Market Dateline PP 7767/09/2010(025354)

RHB Research Institute

RHB Equity 360°

21 September 2010 (Faber, Sime Darby, B-Toto; Technical: TNB)

Top Story : Faber – Concession agreement – likely to be renewed Outperform

Visit Note
- Faber submitted its application for a renewal of its government hospitals non-medical support services
concession to the Ministry of Health in Oct 2009. The outcome is expected to be known by Oct 2010. We
maintain our view that the concession agreement is likely to be renewed.
- Management expects softer UAE earnings in 2H10 due to seasonal factors i.e. ramadhan and summer
when less work can be done. This is in line with our expectation.
- The implementation of the new IFRIC 15 accounting standard on real estate development has been
deferred to Jan 2012, from Jul 2010 previously and as such, Faber will continue to recognise its earnings
based on percentage of completion, i.e. progressive billing method rather than completion method under
IFRIC 15. Subsequently, we have revised up our FY11 property earnings to RM200m from none
previously, while lowering our FY12 property earnings to RM300m (from RM495m previously). This has no
impact on our fair value calculation which includes property based on DCF.
- No change to our FY10 forecast. However, as highlighted above, our FY11-12 EPS forecasts have been
revised by +29.9% and -16.6% respectively for the deferment of IFRIC 15.
- Maintain SOP fair value at RM3.82 and reiterate our Outperform call on the stock.

Corporate Highlights

Sime Darby : Still not enough transparency Market Perform

News Update
- Sime Darby’s forensic audit on the oil and gas division has been completed and that based on the findings
on the four key projects, there has been evidence found to suggest, on a prima facie basis, that there may
have been breaches of duties and obligations and inappropriate conduct. Sime’s Board has resolved to
initiate legal proceedings and where appropriate, to lodge reports with the relevant authorities. However,
the announcement also stated that the Board has been advised by legal counsel to keep confidential the
details of the report so as not to adversely affect the interests of the Group.
- While we are not surprised to find that there have been breaches of conduct and possibly fraud of some
kind, we are disappointed that the company has decided not to disclose to the public the results of the
investigation. We believe disclosing the results of the investigation would have gone a long way in proving
to investors that Sime is serious about being more transparent and improving its corporate governance. We
believe any damage that could be done has already been done in terms of reducing stakeholders’
confidence in the company and it is time for the company to face its demons and expose its faults for all to
see, in order to start rebuilding confidence again.
- No change to our forecasts and fair value of RM8.35. Maintain Market Perform.

Berjaya Sports Toto : Struck by pool betting duty hike and weaker luck factor Market Perform
1QFY11 Results
- 1QFY04/11 net profit was below expectations due to: 1) higher-than-expected gross payout ratio of 67.1%
recorded in 1Q11 (vs. our projected 63%) caused by weaker luck factor, which combined with the two-
month effect of the 2%-pt pool betting duty hike, caused 1QFY11’s gaming EBIT margin to decline 4.2%-pt
yoy; and 2) higher-than-expected interest expense, due to RM7.5m in one-off costs relating to loan
redemption and MTN issuance. We note that topline numbers were in line with our and consensus’
expectations, making up 24-25% of our and consensus FY11 forecasts.
- BToto declared an 8 sen single tier dividend in 1QFY11 (vs. 19 sen in 1QFY10). We believe there is a
possibility for FY11’s dividend payout to surpass consensus expectations, due to holding company Berjaya
Land’s need for cash for its RM711m convertible bonds which are maturing Aug 11.
- We have lowered our net profit numbers for FY11 by 8.3% after raising our gross payout ratios by 1%-pt to
64% (assuming prize payout returns to theoretical levels for the rest of the year) and including the one-off
interest costs. No change to FY12-13 forecasts. Post-earnings revision, there is little change to our DCF-
based fair value of RM4.35. Maintain Market Perform call, as despite unexciting earnings growth, we
believe investors would still hold on to the stock given the decent 5-7% p.a. dividend yield.
 Technical Highlights

Daily Trading Strategy : Good chance to reverse the recent profit-taking leg…
- Thanks to the late buying on selective heavyweight stocks, the previous day’s negative candle was
interrupted as the FBM KLCI recorded a “harami” candle to indicate a better chance to halt the current
profit-taking leg.
- If the follow-through buying support improves further today, the index will trigger a rebound to resume the
recent rally.
- Upon the removal of last Friday’s high of 1,479.59, it will aim towards the technical gap at 1,490.50 -
1,497.64, 1,500 and the all-time high level of 1,524.69.
- We are confident that the 10-day SMA of 1,452 and the pivotal point of 1,450 will continue to underpin the
current uptrend on the FBM KLCI.
- Going forward, investors will focus on the release of further details on the National Key Economic Areas
(NKEA) today as well as the interest rate decision by the US Federal Reserve on the FOMC meeting late
tonight.

Daily Technical Watch: Tenaga Nasional – Medium-term uptrend stays intact…

- 10-day SMA: RM9.061
- 40-day SMA: RM8.782
- Support: IS = RM9.00 S1 = RM8.50 S2 = RM7.95
- Resistance: IR = RM9.60 R1 = RM10.60

Bulletin Board

Co/Sector News Impact Recom

Axiata CEO, Datuk Seri Jamaludin Ibrahim said that the This has been an ongoing concern since Idea’s OP, FV =
company may have to review a possible share price fell over concerns on competition and RM4.75
impairment of its associate stake in India’s Idea the value of the 3G licence. We highlight that any
Cellular. (Financial Daily) impairment if any: 1) would be a non-cash item;
2) would not impact our core net profit forecasts;
3) would not affect our SOP-derived fair value;
and 4) would not likely impair Axiata’s ability to
pay future dividends.
Affin An out-of-court settlement could be on the cards in In our view, the key impact to Affin here is whether OP, FV =
the legal dispute arising out of the 2001 merger any payment would be made to BSNC in order to RM4.10
between BSN Commercial and Perwira Affin Bank. settle the matter of ownership as Affin may then
The case mainly relates to ownership of 106 non- need to make the necessary provisions. We await
performing accounts (gross value of RM988m). for further details on the matter.
(Financial Daily)

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Malaysia Steel Works Renounceable rights issue of warrants on the basis of 1-for-2 30-Sep-10 -
Berjaya Sports Toto First interim single tier exempt dividend of 8 sen 6-Oct-10 18-Oct-10
Guocoland (M) Final dividend of 2 sen less 25% tax 18-Oct-10 3-Nov-10
Master-Pack Group Interim dividend of 1% less 25% tax 15-Nov-10 13-Dec-10

Going “ex” on 22 Sep

Dominant Enterprise Final dividend of 1 sen less 25% tax 22-Sep-10 4-Oct-10
Dominant Enterprise First interim dividend of 1 sen less 25% tax 22-Sep-10 4-Oct-10
Mega First Corporation Interim dividend of 2% less 25% tax 22-Sep-10 7-Oct-10
Carlsberg Brewery M'sia Interim div of 5 sen + interim special div of 2.5 sen, less 25% tax 22-Sep-10 8-Oct-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
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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.

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