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

RHB Research Institute

RHB Equity 360°

5 April 2010 (Timber, Banks; Technical: Ramunia, Petra Perdana)

Top Story : Timber – Japan housing starts fell in February Neutral

Sector Update
- Contrary to expectations, Japan housing starts recorded a 15th straight month of decline (-9.3% yoy and
13.0% mom), which was also below economists expectations of a 1% drop yoy.
- Japan government is encouraging its people to renovate their homes to create a stronger resale market.
While we identify potential beneficiaries from this programme to be WTK and Ta Ann, this positive effect
would be offset by decrease in construction of new housing, which would reduce the demand for basic
plywood products.
- Upward price trend confirmed by JL and a further price appreciation is expected in 2Q10 due to supply
shortages. We expect prices to increase by 10-15% in CY10. As for plywood volumes, we expect an
increase in production volumes by 17-30%.
- Sarawak’s tropical log exports have fallen following the current dry spell. Two timber players who would be
most affected by this are Jaya Tiasa and WTK. However, we expect this impact to be temporary as
seasonally, the dry period should recover by Mar / Apr 10. This is to be offset by recovery in selling prices.
We currently forecast log volumes to rise by 5-10% in CY10 and prices to increase by 10% yoy in CY10.
- No changes to our forecasts. Maintain Neutral on timber sector. Top picks are Ta Ann (OP; FV = RM7.60)
and Evergreen (OP; FV = RM2.35). WTK (OP; FV = RM1.55) and Jaya Tiasa (UP; FV = RM3.05).

Sector Update

Banks : EON Cap’s shareholders to decide on HL Bank’s offer Overweight

Sector Update
- EON Cap (OP, FV=RM8.07) announced last Friday that its Board of Directors has decided to table HL
Bank’s (MP, FV=RM9.05) revised cash offer of RM5.06bn to shareholders at a general meeting.
- This comes as no surprise as we had previously mentioned that EON Cap’s “new board” was likely to
accept the offer.
- Besides the above, EON Cap’s Board had also requested HL Bank to consider, in addition to the proposed
all-cash settlement, an option to settle its offer with some elements of equity in HL Bank. The equity
element, according to the Edge, would help provide shareholders that may want an exposure and ride on
the merged entity.
- Finally, while not required, EON Cap’s Board has decided to appoint an independent adviser for the offer.
- In our view, the revised offer price is still a good deal for HL Bank, especially when viewed relative to the
full takeover transaction P/BV multiple of above 2x during the second round of consolidations.
- For EON Cap, we are maintaining our view that the takeout offer is too low given, among others, improving
fundamentals. Although the EON Cap’s Board has agreed to table the revised offer to shareholders,
approval is still uncertain.

Technical Highlights

Daily Trading Strategy : Medium-term bullish despite short-term volatilities…

- Although the recent sluggish turnover remains our key worry for the short-term trading sentiment, the
successful breakout from Mar’s high of 1,334.34 has painted another bullish scenario on the FBM KLCI‘s
medium-term outlook.
- In fact, we expect the current bullish momentum to push the index to close the previous technical gap at
1,344.46-1,354.79 soon.
- However, if the volume remains below the 1.0bn shares mark, short-term trading sentiment is likely to stay
lukewarm, in our view.
- As such, short-term profit-taking activities may cause a choppy market environment in the near term.
- Nevertheless, as the index has surpassed the crucial resistance zone of 1,250-1,300, its medium-term
outlook has turned bullish with a medium-term target set at 1,390.
- Optimistically, we expect the healthy rotational plays to lure back the trading volume, hence improving the
underlying market sentiment for the near term.

Daily Technical Watch: Ramunia Holdings – Further breakout rally if it sustains at above RM0.40 …
- 10-day SMA: RM0.3185
- 40-day SMA: RM0.3261
- Support: IS = RM0.40 S1 = RM0.30
- Resistance: IR = RM0.58 R1 = RM0.73 R2 = RM0.91

Weekly Trading Idea : Petra Perdana – Smooth recovery may lead retest of RM1.78 soon … Bargain Buy
- Strategy: Bargain Buy for a retest of RM1.78 crucial level soon.
- Target: IR = RM1.78 R1 = RM2.20 R2 = RM2.40
- Support: IS = RM1.35 S1 = RM1.20
- Exit: Stop loss will be triggered if it loses RM1.35.

Commodities & Currencies – More strengthening of ringgit likely this week…

- Light Sweet Crude Oil futures (Crude): Optimistic for a retest of the US$87 resistance level soon.
- Crude Palm Oil futures (CPO): “Hammer-like” candle indicating likelihood of a technical rebound this week.
- Ringgit (RM)/US$: Ringgit’s next target is to rechallenge the 3.07 level.
- Japanese Yen (JPY)/US$: Yen is expected to weaken further towards the 95.5 level soon, against the US$.
- Euro Dollar (EUR)/US$: The pair is likely to sustain at above the 0.73 breakout point.
- US Dollar Index (DXY): The chart is still showing a positive reading overall for the Dollar Index.

Bulletin Board

Co/Sector News Impact Recom

Plantations According to a report in The Edge, Kulim’s Natoleo is the second largest oleochemical OW
oleochemical arm, natural Oleochemical producer in Malaysia after IOICorp, with 500k
(Natoleo) is up for sale and Kulim has received a tonnes of capacity in Pasir Gudang. We believe
number of bids for it. (The Edge) this may present an opportunity for IOIC or even
KLK to expand their operations, given the nearby
location of their downstream operations in Pasir
Gudang. However, proper due diligence would
have to be done first, given Natoleo’s operating
loss recorded in FY12/09 of RM25.5m. It would
not be as synergistic for Sime Darby to acquire it,
given the absence of refinery capacity in Johor.
CIMB CIMB has proposed to increase the number of its Neutral. Assuming all 50m IPO shares are new OP, FV =
IPO shares for listing on the Stock Exchange of shares issued, we estimate this would only RM16.24
Thailand from up to 35m CIMB shares to up to increase the Group’s paid up capital by less than
50m CIMB shares. (Bursa Malaysia) 1.5% and dilute EPS by a similar amount.
TNB Feb electricity demand surged 21.4% yoy, led by While Feb’s strong growth numbers were partly OP, FV =
the industrial segment (+36.1% yoy). YTD (Sep- due to the low base effect, nevertheless, this RM9.50
Feb), electricity demand was up 8% yoy. (TNB) helps reaffirm our view that TNB is a key
beneficiary to a recovering economy. Our model
assumes FY10 demand growth of +3.8%,
although the strong YTD growth suggests there
could be upside potential to our assumption.

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Amanahraya REIT 1st interim income distribution of 1.832 sen (taxable) + 0.0277 sen (TE) 14-Apr-10 28-May-10
Opcom Holdings Single tier interim dividend of 1.5 sen 16-Apr-10 28-Apr-10
Grand Central Enterprises First and final dividend of 3 sen less 25% tax 28-Apr-10 19-May-10

Going “ex” on 6 Apr

Formis Resources Dividend in specie of ISS Consulting shares to Formis shareholders 6-Apr-10 -
Supermax Special tax exempt dividend of 4.5 sen 6-Apr-10 20-Apr-10
M3 Technologies (Asia) Interim tax exempt dividend of 0.5 sen 6-Apr-10 30-Apr-10
Esthetics International Interim dividend of 1 sen less 25% tax 6-Apr-10 30-Apr-10

...For more details, see individual reports attached


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