Market Dateline PP 7767/09/2010(025354)

RHB Research Institute

RHB Equity 360°

28 September 2010 (Top Glove, Adventa, Suncity, EON Cap, Evergreen; Technical: AirAsia, Lion Corp)

Top Story : Top Glove – Expect weaker earnings qoq Underperform (down from MP)
Results Preview
- Top Glove is expected to announce its full-year results on 6 Oct. While we expect weaker numbers qoq, for
the full-year, we see yoy growth of approximately 40-45% largely due to: 1) higher sales volume; and 2)
margin expansion on the back of better economies of scale.
- Qoq, we expect earnings to be weaker on the back of: 1) weaker revenue; and 2) margin contraction
largely due to time lag in passing on weakening US$.
- We have kept our FY10 earnings forecast unchanged for now. However, we have lowered our FY11 and
FY12 forecasts by 10.4% and 9.7% after lowering our corresponding capacity utilisation rate assumptions.
- Given the weaker earnings outlook, we have cut our target PER to 12.5x from 15x and our fair value is
lowered to RM5.30 (from RM6.90). Downgrade to Underperform.

Adventa : Below expectations Market Perform (down from OP)

3QFY10 results
- 9MFY10 net profit of RM24m was below our and consensus expectations accounting for 60% and 67% of
our and consensus full-year net profit estimates respectively. We believe the key variance was due to the
slower-than-expected commence of operations from its new factory in Kluang, which we now expect would
start contributing to earnings from end-4Q10 as compared to our earlier expectations of 3Q10 due to some
slight delay in installing the lines.
- Qoq, revenue grew 7.7% on the back of higher sales volume as its surgical gloves tends to be more
resilient than rubber gloves. Coupled with utilisation effect and lower effective tax rate, 3Q10 net profit
jumped 27.1% qoq.
- We have lowered our FY10-12 earnings forecasts by 10.7-19.5% following the slower-than-expected
contribution from the new lines in Kluang, Johor as well as revising our FY10-12 RM/US$ assumptions to
RM3.10-RM3.20/US$ (from RM3.30/US$ p.a. previously).
- Our fair value is cut to RM2.47 (from RM4.16), based on CY11 PER of 7x. Downgrade to Market Perform.

Corporate Highlights

Sunway City : Another landbanking effort Outperform

News Update
- Suncity, via its wholly-owned subsidiary – Sunway City (Penang) S/B, entered into a SPA with Sungai Ara
Holdings S/B to acquire a piece of freehold land in Penang, measuring 32.74 ha (or 80.9 acres). Total cash
consideration is RM38.8m, to be funded by internal funds.
- The price tag translates into RM11 psf, which is rather attractive. The land is located at the south-west of
Penang Island, surrounded by matured townships. It is also close to Penang International Airport and
Penang Second Link Bridge. The proposed development for the new landbank comprises semi-ds and
bungalows, and is expected to yield a GDV of RM800m.
- As the GDV of RM800m is higher than expected as our forecasts were previously based on a GDV of
RM621m, as guided by management earlier. Hence, we adjust our FY11-12 earnings up by 7-11%.
- Correspondingly, our RNAV/share estimate is revised to RM6.44, from RM6.41. Based on an unchanged
15% discount to RNAV, our fair value is raised slightly to RM5.48, from RM5.45. Maintain Outperform.

EON Capital : Shareholders approve HL Bank’s offer Underperform (down from MP)
News Update
- EON Cap’s shareholders yesterday approved HL Bank’s proposal to acquire the entire assets and liabilities
of EON Cap for RM5.06bn (Offer or Proposed Disposal).
- According to the announcement, the Proposed Disposal was put to vote by shareholders that collectively
hold a 63% stake in EON Cap, with 97% voting in favour of the proposal.
- Having cleared this major milestone, the upcoming events with respect to the Offer include: 1) HL Bank’s
EGM for the proposed acquisition of EON Cap’s assets and liabilities (on 4 Oct); and 2) the ongoing
petition filed by Primus, which has been fixed for hearing on various days between 29 Sep and 22 Oct.
- In our view, HL Bank’s EGM should be a mere formality, leaving the key remaining event being the court’s
decision on the petition.
- Although the disposal is still conditional upon upcoming events such as the court case, approval from EON
Cap’s shareholders means that the deal has taken a major step towards completion.
- Accordingly, we have lowered our fair value to RM7.30/share, which is based on HL Bank’s offer price
(previously RM8.33, based on 12x CY11 EPS).
- Given the limited upside to our fair value, we downgrade our call to Underperform from market perform.

Evergreen : Related-party acquisition Outperform

News Update
- Evergreen has announced a related-party acquisition of an additional 41.8% equity interest in Dawa Timber
Industries (M) S/B (DTI) for RM6.27m from Evergreen Timber Products Pte Ltd (ETP).
- Purpose of the acquisition is to streamline its company holding structure and also to enable the Kuo family
to wind up ETP which has remained dormant since 2004.
- The acquisition is priced at a PER of 7.5x and P/NTA of 1.36x, which seems on the high side compared to
Evergreen’s current valuation at PER of 6x FY11 earnings and P/NTA of 1.05x as at 30 June 2010.
- However, impact to Evergreen bottomline is negligible at 0.6%.
- No change to our forecasts. Indicative fair value is RM2.57. Maintain Outperform.

Technical Highlights

Daily Trading Strategy : Removing the 10-day SMA will spur more buying…
- In tandem with the formation of the previous day’s “dragonfly doji” candle, the KLCI registered a technical
rebound yesterday with a positive candle.
- Given the current positive candle and the improved short-term momentum readings, the benchmark is likely
to take out the 10-day SMA of 1,467 today and head towards the recent high of 1,479.59.
- With the robust regional markets’ performance underpinning the local market sentiment, we expect
investors to return quickly after trimming their holdings in recent consolidation, prompting a fresh round of
bargain-hunting activities in the market.
- Also, with strong healthy volume at around 1.0-1.4bn shares currently, we foresee the rotational play
persisting with core blue chips and speculative lower liners drawing trading attention in the near term.
- Our positive technical outlook will only be jeopardised if the index breaches unexpectedly to below the key
1,450 level in the near term.

Daily Technical Watch: AirAsia – Stay bullish until and unless the stock eases back to below RM2.15…
- 10-day SMA: RM2.081
- 40-day SMA: RM1.771
- Support: IS = RM2.15 S1 = RM1.90 S2 = RM1.80
- Resistance: IR = RM2.26

Short-term Trading Idea: Lion Corp – Momentum would likely increase if it removes RM0.31 …Bargain Buy
- Strategy: Bargain buy above RM0.28 for further breakout rally ahead.
- Target: IR = RM0.31 R1 = RM0.36 R2 = RM0.40
- Support: IS = RM0.28 S1 = RM0.265 S2 = RM0.215
- Exit: Cut loss if it falls convincingly below the DRL near RM0.28.

Bulletin Board

Co/Sector News Impact Recom

Maybank Maybank Investment Bank has set its sights on
expanding into the Singapore, Indonesia and Hong
Kong markets. For Indonesia, it may acquire a
stockbroking firm, while it needs a licence to operate
in Singapore. In addition, Maybank IB expects 50%
revenue contribution from overseas in the next five
years. (Starbiz)
Maybank IB’s plans are not new and among the OP, FV =
options previously mentioned include finding a RM10.50
partner, starting from scratch and a JV. On the
whole, the expected increase in overseas
contribution would be in line with the Group’s target
to see 40% pre-tax contribution from its overseas
operations by 2015, up from 21% in FY10.
Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Jadi Imaging Issue of free warrants on the basis of 1-for-2 7-Oct-10 -
George Kent (M) Interim dividend of 2 sen less 25% tax 8-Oct-10 30-Nov-10
Metro Kajang Holdings First interim dividend of 5 sen less 25% tax 13-Oct-10 28-Oct-10
Hong Leong Bank Final dividend of 15 sen less 25% tax 25-Oct-10 11-Nov-10
Oriental Interest First and final dividend of 10% less 25% tax 24-Nov-10 10-Dec-10
Pintaras Jaya First and final dividend of 15% less 25% tax 17-Dec-10 11-Jan-11

Going “ex” on 29 Sep

Petra Perdana Renounceable Rights Issue on the basis of 3-for 8 29-Sep-10 -
Yeo Hiap Seng (M) Interim dividend of 5 sen less 25% tax 29-Sep-10 15-Oct-10
Kumpulan Fima Final dividend of 5% less 25% tax 29-Sep-10 18-Oct-10
Tiong Nam Logistics Proposed first and final dividend of 7 sen less 25% tax 29-Sep-10 26-Oct-10
Super Enterprise Holdings Final dividend of 3 sen less 25% tax 29-Sep-10 29-Oct-10

...For more details, see individual reports attached

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