Market Dateline PP 7767/09/2011(028730)

RHB Research Institute

RHB Equity 360°

22 October 2010 (Telecom, MAHB, Fajarbaru; Technical: B-Corp)

Top Story : Telecom – Sizing up the pure mobile domestic players – Maxis vs. DiGi Neutral
Sector Update
- In this report, we make a comparison between the only two purely domestic focused mobile operators in
Malaysia, i.e. Maxis and DiGi.
- We find that Maxis is ahead in: (1) subscriber and revenue market share; (2) EBITDA margins; (3) postpaid
ARPU; (4) 3G network population coverage; and (5) non-voice contribution.
- DiGi however commands higher prepaid ARPU due to its traditional focus.
- We prefer Maxis given that it is marginally cheaper by 4.5% at 16.9x FY12/10 PE compared to DiGi’s
17.7x, while offering higher dividend yield of 6.6% in 2010 compared to DiGi’s 5.7%.
- Going forward, we believe Maxis is best positioned to capture the huge untapped potential that mobile
broadband has to offer due to its transformation into Malaysia’s first quad-play telco, cross-selling
opportunities within its higher quality postpaid subscriber base and wide 3G network population coverage.
- No change to our Neutral stance on the sector.
- Maintain Outperform on Maxis (FV=RM5.75) and DiGi (FV=RM26.35) based on DCF valuation. TM (Market
Perform, FV=RM3.55) remains primarily a dividend play, while Axiata (FV=RM4.75) is still a Market
Perform given its strong YTD share price performance.

Corporate Highlights

MAHB : Sabiha Gokcen for long term prospects Outperform

Visit Note
- In the near term, Sabiha Gokcen International Airport (SGIA) will not significantly contribute to MAHB’s
earnings as it expects a period of gestation within the next seven to eight years. Nonetheless, management
is optimistic in the long term terminal given its high growth potential.
- While Ataturk International Airport (AIA) is considered to be the main airport of Istanbul, the terminal is
facing capacity constraints and is estimated to have exceeded capacity by 40%. In addition, we note that
constraints are exacerbated by the lack of space surrounding the terminal. Therefore, we believe this
provides SGIA the opportunity to capture AIA’s passenger spillovers.
- We now take the opportunity to incorporate the KLIA 2 and SGIA projects into our fair value. For the KLIA 2
project, we have assumed a project internal rate of return (IRR) of 8.0%, which implies to equity IRR
17.9%, we estimate that MAHB will yield an enhancement of RM716.3m, translating to 65.1per share.
- On the other hand, for the SGIA project, we have assumed a project IRR of 10.0%, translating to equity
IRR 24.4%, we estimate that the investment will yield an enhancement of RM213.7m given its 20% stake,
translating to 19.4per share.
- Hence, we have raised our SOP fair value to RM6.81 (from RM5.96). Maintain Outperform.

Fajarbaru : Lands RM36.5m Pasir Mas Halal Park infrastructure job Outperform
News Update
- Fajarbaru has been awarded by the ECER Development Council a RM36.5m contract for earth and
infrastructure works for Phase 1, Pasir Mas Halal Park in Kelantan.
- This is the second key contract Fajarbaru has secured so far in FY06/11, boosting its YTD new contracts
secured to RM99m and outstanding construction orderbook by 8% from RM459m to RM496m
- Assuming an EBIT margin of 10-12%, the latest contract will fetch RM3.7-4.4m EBIT over the 15-month
construction period commencing Nov 2010.
- Forecasts maintained as we have assumed Fajarbaru to secure RM250m new jobs p.a. in FY06/11-12.
- Fair value is RM1.37. Maintain Outperform.

Technical Highlights

Daily Trading Strategy : Fresh opportunity to retest 1,500…

- Although the closing with a “star-like” candle indicates a slight weakness on the FBM KLCI in the
immediate term, we favour its ability to crossover the 10-day SMA of 1,489 yesterday.
- A sustainable trading above the 10-day SMA means a return to positive trading sentiment in the short term.
- For now, the 10-day SMA becomes its immediate support level on the chart, followed by the tiny technical
gap near 1,472.32 - 1,476.05.
- In addition, the robust trading volume and healthy rotational plays are expected to cap profit-taking
pressure in the near term, in our view.
- As such, we see a fresh opportunity to retest the 1,500 psychological level and the recent high of 1,503.82,
before gearing up to challenge the historical high at 1,524.69
Daily Technical Watch: Berjaya Corporation – A renewed bullish sentiment on the stock likely…
- 10-day SMA: RM1.052
- 40-day SMA: RM1.05
- Support: IS = RM1.06 S1 = RM0.88 S2 = RM0.75
- Resistance: IR = RM1.20 R1 = RM1.33 R2 = RM1.55
Bulletin Board
Co/Sector News
Property The Housing and Local Government Minister
Datuk Wira Chor Chee Hung commented that
“There is still a long way to reach property bubble
in Malaysia. The appreciation in property prices
was started since 2008, due to land cost, building
materials and vibrancy of the economy”. (BT)
Auto MAA expects prices of hybrid cars will be more
attractive next year to boost sales after the 2011
Budget announcement of full excise duty
exemptions on hybrid cars below 2,000cc until 31
Dec 2011. The removal of excise duties for
hybrid cars means that the price tags for vehicles
such as the Honda Civic Hybrid and Toyota Prius
could be slashed drastically. It is estimated that
the Honda Civic Hybrid and Toyota Prius, now
costing RM129,000 and RM175,000 respectively,
would have a new price tag of RM100,980 and
RM128,046 correspondingly following the excise
duty exemption.
KLK KLK has terminated a previous agreement
(announced in Jul 09) to acquire a 95% stake in
a company with 2,336ha of land in Belitung,
Indonesia for RM2.3m, or RM1,033/ha. Instead, it
has entered into another agreement to acquire
95% in the company which now has a licence to
plant up two pieces of land (the original 2,336ha
and an additional 4,840ha) in the same area, for
RM8.83m, or RM1,295/ha. These lands are
adjacent to KLK’s existing plantations in Belitung.
As KLK has engaged a high conservation value
Impact Recom
Whether or not there is a property bubble is more OW
of a subjective view, we do believe there is some
bubble for properties in selective locations of
Klang Valley. Recently, there is an easing of
concern that the Government is unlikely to
implement any measures to target the
“overheating” property market after the positive
announcement in 2011 Budget. However, we
believe some regulatory risks still prevail.
According to some unconfirmed sources, instead
of implementing a cap on LTV, BNM will focus on
individual commercial banks to tighten their credit
policy. If this is true, impact on the property
market would be very minimal.
Neutral. We already mentioned in our Budget OP
report that cars like the Prius and Civic Hybrid
would see 14-19% price cuts, based on the
Budget announcement. We also mentioned that
while the incentive is a big plus for interested
hybrid car buyers, it will have minimal impact on
the total TIV of the industry, given its immaterial
numbers thus far.
Positive. KLK is replacing one of its previous OP, FV =
S&P agreements to buy land in Indonesia with RM22.05
another, effectively increasing its landbank by a
net 4,598ha for an additional RM6.5m. Although
the effective price of the landbank (based on
KLK’s 95% stake) is slightly higher, at
RM1,295/ha, this is still not excessive, and in line
with the pricing of other greenfield land in
Indonesia, of between RM1,200-2,200/ha.
 study on the land and is carrying out a legal and
financial due diligence, the deal is likely to be
completed in 1Q2012. (Bursa)
KFC KFC expects to have 17 outlets in India by the
end of next year. This includes five outlets which
will be acquired from master franchise holder
Yum! Brands. Currently KFC has three outlets in
India after opening one more yesterday. (Star)
KFC Kulim says it is not interested in taking KFC
private for now. According to Kulim MD, the
possibility of privatization is very remote but not
unlikely. This news follows a recent newspaper
report commenting on Kulim’s disposal of its
shares in QSR and picking up KFC shares.
QL QL announced that it is swapping its 40.51%
stake in Boilermech S/B with that of a 40.51%
stake in Boilermech Holdings. Boilermech
Holdings will in turn fully own Boilermech S/B.
Boilermech Holdings was incorporated to
facilitate its proposed listing on the ACE Market.
(Bursa)
Positive. The target is in line with our forecast of OP, FV =
16 stores owned by KFC in India by end-2011. RM3.61
We are also positive on its plan to acquire 5
stores from Yum! as that eliminates the execution
risk of opening new stores. We understand that
in terms of opening new stores, KFC is having a
few hiccups due to red tape issues.
Neutral. We understand that Kulim’s increased OP, FV =
stake in KFC is for the former to able to directly RM3.61
own KFC and also directly receive dividends
without having to go through QSR first. As it
stands, Kulim owns approximately 50% of QSR
and QSR owns about 50% in KFC.
We are positive on this news as the proposed OP, FV =
listing of Boilermech will provide much needed RM5.41
capital for QL’s venture into renewable energy
while also unlocking value for QL. We previously
highlighted in our 6 Oct report that there is
potential for Boilermech to be listed. The exact
timeline for the listing has yet to be confirmed.

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Atrium REIT Third interim income distribution of 2.15 sen 4-Nov-10 30-Nov-10
CCK Consolidated Final single tier dividend of 3 sen 29-Dec-10 24-Jan-11

Going “ex” on 25 Oct

Hong Leong Bank Final dividend of 15 sen less 25% tax 25-Oct-10 11-Nov-10
C.I. Holdings Final dividend of 7 sen less 25% tax 25-Oct-10 19-Nov-10
Puncak Niaga 4th mandatory partial redemption of 15-year RUJN 25-Oct-10 19-Nov-10
Puncak Niaga Semi-annual coupon payment for 15-year RUJN 25-Oct-10 19-Nov-10

...For more details, see individual reports attached

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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

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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