Malaysia Equity: 2011 Outlook

MALAYSIA EQUITY RESEARCH
KDN : PP 10744/06/2011
1 DEC 2010
MALAYSIA EQUITY
2011
OUTLOOK :
Its the climb
The summit is just a halfway point.

Ed Viesturs. Legendary mountaineer.
KINDLY REFER TO THE LAST PAGE OF THIS PUBLICATION FOR IMPORTANT

DISCLOSURES
DECEMBER 2010 1
TABLE OF CONTENTS
A. 2010 Review And 2011 Outlook

i. Performance, comparisons and assessment ......................................................................... 3
ii. Macro economics performance and outlook........................................................................... 6
iii. Corporate earnings ................................................................................................................ 7
iv. Market valuation and stock selection...................................................................................... 8
B. Sectors We Like
i. Semiconductor...................................................................................................................... 13
ii. Telecommunications ............................................................................................................. 14
iii. Plantation.............................................................................................................................. 15
iv. Oil and gas ........................................................................................................................... 16
v. Banking................................................................................................................................. 17
vi. Healthcare ............................................................................................................................ 18
vii. Construction ......................................................................................................................... 19
C. Sectors To Be Cautious Of
i. Property ................................................................................................................................ 21
ii. Automotive............................................................................................................................ 22
iii. Ports ..................................................................................................................................... 23
D. Our Neutral-View Sectors

i. Media .................................................................................................................................... 25
ii. Consumer ............................................................................................................................. 26
iii. Aviation ................................................................................................................................. 27
iv. Shipping................................................................................................................................ 27
v. Power ................................................................................................................................... 28
vi. Glove...................................................................................................................................... 29
MIDF Research Stock Universe ............................................................................... 30-33
KINDLY REFER TO THE LAST PAGE OF THIS PUBLICATION FOR IMPORTANT

DISCLOSURES
2 DECEMBER 2010
A. 2010 REVIEW &

2011 OUTLOOK
i. Performance, comparisons and assessment
Strong market follow-through in 2010: The FBM KLCI gained 18.3% in the year to Nov 21,
keeping pace the recovery momentum after the index gained 45% in 2009. The index hit all time
highs of 1531.99 points on 10 Nov, or 20.4% for the year to date.
Fourth best in Asia: At the point of writing, the FBM KLCI is set to be the fourth best performer
among major indices in Asia this year, measured in both, local currency and U.S dollar. The KLCI
trailed the Jakartas Composite Index, Philippines Composite and Thailands SET. It is apparent
that the TIPs markets were the Asian darlings of investors this year as investors are concerned
over the bubbles in China.
Table 1: Performance of various markets (% change) as at 21 Nov 10

In Local Currency Index point 1Q10 2Q10 3Q10 4Q10* 2009 2010*
Jakarta Composite 3,725.05 9.6% 4.9% 20.2% 6.4% 87.0% 47.0%
Philpines Composite 4,203.60 3.6% 6.7% 21.6% 2.5% 63.0% 37.7%
SET Index 1,007.35 7.3% 1.2% 22.3% 3.3% 63.2% 37.1%
FBM KLCI 1,506.05 3.8% -0.5% 11.4% 2.9% 45.2% 18.3%
KOSPI 1,940.96 0.6% 0.3% 10.3% 3.6% 49.7% 15.3%
Mumbai Sensex 30 19,523.35 0.4% 1.0% 13.4% -2.7% 81.0% 11.8%
Straits Times 3,197.37 -0.4% -1.8% 9.2% 3.2% 64.5% 10.3%
Hang Seng 23,605.71 -2.9% -5.2% 11.1% 5.6% 52.0% 7.9%
Dow Jones 11,203.55 4.1% -10.0% 10.4% 3.6% 18.8% 7.4%
Taiwan Weighted 8,306.12 -3.3% -7.5% 12.4% 0.8% 78.3% 1.4%
Nikkei 225 10,022.39 5.2% -15.4% -0.1% 7.0% 19.0% -5.0%
Shanghai Composite 2,888.57 -5.1% -22.9% 10.7% 8.8% 80.0% -11.9%
In US Dollar Index point 1Q10 2Q10 3Q10 4Q10* 2009 2010*

Jakarta Composite 3,725.05 13.6% 5.4% 22.1% 6.1% 117.1% 55.1%
SET Index 1,007.35 10.7% 1.0% 30.8% 4.6% 69.9% 52.9%
Philpines Composite 4,203.60 5.8% 3.5% 28.9% 2.8% 67.8% 45.2%
FBM KLCI 1,506.05 9.4% 0.6% 16.5% 1.7% 46.1% 30.4%
Straits Times 3,197.37 0.1% -1.7% 15.9% 4.9% 68.2% 19.7%
KOSPI 1,940.96 3.6% -7.1% 18.3% 4.3% 66.5% 18.8%
Mumbai Sensex 30 19,523.35 3.9% -2.3% 17.1% -3.3% 89.4% 14.9%
Hang Seng 23,605.71 -3.0% -5.5% 11.5% 5.7% 52.0% 7.9%
Dow Jones 11,203.55 4.1% -10.0% 10.4% 3.6% 18.8% 7.4%
Taiwan Weighted 8,306.12 -2.6% -8.5% 15.6% 3.8% 83.0% 7.0%
Nikkei 225 10,022.39 4.0% -10.8% 6.0% 7.2% 16.4% 5.4%
Shanghai Composite 2,888.57 -5.1% -22.3% 12.2% 9.6% 79.9% -9.4%
Source: Bloomberg. * as at 21 Nov
DECEMBER 2010 3
Several factors de!ned the markets performance in 2010:

The price of crude oil retraced by more than 10% on three separate occasions this year. This
happened in January/February, May and August. In the process it depressed the equity market.
The Greece debt crisis almost derailed the global equity market recovery in the second quarter.
The Ireland saga is practically a replay of the Greece episode.
The dollar has been in a secular downtrend. This was probably the single most important factor
driving funds into Asian equity.
There was a surge of foreign fund into Asian equity in 4Q10.
Property led in 2010: The property sector was the best performer in 2010 thus far, with the sub-
index having climbed 27.5%. Five sectors rose more than 20% this year; namely Property, Finance,
Construction, Consumers and Plantation.
The TMT sector set to be the worst performer in 2010: The Telecom & Technology Index rose
by only 4.9%, the worst performer in 2010 (until Nov 21). It was the star performer in 1Q10, but
the sector gave back most of the gains in 2Q10 and 3Q10. It remained a laggard in 4Q10. The
other two underperforming sectors were Industrial and Services/Trading.
More than 50% of stocks under coverage outperformed the market: For 2010 (until Nov
21), 48 out of 92 stocks representing 52% of MIDF Research coverage outperformed the FBM
KLCI (see Table 3). Excluding dividend yields, these stocks registered capital gains of more than
18.3%, which was the FBM KLCIs return. The top two outperformers were consumer-related stocks
namely KFC and CI Holdings which gained 130% and 118% respectively. Our best stock pick for
2010, based on our annual outlook in December 2009, was Dialog, which rose 52%, followed by
RHB Cap at 51%..
Underperformers: KNM remained the worst performer among the stocks under our coverage
with a loss of 43% year to date. Of our top 10 stock picks for 2010 which came out in our annual
outlook in December 2009, only 2 stocks had underperformed the KLCI, namely Pelikan Bhd and
Century Logistics Bhd. Both are small cap stocks.
Table 2: Performance by sector (% change) as at 21 Nov 10

Index point 1Q10 2Q10 3Q10 4Q10* 2009 2010*
Property 996.67 4.3% -3.7% 16.7% 8.8% 51.6% 27.5%
Finance 13,756.48 6.8% 0.5% 12.5% 3.0% 62.7% 24.5%
Construction 276.58 7.3% 0.5% 8.4% 5.5% 36.6% 23.3%
Consumer 458.35 7.5% -0.9% 11.3% 3.8% 32.0% 23.1%
Plantation 7,758.74 1.3% -3.5% 9.1% 14.2% 53.6% 21.9%
Services & Trading 187.14 3.3% -0.5% 10.8% 2.1% 36.5% 16.3%
Industrial 2,875.52 1.4% -2.4% 7.2% 2.1% 28.6% 8.3%
Telecom & Technology 19.03 30.2% -6.9% -12.8% -0.8% 32.5% 4.9%
FBM KLCI 1,506.05 3.8% -0.5% 11.4% 2.9% 45.2% 18.3%

FBM 100 9,965.24 4.7% -0.6% 11.0% 3.8% 48.0% 19.9%
FBM Emas 10,212.41 5.3% -1.0% 10.7% 4.1% 48.6% 20.0%
FBM Small Cap 12,334.46 11.3% -5.0% 7.7% 6.4% 55.1% 21.3%
Source: Bloomberg. * as at 21 Nov
4 DECEMBER 2010
Table 3: Performance of MIDF Research's stocks under coverage

% UNDER- %
TOP GAINERS Share price (RM) TP Share price (RM) TP
change PERFORMERS change
21/11/10 31/12/09 21/11/10 31/12/09
KFC 4.25 1.85 129.7% 10.68 KNM Group 0.44 0.77 -42.9% 0.49
CI Holdings 3.73 1.71 118.1% 4.37 Petra Perdana 0.77 1.28 -40.1% 1.00
UEM Land 2.30 1.23 87.3% 2.40 Wah Seong 2.01 2.33 -13.8% 2.35
Tan Chong 5.62 3.12 80.1% 4.60 Puncak Niaga 2.65 3.03 -12.5% 3.55
Kulim 13.54 7.55 79.3% 11.69 MNRB 2.71 3.09 -12.3% 2.70
AirAsia 2.43 1.38 76.1% 2.71 Century Log. 1.78 2.00 -11.0% 2.35
QSR 5.76 3.31 74.0% 4.67 Maybulk 2.89 3.22 -10.2% 2.87
Sunway Holdings 2.19 1.27 72.4% 2.55 MAS 2.12 2.21 -4.2% 2.50
Faber 2.77 1.61 72.0% 3.60 KLCC Property 3.33 3.44 -3.2% 3.50
Hock Seng Lee 1.82 1.06 71.7% 1.63 Pelikan 1.24 1.27 -2.1% 1.65
MRCB 2.12 1.27 67.1% 1.62 Sime Darby 8.80 8.97 -1.9% 10.87
Jaya Tiasa 4.03 2.61 54.4% 3.96 Silk 0.37 0.37 -1.4% 0.46
Unisem 1.92 1.26 52.1% 2.80 Maxis 5.32 5.37 -0.9% 5.50
Dialog Group 1.43 0.94 51.6% 1.22 K. Perangsang 1.40 1.38 1.4% 1.32
Malaysia Airport 6.00 3.97 51.1% 5.96 Tenaga 8.70 8.40 3.6% 10.35
RHB Cap 8.00 5.30 50.9% 7.80 EON Cap 7.10 6.84 3.8% 7.10
F&N 15.78 10.60 48.9% 13.10 Bintulu Port 6.75 6.50 3.8% 6.81
Lion Industries 2.03 1.37 48.2% 2.25 Bursa Malaysia 8.34 7.99 4.4% 8.00
Axiata 4.50 3.05 47.5% 5.30 Ann Joo 2.93 2.80 4.6% 2.75
Globetronics 1.15 0.78 47.4% 1.80 Kinsteel 0.96 0.91 5.5% 0.90
Kencana 2.06 1.44 43.5% 1.71 Star 3.36 3.18 5.7% 3.50
KPJ 3.73 2.60 43.2% 3.51 MISC 8.61 8.12 6.1% 9.00
Gamuda 3.70 2.60 42.3% 3.90 BAT 45.54 42.80 6.4% 44.84
Genting Plant. 8.77 6.24 40.5% 9.90 IOI Corp 5.89 5.47 7.7% 7.29
PLUS 4.45 3.26 36.5% 4.60 Sapuracrest 2.68 2.48 8.1% 2.80
Sunrise 2.80 2.06 35.9% 2.50 MPI 5.79 5.35 8.2% 7.00
Media Prima 2.25 1.67 34.7% 2.80 UMW Holdings 6.88 6.35 8.3% 6.92
Hartalega 5.54 4.15 33.6% 6.28 TM 3.34 3.06 9.2% 3.70
Sunway City 4.32 3.25 32.9% 4.90 Parkson 5.90 5.31 11.1% 5.90
SP Setia 5.20 3.92 32.7% 4.30 WTK 1.19 1.07 11.2% 1.14
TSH 2.60 1.97 32.0% 3.50 JAKS 0.71 0.64 11.8% 0.95
Nestle 43.32 33.10 30.9% 40.68 TH Plantation 1.65 1.46 13.0% 2.24
Maybank 8.96 6.86 30.6% 10.50 Sarawak Plant. 2.39 2.11 13.3% 3.03
Muhibbah 1.30 1.00 30.0% 1.37 Petronas Gas 11.24 9.87 13.9% 10.15
CIMB 8.33 6.42 29.8% 8.50 Top Glove 5.74 5.03 14.1% 5.14
IJM Corp 5.69 4.48 27.0% 5.24 Public 12.80 11.14 14.9% 13.90
JT International 6.10 4.87 25.3% 5.36 YTL Power 2.60 2.24 16.1% 2.58
AMMB 6.25 5.00 25.0% 7.30 IJM Plantation 2.89 2.48 16.5% 3.09
Lingui 1.25 1.00 25.0% 0.98 DiGi 25.60 21.96 16.6% 27.00
Kossan 3.39 2.72 24.9% 3.90 WCT 3.04 2.60 16.9% 4.24
Litrak 3.45 2.79 23.7% 3.60 Ta Ann 4.70 4.01 17.3% 5.12
Proton 4.77 3.91 22.0% 5.80 NCB 3.66 3.11 17.7% 3.66
AZRB 1.08 0.89 21.3% 1.15 Hong Leong 9.58 8.13 17.8% 9.40
KL Kepong 20.00 16.50 21.2% 24.02 AEON 5.85 4.96 17.9% 5.30
Naim 3.56 2.94 21.1% 3.90
Glomac 1.63 1.35 20.7% 1.65
MBM 3.09 2.59 19.3% 3.10
Mah Sing 1.82 1.53 18.7% 2.13 FBM KLCI 1506.05 1272.78 18.3%
There are 92 stocks under MIDFR universe which will be affected by the mergers of UEMLand-Sunrise, MRCB-IJMLand
and SunwayHoldings-Suncity. We will start covering Konsortium Logistics in 2011.
DECEMBER 2010 5
Table 4 : Macroeconomic forecasts

Variance
Quarter Annual
Selected Indicators in forecast
3Q10a 4Q10e 1Q11f 2009a 2010e 2011f 2010 2011
GDP growth (real) %yoy 5.3 4.8 3.0 4.2 -1.7 7.2 5.3 0.2 -0.6
Manufacturing sector %yoy 7.5 5.5 5.0 7.5 -9.3 11.5 8.4 -0.3 1.4
Services sector %yoy 5.4 5.2 5.5 6.3 2.6 7.5 6.7 1.4 1.2
Consumption %yoy 7.1 7.0 6.9 6.8 1.4 6.8 6.7 0.8 3.4
Investment %yoy 9.8 9.4 9.0 8.8 -5.5 9.4 9.0 8.9 3.2
Exports %yoy 10.4 6.0 4.0 6.0 -10.1 17.2 9.0 7.6 -0.6
Imports %yoy 16.4 8.0 5.0 7.0 -12.5 22.4 11.0 11.9 0.7
Current account RMbn 27.5 26.0 20.5 22.5 112.7 116 114 0 0
In"ation(CPI) - avg %yoy 1.8 1.8 2.0 2.2 0.6 1.6 2.3 -0.3 0
(At end of)
Overnight Policy
% 2.75 2.75 2.75 2.75 2.00 2.75 3.50 0 0
Rate
MGS 3-yr % 3.24 3.25 3.30 3.30 3.10 3.30 3.50 -0.2
USD/MYR RM 3.08 3.10 3.10 3.08 3.40 3.10 3.00 0 0
ii. Macroeconomics: Performance and outlook

We are upgrading our GDP growth estimate for 2010 slightly to 7.2% from 7.0% previously
led by the strong 1H10 performance. Recovery in global trade and a broad-based increase in
domestic demand saw a strong economic rebound with 1HCY10 averaging at 9.5% (-5.1% in
1HCY09). With the growth trajectory normalizing in 2H10 as the base effects wears out and
slower external demand, we estimate the economy would expand by 5.0% during this period.
This would mean 4Q10 would decelerate to 4.8% from 5.3% in 3Q10.
For 2011, we have downgraded the GDP growth to 5.3% from our previous projection of 5.8%,
which is still within the of!cial estimates of 5.0%-6.0%. We have penned out a conservative
view driven by the less favorable base effects, unwinding of policy stimulus, and more subdued
growth in several major export markets. Despite lowering 2011 growth, we believe the economy
will not fall into technical recession. Drivers of economic growth that could put a lid on the
downside risk will be private expenditure, i.e. private consumption and !xed investment. We
expect private expenditure to expand favorably supported by the strengthening labor market
and the output gap that is reducing. Public consumption will remain subdued following the move
to !scal consolidation.
Upward pressure on prices has been milder than anticipated in 2010. On that note, in"ation is
projected to hover around 1.6% in 2010, which is slightly lower than our previous forecast of
1.9%. Going forward, we expect in"ation pressure to emanate from higher domestic demand,
combined with planned reductions in subsidies. But the upward pressure will be stemmed by the
!rmer exchange rate, stable global commodity prices, continuing output gap and maintenance
of price controls on basic goods. Taking these factors into account, we have maintained our
2.3% in"ation target for 2011.
6 DECEMBER 2010
Recent rate hikes showed BNMs ability and !exibility to vary its monetary policy. With a
cumulative of 75bps increase from the three 25bp hikes in 2010, the policy rate is now close to
our neutral level of 3.5%. We reiterate our view that OPR will stay at 2.75% in 2010. Looking
ahead into 2011, with BNM having the ability and !exibility to raise OPR, we expect the policy
rate to increase by 50bps-75bps in 2H11, and less likely in 1H11 in order not to dampen the
slower economic growth. Nonetheless, possibility for BNM to raise rates in 1H11 will take place
if BNM decides to weigh on in!ation as opposed to growth.
Exports growth is projected to moderate over the rest of 2010 and into 2011 due to (1) less
supportive external environment; (2) completion of inventory buildups in industrial economies; and
(3) lower prices for some commodities. Meanwhile, import growth is expected to remain robust
due to buoyant domestic demand. The narrowing trade surplus is expected to be reinforced by
a further deterioration in the income balance from the increased out!ows of pro"ts and dividend
payments. But this narrowing will be partly offset by an improvement in the services account,
when the inbound tourism picks up. We forecast current account surplus would edge down to
13.1% of GDP in 2010 and 12.0% in 2011. On that note, we reiterate our 2010 and 2011 MYR/
US$ forecast of 3.10 and 3.00 respectively.
iii. Corporate Earnings
Good earnings in 2010. The latest concluded earnings season was largely within our expectation.
In all, 43% of the stocks under our coverage reported earnings that were in-line with our
expectation versus 27% outperformers. We maintained our forecast earnings for 78% of the
stocks under our coverage, upgraded 10% and downgraded 12%. The best earnings performance
were registered by the automotive, consumer, and property sectors.
Earnings prospect for 2011 is still healthy despite external uncertainties. The economy is expected
to stay healthy and that bodes well for corporate earnings. Superior earnings prospect can be
found in the traditional key sectors. These are:
i. Banks. Earnings for the banking sector is estimated to grow by 12% in FY2011, on the back
of better net interest margins, expansion in fee-based income, and improving contributions
from overseas ventures. The OPR is expected to rise again in 2H11 that would provide further
upside to the banks earnings potential. Improving asset quality will keep provisions under
control.
ii. Construction. As mentioned, the 10MP and the ETP would provide the earnings impetus going
forward with increasing expectation of more jobs to be announced in 2011. Furthermore, we
expect construction margins to improve as material costs stabilize. Our construction sector
earnings is estimated to grow at an average of 25% next year.
iii. Oil & Gas. One of the key sector under the ETP and is the direct bene"ciary of Petronas
ongoing quest to expand its oil & gas reserve. As such, FY2011 is on track to become a very
good year for O&G companies where earnings outlook is very promising, underpinned by
(i) more deepwater E&P activities. (ii) enhanced oil recovery (EOR) to rejuvenate matured
"elds and (iii) development of small "elds. As such, we are looking at a potentially strong
earnings growth of more than 20% in FY2011.
iv. Plantation. We are anticipating a good FY2011 for the plantation sector due to (i) stronger
DECEMBER 2010 7
Table 5: Sectoral Valuation

EPS Growth (%) PER (x)
KLCI: 1,506.05 Current
FY10 f FY11 f FY10 f FY11 f
recommen-
1/ 1/ 1/ 1/ dation
Sector Previous Revised Previous Revised Previous Revised Previous Revised
Banks 14.2 12.6 11.9 12.7 14.2 15.1 16.2 15.9 Positive
Construction 12.4 19.4 16.6 24.7 18.1 17.8 16.2 15.1 Positive
Oil & Gas 32.5 33.6 15.4 21.0 15.1 15.6 14.3 13.4 Positive
Plantation 21.0 21.0 14.9 54.7 24.2 28.2 21.6 19.2 Positive
Semicon - 10.0 - 8.2 - 8.7 - 6.9 Positive
Telco 5.1 4.9 4.4 5.4 20.0 23.3 18.5 17.5 Positive
Healthcare 11.0 10.3 13.7 11.3 13.3 12.8 14.1 13.4 Positive
Aviation 292.0 292.0 -17.9 57.5 17.1 16.3 12.1 11.5 Neutral
Consumer 14.6 18.3 10.4 11.7 15.0 17.5 14.2 15.3 Neutral
Media 30.6 30.6 16.5 6.8 15.7 14.2 13.3 12.9 Neutral
Power & Utilities 72.8 72.8 8.1 5.7 22.4 26.1 13.3 12.8 Neutral
Rubber Gloves 41.4 37.1 15.0 6.3 13.2 15.4 14.4 13.0 Neutral
Tobacco -0.7 6.1 3.2 3.2 14.8 17.3 13.5 15.7 Neutral
Tolls -2.8 5.5 60.9 10.8 16.2 14.7 13.3 12.7 Neutral
Shipping -40.2 -41.5 24.7 18.1 26.0 30.3 17.7 16.3 Neutral
Automotive 18.0 18.0 21.0 12.2 9.4 11.0 11.2 10.7 Negative
Ports -37.7 -37.7 18.0 4.5 17.1 19.9 15.6 13.8 Negative
Property -5.2 2.2 15.2 14.8 26.1 30.4 21.8 21.3 Negative
FBM KLCI 2/ 14.8 13.1 15.6 15.1 17.4 18.3 14.4 15.8
FBM KLCI 3/ 13.9 14.4 15.2 15.8 16.3 18.1 14.6 16.1
MIDF STOCK
14.1 14.7 15.2 15.9 16.8 18.7 14.6 16.7
UNIVERSE
1/ As at 21 Nov 10 2/Bloomberg consensus 3/MIDF Research Source: MIDF Research
demand growth of 8% from China and 10% from India, outpacing the growth in production
of 5%, (ii) higher average CPO price of RM3,000/MT, and (iii) improving yield. On average,
we estimate the sector could see pro!ts growing more than 15% next year.
A mild adjustment of our 2011 earnings forecast. There were slight adjustments made to some
of our forecast that resulted in a mildly higher FY10 forecast of 14.7% from 14.1% previously.
While our earnings outlook for 2011 is slightly improved to 15.9% from 15.2%.
iv. Market valuation and stock selection
We are setting a 12-month base-case FBM KLCI target of 1,650 points for 2011. The index
can easily overshoot the target in a liquidity driven market. The 1,650 is based on 18.0x FY11
core earnings, at 15.8% earnings growth. This is slightly higher than the 5-year average at the
upper end of the PER band of 17x. At November 21 index of 1506 points, the KLCI traded at
15.8x based on Bloombergs consensus and 16.1x based on MIDFs forecast. In comparison,
the MIDF Researchs stock universe traded at 16.7x on the same day.
8 DECEMBER 2010
Table 6: FBM KLCI : BOTTOM UP VALUATION

Name % Weight in the index Shares in Price Target price % chg
20-Sep 21-Nov the Index 21-Nov 20-Sep 21-Nov
AMMB Holdings Bhd 2.88 3.07 2,260.6 6.34 5.60 7.30 0.47
Axiata Group Bhd 6.30 6.09 6,333.9 4.48 4.91 5.30 1.11
Berjaya Sports Toto BHD * 0.91 0.90 1,013.3 4.16 4.63 4.43 0.06
BAT 1.43 1.39 142.8 45.54 44.84 44.84 (0.02)
CIMB Group Holdings Bhd 10.04 9.87 5,498.6 8.37 8.50 8.50 0.15
DiGi.Com Bhd 3.13 3.14 583.1 25.14 24.30 27.00 0.23
Gamuda 1.66 1.59 2,013.5 3.69 3.90 3.90 0.09
Genting Bhd * 6.20 6.01 2,770.7 10.12 10.56 12.13 1.19
Genting Malaysia BHD * 2.08 2.19 2,936.2 3.47 3.10 3.45 (0.01)
Hong Leong Bank BHD 1.26 1.29 632.0 9.53 8.80 9.40 (0.02)
Hong Leong Financial Group * 0.63 0.61 315.8 9.00 11.43 12.85 0.26
IOI Corp Bhd 6.25 6.31 4,996.8 5.89 5.60 7.29 1.50
Kuala Lumpur Kepong Bhd 1.99 2.30 534.4 20.04 17.40 24.02 0.46
Malayan Banking Bhd 10.16 10.20 5,308.2 8.96 9.20 10.50 1.75
Malaysian Airline System BHD 0.48 0.46 1,002.6 2.14 2.50 2.50 0.08
Maxis Bhd 2.63 2.57 2,250.0 5.32 5.39 5.50 0.09
MISC Bhd 3.47 3.29 1,785.5 8.59 9.00 9.00 0.16
MMC Corp Bhd * 0.74 0.76 1,218.0 2.90 2.62 3.06 0.04
Petronas Dagangan BHD * 0.73 0.72 298.0 11.20 9.27 11.01 (0.01)
Petronas Gas BHD 1.41 1.43 593.6 11.24 10.15 10.15 (0.14)
PLUS Expressways Bhd 1.82 1.91 2,000.0 4.45 4.30 4.60 0.06
PPB Group Bhd * 2.30 2.41 592.7 18.98 18.60 18.38 (0.08)
Public Bank Bhd 9.85 9.70 3,531.9 12.80 12.80 13.90 0.83
RHB Capital Bhd 0.66 0.74 430.7 8.00 7.10 7.80 (0.02)
Sime Darby Bhd 8.20 8.54 4,498.5 8.85 8.40 10.87 1.95
Telekom Malaysia Bhd 1.99 1.92 2,683.1 3.34 3.36 3.70 0.21
Tenaga Nasional Bhd 6.45 6.04 3,241.9 8.68 10.35 10.35 1.16
UMW Holdings Bhd 1.26 1.25 857.0 6.82 6.92 6.92 0.02
YTL Corp Bhd * 1.57 1.70 948.6 8.37 7.75 8.05 (0.07)
YTL Power International Bhd 1.48 1.57 2,875.5 2.55 2.45 2.58 0.02
100.0 total 11.53
* = bloomberg consensus, weights are Bloomberg-derived.
KLCI @ 21 Nov 1,506.1

TARGET @ 20 Nov KLCI 1,679.8
The 1,650 KLCI target is not signi!cantly at odds with the bottom up valuation of 1,680 that
we have derived based on a set of target prices for each of the KLCI component stocks (see
Table 6 above). Based on KLCIs close of 1506.1 on Nov 21, the target of 1,650 represents a
9.6% upside, while the bottom-up target of 1680 re"ects a gain of 11.5%. This is in line with
the 10-year average (2001-2010) return of the KLCI of 10.9%, assuming the index ended 2010
at 1,500 points. (If the KLCI closed 2010 at 1500 points, it will register a gain of 17.9% for the
year).
DECEMBER 2010 9
% of Bursa Market Capitalisation Held by Foreigners % of Bursa Market Capitalisation Held by Foreigners
(at year-end) (at month-end)
27 26.2 21.8 21.7
21.6
25 24.2
23.1
21.4
21.2
23 21.2
21.8 21.6 21.7
21.2 21.3
20.4 21.0 20.9
21 20.8 20.8 20.8
19.5 20.8 20.7 20.7 20.7
18.5 20.6 20.6
19 18.1 18.1 20.6 20.5 20.5
20.4 20.4
17 20.4 20.3 20.3 20.3
20.2
15
20.0
98 99 00 01 02 03 04 05 06 07 08 09 Sep
D09
N
F
O
S
S
J
J
A
A
M
M
10
At end of (Source: Bursa) At end of (Source: Bursa)
The prospects for the KLCI is good moving into 2011. Foreign liquidity should continue to be
attracted to Malaysia. In October, FTSE reclassi!ed Malaysia as an Advanced Emerging
Market to take effect in June 2011. This is expected to attract foreign funds tracking FTSE
indices (estimated to be more than USD3 trillion). Malaysia will be one of only 9 countries to be
in the category. Only 4 Asian countries are in the developed bracket (HK, Japan, Singapore,
Korea) out of 25.
It is true that foreign shareholding in companies listed on Bursa Malaysia has been on an
uptrend (see chart on the right hand above). From 20.4% at the beginning of the year, the
percentage shareholding rose to 21.7% at the end of September. However, from a longer-term
perspective, this percentage is still relatively low (see chart on the left hand side above). At
the end of 2007, foreign shareholding was 26.2%. As long as Malaysia continues to make the
right moves such as climbing up the FTSE classi!cation ladder, foreign funds show be "owing
in. For comparison, the proportion of companies listed in the U.K, a developed market, owned
by foreign shareholders reached a record 41.5% in 2008, according to the Of!ce for National
Statistics. The percentage had risen nearly fourfold in 20 years.
What we can surmise from the "ow data is that a sizeable amount of foreign funds have moved
into Asian equity in 2010 and most are staying put despite the occasional scare such as the
skirmish in Korea. We track the "ow of foreign funds into the equity of six Asian markets (whose
stock market authorities make the data available on daily basis). The six (Korea, Taiwan, India,
Thailand, Indonesia and Philippines) make a good proxy for the rest of East Asian markets.
An estimated USD70.3b "ed the markets in the crisis year of 2008. An estimated USD60.6b
was drawn back to the Asian 6 equity in 2009. For the year to Nov 22, data from the respective
exchanges show that a total of USD57.1b of foreign funds were drawn to the Asian 6 equity.
Most importantly, Asian emerging markets (as represented by the TIPs countries + India) are
seen as more attractive compared to the developed markets (as represented by Taiwan and
Korea). That being the trend, Malaysia should enjoy some spillover effect even if it might not
be in the radar screen of many global investors. Three factors that may draw foreign funds into
Malaysia in 2011 are:
State and General Elections. Stocks tend to perform well in an election year and global
investors are cognizant of this.
10 DECEMBER 2010
Cumulative Foreign Flow to Emerging vs Developed Asia

since Jan 2008 (USD'm)
60,000
Flow of foreign funds into the
equity of 6 Asian markets
40,000
2008.................... - US70.3b out!ow
2009.................... + USD60.6b in!ow
20,000 2010 (till Nov) .... + USD57.1b in!ow
-20,000
More money has gone

-40,000
into the Asian emerging
markets (TIPs + India)
-60,000 this year than to the Asian 6 refers to Korea,
developed markets of Taiwan, India;
Korea and Taiwan Thailand , Indonesia and
-80,000
Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Philippines (TIPs)
Source: respective exchanges
TIPS + India Taiwan + Korea
Commodity rally. Should crude oil price make a gradual rise to the USD100pb-USD110pb
range, commodities will rally again, as evident recently. Malaysia offer good plantation stocks
that global investors cannot afford to ignore. Likewise, Malaysian oil and gas stocks should
make an impression on the investors.
Continued strength of the ringgit. The ringgit was one of the best performing currencies in
Asia this year, and we expect the currency to have another good year in 2011. In the !rst
nine months of 2010, a total of RM27.4b worth of MGS and Treasury bills was bought by
foreigners. There was a bit of a seasonal selldown towards the end of the year as some
investors dollarize their position, but we expect the buying to resume in January.
Otherwise, Malaysia is not really out of sync with regional peers from valuation perspective.
Bloomberg data suggests that the Indian and Indonesian markets are trading at richer earnings
Table 7: Regional earnings and valuation

EPS Growth (% change) PER
2009 2010 (est as of) 2011 (fcast as of) 2009 2010 (est as of) 2011 (fcast as of)
Sep-10 Nov-10 Sep-10 Nov-10 Sep-10 Nov-10 Sep-10 Nov-10
Nikkei 225 -144.0% -285.2% -279.2% 11.1% 12.8% 16.1 17.8 14.5 15.8
(31.9)
Mumbai Sensex 30 -29.7% 60.1% 60.4% 20.6% 20.7% 29.6 19.0 18.5 15.8 15.3
Jakarta Comp. -55.4% 180.3% 181.3% 19.8% 21.2% 51.0 17.1 18.1 14.3 14.9
FBM KLCI -21.3% 63.0% 64.6% 12.3% 12.3% 26.5 15.8 16.1 14.1 14.3
Straits Times 9.6% 0.3% 0.9% 9.9% 9.5% 15.8 15.3 15.6 13.9 14.3
Philippines Comp. -0.1% 39.8% 43.6% 9.7% 9.5% 21.8 15.2 15.2 13.9 13.9
Shanghai Comp. 16.8% 41.8% 42.8% 20.3% 21.1% 23.3 15.1 16.3 12.6 13.5
Hang Seng 25.4% 13.1% 15.8% 15.6% 15.2% 17.2 14.4 14.8 12.5 12.9
Taiwan Weighted 38.5% 112.3% 108.9% 12.0% 12.4% 29.3 13.7 14.0 12.2 12.5
SET Index -55.8% 156.3% 161.9% 16.4% 19.9% 37.1 14.0 14.2 12.1 11.8
DJIA 21.3% 25.7% 28.7% 12.1% 11.5% 16.9 13.0 13.2 11.6 11.8
KOSPI -39.2% 149.9% 147.5% 8.7% 11.7% 27.0 10.4 10.9 9.6 9.8
Source: Bloomberg
DECEMBER 2010 11
Table 8: STOCK SELECTIONS

BIG CAPs (Market Capitalisation >RM5.0b)
Stock Price @ TP Market EPS (sen) EPS Growth (%) PER (x) P/BV Div Yld ROE
19 Nov Cap. (x) (%) (%)
(RM) (RM) (RMMil) FY10F FY11F FY10F FY11F FY10F FY11F FY10F
Maybank 8.96 10.50 63,418.7 53.9 61.0 349.2% 13.2% 16.6 14.7 2.2 2.7 13.6
Sime Dby 8.80 10.87 52,883.3 12.1 45.0 -68.1% 271.9% 72.7 19.6 2.6 2.6 10.8
IOI Corp 5.89 7.29 39,412.2 30.5 34.7 83.7% 13.8% 19.3 17.0 3.6 3.0 8.9
Axiata 4.50 5.30 38,003.2 23.9 25.8 13.8% 7.9% 18.8 17.4 2.0 0.0 9.3
KLK 20.00 24.02 21,350.1 88.4 103.8 54.0% 17.4% 22.6 19.3 3.7 2.3 10.3
DiGi 25.60 27.00 19,904.0 141.7 149.8 10.1% 5.7% 18.1 17.1 14.2 4.7 65.8
AMMB 6.25 7.30 18,838.7 34.7 43.5 9.8% 25.4% 18.0 14.4 1.9 2.4 11.5
IJM Corp 5.69 5.40 7,687.2 25.1 29.1 14.6% 15.9% 22.7 19.6 1.5 1.1 4.5
Gamuda 3.70 4.30 7,562.9 13.4 16.3 38.1% 21.6% 27.6 22.7 2.3 2.4 6.2
MAS 2.12 2.50 7,085.4 10.6 23.9 -62.9% 125.5% 20.0 8.9 2.3 0.0 66.0
MID CAPs (Market Capitalisation RM1.5b - RM5.0b)

19 Nov Cap. (x) (%) (%)
Sapura
2.68 3.10 3,421.6 13.4 18.7 47.3% 39.6% 20.0 14.3 3.3 2.6 7.9
Crest
Kencana 2.06 2.50 3,417.5 10.3 11.0 46.2% 6.7% 20.0 18.7 4.5 1.0 15.7
Dialog 1.43 1.65 2,834.7 5.9 7.5 26.1% 27.1% 24.2 19.1 5.9 2.2 19.8
WCT 3.04 4.24 2,387.3 20.3 29.3 7.4% 44.3% 15.0 10.4 2.0 2.5 9.9
Media 2.25 2.80 2,252.6 18.6 19.4 -6.5% 4.3% 12.1 11.6 1.9 2.2 17.5
Prima
SMALL CAPs (Market Capitalisation <RM1.5b)

19 Nov Cap. (x) (%) (%)
Unisem 1.92 2.80 1,294.4 23.7 27.9 99.2% 17.7% 8.1 6.9 1.2 2.6 6.3
TSH Res. 2.60 3.50 1,077.8 18.4 24.7 1.7% 34.2% 14.1 10.5 1.4 1.9 9.1
Faber 2.77 3.60 1,005.5 26.1 29.4 14.8% 12.5% 10.6 9.4 2.3 2.1 18.1
Naim 3.56 4.45 890.0 35.5 47.0 12.3% 32.4% 10.0 7.6 1.2 2.5 11.7
TH Plant 1.65 2.24 804.9 17.9 18.3 62.3% 2.2% 9.2 9.0 1.7 4.5 8.9
multiple compared with Malaysia.
The climb towards our 1,650 objective would be met with surmountable obstacles. Once met,
we would strongly advise investors to reduce their equity exposure. Its the summit and we know
whats on the other side. Once the U.S starts raising its interest rates, the game will be over.
MIDF Stock selection: Our choice of top stock picks for 2011 generally re!ects our POSITIVE
view of the sectors. Most of the selections are key companies in the plantation, oil and gas,
banking, construction and telecommunication sectors. There are stocks from the NEUTRAL-
view sectors, but these were selected mainly for the stock-speci"c considerations.
12 DECEMBER 2010
B. SECTORS WE LIKE
SEMICONDUCTOR Maintain POSITIVE

New innovations and gadgets to spur growth
Semiconductor would be a controversial sector to be bullish on. It had a good year and many
are of the view that the industry is at the tail end of its upcycle.
Latest number by the Semiconductor Industry Association (SIA) shows that sales grew for 7
consecutive months in September. Asia Paci!c accounted for 53.4% of sales in 3Q10, followed
by the Americas, Japan and Europe at 18.7%, 15.7% and 12.3% respectively. The strong growth
in demand is attributable to smartphones and gadgets.
The book-to-bill ratio for semiconductor industry had been above 1.0x for 15 consecutive months
since July 2009. It fell slightly to 0.98x for October 2010, but we are not sounding the alarm
bell. An inventory correction is always to be expected in 4Q10. We expect the book-to-bill ratio
to go back to parity towards the end of 1Q11.
The SIA had forecast global sales to grow by 6.0% in 2011, to USD318.7b, followed by an
increase of 3.4% to USD329.7b in 2012. The forecast was an upward revision by SIA and we
believe that the revision of the global sales forecast is evident that the sector is expected to
perform well in 2011. We expect demand to remain strong in Asia, led by China and India, but
global growth rate will normalise in 2011 following the normalisation of the low base effect. We
are moderating our growth estimates to growth of 5.0%yoy in global sales, marginally lower than
SIAs estimates, as we view that the slight possibility of a persistent weakness in European and
US markets may moderate growth. However, with the increasing use of semiconductor, such
as for sensors in auto vehicles, we do not expect demand to weaken in 2011.
Maintain POSITIVE. We are seeing expansion by industry players which further fuel next years
expectation. The Malaysian semiconductor companies expand in order to meet demand of its
clients. Therefore, expansion by the companies is also an indicator of the expected performance
of the sector as a whole. Hence, we reiterate our POSITIVE stance in the semiconductor sector.
We expect any inventory correction will be temporary. For industry speci!cs, we continue to
like semiconductor players such as Unisem (BUY, TP:RM2.80) and MPI (Not rated) due to their
exposure in China.
DECEMBER 2010 13
TELECOMMUNICATIONS Maintain POSITIVE

Hungry for data and 4G
We foresee the telecommunication industry thriving on the data business in 2011. 2010 saw
a big gain in data revenue contribution for telecommunication companies. Data contributed
21.7% of Digis 9MFY10 revenue as compared to 19.9% in the previous year. Growth was also
higher at 16.2%yoy compared with 4.7%yoy growth for voice revenue over the same period.
The increasing contribution from data was due to the introduction of a variety of smartphones,
most notably iPhone 4 and Android OS-based models such as HTCs Desire. Also in the mix was
the Blackberry Torch. In 2011, we expect the smartphone revolution to heighten with Symbian
based models joining in the bandwagon, translating to higher data contribution and growth.
WiMax, LTE and 4G technologies will add to the merriment. We expect 2011 to be dominated
by the competition between WiMax and Long Term Evolution (LTE), with both claiming to be
4G, as telecommunication companies look for improved technology to service its customers
data needs. LTE is the next evolution from the 3G platform and we believe that the market will
see its adoption by earliest in 2H11, as Maxis had successfully tested the platform. However,
we believe that it is still early days for 4G, and we expect that 3G will still dominate in 2011.
YES will cause minor ripple. We do not expect YES to be able to dethrone the incumbent for
voice, but it will give serious competition for the mobile broadband market sector in 2011. YTL
Communications, a subsidiary of YTL Power launched YES, a WiMax based platform which it
claimed to offer !ve times the speed of 3G. There is a possibility of a price war but this will be
moderated by a wait and see approach by potential users especially on the question of stability.
Besides, we believe that the market is big enough for the players to compete given that individual
broadband penetration rate is 11.4% as of October 2010, (household broadband penetration
rate is 53.0%). We expect an increasing trend of household, especially urban household, to
own more than 1 mobile internet device.
What exactly is 4G? According to the International Telecommunication Union Radio-

communication Sector (ITU-R), the of!cial standards body which de!nes many wireless
technologies, the of!cial technologies accorded the designation of IMT-Advanced (hence
qualifying them as true 4G technologies), are LTEAdvanced and WiMax 2 (802.16m). This
technology is not yet commercially available and is currently being tested. Companies such as
Intel and Samsung expect to see the true 4G products in late 2011, or more realistically 2012.
Therefore, current technologies are technically not 4G but are considered 3.9G. However, if we
were to acknowledge it as an advancement to 3G, then we could consider it 4G.
We expect data to be the new source of growth for the telecommunication sector in 2011 due to the
increasing popularity of smartphones. Also, the affordability of netbooks and the rollout of faster
broadband technologies should increase data revenue contribution to the telecommunication
players. We maintain our POSITIVE outlook for the sector and continue to like Axiata (BUY,
TP:RM5.50) as we believe that the room for capital appreciation is higher given its exposure in
growth market such as Indonesia and Sri Lanka. We also like Digi (BUY, TP:RM27.00) for its
above-market dividend yield and TM (BUY, Revised TP:RM3.70 from RM3.50) for its exposure
in the growing broadband market. We are NEUTRAL on Maxis (TP:RM5.50) as we believe that
it has the least room for growth amongst the telecommunication players.
14 DECEMBER 2010
PLANTATION Maintain POSITIVE

Upcycle to shift to higher gear
We are con!dent that CPO prices will remain strong in 2011. We expect CPO price to trade
between RM3,000-RM3500 pmt throughout 1Q11. Our average CPO price forecast for 2011 of
RM3,000 pmt will be about 11% higher than the average of about RM2705pmt that we expect
for 2010.
Demand growth is expected to be higher from India and China while the world supply of edible
oil could be constricted in 2011. China and India consumed the worlds largest soybean and palm
oil. The consumption of palm oil in China and India has been growing for the past 5 years at an
average of 5% p.a. and 21% p.a. respectively. In fact, total consumption in India this year is 23%
more than that of China at 7.75m MT and this will be boosted by the FTA between Malaysia
and India to be signed in July 2011. We are expecting the consumption in these countries to
continue its uptrend.
In addition, the government mandatory policy on the biodiesel consumption is expected to be

implemented in June 2011, and this would further support local demand for palm oil. The B5
biodiesel policy stipulates that diesel sold to the market must contain 5% biomethylester (which
is derived from CPO).
Meanwhile we are projecting moderate growth of about 5% CPO production in Malaysia in

CY11. We have yet to see the full La-Nina effects in South America that would disrupt total
soybean production. The global supply of edible oils is naturally linked to the world climate and
is expected to increase also by a dismal of 4% - 5% next year.
All these means that the incremental in supply will not match the incremental in demand and
would put pressure on the CPO prices.
Obviously we are not forsaking the industry risks. The weather has always been a determining
factor. Any changes in Chinas import requirements for palm oil and soy bean would also
in"uence global prices as China is the worlds largest consumer of edible oils. Likewise, there are
possibilities that governments will raise import duties on palm oil in order to protect its domestic
farmers. Locally, there is a risk that the governments may not enforce the biodiesel policy in
fact, the biodiesel mandates in Malaysia have been delayed twice since 2008. But most of these
are inherent industry risks which investors have learnt to lived with for many years.
PALM OIL KEY INDUSTRY INDICATORS

Year 2008 2009 2010E 2011f
Average CPO prices RM2,846 RM2,266 RM2,665 RM3,000
Malaysian Production (MT) 17.7m 17.6m 17.2m 18.0m
FFB Yield (MT/ha) 20.18 19.23 19.34 19.97
OER (%) 20.20 20.48 21.32 21.43
Immature areas (ha) 0.57m 0.56m 0.54m 0.52m
Mature areas (ha) 3.9m 4.0m 4.2m 4.4m

Source: MPOB, USDA, MIDFR
DECEMBER 2010 15
OIL & GAS Maintain POSITIVE

Clear Roadmap to Growth
We expect sentiments in the oil and gas sector to remain buoyant in 2011. Crude oil prices are
expected to hover between USD70-90 per barrel during the next 12 months. At these price
levels, it shall encourage further upstream as well as downstream activities by the oil majors
with the bene!ts cascading down to the entire oil and gas value chains.
We like the fact that there is a clear and actionable 3-pronged strategic roadmap for the local
oil and gas sector as announced recently by the government.
In upstream activities, there will be more deepwater exploration and production (E&P) activities.
Petronas will be ramping up domestic E&P after years of focusing abroad, and has budgeted
capital expenditures about RM40b in 2010 largely in E&P. We expect the amount of capex for
2011 to be maintained at current levels. The local engineering, procurement and construction
(EPC) companies as well as offshore service contractors and process equipment manufacturers
such as MMHE, Kencana Petroleum, SapuraCrest and KNM are the local bene!ciaries.
In addition to E&P, there will be more enhanced oil recovery (EOR) activities to rejuvenate
matured !elds. Petronas, Petronas Carigali, and Exxon Mobil entered into a USD 2.1 billion
EOR joint venture (JV) project in 2009. The maiden domestic EOR project is located at Tapis
as well as 6 other neighbouring local oil and gas !elds. We expect more of such domestic EOR
JV to be concluded going forward involving other oil !elds and JV partners. The EOR project is
expected to raise the recovery rates of local matured !elds from the prevailing 20+% to levels
comparable with North Sea !elds of circa 40+%.
The oil industry is also turning towards the development of smaller oil !elds due to few large
discoveries. The development of small !elds present many challenges, particularly the need
to work in locations where conventional oil !eld facilities (i.e. pipeline and storage) may not be
readily available or deployable. Nonetheless the development and economic success of small
oil !eld with the use of innovative solutions such as Floating Production Storage Of"oading
(FPSO) system demonstrates the business feasibility of these oil !elds.
For the downstream segment, considerations will be on the depleting supply from Peninsular
Malaysia !elds, as the offshore Terengganu gas supply is estimated to last until 2021. The
proposed re-gasi!cation plant located in Melaka is an example of this as it will act as an entry
point to the external gas sources. This will also unlock values from Petronas (via Petronas Gas)
present gas pipelines, emphasizing on the gas transmission business apart from its traditional
processing business. We view Petronas Gas as the main bene!ciary, being the owner of
Peninsulas only gas pipeline system.
A huge oil storage facility will be built next to neighbouring Singapore to form a regional oil
products trading hub. The location of the mega facility is believed to be in Tanjung Pengerang,
southeast of Johor. This initiative would be a boost for the domestic oil terminal business and
we view this as bene!cial to the Dialog Group, being the joint-partner of the Tanjung Pengerang
oil terminal project.
16 DECEMBER 2010
The third area of activities pertain to the local oil eld services industry. There are currently
six Petronas-licensed major fabricators in addition to other smaller companies. We expect
consolidation in the industry with the two largest fabricators, namely MMHE and Sime Darby
Engineering (SDE) to eventually become the anchors. Expect more mergers and acquisitions
(M&A) activities among the local fabricators as well as process equipment manufacturers going
forward. The consolidation exercise will elevate the capacities of local oil !eld services companies
(OFSC) thus increasing their likelihood of winning major contracts locally and overseas. The
local anchors will be in more favourable position to enter into joint ventures as well as strategic
partnerships with the worlds largest OFSCs. These arrangements will help develop the domestic
engineering, procurement and installation capabilities and capacity.
Most of the companies under our oil and gas sector coverage are OFSC contractors that will
most likely bene!t from increased activities, particularly in the upstream segment, consolidation
in the industry, entry of global OFSC players and the move to turn Malaysia into a regional hub
for oil !eld services. The oil and gas sector roadmap provides the platform for actions in the
industry. We could not be more POSITIVE on the sector.
BANKING Maintain POSITIVE

Expect another year of strong earnings
We expect interest income to be boosted again in 2011. While we expect no further rise in interest
rates for the remaining 2010, we believe BNM will raise OPR again in 2H2011, normalizing OPR
towards 3.5%.
Non-interest income will be supported by strong deal "ows. Implementation of projects outlined
in the ETP and 10MP are expected to lead to more funding via the capital market, especially by
the private sector which is expected to provide 92% of the funding for the EPPs. Fee income
growth in 2011 will emanate from IPOs, M&As, privatizations and bond issuance (Sukuk).
More banks will position themselves as regional banks with stronger international connectivity.
We expect higher regional value propositions and regional IB positioning to result in increased
traction for cross border IB deals. With the market expected to be bullish, liquidity "owing
into Asian markets and our target for KLCI Index of 1,650 points for 2011, we believe that
market related businesses will continue to improve next year, in particularly brokerage, asset
management as well as treasury and investment.
In tandem with the expected deceleration in the GDP growth rate, we are targeting a growth
rate for loans of 9-10% for 2011. This is lower compared to our target growth rate of 10-12%
for 2010. Banks would be focussing on viable sectors for SME loans and on larger corporate
loans linked to government projects, particularly the entry-point projects (EPP) outlined in the
Economic Transformation Programme (ETP) and 10th Malaysia Plan (MP).
All banks under our coverage have switched over to FRS139. There has been no material
adverse impact from the adjustments to the total equity position of banks adopting FRS139.
As at Sept 10, industrys gross impaired loan ratio was 3.4% while the net impaired loan/net
NPL ratio was 2.0%. Banks which adopted the new accounting standard had an increase in their
gross impaired loan ratios but the ratios were not directly comparable to the preceding quarters
which were under BNM GP3. However, restating the gross impaired loan ratios to GP3, the ratios
DECEMBER 2010 17
re!ect had re!ected lower percentages, signifying improvement in the respective banking groups
asset quality. We believe that the gross impaired loan ratios of banks will trend downwards after
adopting FRS139 against the backdrop of improving risk management of banks.
Loan loss coverage for most banks fell after adoption of FRS139 due to the rise in individual
impairment loan allowance. As at Sept 10, the banking system loan loss coverage ratio stood
at 95.2%. For 2011, we are expecting gross impaired loan ratio to decline towards 3.2% with a
lower loan loss provisioning, particularly from respective banks overseas operation.
We remain positive on the banking sector and our stock picks are Maybank, AMMB and RHB
Capital.
- Maybank. Attractive among the larger capitalised banking stock in terms in P/BV ratio. Loan
loss provision expense has been trending downwards. International operations loan growth
has been gaining traction, in particularly BII. Continued stronger growth in non-interest
income, improved asset quality post FRS139, improving ROE and stronger NIM for Indonesia
operations are expected to bode well for the Groups earnings. Strong pipeline deal!ow for
IB are expected to continue to support the Groups fee income.
- AMMB. Strategic tie-up with ANZ Bank has proven to have improved the Groups risk
management and asset quality. Leverage of key international partners will be key to Groups
expansion in particularly, for bancassurance, investment banking and corporate loan deals.
- RHB Capital. We believe that potential sell down of EPFs shareholdings from 57% to 40%
will improve the stocks liquidity position and attractiveness. We expect loan growth to be
improve steadily as well as stronger income contribution from overseas operation and
bancassurance business eventually.
HEALTHCARE Maintain POSITIVE

Seeking export
Healthcare provision is one sector that is growing, ironically, healthily. Based on the latest Health
Fact 2009 report by Ministry of Health (July 2010), total admission and outpatients of the private
healthcare facilities grew +9.8%yoy and +16.1%yoy respectively in 2009. Similar statistics
for public hospitals were expectedly lower at +3.2%yoy and +10.8%yoy correspondingly. It is
dif"cult to forecast, but expect the numbers to be within similar range in CY10 and CY11. KPJ
Healthcare (KPJ), for example, recorded revenue growth of +10.8%yoy in 1HFY10. Using KPJ
as a proxy for the private healthcare sector, we are projecting earnings growth of +10.3%yoy
on the back of +9.4%yoy total patients increase in CY11. We are maintaining our call for KPJ
(Neutral; TP: RM3.51) due to the potential earnings dilution on warrants conversion, and pending
3QFY10 results. Our TP is based on targeted PER11 of 14x.
Demand for Hospital Support Services (HSS) will increase in tandem with higher hospital bed
occupancy rate and other related services. We have a Buy call for Faber (Buy; Target Price,
TP: RM3.60), the largest government HSS provider, based on Sum-of-Parts method. Our TP
implies a PER of 12.2x with estimated EPS11 growth of +12.5%. We expect our TP to be easily
realised should Faber renew its government concession which is due to expire in Oct CY11.
18 DECEMBER 2010
The healthcare sector is also one of the 12 National Key Economic Areas (NKEAs) identi!ed
by the government to boost the Gross National Income (GNI). More than half of the targeted
additional GNI contribution is expected to be generated from generic drugs export. In
2009, imports of pharmaceutical products (primarily for cholesterol lowering, anti-diabetic,
cardiovascular and oncology drugs) were 5.4 times more than exports. We expect the ratio to
decline in CY11 onward. Exports of some local drugs manufacturers like Pharmaniaga, Apex
Healthcare and YSP Southeast Asia (Not Rated) account for about 26.7% 18.9% and 11.7% of
total sales respectively. The potential rise in export sales is expected to contribute positively to
the companies CY11 growth. Local drugs makers are trading at average low double-digit PER
with good dividend yield of above 5%.
We are maintaining our Positive view for the sector, underpinned by increasing domestic
healthcare demand and the governments NKEA initiatives. This is evidenced by a recent
announcement of a collaboration with the world-renowned John Hopkins Medical International
and Royal College of Surgeons Ireland for the establishment of a RM2b worth Perdana University,
which will house two medical schools, a 600-bed multi-specialty teaching hospital and a life
sciences research centre.
CONSTRUCTION Maintain POSITIVE

Exciting days ahead
Exciting times are back for the construction sector" It has been a while since the days of the
mega projects in the 1990s. These mega projects are back, under the purview of the 10th
Malaysia Plan and the Economic Transformation Programme (ETP). Never before have multiple
big scale projects been announced in a concentrated span of time. There are 53 high impact
public-private partnership (PPP) projects worth RM63b announced during the 10MP, the
implementation of which is expected to gain momentum in 2011. Under the ETP, the Greater KL
initiatives alone could sustain many local contractors over the next 5-10 years, which projects
ranging from the high-capacity mass rapid transit system valued at RM36bn, the construction
of seven highways valued at RM19b, development of Malaysian Rubber Boardss 3,300- acre
land in Sungai Buloh valued at RM10b and the two-coal !red power plants valued at RM7b.
Construction sector was also a big winner in the 2011 Budget, with the biggest surprise coming
in the form of the RM5b Warisan Merdeka project. Developments on the four corridors (excluding
the development of the Greater KL) were also given further boost with RM853m allocation.
Local contractors are bene!tting from the spending bonanza, as they have become more
competitive and more capable, technically, to undertake the various jobs. So far, more than
RM4.0b jobs have been awarded to local contractors. These jobs include:
Selected Projects Awarded to Value

- LCCT package 2 Gadang RM291m
- LCCT Integrated Complex WCT RM486m
- Hulu Terengganu Dam Loh & Loh-Sinohydro JV RM828m
- Besraya extension IJM RM600m
- Paya Beda Dam JAKS RM333m
- Murum dam access roads IJM RM247m
- Batu Kawan Expressway for IJM RM350m
the 2nd Penang Bridge.
DECEMBER 2010 19
We expect more projects to be awarded in 2011, which include the remaining packages of the
new LCCT, the LRT extension line (Kelana Jaya) and upstream portion of the Pahang-Selangor
Inter-state Raw Water Transfer project coupled with infrastructure jobs in Sarawak.
It is an election year in Sarawak and construction stocks have always performed well in a year
voters go to the poll. The Federal government is paying a special interest in Sarawak, rewarding
the people and the state for the support that they have given to Putrajaya. In the pipeline are
various infrastructure projects such as road works, ports, bridges, schools and low-cost housing.
Infrastructure works for the SCORE economic corridor is also another important source of
construction projects.
Earnings prospects for listed construction companies are improving and that underpins our
POSITIVE view of the sector. Year-to-date, the KL Construction Index has surpassed the KLCI
index, growing 23.3% YTD vs 18.3%. Most construction companies in our universe caught up
with our full year forecast during the recent results season, and we foresee better numbers
ahead as more jobs are expected to be rolled out in 2011. The upside on selected large-cap
construction stocks may be limited due to valuations, but there is still room for growth in small-
cap and mid-cap construction stocks. Nevertheless, Gamuda remains one of our top picks as
the company was highlighted to be the front-liner for the proposed MRT project and also to
clinch the portion of the LRT extension line. We like Naim and Hock Seng Lee for Sarawak
exposure. The M&A between MRCB and IJM Land would provide a near term catalyst for share
price appreciation.
20 DECEMBER 2010
C. SECTORS TO BE
CAUTIOUS OF
PROPERTY Downgrade to NEGATIVE

More muted growth in 2011
Record residential sales transactions in 2010 may indicate an overheating market. Malaysias
residential property sector is expected to register the highest ever sales transactions on record
this year of circa RM50 billion (1H10: RM23.5 billion). The all-time high sales transactions can
be attributed to relatively low interest rates, accommodative home !nancing schemes, and
greater housing demand especially from up-graders market. This is attested by the high sales
!gures reported by many of the listed companies under our coverage particularly those who
were offering lifestyle housing products.
Runaway prices contained in selected localities but enough to alert authorities into action. Despite
the brisk sales transactions, Malaysias house price index (HPI) rose at a measured pace with
gains of 5.7%yoy and 4.3%yoy in 1Q10 and 2Q10 respectively. Nevertheless newly launched
house prices in certain hot-spots in the Klang Valley and Penang have recorded greater gains
than what the HPI indicated. These pockets of runaway prices may have alerted the authorities
to introduce measures to stem it from spreading to other localities.
70%-LTV cap for third mortgage may cool speculations in hot spot areas. In order to curb the
rise in property speculations that may lead to a broad-based runaway property prices, BNM
recently announced the implementation of loan-to-value (LTV) cap at 70% on the third residential
mortgage onwards. The measure was not unexpected as the authorities have earlier indicated
its resolve to nip property market speculations in the bud.
Two-tier market emerges but we expect the divergences to close out pursuant to measure
introduced. We are seeing greater price divergences between the hot-spots and non hot-spots
areas as well as between newly launched and existing properties. As a result of the cooling
down measure introduced by the authorities, we expect the divergences to close out over time
even though general house prices may nonetheless continue to maintain its secular uptrend
trajectory in line with rising replacement costs.
Commercial markets are expected to remain soft going forward. The prospects for commercial
properties are less promising due to the substantial amount of incoming supply to the market.
Retail and of!ce space are experiencing weaker occupancy rates. The retail market is expecting
another 13% rise in the supply of retail spaces or an additional 3 million sq ft in 2010. Moreover,
the of!ce market is projecting a 21% rise or an additional 14.9 million sq ft in new of!ce spaces
up to 2014. This will further weaken occupancy rates as prospective tenants will have more
DECEMBER 2010 21
bargaining power in rental negotiations.
More muted residential sales growth in 2011. Residential sales transactions are estimated to
rise by almost 20%yoy to breach the RM50 billion (2009: RM42 billion) mark for the !rst time
in 2010. Pursuant to the high base year, we thus expect a more subdued sales growth in 2011
with a projected single-digit growth in transactions value.
Downgrade due to anticipated slowdown in sales growth. An anticipated slowdown in the rise
of residential sales transactions will have a direct bearing on the top line growth of property
companies which rely mostly on residential properties as its mainstay products. Moreover, the
performance of property stocks is generally driven by the growth of its sales numbers. Hence
we expect the property stocks to under perform the broader market in 2011 as it will be dif!cult
for property share prices to out perform without strong top line growth. We downgrade our 2011
outlook for the property sector to NEGATIVE.
AUTOMOTIVE Downgrade to NEGATIVE

Good things must come to an end
2010 is indeed a very good year. The Total Industry Volume (TIV) for this year is set to reach all
time high with an estimated sale of more than 570,000 units, compared with 552,316 in 2005.
The catalysts for sales can be narrowed to (i) cheap !nancing, (ii) aggressive promotional
activities, and (iii) introduction of new models/variants from the national car makers. But TIV
above 535,000 units for the 3rd straight year is a feat that may not be repeated in 2011.
Pent-up demand factor is no longer valid. One of the main factors for the strong 2010 sales
was the pent-up in demand as customers held back purchases in the crisis year of 2009. Car
sales momentum is stabilizing in 2H10, suggesting a "attish growth prospect that could stretch
into 2011.
Possible rise in interest rate is a threat. Interest rate remains friendly but we are not discounting
the possibility of interest rate hikes in 2H11. Another round of rate hikes would be a major
dampener to motor vehicle sales. The movement in interest rate, coupled with a more stringent
banks approval criterion would have the biggest impact on consumer within the low-mid income
bracket. Incidentally, this is also the territory of the national car companies whose bread and
butter offerings make up of almost 70% of total vehicle sales in the country. Furthermore, the fact
that banks are offering higher interest rate on national car models is testament of the inherent
risks i.e. default risk on this particular segment. A dip in the sale of national car models would
have a signi!cant bearing on the industry TIV.
The replacement cycle is ending. In Malaysia, the replacement cycle is commonly de!ned as
!ve years. The previous high was in 2005 and what we are seeing in 2010 is a cyclical repeat
of the peak. That is also why we are not expecting another bumper year in 2011.
No signs of productions ramp up. Auto manufacturers and assemblers have yet to show any
inclination to increase production due to the anticipation of a stiffer competition. Companies are
assessing the sales situation before committing to change their production schedule. There is
no point ramping up production if sales is forecast to be "attish at best.
Aggressive promotional activities could take its toll on earnings growth. Automakers continue to
22 DECEMBER 2010
pump up sales by offering big incentives, which was the usual tactic. We could see the different
strategies employed in trying to win customers i.e. new in-house car !nancing schemes, offers
of lease programs and free service/maintenance packages. The downside to such schemes
is that it will eat into margins despite the bene!ts from the current RM appreciation versus the
USD.
New model/variant launches for 2011 are not going to be as exciting as that in 2010, while new
entrances are not expected to disrupt the establishment. For 2011, we would see the impact
of the Proton Inspira, of which Proton is targeting a monthly sale of 1,500 units per month. So
far, bookings for Inspira have exceeded 2,000 units. Apart from that, there are no new models
scheduled to be launched for both Proton and Perodua in 2011, except Proton Exora Hybrid.
Other notable launches would be the new Honda Civic, Kia Optima and Kia Soul.
We view that the auto market is heading into a consolidation phase in 2011 with TIV estimated
to be "attish at best. In fact, we are looking at a slight dip in sales going forward by -1.6%yoy.
We expect Protons performance to be only in line with that of the market next year. Hence we
are downgrading our call to Neutral from BUY. As for Tan Chong, competition is intense and we
anticipate lost of sales to the surging Koreans. Furthermore, its valuation is a stretch, hence
our Sell call. UMW is a Neutral unless its Oil & Gas division stages a remarkable recovery in a
short period of time. Other notable mention would be MBM Resource (Neutral) for its dividend
play. Overall we are downgrading the sector to NEGATIVE as car market is not expected to
remain as vibrant in 2011.
PORTS Downgrade to NEGATIVE

Remained cautious
We are bracing for slower trade growth in 2011. Malaysias recent trade data showed consistent
signs of deceleration since May after restocking activities led rebound in 4Q09 to 1Q10. Exports
in September continued its declining trend, with growth decelerating to 6.9%yoy from 10.6%yoy
in August. Export growth was 21.8%yoy in July. Imports also showed a declining growth trend.
September imports grew by 14.6%yoy as compared to 16.5%yoy, 18.1%yoy, 30.1%yoy and
34.2%yoy in August, July, June and May respectively. We expect the slower growth trend to
continue into 4Q10 and into 2011 as we expect the appreciation of the ringgit vis-à-vis the US
dollar to hurt Malaysian exporters.
Less manufacturing activities, less exports. The Malaysian Industrial Production Index (IPI) for
manufacturing grew by 7.6%yoy for September. Although, it is higher than Augusts manufacturing
IPI growth of 6.5%yoy, the growth rate for the seasonal adjusted manufacturing IPI still showed
a declining trend. The seasonal adjusted manufacturing IPI for September gained 7.2%yoy while
August and July growth rate were 9.0%yoy and 13.0%yoy respectively. We expect that the IPI
and manufacturing to grow at a slower pace in 2H10 and into 2011 due to dissipating global
stimulus spending, uncoordinated global monetary policy, continuing uncertainties weighing
down on global manufacturing and OECD leading indicators to remain weak owing to recovery
uncertainties. We believe that it will translate to lower export growth for 2011.
We are already seeing lower port traf!c and revenues. For 3Q10, NCB saw its port traf!c declining
2.9%qoq while revenue was "at, although the third quarter tends to be an active month for trade.
For its haulage/logistics, traf!c declined by 7.35%qoq and revenue declined by 12.1%qoq. We
DECEMBER 2010 23
believe that these are signs of the effects of a declining trade and lower rates. We expect an
easing of port traf!c growth in 4Q10 onwards due to the lower export growth.
We are NEGATIVE on the seaport sector in 2011. As we are expecting Malaysias total trade
growth to continue its decline in 2011, we are downgrading the sector to NEGATIVE. We expect
the slower growth will negatively impact total throughputs and revenue of the port companies.
We believe that logistics companies are anticipating the slowing of trade in 2011, hence the
reason for some companies to focus on growing the contract logistics in order to mitigate the
slowing of business. However, we are maintaining our NEUTRAL call on NCB (TP: RM3.66)
for its dividend play.
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24 DECEMBER 2010
C. NEUTRAL-VIEW
SECTORS
MEDIA Downgrade to NEUTRAL

No major event, no repeat in adex growth
According to Nielsen Media Research (NMR), consumers in Malaysia continues to be optimistic
as the consumer con!dence index reached a 3-year high of 103 in the 3Q10, up 4 points from
the previous quarter. Factors such as con!dence on job prospects, the buoyant stock market
and the strong ringgit have weigh in to the optimism. Additionally, more Malaysian consumers,
53%, feel that the country is not in an economic recession (compared to 54% and 44% in the
2Q10 and 1Q10 respectively). We expect that this con!dence will translate to a continuing
growth in adex going forward.
..but is not being re"ected in spending pattern. Although, the consumer con!dence will
translate to a continuing growth in adex in 2011, we do not expect 2010 growth rate to be
repeated especially in the absence of a major sporting event. We believe the 2010 World Cup
had played a key role in the rebound in adex. Also, while Malaysian consumers generally feel
more optimistic, lingering uncertainties about the economy, both locally and globally will in"uence
the way they look at spending. According to a survey by NMR, Malaysian consumers are also
still showing caution when it comes to household expenditures. In 3Q10, 73% Malaysian said
to have changed their spending habits to save on household expenses, compared to 78% in
2Q10. In the same survey, Malaysian consumers are likely to continue to save even as economic
conditions improve with 35% of consumers said they will continue to save on utility bills, 31%
will spend less for new clothes, 29% will reduce out-of-home entertainment and 24% will use
cheaper groceries brands.
No major event to boost next year, downgrade to NEUTRAL. We are downgrading our sector
recommendation to NEUTRAL given the absence of a major event which can boost adex growth
and the cautious spending behaviour of Malaysian consumer. Although there will still be adex
growth in 2011, we believe that the stellar performance of 2010 will not be repeated. Hence,
we are moderating the adex growth for 2011 to 7.0%. For speci!c companies we maintain our
NEUTRAL call on Star (TP:RM3.50) as we deem print media to be unexciting at this juncture
and would not be able to take full advantage of adex growth due to its limited offering, while
we continue to Media Prima (BUY, TP:RM2.80) due to its complete offerings (TV, radio, print,
electronic and advertising) to capture adex revenues.
ROAD TOLL Maintain NEUTRAL

Stronger traf!c growth but no toll rates hike
It is dif!cult to have a conviction in a sector that is enjoying strong consumer demand but is
DECEMBER 2010 25
unable to charge higher price. The government had announced during Budget 2011 that toll
rates will be maintained for the next !ve years. This will stabilize traf!c volume for PLUS. In
fact, traf!c volume for PLUS has been steadily growing at an average of 7% p.a. With !xed toll
rates, stronger economy, low unemployment and new national car models, traf!c growth will be
healthy in the next few years. The government s compensation for PLUS in 2011 is expected
to increase 7% to RM920m in 2011 as the toll rates remain.
The take-over by EPF and Khazanah completes the puzzle. Finally, PLUS accepted the offer
from EPF and Khazanah to buy over all the assets and liabilities for RM23b which translates
into RM4.60 per share. The expected delisting of PLUS will take away the shine from the road
toll sector, leaving LITRAK as the main listed road concessionaire.
Consumer Sector (F&B, Retail) Maintain NEUTRAL

Keep spending
We are not worried about the sector as consumer sentiment is holding well. MIER consumer
sentiment index remains stable at 115.8 (+5.4 points) in 3QCY10). Retail Group Malaysia
(RGM) recently also revised upward its CY10 growth forecast for the retail industry to +6.1%
from +5.5%. As the economy is holding up well, we expect consumer spending to be healthy
in CY11, supported also by the Economic Transformation Programme (ETP). The proposed
minimum wage policy will also help to raise disposable income especially the low income group.
Average consumer spending per household is projected to grow by an average of at least 8%
per annum between 2010 and 2020. We are anticipating at least 10% earnings growth next
year for the consumer sector.
However, the sector continues to face high raw materials costs. Our in-house forecast for CPO
price in CY11 is averaged at RM3,000/MT, +13.6% higher than the average year-to-date. And,
we are projecting crude oil to hover between USD70 and USD90/barrel. We believe high raw
materials cost environment will persist in CY11, translating into high production expenses.
However, pro!t margin might be safeguarded by stronger Ringgit and better costs control.
Bursas Consumer Index (KLCSI) gained +22.8%ytd, outperforming KLCIs +18.3%ytd.

Consumer stocks mainly involve in F&B business, for instance, KFC Holdings (Neutral, TP:
RM3.56), QSR Brand (Neutral, TP: RM5.75), Mamee, CI Holdings and Cocoaland, stole the
limelight with share price having surged +60.6% to +129.7%ytd. The commendable performance
was supported by strong earnings and valuation re-rating, which is in tandem with market rally,
and corporate exercises. However, high share prices now weigh down relative dividend return
to the investors. Average CY11 net dividend yield of the stock under our coverage is estimated
at only about 2.6%, lower than the current average 12-month !xed deposit rate, MGS 3-year
and 10-year KLCSI average of 3.0%, 3.2% and 4.5% respectively. Dividend return at current
juncture is signi!cantly lower that the !gure in 2008, of which KLCSIs dividend yield topped at
about 8%.
Maintain NEUTRAL. M&A stories (e.g. F&N-Cocoaland, QSR and KFCH) are spurring the sector
and driving the share price. However, we do not expect consumer counters to outperform KLCI
(of which we have a bullish view) next year due to their demanding valuation. Other potential
risks going forward include improper GST implementation, subsidy cut and rising household
debts which might restrain consumer spending. Maintain Neutral recommendation despite the
26 DECEMBER 2010
valuation concern as further downsides are cushioned by solid sector fundamental and consistent
earnings growth prospects. In addition, initiatives under ETP, which include abolishment of
import duty; unify promotional sales campaign; enhance shopping experiences especially for
the foreign tourists etc, will help boost the local wholesale & retail sector.
AVIATION Maintain NEUTRAL

Cloudy skies ahead
Travel is booming in Asia. In 3Q10, Asia region recorded the highest number of passenger
growth around 20%yoy followed by North & Mid Paci!c region (15%yoy), Middle East Asia region
(10%yoy) and North Atlantic region (3%yoy). We believe that the main catalyst for the growth
was the higher year-on-year global consumer index from Asia region attributed from Thailand
(+23ppt), Hong Kong (+10ppt), India (+9ppt), Malaysia (+7ppt), and Singapore (+6ppt).
Passenger movement and tourists are expected to grow by 4.0%yoy. We expect both total
passenger movement and tourist arrivals to grow by 4.0%yoy to 55m and 24m respectively on
the back of strong domestic and regional demand for travel. Based on available data, Malaysia
received 11.87m visitors in 1H10, an increase of 4.6%yoy. The key source of tourists to Malaysia
was Indonesia, with 1.25m visitors followed by Thailand (0.7m), Brunei (0.6m), China (0.5m)
and India (0.4m), showing the attractiveness of Malaysian tourist destination. We also believe
that outgoing tourism may increase in 2011 as the stronger ringgit vis-à-vis major currencies
increase the appeal for Malaysian to travel abroad.
However, possible headwind in the form of fuel price and reemergence of avian "u makes
aviation too volatile for comfort. The price of Singapore Jet Kerosene in 3Q09 was USD75.63/
bbl; the price of fuel in 3Q10 was USD86.26/bbl, an increase of 14.1%yoy. The increase in fuel
price means higher operating cost to both airlines companies . In 2011, we expect jet fuel price
to hover from USD90/bbl to USD110/bbl. Meantime, we are wary of the possible reemergence
of a global pandemic in 2011. According to media reports, a 59 year old woman in Hong Kong
was found to have contracted H5N1 avian "u virus after visiting China in October. In the last
pandemic, H1N1 in 2009, the airline industry reported an estimated losses totaling USD9.0b.
We are NEUTRAL on the sector at best. Although the sector stands to gain from the expected
boost in tourist arrivals in 1H10 and higher passenger movement, we expect airlines earnings to
be capped by rising fuel price. For speci!c companies, we retain our NEUTRAL call for AIRASIA
(TP: RM2.71) and MAHB (TP: RM6.00), while we maintain a BUY call for MAS (TP: RM2.50).
SHIPPING Maintain NEUTRAL

Rates remained volatile
The indicator for crude oil shipping rate, the Baltic Dirty Tanker Index (BDTI), remain volatile
since its recovery in April 2009. It peaked in January 2010 at 1216, only to decline to its lowest
level of 678 in September 2010. The average BDTI for 2010 is currently 887 with a standard
deviation of 15.5%. We believe that the volatility is due to the continuing oversupply of ships.
We expect this volatility to remain in 2011 as orders and construction of new ships still continue.
The BDTI had rebounded since its lowest point to 882 and is on an increasing trend. We believe
that this is due to an increase in oil trading activities, evidenced by the price of crude oil hitting
its 1 year high in November 2010. We expect this to provide potential for rates to increase in
DECEMBER 2010 27
2011 but any upside will be capped by the persistent overcapacity situation.
Container rates have fallen of slightly. Container shipping rates, indicated by the CTEX Index,
has fallen off lately to close at 555 in November 2010, which is a decline of 7.7% from its highest
point in September 2010. We believe that the slowing growth of international trade was a factor
especially the persistent weakness in US and Europe. We expect the variance will smaller in
2011 due to the continue decrease in international trade and business volumes.
MISC will bene!t from any increase in rates. We expect MISC (NEUTRAL; TP: RM9.00) to gain
from the recovery in rates but the depreciating US dollar vis-à-vis the ringgit will cap any upside.
Although, shipping rates have improved and is on an uptrend, we still maintain NEUTRAL on
this sector as we remained cautious on the volatility of the shipping rates due to the persistent
overcapacity problem and slower trade in the future.
POWER SECTOR Maintain NEUTRAL

Not much upside in 2011
The power sector staged a rebound this year as demand grew strongly by 8.8%yoy but it was
possible only because of the sharp fall in demand in 2009. The impact from the lower base
"atters the current !nancial year performance for Tenaga Nasional.
We do not expect a major shift in its business fundamentals any time soon. Some key issues
that will have a bearing on the sector are:
i. The long overdue tariff review. The current tariff will remain status quo, even in 2011. In view
of the possible General Elections next year, the government would not want to risk making
unpopular moves such as raising the electricity price. This issue will prolong and continue
to drag sentiment on Tenaga.
ii. The strengthening of the RM against the US Dollar bene!ts Tenaga in terms of translation
gains and to offset the rise on coal prices. However, there is a new threat in the form of the
rising JPY that may negate the savings from the RM/USD gains. For Tenaga, its JPY loans
amounted to RM5.3b or 25% of its total loans, while USD debt accounted for 21.2% or
RM4.5b.
iii. Higher coal prices but impact was softened by stronger RM/USD. For FY10, the US$ was
at RM3.14 versus RM3.53, an 11% improvement that helped to offset the rising price of coal.
The impact from the stronger Ringgit is evidenced by the improved average coal price for
FY10 at US$88/tonne versus US$90 in FY09. As for coal, price has been rising especially
in 2HCY10, from an average of US$75 per tonne to US$95 per tonne.
Maintain NEUTRAL. Even with the general optimism regarding the recovery story, we are
taking a more conservative view. YTL Power remains a sound dividend play with yield estimated
at 5.7%. Meanwhile, Tenaga is still the main player and a key stock on Bursa Malaysia, thus
barring any unexpected events, we would expect its share price to remain resilient.
28 DECEMBER 2010
GLOVE Maintain NEUTRAL

Saved by nitrile glove
Glove manufacturers 3QCY10 results showed slower glove demand growth, especially for the
latex segment. Nitrile glove sales on the other hand were sustained thanks to buyers switching
given the fact that high latex prices translated into rising latex glove selling prices. Nitrile price
is relatively stable; consequently price premium for nitrile to latex glove had narrowed. The
quality of nitrile glove is also superior with no protein content as compared to latex glove, which
might cause allergy. As long as high latex prices persist, demand switch to nitrile glove namely
in the developed countries is expected to continue in CY11. Note that, nitrile glove segment
accounted for about 83%, 38% and 7% respectively of the total Hartalega, Kossan and Top
Glove revenue. In spite of normalised glove sales post-pandemic outbreak, demand growth of
8-10% in CY11 globally is still a comfortable estimate. Note that, 3QCY10 glove export declined
by -4.0%qoq to 132k MT but increased +12.4%yoy. For the cumulative 9 months, the growth
rate was +20.4%yoy to 400k MT.
Latex price hit all-time high of RM8.70/kg on 19 Nov 2010. Latex price averaged at RM7.24/kg
year-to-date, +60.6% higher than the average in CY09. Note that, latex accounts for 55-60% of
the total glove production costs. According to Thai Rubber Association, natural-rubber output
in Thailand, the world largest producer, may decline by -10% to 0.87mMT in the 4QCY10,
reducing total full year production by -5% to 3m MT. Heavy rainfall disrupts rubber tapping and
cut supplies. Strong demand also drives the commodity prices. Furthermore, providing weaker
US Dollar, we believe latex price will remain high. US Dollar has depreciated signi!cantly by
-9%ytd against Ringgit to RM3.1185/USD. Our in-house estimate for CY11 is averaged at RM2.95/
USD. Moreover, as glove makers sales are mainly denominated in US Dollar, translation losses
is expected to continue in CY11.
We expect pro!t margin to remain under pressure. Rubber glove supply is expected to change
from shortage, which was caused by demand surge on H1N1 pandemic outbreak, to surplus in
CY2011. Cost passing power ability is hence being reduced as buyers are less willing to absorb
the additional costs given supply surplus environment. Recall, glove makers can pass on up
to 100% additional costs during the H1N1 pandemic to their customers. Secondly, production
costs per output might increase as a result of lower average production utilisation rate taking
into account larger capacity base (due to expansion). Thirdly, margin decline is due to high latex
price coupled with weaker US Dollar. We estimates that average EBIT margin in the industry
might already peak in 4QCY09 or 1QCY10. Nonetheless, we expect pro!t margin for nitrile glove
players to be more stable than latex glove makers.
Maintain Neutral. We are maintaining our Neutral call for the sector. In a nutshell, high latex
price, weaker US Dollar, potential excess production capacity and expected lower utilisation
rate going forward are among the concerns. Nonetheless, we do see opportunity in Kossan
(Trading Buy, TP: RM3.90) and Hartalega (Trading Buy, TP: RM6.28) due to their product
mix. Again, any unpredictable disease outbreak is a key re-rating catalyst for the sector. H5N1
avian in"uenza, which is the !rst case in Hong Kong since 2003, has con!rmed on 18 Nov 10.
But, it is still too early to judge the impact to the sector.
DECEMBER 2010 29
MIDF RESEARCH STOCK UNIVERSE (PRICES AS AT 21 NOV 2010)
Rec. Price Target Net Pro!t (RM m) EPS (sen) EPS (% chg) PER
(RM) Price
09 10F 11F 09 10FMALAYSIA
11F 09 EQUITY
10F RESEARCH
11F 09 10F 11F
CONSTRUCTION
IJM BUY 5.69 6.44 290.2 332.6* 416.6 21.9 25.1 30.8 >100.0 14.6 22.7 26.0 22.7 18.5
WCT BUY 3.04 4.24 147.1 144.2 192.5 18.9 20.3 29.3 43.4 7.4 44.3 16.1 15.0 10.4
Gamuda BUY 3.70 4.30 204.2 269.5 329.0 9.7 13.4 16.3 -40.4 38.1 21.6 38.1 27.6 22.7
Naim BUY 3.56 4.65 78.9 101.8 122.1 31.6 40.7 48.8 -5.2 28.8 19.9 11.3 8.7 7.3
HSL NEUTRAL 1.82 1.63 56.3 69.0 79.1 9.7 11.8 13.6 27.6 21.6 15.3 18.8 15.4 13.4
MRCB NEUTRAL 2.12 2.30 40.3 45.1 71.2 4.4 3.9 5.5 >100.0 -11.4 41.0 48.2 54.4 38.5
Ahmad Zaki. NEUTRAL 1.08 1.15 23.9 31.7 36.5 8.6 11.5 13.2 51.1 33.7 14.8 12.6 9.4 8.2
TELECOMMUNICATIONS
TM BUY 3.34 3.70 673.3 623.6 655.3 18.2 17.4 18.3 -20.9 -4.4 5.2 18.4 19.2 18.3
Axiata BUY 4.50 5.50 1,755.9 2,754.5 3,010.3 21.0 32.6 35.5 >100.0 55.3 9.3 21.4 13.8 12.7
Maxis NEUTRAL 5.32 5.50 2,332.0 2,298.9 2,367.9 27.3 30.6 31.5 >100.0 12.1 2.9 19.5 17.4 16.9
Digi BUY 25.60 27.00 1,000.5 1,101.7 1,164.4 128.7 141.7 149.8 -13.3 10.1 5.7 19.9 18.1 17.1
MEDIA
M Prima BUY 2.25 2.80 192.3 186.5 194.1 19.9 18.6 19.4 95.7 -6.5 4.3 11.3 12.1 11.6
Star NEUTRAL 3.36 3.50 144.7 165.0 181.3 19.6 22.3 24.5 4.2 14.0 9.9 17.1 15.0 13.7
SEMICONDUCTOR
Unisem BUY 1.92 2.80 60.7 159.9 188.0 11.9 23.7 27.9 >100.0 99.2 17.7 16.1 8.1 6.9
PLANTATION
Sime Darby BUY 8.80 10.87 2,280.1 726.8 2,804.1 37.9 12.1 46.7 -36.4 -68.1 >100 23.2 72.7 18.8
IOI BUY 5.89 7.29 983.5 2,035.7 2,071.7 16.6 30.5 31.0 -54.9 83.5 1.8 35.5 19.3 19.0
KLK BUY 20.00 24.02 612.5 944.2 1,114.8 57.4 88.4 104.4 -41.2 54.0 18.1 34.8 22.6 19.3
Genting Plant NEUTRAL 8.77 9.90 256.8 311.5 417.5 33.8 41.1 55.0 -31.5 21.6 33.8 25.9 21.3 15.9
Kulim NEUTRAL 13.54 11.69 142.1 369.0 274.4 44.6 115.8 86.1 -61.9 >100 -25.6 30.4 11.7 15.7
IJM Plant NEUTRAL 2.89 3.09 123.2 79.5 137.0 19.2 9.9 17.1 19.0 -48.4 72.7 15.1 29.2 16.9
TH Plant BUY 1.65 2.24 53.8 69.8 97.6 11.0 14.3 20.0 -47.5 30.0 39.8 15.0 11.5 8.3
Sarawak Plant BUY 2.39 2.83 39.4 49.6 58.2 14.1 17.7 20.8 -24.0 25.9 17.4 17.0 13.5 11.5
TSH Res. BUY 2.60 3.50 74.2 76.3 102.1 18.1 18.4 24.7 24.4 1.7 33.8 14.4 14.1 10.5
TOBACCO
BAT NEUTRAL 45.54 44.84 746.8 788.5 769.5 261.5 276.1 269.5 -8.0 5.6 -2.4 17.4 16.5 16.9
JT Intl NEUTRAL 6.10 5.36 98.2 108.2 116.8 37.5 41.4 44.7 -1.3 10.4 8.0 16.3 14.7 13.6
GLOVE
Top Glove NEUTRAL 5.74 5.14 169.2 245.3 245.1 27.3 39.6 39.5 46.9 45.1 -0.3 21.0 14.5 14.5
Kossan T BUY 3.39 3.90 66.8 113.1 124.7 20.9 35.4 39.0 14.0 69.4 10.2 16.2 9.6 8.7
Hartalega T BUY 5.54 6.28 84.5 143.1* 161.2 23.2 39.4 44.3 9.0 69.8 12.4 23.9 14.1 12.5
HEALTHCARE
KPJ NEUTRAL 3.73 3.51 110.9 120.0 132.4 21.0 22.7 25.1 26.9 8.2 10.3 17.7 16.4 14.9
CONSUMER (F&B, Retail)
KFC NEUTRAL 4.25 3.56 130.4 141.9 156.8 16.4 17.9 19.8 9.7 9.1 10.6 25.9 23.7 21.5
QSR NEUTRAL 5.76 5.75 90.9 100.5 111.4 31.8 35.1 38.9 2.8 10.6 10.8 18.1 16.4 14.8
AEON NEUTRAL 5.85 5.30 133.5 149.0 158.1 38.0 42.5 45.0 10.6 11.6 6.0 15.4 13.8 13.0
Parkson NEUTRAL 5.90 5.90 263.3 284.4* 340.0 25.4 27.4 32.8 31.6 7.9 19.7 23.2 21.5 18.0
F&N NEUTRAL 15.78 13.10 224.4 302.1 310.7 63.0 84.7 87.2 34.6 34.4 3.0 25.0 18.6 18.1
Nestle NEUTRAL 43.32 40.68 351.8 411.5 441.1 150.0 175.5 188.1 3.5 17.0 7.2 28.9 24.7 23.0
Pelikan BUY 1.24 1.65 46.1 64.3 106.1 9.0 12.5 20.7 -20.3 38.9 65.6 13.8 9.9 6.0
CI Holdings BUY 3.73 4.37 21.0 38.2 42.8 14.8 26.9 30.1 31.7 82.1 11.9 25.2 13.9 12.4
BANKING
AMMB BUY 6.25 7.30 860.8 1,008.6* 1,309.7 31.6 34.7 43.5 11.9 9.8 25.4 19.8 18.0 14.4
Maybank BUY 8.96 10.50 691.9 3,818.2* 4,296.1 12.0 53.9 61.0 -77.8 >100 13.2 74.7 16.6 14.7
Public Bank NEUTRAL 12.80 13.90 2,517.3 3,004.9 3,273.7 73.3 85.0 92.6 -4.7 16.0 8.9 17.5 15.1 13.8
RHB Capital BUY 8.00 7.80# 1,201.4 1,330.8 1,649.3 55.8 61.8 65.0 14.6 10.8 5.2 14.3 12.9 12.3
Eon Capital NEUTRAL 7.10 7.30 341.1 386.0 412.3 49.2 55.7 59.5 >100 13.2 6.8 14.4 12.7 11.9
Hong Leong NEUTRAL 9.58 9.40 905.3 988.0* 1,048.2 62.5 68.2 72.3 22.1 9.1 6.0 15.3 14.0 13.3
CIMB 30 NEUTRAL 8.33 8.80 2,806.8 3,705.1 4,062.6 79.5 49.8 55.0 >100 -37.4 10.4 10.5 16.7 15.1
DECEMBER 2010
Source: Company, MIDF Research # = Under Review * = actual
DPS Yield (%) PBV BV / share Net mar- ROA ROE No of Market cap 52-week Price (RM)
09 MALAYSIA
10F 11F EQUITY
09 RESEARCH
10F 11F 10 (RM) gin (%) (%) (%) shares (m) (RM m) High Low
6.5 6.5 6.5 1.1 1.1 1.1 1.5 3.70 7.2 2.3 4.5 1,351.0 7,687.2 5.77 4.28
7.5 7.5 7.5 2.5 2.5 2.5 2.0 1.55 3.2 3.3 9.9 785.3 2,387.3 3.31 2.30
8.0 9.0 9.0 2.2 2.4 2.4 2.3 1.61 8.3 3.1 6.2 2,044.0 7,562.9 4.01 2.58
- 9.6 9.8 - 2.7 2.7 1.2 2.86 13.9 7.5 11.7 250.0 890.0 3.83 2.40
9.7 11.8 13.6 5.3 6.5 7.5 3.2 0.58 15.0 11.8 19.3 582.7 1,060.5 1.91 1.00
1.0 1.0 1.0 0.5 0.5 0.5 2.4 0.88 4.4 1.3 5.8 1,380.3 2,926.3 2.28 1.17
2.2 2.2 2.2 2.0 2.0 2.0 1.3 0.82 5.2 3.3 10.3 276.7 298.8 1.28 0.74
23.0 24.0 25.0 6.9 7.2 7.5 1.6 2.07 7.8 3.4 9.4 3,577.4 11,948.5 3.60 2.96
0.0 0.0 0.0 0.0 0.0 0.0 2.0 2.23 13.4 4.7 9.3 8,445.2 38,003.2 4.66 2.97
9.0 10.0 12.0 1.7 1.9 2.3 4.5 1.19 30.6 13.1 26.1 7,500.0 39,900.0 5.54 5.10
178.0 150.0 120.0 7.0 5.9 4.7 14.2 1.80 20.4 21.1 65.8 777.5 19,904.0 25.60 20.96
5.0 5.0 5.0 2.2 2.2 2.2 1.9 1.16 25.8 9.2 17.5 1,001.1 2,252.6 2.37 1.53
20.0 60.0 20.0 6.0 17.9 6.0 2.0 1.70 14.9 7.9 11.3 738.6 2,481.6 3.74 2.76
2.5 5.0 5.0 1.3 2.6 2.6 1.2 1.54 5.9 3.7 6.3 674.2 1,294.4 2.72 1.11
19.0 10.0 23.0 2.2 1.1 2.6 2.6 3.40 6.9 6.1 10.8 6,009.5 52,883.3 9.19 7.47
8.0 17.0 17.5 1.4 2.9 3.0 3.6 1.65 7.9 5.7 8.9 6,691.4 39,412.2 6.01 4.67
33.8 37.5 45.0 1.7 1.9 2.3 3.7 5.41 9.3 7.1 10.3 1,067.5 21,350.1 20.96 15.12
8.3 11.1 11.4 0.9 1.3 1.3 2.4 3.58 34.0 9.0 9.8 758.8 6,655.1 9.00 5.98
7.5 11.3 12.0 0.6 0.8 0.9 1.2 10.91 2.4 1.8 2.8 318.7 4,314.8 14.20 7.04
9.8 8.0 8.0 3.4 2.8 2.8 1.9 1.49 30.3 8.9 10.2 801.3 2,315.9 3.14 2.36
6.4 7.4 7.5 3.9 4.5 4.5 1.7 0.96 17.7 5.7 8.9 487.8 804.9 1.78 1.40
7.5 8.0 9.0 3.1 3.3 3.8 1.3 1.82 13.3 5.9 7.8 280.0 669.2 2.51 1.95
5.0 5.0 5.0 1.9 1.9 1.9 1.4 1.81 7.6 4.3 9.1 414.5 1,077.8 2.86 1.67
236.0 260.0 260.0 5.2 5.7 5.7 26.7 1.71 19.0 51.8 170 285.5 13,003.0 49.94 41.42
50.2 29.0 30.0 8.2 4.8 4.9 4.1 1.50 8.5 23.8 31.1 261.5 1,595.4 6.10 4.61
22.0 16.0 15.8 3.8 2.8 2.8 3.2 1.77 8.1 12.3 15.2 618.3 3,548.8 7.38 4.34
4.2 7.1 7.8 1.2 2.1 2.3 2.6 1.32 7.9 9.7 18.6 319.7 1,083.9 4.28 2.42
8.0 13.3 15.5 1.4 2.4 2.8 4.8 1.16 25.0 17.6 46.9 363.5 2,013.6 5.70 3.72
6.0 11.4 12.5 1.6 3.0 3.4 2.9 1.29 7.6 8.1 16.4 554.9 2,069.7 3.85 1.94
4.5 4.9 5.4 1.1 1.2 1.3 4.0 1.06 5.7 10.1 16.2 793.2 3,371.2 4.62 1.63
9.8 10.5 11.7 1.7 1.8 2.0 2.2 2.59 3.3 4.3 6.8 290.0 1,670.6 6.14 3.15
9.0 12.7 13.5 1.5 2.2 2.3 2.0 2.95 3.6 6.5 13.6 351.0 2,053.4 6.08 4.80
5.0 6.0 16.4 0.8 1.0 2.8 3.0 1.97 9.7 3.9 9.2 1,093.6 6,452.5 6.20 5.00
41.7 59.3 61.0 2.6 3.8 3.9 3.1 5.03 8.3 10.2 16.8 357.7 5,644.9 16.00 10.29
150.0 175.5 188.1 3.5 4.1 4.3 16.8 2.57 9.4 20.5 62.0 234.5 10,158.5 45.00 32.48
2.0 2.0 2.0 1.6 1.6 1.6 0.4 3.18 3.8 3.0 7.6 512.8 635.9 1.39 1.00
5.3 8.3 9.0 1.4 2.2 2.4 3.1 1.22 4.1 5.4 12.9 142.0 529.7 4.00 1.60
8.0 10.5 15.2 1.3 1.7 2.4 1.9 3.26 n.m 1.1 11.5 3,014.2 18,838.7 6.40 4.51
8.0 55.0 24.4 0.9 6.1 2.7 2.2 4.00 n.m 1.2 13.5 7,078.0 63,418.7 9.38 6.61
77.0 47.0 51.0 6.0 3.7 4.0 3.7 3.48 n.m 1.6 26.1 3,531.9 45,208.7 12.90 10.55
22.5 15.0 15.0 2.8 1.9 1.9 1.9 4.32 n.m 1.1 14.5 2,153.5 17,227.8 8.19 5.15
10.0 11.7 12.5 1.4 1.6 1.8 1.3 5.57 n.m 0.8 10.1 693.2 4,921.8 7.22 5.77
24.0 24.0 24.0 2.5 2.5 2.5 2.1 4.69 n.m 1.2 16.3 1,580.1 15,137.4 9.80 7.70
18.5 18.0 18.0 2.2 2.2 2.2 2.8 3.13 n.m 1.4 15.0 7,432.8 61,915.0 20108.62 31
DECEMBER 6.03
MIDF RESEARCH STOCK UNIVERSE (PRICES AS AT 21 NOV 2010) (contd)
Rec. Price Target Net Pro!t (RM m) EPS (sen) EPS (% chg) PER
(RM) Price
09 10F 11F 09 10F 11F 09 10F 11F 09 10F 11F
FINANCE
Bursa NEUTRAL 8.34 8.00 177.7 119.8 140.9 33.7 23.0 27.0 69.3 -31.8 17.4 24.7 36.3 30.9
INSURANCE
MNRB NR 2.71 2.70 45.5 63.5 73.0 21.0 30.0 34.0 -73.8 42.9 13.3 12.9 9.0 8.0
STEEL
Ann Joo NEUTRAL 2.93 2.75 31.6 161.4 177.6 6.3 30.9 34.0 -77.0 >100 10.0 46.5 9.5 8.6
Kinsteel NEUTRAL 0.96 0.90 18.2 105.1 140.8 1.8 11.0 15.0 -48.6 >100 36.4 53.3 8.7 6.4
Lion BUY 2.03 2.25 -278.3 363.5 323.5 -39.0 50.9 45.1 -132.8 >100 -11.4 n.a. 4.0 4.5
OIL & GAS
Dialog Group BUY 1.43 1.65 101.4 116.1 149.3 4.7 5.9 7.5 21.2 26.1 27.1 30.6 24.2 19.1
KNM BUY 0.44 0.55 257.8 160.3 232.0 6.6 4.0 5.8 -25.0 -39.3 45.0 6.6 10.9 7.5
Kencana Pet. BUY 2.06 2.50 118.2 172.8 207.9 7.1 10.3 110 25.2 46.2 >100 29.2 20.0 1.9
Muhibbah Eg. NEUTRAL 1.30 1.37 14.0 56.7 62.4 3.6 14.5 16.0 -36.7 >100 10.0 36.4 9.0 8.1
Petra Pna NEUTRAL 0.77 0.85 29.3 47.3 52.8 9.9 15.9 17.8 -61.9 60.6 11.9 7.7 4.8 4.3
Pet. Gas NEUTRAL 11.24 11.00 928.0 940.6 1,132.2 46.9 52.8 57.2 -15.0 12.6 8.3 24.0 21.3 19.7
Sapura Crst BUY 2.68 3.10 115.7 170.2 239.0 9.1 13.4 18.7 21.7 47.3 39.6 29.5 20.0 14.3
Wah Seong BUY 2.01 2.35 206.4 187.9 166.6 17.7 17.0 24.2 12.7 -4.0 42.5 11.4 11.8 8.3
PROPERTY
KLCCP NEUTRAL 3.33 3.50 328.4 235.2 242.8 25.1 25.2 26.0 -6.8 0.3 3.2 13.2 13.2 12.8
Mah Sing BUY 1.82 2.13 95.8 119.6 136.9 11.3 14.0 16.0 -9.2 23.9 14.3 16.1 13.0 11.4
Sunway City NEUTRAL 4.32 4.90 207.0 177.5 221.1 119.8 37.7 47.0 >100 -68.5 24.7 3.6 11.5 9.2
SP Setia NEUTRAL 5.20 5.00 171.2 234.1 296.8 16.8 23.0 29.1 -20.0 36.9 26.5 31.0 22.6 17.9
UEMLand NEUTRAL 2.30 2.40 115.6 80.9 88.2 4.7 3.3 4.4 83.6 -29.8 33.3 48.9 69.7 52.3
Sunrise NEUTRAL 2.80 2.80 134.0 148.1 167.1 32.0 29.9 33.8 -10.4 -6.6 13.0 8.8 9.4 8.3
TRANSPORT
- Aviation
MAS BUY 2.12 2.50 493.1 310.5 839.0 28.6 10.6 25.1 >100 -62.9 >100 7.4 20.0 8.4
AirAsia NEUTRAL 2.43 2.71 549.1 616.4 786.1 22.4 22.3 25.9 >100 -0.4 16.1 10.8 10.9 9.4
MAHB NEUTRAL 6.00 5.96 377.2 337.9 408.9 34.3 30.7 37.2 23.6 -10.5 21.2 17.5 19.5 16.1
- Ports & Logistics
NCB NEUTRAL 3.66 3.66 141.0 159.7 167.7 30.0 34.2 35.7 -9.4 14.0 4.4 12.2 10.7 10.3
Century BUY 1.78 2.35 20.9 30.0 29.6 27.4 33.2 33.6 29.7 21.2 1.2 6.5 5.4 5.3
Bintulu Port NR 6.75 n.a. 128.8 143.0 150.4 32.2 35.8 37.6 -14.5 11.1 5.2 21.0 18.9 18.0
- Shipping
MISC NEUTRAL 8.61 9.00 1,488.7 822.2* 1,756.8 35.9 17.7 39.4 -42.9 -50.7 >100 24.0 48.6 21.9
Maybulk NR 2.89 n.a. 243.8 190.5 220.3 24.4 19.1 22.0 -47.1 -21.9 15.6 11.8 15.2 13.1
TOLL
PLUS NEUTRAL 4.45 4.60 1,186.4 1,211.1 1,307.3 23.7 24.2 26.3 9.8 2.1 8.7 18.8 18.4 16.9
LITRAK NEUTRAL 3.45 3.60 102.1 86.0 139.4 20.7 17.2 27.9 -3.1 -16.9 62.2 16.7 20.1 12.4
SILK BUY 0.37 0.46 -37.4 22.2 15.4 -20.8 5.9 4.1 -121 >100 -30.5 n.a. 6.2 8.9
UTILITIES
Tenaga BUY 8.70 9.98 917.9 3201.9* 3,346.4 21.2 73.4 79.6 -64.6 >100 8.4 41.0 11.9 10.9
YTL Power NEUTRAL 2.60 2.58 625.8 1,212.1 1,293.6 11.0 16.7 17.9 -45.0 51.8 7.2 23.6 15.6 14.5
Puncak Niaga T. BUY 2.65 3.55 142.6 149.1 182.8 34.9 36.3 44.5 >100 4.0 22.6 7.6 7.3 6.0
JAKS NR 0.71 n.a. -6.8 1.6 1.8 -1.5 3.7 4.1 -329.8 >100 10.8 n.a. 19.2 17.3
AUTO
Proton BUY 4.77 5.80 -320.3 239.1 314.9 -58.3 43.5 57.3 -271.5 >100 31.7 n.a. 11.0 8.3
UMW NEUTRAL 6.88 6.92 371.1 653.1 708.3 33.6 57.2 62.0 -35.8 70.2 8.4 20.5 12.0 11.1
Tan Chong SELL 5.62 4.60 152.3 242.7 257.4 23.3 36.1 38.3 -36.9 54.9 6.1 24.1 15.6 14.7
MBM Rsces NEUTRAL 3.09 3.10 66.5 151.7 162.7 27.4 62.5 67.1 -43.4 >100 7.4 11.3 4.9 4.6
Source: Company, MIDF Research * = actual
32 DECEMBER 2010
DPS Yield PBV BV / share Net mar- ROA ROE No of Market cap 52-week Price (RM)
(RM) gin (%) (%) (%) shares (m) (RM m)
09 10F 11F 09 10F 11F 10 High Low
19.1 20.7 24.3 2.3 2.5 2.9 5.5 1.52 59.7 9.9 20.9 531.4 4,431.9 8.66 6.75
0.0 0.0 0.0 0.0 0.0 0.0 0.6 4.37 4.7 1.3 5.0 213.1 577.4 3.20 1.90
6.0 10.0 12.0 2.0 3.4 4.1 1.5 2.00 2.4 1.6 3.4 522.7 1,531.5 3.35 2.23
1.0 1.0 1.0 1.0 1.0 1.0 1.1 0.89 0.9 0.5 1.1 955.9 917.7 1.18 0.77
0.8 0.8 0.8 0.4 0.4 0.4 0.5 4.25 n.a. n.a. n.a. 717.9 1,457.4 2.15 1.21
3.1 3.1 3.1 2.2 2.2 2.2 5.9 0.24 8.1 10.3 18.0 1,982.3 2,834.7 1.49 0.89
0.7 0.7 0.7 1.6 1.6 1.6 1.1 0.41 14.2 6.3 13.0 4,004.4 1,761.9 0.85 0.39
1.0 2.0 2.0 0.5 1.0 1.0 4.5 0.45 10.8 8.6 15.7 1,659.0 3,417.5 2.11 1.26
2.5 3.5 3.5 1.9 2.7 2.7 1.5 0.86 0.6 0.5 2.5 398.1 517.5 1.44 0.83
2.0 2.0 2.0 2.6 2.6 2.6 0.6 1.36 4.8 2.6 5.2 450.1 344.3 1.81 0.74
37.5 35.0 40.0 3.3 3.1 3.6 2.6 4.24 28.8 9.4 11.6 1,978.7 22,240.9 11.50 9.56
5.0 7.0 7.0 1.9 2.6 2.6 3.3 0.82 3.6 3.5 7.9 1,276.7 3,421.6 2.74 1.87
7.4 6.0 7.0 3.7 3.0 3.5 1.6 1.27 10.6 9.4 19.9 723.9 1,455.1 2.83 1.99
10.5 10.5 11.0 3.2 3.2 3.3 0.6 5.69 23.8 1.8 2.5 934.1 3,110.5 3.53 2.74
6.0 8.5 9.0 3.3 4.7 4.9 1.8 1.03 13.7 6.2 11.2 831.6 1,513.5 2.00 1.40
13.0 9.0 9.0 3.0 2.1 2.1 0.8 5.21 12.9 3.4 6.5 470.0 2,030.4 4.33 2.93
14.0 15.0 15.0 2.7 2.9 2.9 2.5 2.07 12.2 4.3 8.4 1,016.8 5,287.4 5.32 3.51
0.0 0.5 0.5 0.0 0.2 0.2 3.3 0.70 28.7 3.3 5.8 3,642.3 8,377.2 2.52 1.14
6.9 3.4 3.7 2.5 1.2 1.3 1.2 2.28 22.7 6.8 12.2 495.4 1,387.1 3.26 1.72
0.0 0.0 0.0 0.0 0.0 0.0 2.3 0.92 4.4 5.8 66.0 3,342.2 7,085.4 2.60 1.80
0.0 0.0 5.0 0.0 0.0 2.1 2.3 1.07 17.5 4.8 20.9 2,771.3 6,734.2 2.73 1.07
22.9 17.0 18.0 3.8 2.8 3.0 2.0 3.02 23.0 7.2 11.2 1,100.0 6,600.0 6.25 3.67
21.0 22.0 23.0 5.7 6.0 6.3 0.9 4.03 17.0 6.8 7.6 470.3 1,721.1 3.80 2.97
6.0 7.0 7.0 3.4 3.9 3.9 0.4 4.11 9.9 7.2 13.3 82.0 146.0 2.10 1.45
22.5 24.0 24.0 3.3 3.6 3.6 3.3 2.07 29.3 12.7 15.2 400.0 2,700.0 7.05 6.08
35.0 35.0 35.0 4.1 4.1 4.1 1.6 5.25 10.8 3.6 6.2 4,463.8 38,433.3 9.13 7.77
15.0 15.0 15.0 5.2 5.2 5.2 1.8 1.64 80.3 10.6 13.1 1,000.0 2,890.0 3.30 2.80
16.5 18.2 19.6 3.7 4.1 4.4 3.8 1.18 37.3 6.5 19.5 5,000.0 22,250.0 4.49 3.19
20.7 17.2 27.9 6.0 5.0 8.1 4.0 0.87 32.9 4.4 23.9 502.1 1,732.2 3.70 2.70
0.0 0.0 0.0 0.0 0.0 0.0 0.5 0.76 n.a. n.a. n.a. 397.0 144.9 0.47 0.32
17.8 9.3 25.0 2.0 1.1 2.9 1.3 6.61 3.0 1.2 3.2 4,358.1 37,915.1 9.29 7.73
12.7 10.0 10.0 4.9 3.8 3.8 2.6 1.00 4.7 1.8 8.7 7,252.8 18,857.3 2.76 2.12
7.5 7.5 7.5 2.8 2.8 2.8 0.7 3.65 7.6 1.6 8.2 411.1 1,089.5 3.25 2.03
0.0 0.0 0.0 0.0 0.0 0.0 0.7 1.04 n.a. n.a. n.a. 438.4 311.2 0.93 0.56
0.0 3.8 3.8 0.0 0.8 0.8 0.5 9.85 n.a. n.a. n.a. 549.2 2,619.7 5.03 3.66
15.0 22.5 22.5 2.2 3.3 3.3 1.9 3.62 3.5 4.2 7.5 1,151.0 7,918.6 7.03 5.90
8.3 11.1 11.1 1.5 2.0 2.0 2.2 2.50 5.3 6.2 10.0 672.0 3,776.6 6.02 2.30
11.2 11.5 11.5 3.6 3.7 3.7 0.8 4.03 5.6 5.8 6.5 242.7 749.8 3.36 2.40
DECEMBER 2010 33
YOUR EQUITY CAPITAL MARKET TEAM
Research
Zulki!i Hamzah (Head) ............................................. zulki!i.hamzah@midf.com.my ............03-2173 8390

Anthony Das ................................................................ anthony.dass@midf.com.my ............03-2173 8396
Chief Economist
Wan Azhar Mustapha ...................................................... wan.azhar@midf.com.my ............03-2173 8393
Utilities, Auto, Construction, Timber
Imran Yassin ................................................................imran.yassin@midf.com.my ............03-2173 8395
Telecommunications, Media, Technology
Kelvin Ong Poh Meng, CFA..............................................kelvin.ong@midf.com.my ............03-2173 8227
Banks, Steel, Insurance
Syed Muhammed Kifni Syed Kamaruddin .............................smkifni@midf.com.my ............03-2173 8383
Oil & Gas, Property, REITS
Belford Chang Kee Zheng ..................................................chang.kz@midf.com.my ............03-2173 8392
Consumer FMCG & Services, Healthcare, Gloves
Ha"za Mohd Hazari ................................................................ ha"za@midf.com.my ............03-2772 1650
Transport (Airlines, Shipping, Ports, Logistics)
Jasmaliha Jaafar ...............................................................jasmaliha@midf.com.my ............03-2772 1655
Plantation, Toll
Sales and Distribution
Wan Ahmad Satria ...........................................................wan.satria@midf.com.my ............03-2173 8728
Dealing
Kamaruzaman bin Abdullah (Head)........................... kamaruzaman@midf.com.my ............03-2173 8210

Mohammad Azmi bin Ab. Rahman ......................................... azmia@midf.com.my ............03-2173 8445
Azlinda bt Sahnan .................................................................azlinda@midf.com.my ............03-2772 1644
Kamal Bahrin bin Zulki!i .............................................. kamal.bahrin@midf.com.my ............03-2173 8386
Shaiful Baharin bin Mohd Zain .............................s_baharin.m_zain@midf.com.my ............03-2173 8445
Zarina binti Yusoff ................................................................. zarinay@midf.com.my ............03-2173 8365
Mohammad bin Abdul Samad .......................... mohamad.a_samad@midf.com.my ............03-2173 8445
Euaraj a/l Arumugam .............................................................. euaraj@midf.com.my ............03-2173 8363
Muhamad Daniel Lee Yam Sia bin Abdullah .......................... daniel@midf.com.my ............03-2173 8362
Mohd Faris bin Md Salleh .......................................................... faris@midf.com.my ............03-2173 8361
Louise Lee Lai Yoong .........................................................louiselee@midf.com.my ............03-2173 8359
Ameer Rizwan bin Azman ...........................................ameer.rizwan@midf.com.my ............03-2772 1643
34 DECEMBER 2010
DISCLAIMER
This report has been prepared by MIDF AMANAH INVESTMENT BANK BERHAD
(23878-X). It is for distribution only under such circumstances as may be permitted by
applicable law.
Readers should be fully aware that this report is for information purposes only. The
opinions contained in this report are based on information obtained or derived from
sources that we believe are reliable. MIDF AMANAH INVESTMENT BANK BERHAD
makes no representation or warranty, expressed or implied, as to the accuracy,
completeness or reliability of the information contained therein and it should not be
relied upon as such.
This report is not, and should not be construed as, an offer to buy or sell any
securities or other !nancial instruments. The analysis contained herein is based on
numerous assumptions. Different assumptions could result in materially different
results. All opinions and estimates are subject to change without notice. The research
analysts will initiate, update and cease coverage solely at the discretion of MIDF
AMANAH INVESTMENT BANK BERHAD.
The directors, employees and representatives of MIDF AMANAH INVESTMENT

BANK BERHAD may have interest in any of the securities mentioned and may bene!t
from the information herein. Members of the MIDF Group and their af!liates may
provide services to any company and af!liates of such companies whose securities
are mentioned herein
This document may not be reproduced, distributed or published in any form or for any
purpose.
MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS
STOCK RECOMMENDATIONS
BUY Total return is expected to be >15% over the next 12 months.
Stock price is expected to rise by >15% within 3-months after a Trading Buy
TRADING BUY
rating has been assigned due to positive news"ow.
Total return is expected to be between -15% and +15% over the next 12
NEUTRAL
months.
SELL Negative total return is expected to be -15% over the next 12 months.
Stock price is expected to fall by >15% within 3-months after a Trading Sell
TRADING SELL
rating has been assigned due to negative news"ow.
SECTOR RECOMMENDATIONS
The sector is expected to outperform the overall market over the next 12
POSITIVE
months.
NEUTRAL The sector is to perform in line with the overall market over the next 12 months.
The sector is expected to underperform the overall market over the next 12
NEGATIVE
months.
DECEMBER 2010 35
MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad (23878 - X)

(Bank Pelaburan)
(A Participating Organisation of Bursa Malaysia Securities Berhad)
Business Address:
11 & 12 th Floor, Menara MIDF,
82, Jalan Raja Chulan, 50200
Kuala Lumpur.
Tel: 2173 8888
Fax: 2173 8380
36 DECEMBER 2010

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MALAYSIA EQUITY RESEARCH

The summit is just a halfway point.

KINDLY REFER TO THE LAST PAGE OF THIS PUBLICATION FOR IMPORTANT

A. 2010 Review And 2011 Outlook

D. Our Neutral-View Sectors

MIDF Research Stock Universe ............................................................................... 30-33

KINDLY REFER TO THE LAST PAGE OF THIS PUBLICATION FOR IMPORTANT

A. 2010 REVIEW &

i. Performance, comparisons and assessment

Table 1: Performance of various markets (% change) as at 21 Nov 10

In US Dollar Index point 1Q10 2Q10 3Q10 4Q10* 2009 2010*

Several factors de!ned the markets performance in 2010:

Table 2: Performance by sector (% change) as at 21 Nov 10

FBM KLCI 1,506.05 3.8% -0.5% 11.4% 2.9% 45.2% 18.3%

Table 3: Performance of MIDF Research's stocks under coverage

Table 4 : Macroeconomic forecasts

ii. Macroeconomics: Performance and outlook

iii. Corporate Earnings

Table 5: Sectoral Valuation

iv. Market valuation and stock selection

Table 6: FBM KLCI : BOTTOM UP VALUATION

KLCI @ 21 Nov 1,506.1

Cumulative Foreign Flow to Emerging vs Developed Asia

More money has gone

Table 7: Regional earnings and valuation

Table 8: STOCK SELECTIONS

MID CAPs (Market Capitalisation RM1.5b - RM5.0b)

SMALL CAPs (Market Capitalisation <RM1.5b)

multiple compared with Malaysia.

SEMICONDUCTOR Maintain POSITIVE

TELECOMMUNICATIONS Maintain POSITIVE

 What exactly is 4G? According to the International Telecommunication Union Radio-

PLANTATION Maintain POSITIVE

 In addition, the government mandatory policy on the biodiesel consumption is expected to be

 Meanwhile we are projecting moderate growth of about 5% CPO production in Malaysia in

PALM OIL KEY INDUSTRY INDICATORS

Average CPO prices RM2,846 RM2,266 RM2,665 RM3,000

Malaysian Production (MT) 17.7m 17.6m 17.2m 18.0m

FFB Yield (MT/ha) 20.18 19.23 19.34 19.97

OER (%) 20.20 20.48 21.32 21.43

Immature areas (ha) 0.57m 0.56m 0.54m 0.52m

Mature areas (ha) 3.9m 4.0m 4.2m 4.4m

OIL & GAS Maintain POSITIVE

BANKING Maintain POSITIVE

HEALTHCARE Maintain POSITIVE

CONSTRUCTION Maintain POSITIVE

Selected Projects Awarded to Value

PROPERTY Downgrade to NEGATIVE

bargaining power in rental negotiations.

AUTOMOTIVE Downgrade to NEGATIVE

PORTS Downgrade to NEGATIVE

! " # $ " % & ' ( ) * ) +

MEDIA Downgrade to NEUTRAL

ROAD TOLL Maintain NEUTRAL

Consumer Sector (F&B, Retail) Maintain NEUTRAL

 Bursas Consumer Index (KLCSI) gained +22.8%ytd, outperforming KLCIs +18.3%ytd.

AVIATION Maintain NEUTRAL

The summit is just a halfway point.

Several factors de!ned the markets performance in 2010:

What exactly is 4G? According to the International Telecommunication Union Radio-

In addition, the government mandatory policy on the biodiesel consumption is expected to be

Meanwhile we are projecting moderate growth of about 5% CPO production in Malaysia in

Bursas Consumer Index (KLCSI) gained +22.8%ytd, outperforming KLCIs +18.3%ytd.