residential block. Total GDV is approximately RM370m, and should be completed within 2-3 years.
- Star will contribute a 24,568 sq. metre leasehold commercial land in Petaling Jaya to the project. The land
is currently occupied by factory and office buildings that have been rented out to Utar Education
Foundation at a monthly rental of RM115.8k.
- Under the agreement, Star is entitled to saleable office units with a built up of 220,000 sq. ft., which Star
plans to house its three radio stations and its new multi-media division currently housed in rented premises.
- Assuming Star rents out the whole of the 220,000 sq. ft. at RM2.00 per sq. ft. (based on rental rate that
Jaks Island is proposing for one of the office towers to University Tunku Abdul Rahman) or RM5.3m p.a.,
Star could recognised approximately RM3.9m in incremental annual rental income (after taking into
account rental income of RM1.4m foregone from Utar Education Foundation). This is approximately 0.4%
of FY12 revenue, which is insignificant.
- Maintained indicative fair value of RM3.30 based on unchanged target FY10 PER of 16x.

Adventa : 1Q10 earnings within expectations Outperform

1QFY10 Results
- 1QFY10/10 1Q net profit of RM9.4m (+24.7% yoy), accounted for 20.5% and 22.3% of our and consensus
full-year net profit estimates respectively. We consider this to be in line with our forecast as we expect
stronger earnings ahead following the additional capacity expansion, which will come through in 2H2010.
- Qoq, revenue grew 2.5% qoq on the back of higher selling prices in order to pass on higher raw material
cost to customers, which more than offset the increase in latex prices (+24.2% qoq) and weaker US$ (-
2.3% qoq) as 1Q EBIT margin expanded by 1.7%-pts qoq.
- We are keeping our FY10-12 earnings unchanged for now.
- Our fair value is maintained at RM4.34 based on unchanged target CY10 PER of 13x.

Technical Highlights

Daily Trading Strategy : The 10-day and 40-day SMAs to buffer short-term downside…
- In line with our expectation, the local benchmark tweaked lower on mild profit-taking activities yesterday.
- Although the negative candlestick pattern suggests further consolidation ahead, the FBM KLCI will be well-
supported above the 40-day and 10-day SMAs near 1,276 and 1,271 in the near term, in our view.
- In fact, we still maintain that the current upswing remains intact, and the index is still poised to revisit the
psychological level of 1,300 soon, as long as it stays at above the two SMAs.
- However, to resume the previous 10-month uptrend, the FBM KLCI must remove the next psychological
resistance of 1,300 and the Jan high of 1,308.52.
- Meantime, investors will focus on Bank Negara’s interest rate decision on Thursday as well as the
upcoming US monthly jobs data come Friday to assess near-term market direction.

Daily Technical Watch: Jaks Resources – Further rally if it neutralises Jan’s high of RM0.875 …
- 10-day SMA: RM0.762
- 40-day SMA: RM0.7542
- Support: IS = RM0.71 S1 = RM0.62 S2 = RM0.55
- Resistance: IR = RM0.84 R1 = RM0.95 R2 = RM1.08

Bulletin Board

Co/Sector News Impact Recom

Plantations According to MPOB chairman, Malaysia may Negative, although there have been reports that OW
 miss its output target of 18.1m tonnes (+2.8% planters are now looking to recruit workers from
yoy) this year because of a shortage of foreign other countries like China, Bangladesh and the
labour. The industry is in talks with the Philippines. At last update, all the companies we
government now to get more flexible work cover are not facing any significant shortage of
permits for foreign labourers which would include labour, although they admit that the hiring
extending the length of the work permits, process has become more tiresome and tedious.
currently at 5 years. (Financial Daily)
AEON Mydin to open its biggest hypermarket in Kota There is no impact to AEON as it does not have OP, FV =
Bahru by 2012. (Business Times) any supermarkets in Kota Bahru. RM5.85

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Multi-Purpose Holdings Interim dividend of 4 sen less 25% tax 18-Mar-10 29-Mar-10
Boustead Holdings 4th interim dividend of 4 sen less 25% tax 16-Mar-10 31-Mar-10
Boustead Holdings 4th interim dividend of 6 sen single tier 16-Mar-10 2-Apr-10

Going “ex” on 8 Mar

Wijaya Baru Global Fifth interest payment on 7% 5-year ICULS 2007/12 8-Mar-10 17-Mar-10

...For more details, see individual reports attached

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