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

RHB Research Institute

RHB Equity 360°

4 May 2010 (Construction, Semiconductor, Kencana, Daibochi, Hunza; Technical: Proton)

Top Story : Construction – Give me your best shot! Peninsular boys Neutral
Sector Update
- News last month that IJM had been awarded two work packages for the Murum Access Road (RM246.7m)
may be read by the market as a signal that the Sarawak construction market is beginning to open up.
- Some argue that Sarawak’s construction market was never quite “closed” to start with. Peninsular boys had
all along been casually bidding/lobbying for selective public jobs and only turned aggressive recently.
- Sarawak-based contractors generally do not feel “under siege” because: 1) Structurally, Sarawak-based
contractors are more competitive than the Peninsular boys in Sarawak; and 2) They believe there will be
enough jobs to go around in Sarawak.
- The three remaining packages of the Murum Access Road worth about RM200m each are likely to stay
with Sarawak-based players.
- We believe the market should not read too much into IJM’s Sarawak jobs. Maintain Neutral.

Sector Call

Semiconductor : Chip sales up 58.6% yoy and 4.6% mom Overweight

Sector Update
- SIA reported Mar chip sales were up 58.6 % yoy and 4.6% mom. The stronger yoy sales growth of 58.6%
for Mar was the fifth monthly gain on yoy basis. Chip sales of US$23.1bn grew 4.6% mom mainly driven by
the growing demand for chips in developing countries and improved sales from the enterprise sector.
- Microsoft and IBM reported 1Q net earnings growth of 35% and 13% yoy respectively driven by stronger
growth in software and hardware business as well as operating systems respectively. Microsoft reported
strong quarterly results mainly due to stronger sales of its Windows 7 OS and business software, driven
mainly by the stronger corporate spending.
- Mar 10 booking orders surged 423.2% yoy (vs. 384.2% in Feb) to US$1.29bn mainly due to higher
investment in packaging, testing and fabrication equipment. Furthermore, with a book-to-bill ratio of 1.19,
Mar 10 was the ninth consecutive month of a book-to-bill ratio above parity, suggesting resilient growth in
capex trend since Jul 09.
- Maintain Overweight stance. Our top pick for the sector is Unisem.

Corporate Highlights

Kencana : Gorgon LNG fabrication contract Outperform

News Update
- Kencana announced yesterday that it had received a letter of award from Saipem S.A. (an oil and gas
service provider) for the fabrication of LNG jetty and marine structures for the Gorgon LNG project. The
contract is worth RM166m and is expected to be delivered in stages from 2Q11 to 3Q12.
- Recall in our 15 Apr report, we highlighted that the company was in final stages of negotiations for three
sizeable contracts (i.e. two from Malaysia and one from overseas), collectively worth RM400m. After this,
we expect Kencana to announce two more sizeable contracts worth around RM240m in the near term.
- No change to our forecasts as we have already assumed RM1.0-1.3bn new orders p.a. flowing in over the
next 24 months to replenish existing ones.
- Maintain Outperform and fair value of RM1.88/share.

Daibochi : Net profit flattish yoy, but higher earnings expected ahead Outperform
1QFY10 Results
- 1Q10 net profit was in line with our and consensus expectations, accounting for 19% of our and consensus
FY10 forecasts. We consider this to be in line due to: 1) 3-month time lag in passing on rising raw material
costs; 2) mismatch in timing of forex; and 3) R&D expenses recognised during the quarter.
- Daibochi has since increased average selling prices of its products by 3-4% in Apr 10.
- No change to our earnings forecasts. Maintain Outperform call with target price of RM4.40 based on
unchanged 12x FY10 EPS. Attractive dividend yield of 7-8% gross.

Hunza Properties : Better progress billings from Gurney Paragon Market Perform
3QFY10 Results
- 9MFY06/10 results were within expectations. As at Mar 10, the company had unbilled sales of RM167.3m,
or 0.7x of our FY10 revenue projection.
- No change to our earnings forecasts and indicative fair value of RM1.43 (based on unchanged 50%
discount to RNAV/share of RM2.85).

Technical Highlights

Daily Trading Strategy : Risk of a “double top” formation remains…

- Although yesterday’s recovery from the early weakness managed to push the FBM KLCI to close
marginally positive, a “hangman” candle from the candlestick pattern suggests a potential pullback today.
- As the index could not match last Friday’s high of 1,348.15, it still faces the similar risk of a possible
“double top” formation, if it eases further today.
- Given the daily turnover that was far below the 1.0-1.2bn shares of active-trading level, the market
sentiment will remain weak in the near term.
- We expect investors to continue adopting their wait-and-see strategy, pending stabilisation signs from the
volatile regional markets’ sentiment.
- For support, the 10-day and 40-day SMAs of 1,339 and 1,336 will buffer the selling pressure, if any.

Daily Technical Watch: Proton – Poised for another chart breakout should it surpass RM5.00 today …
- 10-day SMA: RM4.831
- 40-day SMA: RM4.662
- Support: IS = RM4.26 S1 = RM3.80 S2 = RM3.40
- Resistance: IR = RM5.00 R1 = RM6.00 R2 = RM7.00

Bulletin Board

Co/Sector News Impact Recom

Plantations Palm oil producers in Indonesia and Malaysia
have established the Indonesia-Malaysia Palm
Oil Group (IMPOG) to formalise their
collaboration on sustainable palm oil
development. While the IMPOG did not discuss
any alternative sustainability certification scheme
for palm oil, the meeting agreed to engage with
the Roundtable on Sustainable Palm Oil (RSPO)
for a more practical and implementable scheme.
(The Star)
Infrastructure Asas Serba (which proposed to take over 23 toll
- toll road roads and highways in Malaysia a year ago) is
now proposing to take over all existing toll
concessionaires by raising RM50bn from a bond
sale. It will also allow highway companies, the
Government, banks and the public to be the
shareholders. (The Star)
Positive. The two countries working together OW
would hopefully have a better basis and standing
to argue the case for palm oil. However, it is
important that the Malaysian and Indonesian
palm oil producers do not take it too far and
compromise on sustainable practices, as the
consequences would be damaging to the
industry.
Neutral. We believe Asas Serba's proposal is PLUS:
unlikely to materialise, given: 1) The huge OP, FV =
funding required; 2) Toll concessionaire such as RM4.13
PLUS generate free cash flow of RM1bn p.a..
This means the Government is unlikely to sell
these prized assets at low prices given its strong
cash generation ability, even if it does intend to
sell; and 3) In the absence of future toll hikes,
Asas Serba will have to lobby for an extension in
toll concession, and this will not go down well
with the Government and the people.
 Rubber Latexx Partners reported 127% yoy growth in its This follows Supermax’s 19 Apr announcement of OW
gloves 1QFY12/10 net profits driven by increased in sales its 1QFY10 net profit which rose by 161% yoy. We
volume as a result of capacity expansion as well as expect Kossan to announce its results later this
improved overall efficiency achieved which gave rise month with similar levels of growth. We expect the
to lower overheads, operational and supervision outlook for gloves would continue to be strong,
costs. (Bursa) supported by organic demand growth and rising
healthcare awareness in developing countries such
as China and India. Also if fuel prices go up, which
would result in higher gas prices for the glove
manufacturers, we believe the glove players would
be able to pass on the cost increase to customers,
albeit with slight time lag (2-3 months).

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Tai Kwong Yokohama Final dividend of 5 sen less 25% tax 13-May-10 15-Jun-10
Daibochi Plastic Interim tax exempt dividend of 3.5 sen 18-May-10 4-Jun-10
Hunza Properties Special interim single tier dividend of 2.5 sen 9-Jun-10 28-Jun-10
Latexx Partners First interim tax exempt dividend of 2.5 sen 18-Jun-10 5-Jul-10
Ann Joo Resources Final dividend of 3 sen less 25% tax 26-May-10 15-Jun-10

Going “ex” on 5 May

Box-Pak (M) First and final dividend of 7 sen less 25% tax 5-May-10 18-May-10
Kian Joo Can Factory Final dividend of 1.875 sen less 25% tax 5-May-10 18-May-10
LCTH Corporation Final dividend of 1.78 sen less 25% tax 5-May-10 21-May-10
Tradewinds (M) First interim dividend of 10 sen less 25% tax 5-May-10 21-May-10
Help International First and final fividend of 3 sen less 25% tax 5-May-10 27-May-10

...For more details, see individual reports attached

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