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

RHB Research Institute

RHB Equity 360°

8 July 2010 (QL, Banks, Kencana; Technical: Proton)

Top Story : QL Resources – Pathway paved for QL’s next growth phase Outperform
Visit Note
- 74.5%-owned plantation in Indonesia is expected to start contributing more meaningfully to the plantation
division (>60% of plantation earnings) by FY13 arising from the maturing age profile of its plants and milling
profits from CPO mill in Indonesia.
- QL targets to enlarge its eggs product to 4.0m eggs/day (+60%) by FY13. This would come from its
expansion plans in Malaysia (+0.5m (+20%) in FY11), Indonesia (+0.5m (+20%) in FY12) and Vietnam
(+0.5m (+20%) by end-FY12).
- Started construction of surimi plant in Indonesia which has 2 lines with a total initial capacity of 5,000mt
p.a.. Earnings contribution from this new plant is expected to come in by early-FY12.
- Our FY11-13 earnings forecasts have been reduced by 0.1-5.0% p.a. after: 1) tweaking our earnings
model; 2) assuming earnings for Indonesia and Vietnam operations only come in by mid- to end-FY12
instead of early-FY12 previously; and 3) increasing our capex assumptions.
- Our fair value has been increased to RM4.90 (from RM4.60) based on higher CY11 PER target of 14.5x
(from 13x), to be in line with the consumer sector target PER.

Commodities Corner

Oil & Gas : Ban on new offshore oil drilling urged by Europe energy chief
- According to a Bloomberg news report, European Energy Commissioner Guenther Oettinger has urged all
EU national governments to ban new offshore oil drilling until the causes of BP Plc’s spill in the Gulf of
Mexico are known. He said that he would meet with national regulators on 14 July.
- This supports our view that industry conditions will continue to remain soft, with the potential for: 1) a rising
number of unutilised offshore assets around the world which would place downward pressure on daily
charter rates; and 2) more oil producing regions imposing tougher safety regulations for all offshore activity.
- We reiterate our Neutral call on the sector. Our top pick is Dialog (OP, FV = RM1.30) which is asset-light,
has 70% recurrent income, and is in the running to build storage terminals for Petronas’ new onshore
downstream facilities.

Sector Call

Banks : Ball back in HL Bank’s court? Overweight

Sector News Update
- EON Cap announced yesterday that its Board had reaffirmed its decision to table HL Bank’s offer for EON
Cap’s assets and liabilities to shareholders for their consideration and approval.
- Apart from approvals to be obtained from shareholders and the Minister of Finance for the offer, it appears
that EON Cap’s Board has attached another condition to accepting the offer, i.e. the final decision of the
court with respect to the petition filed by Primus.
- As mentioned previously, the court has fixed the case for trial starting from 20 Sep. Hence, with the added
condition above, it is unclear how this would affect the 15 Aug deadline as set by HL Bank.
- On the whole, the recent developments suggest that the saga could continue to drag on.
- We retain our view that one way or the other, the issue of HL Bank’s offer would need to be resolved soon
as the longer it drags on, it may affect the execution of business plans and impact operations, in our view.
- We maintain our Market Perform call for both EON Cap (FV = RM7.92) and HL Bank (FV = RM9.20).

Corporate Highlights

Kencana : Newfield contract Underperform

News Update
 - Announced a new RM201.1m contract for topsides construction from Newfield.
- No changes to our forecasts. Maintain Underperform with fair value of RM1.27.

Technical Highlights

Daily Trading Strategy : Surpassing the 10-day SMA will confirm a technical rebound…
- Bucking the general profit-taking trend in the regional markets, the local bourse appeared much resilient
than expected yesterday.
- With a collection of two positive candles in a row, and a survival at above the critical 1,300 psychological
level, a retest of the 10-day SMA looks imminent in the near term.
- This technical rebound will be confirmed if it surpasses the 10-day SMA soon. Optimistically, it will also
revisit the recent high of 1,335.31 if the recovery momentum continues.
- However, a stronger daily turnover and a sustainable positive market breadth are still needed to maintain
the current recovery pace.
- Failure to overcome the above factors will induce more selling pressure, hence pressing the index lower to
the 40-day SMA and 1,300. That, if it occurs, will change the index outlook to the bearish mood again.

Daily Technical Watch: Proton Holdings – Losing RM4.26 will lead more selling towards RM3.80…
- 10-day SMA: RM4.483
- 40-day SMA: RM4.603
- Support: IS = RM4.26 S1 = RM3.80 S2 = RM3.40
- Resistance: IR = RM4.60 R1 = RM5.00

Bulletin Board

Co/Sector News Impact Recom

Consumer – Carrefour Malaysia and Singapore deny exit We understand that based on third party sources, N
Retail report and is scheduled to open another four the sale of Carrefour’s operations in Malaysia is
Carrefour outlets by year-end. (Business Times) ongoing, but we believe that any confirmation
from Carrefour would only come once a buyer
has been identified and the agreement has been
signed.
Consumer Implementation of GST, which was scheduled for Neutral. No initial impact on consumers buying N
2011, has been put off indefinitely. (Business ahead pre-GST.
Times)

Insurance The govt is expected to implement the TPBID Neutral. We have previously highlighted that we OW
insurance scheme next year after the details are expect the new scheme to be implemented next
finalised at the latest by year-end, the Dewan year. However, we previously expected the
Rakyat was told. (Bernama) details to be finalised around the 3Q FY10.
Puncak Syabas (a 70% subsidiary of Puncak) has asked Neutral. This is only a short-term solution, and a MP, FV =
Niaga for bondholders' indulgence to get a soft loan of holistic water sector restructuring is required in RM2.92
RM300-400m from the Government, and the order to solve this issue.
bondholders have agreed to the request,
according to industry sources. (Starbiz)

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
None

Going “ex” on 9 Jul

 Signature International Bonus issue on the basis of 1-for-2 9-Jul-10 -
Seg International Final dividend of 3.5 sen less 25% tax 9-Jul-10 28-Jul-10
Premium Nutrients Tax-exempt interim dividend of 1.5 sen 9-Jul-10 28-Jul-10

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