Market Dateline PP 7767/09/2010(025354)

RHB Research Institute

RHB Equity 360

14 June 2010 (Lafarge, Adventa; Technical: Top Glove, Hai-O)

Top Story : Lafarge M Cement Better times ahead Market Perform

Visit Note
- While demand growth in 1HFY12/10 is likely to be flattish on yoy basis, we sense that Lafarge is positive
on domestic cement consumption from 2HFY12/10, on the back of the roll out/ resumption of several large-
scale projects.
- Rise in demand and selling prices is to be partly offset by higher energy prices, as thermal coal prices have
risen to US$98.16/metric tonne, from US$68.6 a year ago. Should the government approve TNBs proposal
to increase electricity tariff, Lafarges production cost will be higher, hence further lowering margins.
- Lafarges initial plan to invest in a new RM100m grinding plant to resolve its production bottleneck is put on
hold for the time being. We believe a decision will be made in a few months time when it starts to see a
surge in demand.
- We believe Lafarge will declare a higher dividend for FY12/10 in view of its strong cash position. Based on
our estimates, Lafarge can raise FY12/10 gross DPS from 38 sen to 60 sen, translating to a yield of 9.1%.
- We are raising our FY12/10 earnings forecast by 18.7% to RM361.1m, while indicative fair value remains
unchanged at RM6.83 based on 14x FY12/11 EPS of 48.8 sen. Maintain Market Perform.

Corporate Highlights

Adventa : Delay in expansion plan Outperform

Results Preview
- Adventa is due to announce its 2QFY10 results on 15 Jun. We expect Adventa to post low double-digit yoy
revenue growth largely due to a combination of higher volume sales as a result of expansion in capacity
offset by the higher raw material cost and weaker US$. As a result, core earnings could be flat yoy.
- Qoq, we expect revenue to be higher by mid-single digit mainly due to higher selling prices in order to pass
on higher raw material costs to customers but the increase in selling prices would not be enough to offset
the higher raw material prices (+24.8% qoq) and weaker US$ (-2.5% qoq) due to the time lag in passing on
the higher cost. Consequently, we expect 2Q10 net profit to be lower qoq.
- Management has guided that the commercial production for its new factory in Kluang, Johor has been
delayed due to the delay in shipment of some parts for the lines by the supplier. The new factory, which will
house seven new lines now expected to be installed progressively starting from next month.
- We have cut our FY10-11 earnings forecasts by 6.7-8.3% to factor in the slight delay in expansion plan and
the time lag in passing on the cost increase to consumers. We maintained our FY12 forecasts for now.
- Despite the lower forecasts, our fair value has been raised to RM5.19 as we roll-forward our valuation year
to FY11 (from RM4.34 based on CY10). No change to our target PER of 13x and Outperform call.

Technical Highlights

Daily Trading Strategy : Trading interest to stay dull

- In line with our expectation, sellers returned near the 1,300 heavy psychological barrier after the FBM KLCI
covered a technical gap when it hit an intraday high of 1,302.07 on last Friday.
- This resulted in a failure to take out the 1,300 level, and added with a negative candle, the benchmark is
likely to experience further profit-taking activities today, in our opinion.
- In other words, we expect it to cover the lower technical gap at 1,293.27 1,294.67 soon, before retesting
the 10-day SMA near 1,288.
- Apart from that, trading interest is expected to stay dull in the near term, as most investors are likely to turn
away from the market for the FIFA 2010 World Cup and school holidays.
- Therefore, until the FBM KLCI can decisively break out from the 1,300 major psychological hurdle with
strong daily turnover at between 800m 1.0bn shares, any rebound attempt will be short-lived and
unsustainable, in our view.
 Daily Technical Watch: TopGlove LT heavy resistance stays at RM14.00 and all-time high of RM14.02
- 10-day SMA: RM12.396
- 40-day SMA: RM12.457
- Support: IS = RM12.00 S1 = RM10.60 S2 = RM9.70
- Resistance: IR = RM14.00

Weekly Trading Idea : HaiO Enterprise Upside to be blocked by RM4.40 and UTL Sell Into Strength
- Strategy: Sell into strength near RM4.40 and the UTL of RM4.70.
- Resistance: IR = RM4.40 R1 = RM4.93
- Support: IS = RM4.12 S1 = RM3.67 S2 = RM3.20
- Exit: The chart will turn bullish, should it take out the UTL.

Commodities & Currencies Further weakness in the US Dollar is seen this week
- Light Sweet Crude Oil futures (Crude): Tough challenge for it to surpass beyond 40-week SMA and US$78.
- Crude Palm Oil futures (CPO): More downside risk towards the RM2,200 support level soon.
- Ringgit (RM)/US$: More strength on the Ringgit this week.
- Japanese Yen (JPY)/US$: Poised to head lower towards the DRL near 88 and the 87 support level.
- Euro Dollar (EUR)/US$: The EUR is ready to appreciate towards the 0.80 level.
- US Dollar Index (DXY): Good immediate support at 85.

Bulletin Board

Co/Sector News Impact Recom

MAHB MAHB is in the midst of evaluating proposals for
a 20ha commercial development adjacent to the
new LCCT. The land is expected to feature an
integrated complex (two carparks, ERL and
landside mall) and a three star hotel. Retail
space for the new LCCT will make up of 20% of
the total space of the airport. Note that MTB's
retail space is only at 5% currently. (BT)
Positive. The commercial development will OP, FV =
diversify MAHBs earnings base (which currently RM5.45
depends solely on the airport business). We note
that we have yet to reflect the potential earnings
arising from the commercial development, as
MAHB is still in the stage of negotiating with
potential partners.

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Scomi Engineering Coupon of 4% less tax for ICULS 17-Jun-10 -
PA Resources Renounceable rights issue 23-Jun-10 -
SapuraCrest Single tier final dividend of 4 sen 28-Jul-10 16-Aug-10

Going ex on 15 Jun
Boustead Holdings First interim dividend of 5 sen single tier 15-Jun-10 28-Jun-10
Kumpulan Jetson 16th Interest payment of 5% ICULS 2002/2012 15-Jun-10 30-Jun-10
Majuperak Holdings Dividend 1% to ICPS shareholders 15-Jun-10 16-Jul-10

...For more details, see individual reports attached

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