Market Dateline PP 7767/09/2011(028730)

RHB Research Institute

RHB Equity 360°

21 October 2010 (Media, Rubber Gloves, Puncak Niaga, WCT, Axis REIT, BAT; Technical: AFG)

Top Story : Media – 9M10 print and tv adex up by 18.2% yoy Overweight
Sector Update
- According to Nielsen Media Research, Sep’s gross ad spend for print and TV media rose 3.4% yoy with
print adex up 7.0% yoy, while adex for TV remain flat yoy. Mom, total print and TV gross adex fell by
14.5%. This was not too surprising considering that Aug adex benefited from the Merdeka celebrations and
Hari Raya festival.
- For print media, Sep’s adex was led by Chinese dailies, where adex grew 13.8% yoy followed by English
dailies, which grew 8.7% led by Malay Mail and Star. Adex for the Malay segment remained relative flat yoy
largely due to weaker adex by Utusan and Harian Metro, offset by stronger adex from Berita Harian.
- Sep’s TV adex growth was flat yoy due to weaker adex recorded by the Media Prima channels (-6.1% yoy),
offset by the stronger numbers from TV2 and TV1.
- While 9M10 adex growth stood at 18.2% yoy, we expect the growth rate to slowdown in 4Q10 as adex will
now be coming from a higher base. Nevertheless, adex growth should continue to remain healthy,
supported by the year-end festivities.
- Media Prima (FV=RM2.75) remains our preferred pick as we believe adex (especially TV) will be a prime
beneficiary of a recovering economy. We maintain our Outperform call on Media Chinese (FV=RM1.21)
and Trading Buy call on Star (FV=RM4.34). Maintain Overweight for the sector.

Macro View

Economy : Leading index bounced back in Aug, pointing to a resilient economic activities ahead
Economic Highlights (published 20 Oct 2010)
- The Leading Index, which provides an early signal of the direction that the economy is heading, rebounded
to increase by 0.9% mom in August, from -0.1% in July and -0.2% in June. This was the first increase in
five months, suggesting that the leading index, though weakening, remains resilient.
- The pick-up was underpinned by increases in real money supply (+0.8%) and CPI for services (+0.1%;
inverted) as well as a stronger growth in the Bursa Malaysia Industrial index (+0.1%). These were,
however, offset partially by sharper declines in trade with eight major trading partners (-0.2%) and unit
labour cost in the manufacturing sector (-0.2%) as well as a slowdown in the number of housing permits
approved (+0.2%).
- As a result, the leading index’s six-month smoothed growth rate bounced back to +2.2% in Aug, after
moderating to +0.9% in Jul but off the peak of +11.2% recorded in Mar. This was the first rebound, after
four consecutive months of slowing down, indicating that the economy is likely to sustain its growth in the
months ahead, albeit at a more moderate pace.

Sector Call

Rubber Gloves : Still cautious on near-term outlook Neutral

Sector Update
- The share prices for glove manufacturers were generally up 0.4-10.1%, as compared to 0.1% for the FBM
KLCI and FBM100 respectively. We believe the strong share price performances were largely due to the
news that MARGMA had urged its members to raise glove prices to pass on the higher raw material costs
and continued weakening US$ against RM.
- In our view, the near-term outlook for the rubber glove manufacturers remains challenging due to slowdown
in orders for rubber gloves as latex price remains high (+27.8% YTD) while the US$ remains soft against
RM (-8.8% YTD). We believe this will make it difficult for some glove manufacturers to adjust prices.
- Kossan (FV=RM4.25) remains our top pick as nitrile gloves make up a higher proportion of sales mix and
demand for nitrile gloves have been rather steady as compared to latex gloves.
- Maintain Underperform call on Top Glove (FV=RM5.40) and Market Perform call on Adventa (FV=RM2.47).
- As for Hartalega (FV=RM5.64), the potential upside to our fair value is now in line with our expected market
return and thus, we downgrade our call on the company to Market Perform.
- No change to our Neutral call on the sector.
Corporate Highlights

Puncak Niaga : Eyeing Hogenakkal water project in India Market Perform

News Update
- Puncak Niaga formed a 60:40 JV with P&C Constructions (P) Ltd to bid for Packages III and V for the
Hogenakkal water project in India.
- The project comprises five Packages worth INR19.288bn (RM1.35bn), and will require annual maintenance
cost of INR636.7m (RM44.6m).
- We understand the project will require three years to complete.
- The Japan International Co-operation Agency is funding 82% of the project cost while the balance will
come from the India government.
- Maintain earnings forecasts and fair value of RM3.01 (20% discount to DCF-derived NPV of RM3.77 based
on WACC of 11.5%). Maintain Market Perform.

WCT : Secures RM1.36bn building job in Qatar and RM128m hospital project in Sabah Underperform
News Update
- WCT has secured two key contracts, namely: (1) A QAR1.59bn (RM1.36bn) government administrative
building job in Doha, Qatar; and (2) The Tuaran hospital project in Sabah worth RM127.8m.
- The latest contracts have boosted its YTD new contracts secured to RM2.1bn and its outstanding
construction orderbook by 53% to RM4.3bn.
- Assuming an EBIT margin of 8-10%, the latest contracts will fetch RM119-149m EBIT over the construction
period ending Apr/May 2013.
- We expect limited reaction from the market as WCT had been hinting on the Qatar job for a while by now.
- We are raising FY12/10-12 net profit forecasts by 6-13%, having reflected RM2.1bn new contracts secured
in FY12/10 vis-à-vis our previous assumption of RM1.5bn.
- Fair value is raised to RM2.56 from RM2.30. Maintain Underperform.

Axis REIT : Quattro West started to contribute Outperform

3QFY10 Results
- Axis REIT’s 3Q10 realised net profit of RM12.6m (+22.8% yoy; +3.9% qoq) was in line with our expectation
and consensus estimates. Sequential revenue increased by 6.5%, mainly attributed to the contribution of
Quattro West (formerly known as Nestle House), which commenced its operations in Aug, as well as a
positive rental reversion of 6.1% up to Sept 2010. A 4 sen DPU was declared for 3Q10.
- In 4Q10, 4 new properties will make their maiden contribution to earnings. These include: Tesco Bukit
Indah Johor, PTP D8 warehouse in Johor, Axis PDI Centre in Banting and Axis Technology Centre in PJ.
- No change in our forecasts. We maintain our Outperform call on Axis REIT, with an unchanged indicative
fair value of RM2.67, based on 7% target yield on our FY11 DPU forecast of 18.7 sen.

BAT : Impact of less than 20’s ban cushioned by relaunch of Peter Stuyvesant Underperform
3QFY10 Results
- 9MFY12/10’s net profit of RM548.4m (-4.4% yoy) was within expectations, accounting for 76% of both our
and consensus forecasts. This was on the back of a 3.6% growth in revenues.
- Besides the impact on margins, the ban also affected market share of BAT’s premium segment. 3Q10
premium market share of 72.1% was lower by 0.5%-pt from 3Q09.
- To capture the down-trading market, BAT in June relaunched Peter Stuyvesant as a VFM brand. We were
positively surprised at the response as Peter gained 2.6% market share after just four months of being
launched, with minimal canibalisation towards the other brands’ market shares.
- Cigarette prices could yet again be increased if the proposal 0.5 sen/stick cess is implemented by the
Government. Assuming BAT fully passes on the cess to customers without any increase in sales tax, a
price of 20’s would cost RM10.10.
- We have revised our FY11-12 earnings forecasts up by 0.5-0.7% after increasing our VFM market share
assumptions to 42-44% (from 37%).
- Our fair value is thus raised to RM42.92 (from RM42.90 previously) based on unchanged WACC of 7.6%.
Technical Highlights

Daily Trading Strategy : Recapturing the 10-day sma will renew upbeat sentiment…
- Despite failing to reclaim the 10-day SMA of 1,488 yesterday, we see a good chance for further near-term
recovery as the local and regional markets’ performance appeared more resilient than we had expected.
- Apart from that, we were encouraged by the solid rotational plays on the lower liners and the selective
sectors, which have kept the trading sentiment on an upbeat mode with robust participation in recent
sessions.
- Therefore, in our opinion, further recovery to above the 10-day SMA today will attract further follow-through
buying support in the near term.
- And once the recent high of 1,503.82 can be cleared, the short-term technical scenario will return to
positive as the benchmark gears up to rechallenge the historical high at 1,524.69.
- On the downside, the solid medium-term support at 1,450 level and the 40-day SMA of 1,458 are expected
to keep sellers at bay.

Daily Technical Watch: Alliance Financial Group – Medium- to long-term uptrend remains largely intact…
- 10-day SMA: RM3.225
- 40-day SMA: RM3.151
- Support: IS = RM3.10 S1 = RM2.95 S2 = RM2.80
- Resistance: IR = RM3.30 R1 = RM3.48 R2 = RM3.68

Bulletin Board

Co/Sector News Impact Recom

Auto Berjaya Corp (BCorp) has obtained a licence to Neutral. We believe any additional capacity from OP
manufacture passenger and commercial vehicles the new manufacturing licence to have minimal
at a factory to be built in Selangor (Bukit Tagar), near-term impact on the sector as the license
but the rights do not cover small cars that the does not cover small cars that the diversified
diversified group is more interested in. The MITI group is interested in. While the licence will
licence is for the production of commercial facilitate the company’s plans for hybrid and
vehicles, hybrid cars, electric cars and luxury electric vehicles, at present such cars are not as
passenger vehicles. BCorp wanted to partner popular as traditional vehicles hence the impact
China's BYD Auto to develop 1-litre cars for the on the industry will also be minimal in the near
domestic and Asean markets at a new factory on term.
41ha in Bukit Tagar. Both parties had signed a
MOU to develop the latter's F0 model in Feb. F0
retails at between US$4,000 (RM13,778) and
US$5,000 (RM17,222) in China. The
government, however, does not plan to relax
rules under the National Automotive Policy,
which only allows new manufacturing licence for
cars with capacity of 1.8l and above. A
spokesperson mentioned that previous plans to
assemble BYD vehicles had not been shelved.
BYD Auto is the fourth biggest carmaker in
China by volume, after Volkswagen, General
Motors and Toyota. (Business Times)
Genting Has entered into an agreement for a 50:50 JV with Positive if the casino licence application is MP, FV =
Malaysia Apollo Resorts & Leisure Ltd, to develop a leisure approved. However, the outcome of the application RM3.95
entertainment centre on 16 acres of land in the is only expected to be known in Feb 2011, while
Docklands, London, next to the London City Airport. work would start by 3Q2012. The casino would then
Apollo has been approved in principle under the first be targeted for opening in 2013.
stage application for a “single large casino
premises” licence in the London Borough of
Newham (which covers the Docklands district), and
 will proceed to the second stage. If approved, the
licence will be transferred to the JV. The land will
also be used on an interim basis to facilitate the
planned Olympic Festival Village. (Bursa Malaysia)

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Advanced Packaging Tech Capital repayment and share consolidation 03-Nov-10 25-Nov-10
British American Tobacco Second interim dividend of 64 sen tax exempt 08-Nov-10 19-Nov-10
Scicom (MSC) Tax exempt final dividend of 1 sen 15-Nov-10 02-Dec-10

Going “ex” on 22 Oct

Tien Wah Press Holdings Renounceable Rights Issue on the basis of 2-for-5 22-Oct-10 -
Kein Hing International First and final tax-exempt dividend of 4% 22-Oct-10 19-Nov-10
YNH Property Interim dividend of 3% single tier 22-Oct-10 26-Nov-10

...For more details, see individual reports attached

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