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July 02, 2015
Mal
aysi
a ST
RATE
GY
RESE
ARCH
|
SEE PAGE Error! Bookmark not defined. FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS
PP16832/01/2013 (031128)
Malaysia Strategy NEUTRAL (unchanged)
Mindful of still headwinds ahead § Greek debt crisis, US rate hike are among the key headwinds
ahead. This supports our call to stay defensive in the near term after Fitch’s surprising reaffirmation of Malaysia’s debt rating and upgrade in Outlook.
§ We are hopeful for the concerns to dissipate, fund outflows to stabilise towards year end, corporate earnings to recover in 2016. Our 1,830 end-2015 KLCI target is unchanged.
§ Defensive short-term, long long-term. Beyond the near-term turbulence, there remain good enough reasons to continue positioning for the mid and longer term. Any broad market weakness is an opportunity to accumulate.
What’s New The KLCI has underperformed in 1H15, affected by external and domestic concerns. In addition, despite 4Q14 and 1Q15 real GDP growth surprising on the upside, corporate earnings have failed to live up to expectations again. 1H15 has seen one of the most intense of foreign selling in Malaysian equities at MYR9b net.
What’s Our View Recent external developments and uncertainties do point towards continuous (or potentially higher) volatility especially in 3Q15. If eurozone eventually finds a breakthrough to avoid a messy ‘Grexit’, and if we are right in that US does raise interest rate from Sep 2015, then we should expect a relatively calmer year-end for global capital markets. At the domestic front, our base case assumes that the 1MDB debt issue will be resolved by year end.
The near-term outlook continues to support our call for a defensive strategy. But, beyond the near-term turbulence, we believe that there remain good reasons for investors to continue positioning for the mid and longer term. Continuous fiscal efforts, healthy banking and corporate balance sheets, and strong domestic liquidity are some of the key reasons. Also, the KLCI’s premium valuation gap versus its regional peers has narrowed considerably. Any broad market weakness is therefore an opportunity to accumulate.
We leave our end-2015 KLCI target of 1,830 pts unchanged, which implies 15.9x 12M fwd (2016) PER. Based on yesterday’s close, the KLCI trades at 15.6x on 12M fwd core earnings, which is at about its mean valuation. We believe a stronger re-rating for the KLCI will come when corporate earnings growth starts to show a stronger uptrend and commodity prices strengthen.
Thematic investing in 2H15 will remain on: (i) major infra projects roll-outs (positive for construction), (ii) continued strength in the USD, (iii) the upcoming Sarawak state elections, (iv) confirmation of a strong El Nino. In this report, we highlighted stocks which offer values, our defensive BUYs, our thematics BUYs. Narrowing our list further, our top BUYs for 2H15 are highlighted on the right.
MALAYSIA RESEARCH TEAM
(Details in page 47)
Analysts Wong Chew Hann
(603) 2297 8686
Current KLCI: 1,728 (1 Jul)
YE KLCI target: 1,830 (unchanged) M’sia equities growth & valuation
2014A 2015E 2016E
KLCI @ 1,728 PE (x) 17.6 16.4 15.0
Earnings Growth (%) -2.2% 5.2% 9.7%
Research Universe
PE (x) 18.0 16.9 15.2
Earnings Growth (%) -1.6% 6.6% 10.9%
Our top BUY picks Stock Name BB Ticker Shr Px @
1 Jul TP
Tenaga TNB 12.76 16.00
Axiata AXIATA 6.46 7.60
Genting Malaysia GENM 4.23 4.60
KLCC Prop KLCCSS 7.02 7.65
Gamuda GAM 4.80 6.00
BIMB BIMB 4.09 4.80
Top Glove TOPG 6.68 7.10
Inari Amertron INARI 3.30 4.05
NCB NCB 3.55 5.20
MBM Resources MBM 3.44 4.20
Source: Maybank KE
July 02, 2015 2
Strategy
Contents Page
1H 2015 Review
3
2H 2015 Outlook 11
Strategy 21
Sector Outlook
26
Bottom-up Stock Picks
37
Appendix 1 – Dividend stocks
42
Appendix 2 – Foreign shareholding
43
Equity Research Stock Universe 44
July 02, 2015 3
Strategy
1H 2015 REVIEW Underperformed, on external and domestic concerns
The KLCI has underperformed in 1H15, affected by external and domestic concerns. Lower crude oil price, uncertainty over the timing of the US federal funds rate hike, Greece’s debt crisis, Fitch’s warning of a likely downgrade to Malaysia’s sovereign debt rating, and the 1MDB debt issue which has turned political, have collectively weighed on sentiment. In addition, despite 4Q14 and 1Q15 Malaysia real GDP growth surprising on the upside, corporate earnings have failed to live up to expectations again. Based on 30 Jun close, the KLCI has retreated 3.1% YTD in MYR terms, 10.1% in USD terms. The KLCI started the year with a low of 1,709 pts on 7 Jan, raced to a high of 1,863 on 21 Apr, but succumbed to selling pressure (foreigners were net sellers) to a year low of 1,692 on 29 Jun. It rebounded to 1,707 on 30 Jun. The FBMSC has however ‘outperformed’ (+4.8% YTD), as investors (largely domestic) seek growth that is lacking in the big caps.
KLCI’s 1H 2015, major events
Source: Maybank KE (compilation)
KLCI (-3.1%) vs. Brent crude oil price (+10.0%), 1H 2015 KLCI (-3.1%) vs. USDMYR (-7.3%), 1H 2015
Source: Bloomberg, Maybank KE (chart) Source: Bloomberg, Maybank KE (chart)
1,650
1,700
1,750
1,800
1,850
1,900
Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15
20/1: National Budget 2015 reset
21/1: Fitch maintains a 'Negative' outlook on M'sia's LT issuer default ratings; it is "more likely than not to dowgrade the ratings within the next 12-18 months".
26/1: Brent hit a low of USD45/bbl
9/2: CIMB unveiled Target 2018 initiative
12/2: M'sia 4Q14 GDP up 5.8% YoY
1/3: Electricity tariff down 5.8% in Peninsular, for Mar-Jun 2015
11/3: BNM Annual Report 2014
22/3: Chempaka state assembly seat by-election (PAS won)
1/4: 6% GST implementation
2/4: Former PM Mahathir renewed his call for Najib to step down
7/4: IMF projects global GDP growth at 3.5% in 2015, 3.8% in 2016
28/4: ETP Annual Report 2014
5/5: Rompin parliamentary seat by-election (BN won)7/5: Permatang Pauh parliamentary seat by-election (PKR won)
15/5: M'sia 1Q15 GDP up 5.6% YoY15/5: Malakoff lists21/5: 11th M'sia Plan unveiled
21/4: 1,862.8, year high
7/1: 1,709.2low
1/6: New Malaysia Airlines Bhd commences business
5/6: OPEC meeting -crude oil output maintain at 30m bpd
30/6: Fitch maintains M'sia's LT issuer default ratings at "A-" , but upgrades the outlook to 'Stable'
1/7: Industrial gas subsidy cut - tariff up 10.3%
1/7: Electricity tariff unchanged for next 6M, Jul-Dec
29/6: 1,691.9, year low
45
50
55
60
65
70
1,650
1,700
1,750
1,800
1,850
1,900
Jan-
15
Feb-
15
Mar-1
5
Apr-1
5
May-1
5
Jun-
15
KLCI (pts, LHS)
Brent (USD/bbl, RHS)
0.260
0.265
0.270
0.275
0.280
0.285
1,650
1,700
1,750
1,800
1,850
1,900
Jan-
15
Feb-
15
Mar-1
5
Apr-1
5
May-1
5
Jun-
15
KLCI (pts, LHS)
USDMYR (RHS)
July 02, 2015 4
Strategy
KLCI (-3.1%) vs. MSCI Asia ex-Japan (+4.2%), MSCI World (+1.5%), 1H 2015
KLCI vs. Regional, 1H 2015, in local currencies
Source: Bloomberg, Maybank KE (chart) Source: Bloomberg, Maybank KE (chart)
KLCI vs. Regional, 1H 2015, in USD FBM performances, 1H 2015
Source: Bursa Malaysia, Maybank KE (chart) Source: Bloomberg, Maybank KE (computation)
Sectors’ performances in 1H15 (% gains/(losses), based on average gains/(losses) for stocks under our coverage, within their respective sectors)
Sectors’ performances in 1H15 (% gains/(losses), based on market cap weighted gains/(losses) for stocks under our coverage, within their respective sectors)
Source: Maybank KE Source: Maybank KE
95
100
105
110
115
Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15
Index MSCI AC WorldMSCI Asia Ex-JapanKLCI
(6.1)(3.1)(1.4)
0.2 0.5 1.0
4.2 4.6
8.3 8.7
11.2 16.0
32.2
(10) (5) 0 5 10 15 20 25 30 35
IndonesiaMalaysia
SingaporeTaiwan
ThailandIndia
MSCI Asia ex JapPhilippines
KoreaVietnam
Hong KongJapanChina
(12.8)(10.1)
(3.2)(2.2)
0.1 2.6
3.9 5.4
6.6 11.2
13.1 32.3
(20) (15) (10) (5) 0 5 10 15 20 25 30 35
IndonesiaMalaysia
SingaporeThailand
IndiaTaiwan
PhilippinesKorea
VietnamHong Kong
JapanChina
-6% -4% -2% 0% 2% 4% 6%
KLCI
FBMHS
FBMEMAS
FBMS
FBM70
FBMSC
(40%)(30%)(20%)(10%) 0% 10% 20% 30% 40% 50%
Transport - aviationBuilding Mat
Non-Bank FinPlantation
UtilitiesMedia
PropertyBankingGaming
Oil & GasTelcoAutos
Transport - shippingConsumer
Construction/InfraPetrochem
GloveTransport - ports
Technology
(30%) (20%) (10%) 0% 10% 20% 30% 40% 50%
Transport - aviationBuilding Mat
PlantationTelco
UtilitiesGaming
Non-Bank FinProperty
Oil & GasAutos
BankingMedia
Construction/InfraTransport - shipping
ConsumerPetrochem
Transport - portsGlove
Technology
July 02, 2015 5
Strategy
Stock gains in 1H15 Stock losses in 1H15
Source: Maybank KE Source: Maybank KE
1%1%3%3%3%4%4%4%4%5%5%5%5%6%6%7%7%8%8%9%9%10%10%10%11%12%13%
15%17%17%17%18%18%18%19%20%22%22%
28%31%32%
37%37%
40%45%
51%52%
57%68%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Magnum IJM Corp SapuraKencana Bursa Malaysia Maybank Astro Malaysia Holdings Public Bank Genting Malaysia Sunway REIT IGB REIT Pavilion REIT MSM Malaysia Holdings MRCB-Quill REIT Bumi Armada KLCC Prop Dialog Nestle MISC YTL Power Oldtown Kimlun Corporation Sunway Berhad HSL 7-Eleven Star Carlsberg Brewery Yinson Eversendai Corporation Berjaya Auto Wah Seong IHH Petronas Chemicals Guinness Litrak Barakah Offshore QL Resources MBM Resources Hartalega Hldgs Westports KNM Group Cahya Mata Sarawak Perdana Petroleum Inari Amertron TIME dotCom Kossan Rubber Vitrox Corp Top Glove NCB Holdings Harbour-Link Group
(60%)(43%)(42%)
(32%)(29%)(27%)
(23%)(20%)(19%)
(17%)(16%)(15%)(15%)(14%)
(12%)(11%)(11%)(10%)
(9%)(9%)(9%)(9%)(9%)(8%)(7%)(7%)(7%)(7%)(6%)(6%)(5%)(5%)(4%)(4%)(4%)(4%)(3%)(3%)(3%)(3%)(3%)(3%)(3%)(3%)(3%)(2%)(2%)(1%)(1%)(1%)(1%)(0%)(0%)(0%)
(70%) (60%) (50%) (40%) (30%) (20%) (10%) 0%
AirAsia X AirAsia Icon Offshore MMHE UEM Sunrise UMW O&G Felda Global Ventures Gas Malaysia MCIL MPHB Capital Glomac Alam Maritim IOI Corp Media Prima Lafarge DiGi.Com Ecoworld Ann Joo Resources WCT Tan Chong Motor Genting Sarawak Oil Palms AMMB Holdings Tenaga Axiata TH Plantations Hong Leong Financial Group Sime Darby Gamuda Padini Holdings Alliance Financial Group UMW Hldgs KL Kepong SP Setia Maxis CMMT Berjaya Sports Toto Axis REIT Telekom Hong Leong Bank MAHB Petronas Gas Malakoff RHB Capital BAT (M) TSH Resources Ta Ann Perisai Petroleum CIMB BIMB Holdings Boustead Plantations Mah Sing Genting Plantations AEON Co
July 02, 2015 6
Strategy
Foreign selling heightened
Foreign investors were net sellers to the tune of MYR9.0b in 1H15, which has substantially exceeded their net sell of MYR6.9b in the whole of 2014. Foreign funds, which have been aggressively selling since Sep 2014, sparked by the fall in global crude oil prices, turned net buyers from mid-Mar 2015 but reversed their position again from end-Apr 2015. While foreign net selling was also prevalent in the region since May 2015, we note that Malaysia equities took the brunt with the highest foreign net selling in the region in 1H15, followed by Thailand. As a result, cumulative foreign net buy in Malaysia equities has tapered to just MYR0.2b since early-2012, MYR2.0b since early-2011, MYR17.9b since early-2010. Foreign holdings in Malaysia equities, was down 0.6-ppts to 23.2% at end-May 2015, from 23.8% end-Dec 2014.
Malaysian equities: Daily and cumulative foreign net buying/(selling) in 2015 YTD (MYR b)
Malaysian equities: Yearly and cumulative foreign net buying/(selling) since 2010 (MYR b)
Source: Bursa Malaysia, Maybank KE (chart) Source: Bursa Malaysia, Maybank KE (chart)
Malaysian equities: Market foreign shareholding Regional: Foreign fund flows into/(out of) equities (USD b)
Source: Bursa Malaysia, Maybank KE (chart) Source: Bursa Malaysia (for M’sia), Bloomberg, Maybank KE (chart)
(Please refer to charts in page 13 for more details on regional fund flows.)
(9000)(8000)(7000)(6000)(5000)(4000)(3000)(2000)(1000)0
(500)(400)(300)(200)(100)
0100200300400
2-Ja
n
16-Ja
n
30-Ja
n
13-F
eb
27-F
eb
13-M
ar
27-M
ar
10-A
pr
24-A
pr
8-Ma
y
22-M
ay
5-Ju
n
19-Ju
n
Daily foreign net buy/(sell) (MYR m, LHS)Cumulative foreign net buy/(sell) (MYR m, RHS)
15.9
1.8
13.7
2.4
(6.9) (9.0)
15.9 17.7
31.4 33.8
26.9
17.9
(15)
(5)
5
15
25
35
45
2010 2011 2012 2013 2014 2015 YTD
Yearly Cumm
15
17
19
21
23
25
27
29
Dec 9
8De
c 03
Feb 0
7Ju
l 07
Dec 0
7Ma
y 08
Oct 0
8Ma
r 09
Aug 0
9Ja
n 10
Jun 1
0No
v 10
Apr 1
1Se
p 11
Feb 1
2Ju
l 12
Dec 1
2Ma
y 13
Oct 1
3Ma
r 14
Aug 1
4Ja
n 15
23.2% end-May 2015 (Dec 2014: 23.8%, Dec 2013: 23.5%, Dec 2012: 23.9%; Dec 2011: 22.7%)
(7,000)
(5,000)
(3,000)
(1,000)
1,000
3,000
5,000
2010 2011 2012 2013 2014 2015 YTD
Indonesia PhilippinesThailand VietnamMalaysia
July 02, 2015 7
Strategy
Corporate earnings disappointed again
Despite 4Q14/1Q15 real GDP growth surprising on the upside at +5.8%/5.6% YoY, corporate earnings have failed to live up to expectations again. The ratio of earnings disappointment to positive surprise (versus our forecasts) has remained at >1x in both the 4Q14 and 1Q15 results season, although the ratio of in-line results has improved to 61% in 1Q15 from 50% in 4Q14. Earnings growth stayed slow with core net profit of our research universe down 3.7% YoY in 4Q14, and up just 1.8% YoY in 1Q15. Plantation earnings prominently disappointed in 1Q15, on lower-than-expected FFB production and CPO ASPs. NIM at the banks also slumped by an average 10 bps QoQ in 1Q15. We estimate 2014 KLCI core net profit had contracted 2.2% YoY. We are now looking at a slower KLCI core earnings growth of 5.2% for 2015 (vs +6.6%), but a higher 9.7% for 2016 (vs +8.8%) on the lower base effect.
Quarterly recurring net profit of research universe Below/Above expectations ratio
Source: Maybank KE Source: Maybank KE Maybank KE research forecast revisions YoY growth (%) Early-2015 forecast Current forecast 2014F 2015F 2016F 2014A 2015F 2016F Corporate earnings:
KLCI 30 0.8 6.6 8.8 -2.2 5.2 9.7
Research universe 1.2 8.5 9.6 -1.6 6.6 10.9
Malaysia real GDP 5.9 5.0 NA 6.0 4.9 5.2
Global real GDP 3.3 3.6 NA 3.4 3.3 3.7
Source: Maybank KE
Expect negative growth in some sectors
Similarly, we are also looking at a slower core earnings growth for our research universe (74% of Malaysia equities market value) of 6.6% for 2015 (vs +8.5%) but a higher 10.9% for 2016 (+9.6%). We now expect five sectors to record earnings contraction in 2015 - auto, gaming (NFO), non-bank financial, oil & gas, plantation. Among the big-cap sectors, we expect just telco to deliver above-market earnings growth in 2015 (+11%), helped by the Goods & Services Tax (GST) pass-through for the prepaid segment. As for the banks, we expect below-market earnings growth (+4.5%). Earnings risks remain on the downside, if: (i) the dampening impact of the 6% GST stays much longer than our expected six months, (ii) commodity prices, in particular CPO price, fall short. For the plantation sector, our earnings forecasts incorporate MYR2,400/t CPO ASP for 2015 (YTD: MYR2,228/t) as we hold out for a potential El-Nino, and MYR2,500/t for 2016.
8,000
10,000
12,000
14,000
16,000
18,000
CY 1Q
10CY
2Q10
CY 3Q
10CY
4Q10
CY 1Q
11CY
2Q11
CY 3Q
11CY
4Q11
CY 1Q
12CY
2Q12
CY 3Q
12CY
4Q12
CY 1Q
13CY
2Q13
CY 3Q
13CY
4Q13
CY 1Q
14CY
2Q14
CY 3Q
14CY
4Q14
CY 1Q
15
(MYR m)
1Q15: 1.8% YoY
0.8 1.1
0.9 0.8
1.5
1.0
1.8
1.3
1.8
3.0
3.5
1.2 1.3
2.1 1.6
1.1
1.8
3.4 3.5
1.3
1.8
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
xBelow/Above ratio
July 02, 2015 8
Strategy
Research Universe: Earnings breakdown by sector – CY15 KLCI 30: Earnings breakdown by sector – CY15
Source: Maybank KE Source: Maybank KE
Maybank KE Research Universe earnings growth revision Estimates in early-
2015 Current estimates, post-1Q15
results season
Sector CY 14F CY 15F CY 14A CY 15E CY 16E Banking & Finance 2.2 6.2 0.8 4.5 8.2 Non-banking Finance 4.4 5.1 6.2 (1.3) 4.4 Building materials (11.7) 19.6 (28.3) 26.1 17.6 Consumer 9.5 2.7 6.9 9.5 8.6 Automotive (12.2) 4.7 (12.3) (2.8) 23.1 Construction, Infra 6.8 8.6 0.3 11.2 13.1 Gaming – NFO (6.4) 4.8 (12.0) (1.4) 2.6 Gaming – Casino (11.2) 12.6 (16.5) 17.2 13.1 Gloves (2.1) 15.4 (0.1) 27.2 12.4 Media (3.9) 16.9 (1.1) 9.1 13.5 Oil & Gas 22.3 (0.3) 14.7 (13.3) 13.7 Petrochemicals (2.4) 12.3 (21.6) 11.5 19.9 Plantation (0.4) 4.3 (11.3) (3.9) 26.6 Property – Developer (0.8) 17.2 3.9 13.2 16.3 Property – REIT 5.4 11.5 6.5 7.3 11.9 Semicon/Tech NA NA 89.5 29.6 12.6 Telco (4.3) 12.5 (5.3) 11.0 8.8 Transport – Aviation (64.5) NM (83.4) 588.8 15.4 Transport – Shipping 15.2 3.6 27.1 8.1 (4.7) Transport – Ports (1.8) 0.7 10.9 3.4 14.4 Utilities 8.5 5.7 10.9 3.0 6.7 Stocks under cvrg 1.2 8.5 (1.6) 6.6 10.9
Source: Maybank KE
Banking & Finance
33%
Building materials
1%Consumer7%
Construction, Infra 3%
Gaming5%Gloves
1%
Oil & Gas7%
Media1%
Plantation8%
Property6%
Telcos11%
Transport5%
Utilities12%
Banking & Financials
41%Consumer3%
Gaming6%
Oil & Gas8%
Plantations9%
Property0%
Telcos14%
Transport4%
Utilities14% Media
1%
July 02, 2015 9
Strategy
On the ground sentiment: Somewhat a mixed bag
Ahead of the 6% GST implementation on 1 Apr 2015, consumer sentiment weakened considerably in 1Q15. MIER’s Consumer Sentiment Index fell to a 6-year low of 72.6 pts in 1Q15 as income trends were lower and consumers said that they would tighten their purse strings. This ties in with findings from Merdeka Centre’s poll in Mar 2015 where 62% of the respondents said that the country was heading in the wrong direction with the high cost of living (17%), unfavorable economic conditions (16%) and GST (12%) being the main reasons for their discontent. On the other hand, MIER’s Business Sentiment Index rose to a surprising 101.0 pts in 1Q15 from 86.4 in 4Q14, as respondents reported healthy sales, and growth in domestic and export orders, and they expect business activities to accelerate in 2Q15.
Consumer Sentiment Index Business Sentiment Index
Source: MIER, Maybank KE (chart) Source: MIER, Maybank KE (chart)
Direction of the country
Qs: Do you feel things in this country are going in the right direction, or do you feel things have gotten on the wrong track? Source: Merdeka Centre, Maybank KE (chart)
5060708090
100110120130140150
31-M
ar-9
831
-Mar
-99
31-M
ar-0
030
-Mar
-01
29-M
ar-0
231
-Mar
-03
31-M
ar-0
431
-Mar
-05
31-M
ar-0
630
-Mar
-07
31-M
ar-0
831
-Mar
-09
31-M
ar-1
031
-Mar
-11
30-M
ar-1
229
-Mar
-13
31-M
ar-1
431
-Mar
-15
MIER consumer sentiment index5-year (2009-13) average
5060708090
100110120130140150
31-M
ar-9
831
-Mar
-99
31-M
ar-0
030
-Mar
-01
29-M
ar-0
231
-Mar
-03
31-M
ar-0
431
-Mar
-05
31-M
ar-0
630
-Mar
-07
31-M
ar-0
831
-Mar
-09
31-M
ar-1
031
-Mar
-11
30-M
ar-1
229
-Mar
-13
31-M
ar-1
431
-Mar
-15
MIER business sentiment index5-year (2009-13) average
0%
10%
20%
30%
40%
50%
60%
70%
10-2
008
07-2
009
09-2
009
01-2
010
05-2
010
02-2
011
08-2
011
12-2
011
04-2
012
06-2
012
12-2
012
03-2
013
05-2
013…
06-2
013
12-2
013
03-2
014
06-2
014
08-2
014
11-2
014
01-2
015
03-2
015
Right Direction
Wrong Direction
July 02, 2015 10
Strategy
Positive reaffirmations of the 11MP largely “ignored”
The 11th Malaysia Plan (11MP; 2016-2020), unveiled on 21 May 2015, sets into motion the country’s path towards a high-income economy by 2020. The focus will be on developing the people’s economy in addition to the capital economy. We are positive that the long-term macro targets are reaffirmed while structural reforms to strengthen the economic foundation will continue. A balanced government budget by 2020, a lower government debt to GDP ratio by 2020, are some of the key positive reiterates to the long-term macro targets. Public investment is targeted to grow by 2.7% p.a. while government development expenditure will be 16% higher at MYR260b (10MP: e.MYR223.5b). We note that previous Malaysia Plans have been positively received by the investment community. However, due to the external and domestic concerns especially in 2Q15, the positives of the 11MP have been largely “ignored”.
11MP: Major macro targets reaffirmed
GDP growth 5-6% p.a.
GNI per capita MYR54,100 (USD15,690) by 2020
Average monthly household income MYR10,540 by 2020 (2014: MYR6,141)
Salaries as a % of GDP At least 40% by 2020 (2014: 34.9%)
Malaysian Wellbeing Index (MWI) +1.7% p.a. (10MP: +1.2% p.a.)
Current account as a % of GNI 2.6% by 2020
Ratio of federal government debt to GDP <45% by 2020
Government fiscal position Balanced budget, by 2020 *
* Government revenue is targeted to expand by 7.9% p.a. and its dependence on oil-related revenue is targeted to decline to 15.5% by 2020 (2015: 21.5%); Source: 11MP blueprint
11MP’s Strategic Thrusts (ST)
ST1 Enhancing inclusiveness towards an equitable society
ST2 Improving wellbeing for all
ST3 Accelerating human capital development for an advanced nation
ST4 Pursuing green growth for sustainability and resilience
ST5 Strengthening infrastructure to support economic expansion
ST6 Re-engineering economic growth for greater prosperity
Source: 11MP blueprint
July 02, 2015 11
Strategy
2H 2015 OUTLOOK It started with Fitch’s surprising twist
A surprising twist, Fitch Ratings affirmed Malaysia's long-term (LT) foreign currency Issuer Default Rating (IDR) at 'A-' after the stroke of mid-night on 30 Jun 2015 (Malaysia time), and raised the Outlook on Malaysia LT IDRs to ‘Stable’ from ‘Negative’. Post the National Budget 2015 review on 20 Jan 2015, Fitch had reiterated its concerns on Malaysia’s “dependence on petroleum-linked revenues as a key sovereign credit weakness” and retained a ‘Negative’ Outlook on the country’s LT IDR, adding that it was “more likely than not to downgrade the ratings within the next 12-18 months.” Fitch’s statement earlier this year, on 21 Jan 2015, also mentioned Malaysia’s rising contingent sovereign liabilities, highlighting 1MDB. Fitch’s reaffirmation of Malaysia’s ‘A-' rating on 30 Jun 2015 was therefore unexpected; the Outlook upgrade was a huge positive surprise.
We understand that a change in the Outlook can typically be a prelude to a change in rating within the next 18 months. Therefore, the shift to ‘Stable’ Outlook implies the prospect of no change in the existing rating over the next 18 months, barring any negative shocks and unforeseen circumstances. Domestic currency and bond markets reacted positively yesterday, while equities also received a strong lift. The KLCI jumped 21 pts (+1.2%) to close at 1,728.0 yesterday (1 Jul 2015). That said, foreign investors remained net sellers yesterday, but small at c.MYR41m.
Malaysia's current sovereign debt ratings (Foreign Currency Long-Term Debt)
Rating Since Rating outlook Since
Moody’s A3 16 Dec 2004 Positive 20 Nov 2013
S&P A- 8 Oct 2003 Stable 15 May 2008
Fitch A- 8 Nov 2004 Stable 30 Jun 2015
Source: Moody’s, S&P, Fitch
But, there are other headwinds ahead
With the uncertainty over Fitch’s sovereign debt rating downgrade behind us, the focus shifts back to the remaining pertinent ‘lookouts’ for 2H15. Externally, we will remain watchful of: (i) developments at the eurozone and growth risks at China – developments in the last few trading days of Jun 2015 have brought about risk aversion, higher volatility again in the capital markets, (ii) US’ first rate hike in over 11 years – the questions really are “when”, “how much”, and (iii) US’ economic recovery – will it be stronger than the average +2.3% recorded over the past 3 years (2012-2014) to sustain the USD rally. Domestically: (i) 1MDB’s debt issue – how will this pan out, (ii) net portfolio outflows and foreign selling on equities - are we nearing the end after bouts of outflows/selling in the past four quarters since 3Q14, (iii) consumer sentiment – when will it turn from the GST blues, (iv) El Nino - are we really heading into one.
July 02, 2015 12
Strategy
Risks at the eurozone – what is next?
At the time of writing, Greece has closed its banks, imposed capital controls and will conduct a public referendum on 5 Jul 2015 to vote on proposals on continued austerity to restore bailout aids from its creditors. Greece has technically defaulted on a €1.6b loan due to the IMF on 30 Jun 2015, and it is due to repay another €6.7b to the ECB in Jul-Aug 2015. Without another bailout, Greece does not have the money to repay. A Greek exit from the eurozone remains a risk at this juncture. What is next, while difficult to predict, could be a function of the public referendum’s outcome this weekend, according to our Economics Research. A ‘Grexit’ will draw concerns back on the contagion effect and the integrity of the euro single currency. Market’s reaction will, quite predictably, be negative and perhaps prolonged – this will be the worst case scenario.
Growth risks at China
Over at China, economic growth has slowed to +7.0% YoY in 1Q15, while consensus is expecting +6.9% for this year (Maybank KE: +6.9%). The People’s Bank of China’s recent interest rate cut and reserve requirement ratio cut (on 27-28 Jun 2015) have drawn attention back to the underlying economy. The cuts came ahead of key economic data releases, including China’s 2Q15 GDP due on 15 Jul 2015. The timing suggests that policymakers feel that the real economy is still soft and needs further support. That said, recent monetary easing and government support measures have provided a lift to property sales and eased the downward pressure on property prices. A strong rally in China’s stock markets should also have positive wealth effect for the retail sector.
US’ first rate hike in over 11 years – when, how much?
Signal from the Federal Reserve in its press release on 17 Jun 2015 after the FOMC’s fourth meeting for the year is that the next phase of monetary policy normalization i.e. benchmark interest rate rise, will start later this year, following the end of quantitative easing (QE) in late-2014. FOMC members’ median forecast for the federal funds rate (FFR) remained at 0.625% for end-2015 (now at 0%-0.25%) and the number of members taking the view that this year is the appropriate time to start firming on monetary policy stance remained at an overwhelming 15 out of 17. There will be four more FOMC meetings this year – 28-29 Jul, 16-17 Sep, 27-28 Oct, 15-16 Dec. We continue to expect the FOMC to raise the FFR from Sep, but by just 50 bps (previously +50-75 bps) until year end. We reiterate our view that markets will price in the rate hike ahead, triggering outflows again from the region as the yield carry plays continue to unravel. Since May 2015, we have seen prominent foreign net selling in regional equities.
July 02, 2015 13
Strategy
US federal funds rate (%) Foreign fund flows into/(out of) regional equities (USD m)
Source: Bloomberg, Maybank KE (chart) Source: Bloomberg, Bursa Malaysia, Maybank KE (chart)
Foreign fund flows in regional equities (USD m), till 30 Jun 2015 Monthly/Quarterly Data India Indonesia Philippines Thailand Vietnam Malaysia
Jun-15 (883) (307) (258) (311) 50 (843)
May-15 (67) (264) (201) 94 53 (694)
Apr-15 1,212 448 (203) 7 76 55
Mar-15 1,687 (413) 167 84 (43) (163)
Feb-15 1,434 830 372 (213) 50 (111)
Jan-15 2,879 19 529 (128) 5 (670)
2Q 2015 262 (123) (663) (211) 179 (1,482)
1Q 2015 6,000 436 1,068 (257) 12 (944)
4Q 2014 2,348 (461) (67) (1,004) (87) (1,105)
3Q 2014 3,896 397 311 1,159 (60) (498)
2Q 2014 5,832 1,701 619 (618) 243 1,299
1Q 2014 4,086 2,129 393 (629) 40 (1,726)
Source: Bloomberg, Bursa Malaysia
US’ economic recovery – will it be stronger, weaker?
US’ 1Q15 real GDP grew 2.7% YoY but contracted 0.7% QoQ, according to the second estimate released by the Bureau of Economic Analysis on 29 May 2015. FOMC’s press release on 17 Jun 2015 said that information received since its last meeting in Apr “suggests that economic activity has been expanding moderately after having changed little during the first quarter.” While the pace of job gains has picked up, growth in household spending has been moderate and the housing sector has shown some improvements, the Feds also noted on “soft” business fixed investments and net exports. Based on the weak 1Q15 growth and a ‘moderate expansion’ in 2Q15, our Economics Research team thinks that our earlier 2015 3% real GDP growth forecast for the US is now a stretch as this requires QoQ growth averaging 5% in 2Q-4Q15. Instead of ‘strengthening’ growth, we now expect US’ growth momentum to ‘sustain’ (it recorded +2.3% average growth from 2012-2014). We have revised down our 2015 real GDP growth forecast for the US to +2.3%.
02468
101214161820
Feb-
71Ma
y-73
Aug-
75No
v-77
Feb-
80Ma
y-82
Aug-
84No
v-86
Feb-
89Ma
y-91
Aug-
93No
v-95
Feb-
98Ma
y-00
Aug-
02No
v-04
Feb-
07Ma
y-09
Aug-
11No
v-13 (2,000)
(1,500)
(1,000)
(500)
0
500
1,000
1,500
2,000
Jan-
14Fe
b-14
Mar-1
4Ap
r-14
May-1
4Ju
n-14
Jul-1
4Au
g-14
Sep-
14Oc
t-14
Nov-1
4De
c-14
Jan-
15Fe
b-15
Mar-1
5Ap
r-15
May-1
5Ju
n-15
EM ASEAN ex-Malaysia Malaysia
July 02, 2015 14
Strategy
US real GDP growth
Source: CEIC, Maybank KE (chart)
What does this mean for the USD – can it sustain its rally?
With signs pointing towards a ‘sustained’, rather than a ‘strengthening’ US economic growth momentum for 2015, the question next is the sustainability of the USD rally. The DXY has risen 5.8% this year, 17.2% since end-Jul 2014. While a stronger US economic growth and higher federal funds rate will lift the USD higher, a slower (but not too weak) US economic growth could renew concerns on global growth which could be positive for the USD as a risk aversion trade. Our FX Research team projects the DXY to strengthen further to 97.2 by end-2015 (from 95.5 at 30 Jun 2015) after incorporating also a 50 bps hike in the federal funds rate from Sep 2015 till year-end. We expect most regional currencies to weaken further, and the USDMYR pair to end 3Q15 at 3.82, 4Q15 at 3.78. That said, the MYR remains fundamentally unvalued, and our FX Research estimates a fair value of 3.30 against the USD.
DXY and FFR DXY and USD/MYR
Source: Bloomberg, Maybank KE (chart) Source: Bloomberg, Maybank KE (chart)
(10)(8)(6)(4)(2)0246
Mar-0
6Au
g-06
Jan-
07Ju
n-07
Nov-0
7Ap
r-08
Sep-
08Fe
b-09
Jul-0
9De
c-09
May-1
0Oc
t-10
Mar-1
1Au
g-11
Jan-
12Ju
n-12
Nov-1
2Ap
r-13
Sep-
13Fe
b-14
Jul-1
4De
c-14
Real GDP (% YoY)
Real GDP (% QoQ)
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
65
70
75
80
85
90
95
100
Jan-
07Ju
l-07
Jan-
08Ju
l-08
Jan-
09Ju
l-09
Jan-
10Ju
l-10
Jan-
11Ju
l-11
Jan-
12Ju
l-12
Jan-
13Ju
l-13
Jan-
14Ju
l-14
Jan-
15
DXY (LHS) FFR (LHS, %)
QE2Nov 10-Jun 11
QE3Sep 12-Nov 13
QE Taper
Dec 13-Oct 14
75
80
85
90
95
100
2.90
3.10
3.30
3.50
3.70
3.90
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
USD/MYR (LHS) DXY (RHS)
July 02, 2015 15
Strategy
Global: Currencies vs US Dollar 30-Jun-15 End Q3-15 End Q4-15 End Q1-16 End Q2-16
USD/JPY 122 128 132 132 134 EUR/USD 1.12 1.08 1.12 1.12 1.12 GBP/USD 1.57 1.56 1.58 1.60 1.62 AUD/USD 0.77 0.74 0.76 0.74 0.72 NZD/USD 0.68 0.65 0.68 0.69 0.69 USD/SGD 1.35 1.38 1.37 1.36 1.35 USD/MYR 3.77 3.82 3.78 3.74 3.70 USD/IDR 13,339 13,500 13,750 13,400 13,250 USD/THB 33.8 34.5 34.0 33.8 33.5 USD/PHP 45.1 45.5 45.3 45.0 45.0 USD/INR 63.65 63.80 63.50 63.00 62.50 USD/VND 21,810 21,800 21,750 21,750 21,700 USD/CNY 6.2 6.2 6.2 6.2 6.2 USD/HKD 7.75 7.77 7.77 7.80 7.80 USD/TWD 30.9 31.6 31.4 31.0 31.0 USD/KRW 1,115 1,140 1,150 1,150 1,150 DXY 95.49 99.09 97.15 96.66 96.72
Source: Maybank FX Research
What all this means is that capital markets will stay volatile
The ongoing uncertainties at Greece and eurozone, a cautious stance still on China’s economic growth momentum, and the “guessing game” over the timing and quantum of the US federal funds rate hike would mean continuous volatility in the capital markets as investors remain sensitive to risks. Already we have seen panic selling in the last few trading days of Jun 2015 triggered by developments in Greece and China. The VIX spiked 34% on 29 Jun 2015 alone and has stayed at about the same level on 30 Jun. Having said that, recent implied volatilities in equities remain relatively lower than bonds and FX. The question is, will this heighten ahead.
VIX (Equities) vs. MOVE (Bonds) VIX (Equities) vs. CVIX (FX)
Source: Bloomberg, Maybank KE (chart) Source: Bloomberg, Maybank KE (chart)
20
40
60
80
100
120
140
0
10
20
30
40
50
60
Mar-1
1Ju
n-11
Sep-
11De
c-11
Mar-1
2Ju
n-12
Sep-
12De
c-12
Mar-1
3Ju
n-13
Sep-
13De
c-13
Mar-1
4Ju
n-14
Sep-
14De
c-14
Mar-1
5Ju
n-15
VIX ( LHS) MOVE (RHS)
4
6
8
10
12
14
16
0
10
20
30
40
50
60
Mar-1
1Ju
n-11
Sep-
11De
c-11
Mar-1
2Ju
n-12
Sep-
12De
c-12
Mar-1
3Ju
n-13
Sep-
13De
c-13
Mar-1
4Ju
n-14
Sep-
14De
c-14
Mar-1
5Ju
n-15
VIX ( LHS) CVIX (RHS)
July 02, 2015 16
Strategy
1MDB’s debt issue – how will this pan out?
1Malaysia Development Bhd (1MDB) is a ‘strategic development company’ and its subsidiaries, JVs, associates are involved in energy (power plants) and property development. Based on its FY3/14 accounts, 1MDB group has a BV of MYR2.4b (MYR51.4b assets, MYR49b liabilities). Total debts stood at MYR41.9b comprising MYR19.8b (47%) in MYR, MYR22b (53%) in USD. Of the MYR41.9b, we estimate MYR15+b (c.36%) are financing at the power plant business. The concern on IMDB’s financials has been on the servicing and repayment of its non-power plant debts. Bank Negara has said that IMDB’s debts are not a systemic risk to the banking system based on stress tests done. Yet, this has not stopped 1MDB from turning into a political issue.
Over the next few months, all eyes will be on two developments: (i) the Auditor General’s and Parliament Public Accounts Committee’s findings, and (ii) IMDB’s rationalization plan to establish TRX and Bandar Malaysia as standalone property development companies and the monetisation of Edra Energy (which holds the power plant assets), which we think will lead to the unwinding of the holding company and the group’s non-project related debts. Prime Minister Najib had, on 14 Jun 2015, assured that the issue would be resolved “within the next few months”.
Net portfolio outflows – are we nearing the end?
Based on Bank Negara’s statistics, a total of MYR39.4b in net portfolio investments into the country have reversed out in 3Q14-1Q15 (2Q15 data not available yet). 3Q14 was about the same time that the US QE taper tantrum started, crude oil prices started to fall, and the 1MDB debt issue unwound. At equities, prominent foreign net selling also started in Sep 2014. From Sep 2014 till 30 Jun 2015, foreign investors sold a net MYR14.2b in Malaysian equities, according to data we compiled from Bursa Malaysia.
As at end-1Q15, cumulative net portfolio inflows have fallen to pre-2012’s levels, and as at 30 Jun 2015, cumulative foreign net buy in equities have also fallen to pre-2012’s levels. This means a sizeable reversal of inflows over the past three years plus. However, using early-2010 as a base (post global financial crisis), we calculate a still sizeable MYR89b cumulative net portfolio inflows remaining at end-1Q15, but cumulative foreign net buy in equities has tapered to MYR17.9b at 30 Jun 2015. Any unorderly capital outflows could therefore have a larger impact on the bond market rather than equities. In such a scenario, we take comfort that there are domestic liquidity to provide the support.
July 02, 2015 17
Strategy
Malaysia: Net portfolio inflows/(outflows)
Source: Bank Negara, Maybank KE (chart)
Malaysia: Foreign net buying/(selling) on equities
Source: Bank Negara, Maybank KE (chart)
Consumer sentiment – when will it turn?
In Apr 2015, the first month of the GST implementation, inflation rate (CPI) quickened to +1.8% YoY (1Q15: +0.7% YoY average). Within the CPI basket, a high double-digit rise was recorded in the ‘alcoholic beverages & tobacco’ component (Apr 2015: +13.0% YoY) as cigarette prices were upped to include the GST (BAT reversed this on 19 Apr as it decided to absorb the GST, only to raise prices again on 29 Jun as it partially passes on the GST). In May 2015, CPI was +2.1% YoY and +0.4% MoM. On the ground, we note/observe that:
§ Automotive TIV/volume sales took a dive to 45.2k units in Apr 2015 (-33% MoM, -23% YoY), but recovered partially to 51.3k units in May 2015 (+13% MoM, -8% YoY).
§ Total gross adex eased 10% MoM and 11% YoY in Apr 2015 (the latter, despite an already low Apr 2014 base due to the MH370 tragedy back then) as the private sector continued to hold back on ad spend; total gross adex however recovered by 14% MoM in May 2015, but was still down by 7% YoY and down 2% compared to the whole of 2014.
§ Telco has been allowed to pass on the GST in the prepaid segment (previously they absorbed the services tax). However, they can only impose the GST upon ‘usage’ and not on ‘reloads’ of the prepaids (they have been given six months to implement the GST on ‘usage’).
§ NFOs are absorbing the GST without noticeable price payout cuts, on fear of losing market share to the illegal NFOs.
(90)
(60)
(30)
0
30
60
90
120
150
(30)
(20)
(10)
0
10
20
30
40
50
2010 2011 2012 2013 2014 2015
NPI (MYR b, LHS)Cumm NPI (MYR b, RHS)
(40)(30)(20)(10)01020304050
(8)(6)(4)(2)02468
10
2010 2011 2012 2013 2014 2015
Net foreign buy/(sell) (MYR b, LHS)Cumm net foreign buy/(sell) (MYR b, RHS)
July 02, 2015 18
Strategy
§ Brewers like Carlsberg and Guinness, and FMCG players like OldTown are passing on certain savings from the replacement of the previous sales tax with the GST.
§ Padini has decided to absorb the GST, maintaining price tags of all products and is looking to scale down its expansion plans.
§ Retailers like AEON and 7-Eleven have been passing on the GST to customers (GST affects c.80% of items sold in 7-Eleven).
Consumer sentiment took a dive in 1Q15 ahead of the GST implementation, and the question is when this turn will. Based on our channel checks with players in the retail industry, many are expecting 6-9 months of slowdown. In countries which have implemented the GST/VAT, we note that retail sales took 8 months (in Australia) and 10 months (in China) to recover to their pre-GST levels. That said, Malaysia’s GST regime is not the same with the other countries and thus, comparison is not fair. For one, Malaysia’s GST replaces the 5-10% sales tax and 6% services tax which have existed prior to the GST implementation on 1 Apr 2015. Secondly, Malaysia’s GST has quite a number of goods and services being zero-rated (we estimate 17% in the CPI basket, by number of items), and GST-exempt (11%). Our house view is a 6-month slowdown.
Australia’s retail sales only returned to pre-Jul 2000 VAT implementation level in Feb 2001, 8 months impact
China’s retail sales only returned to pre-Jan 1994 VAT implementation level in Oct 1994, 10 months impact
Source: CEIC, Maybank KE (chart) Source: CEIC, Maybank KE (chart)
Malaysia’s retail sales (MYR m)
Source: CEIC, Maybank KE (chart)
11,000
11,500
12,000
12,500
13,000
13,500
14,000
Jul-9
9
Sep-
99
Nov-9
9
Jan-
00
Mar-0
0
May-0
0
Jul-0
0
Sep-
00
Nov-0
0
Jan-
01
Mar-0
1
May-0
1
Jul-0
1 80
100
120
140
160
180
200
Jan-
93
Mar-9
3
May-9
3
Jul-9
3
Sep-
93
Nov-9
3
Jan-
94
Mar-9
4
May-9
4
Jul-9
4
Sep-
94
Nov-9
4
50,000
60,000
70,000
80,000
90,000
100,000
Mar
-10
Sep
-10
Mar
-11
Sep
-11
Mar
-12
Sep
-12
Mar
-13
Sep
-13
Mar
-14
Sep
-14
Mar
-15
July 02, 2015 19
Strategy
El Nino – are we really heading into one?
An El Nino has been confirmed by the Australia Bureau of Meteorology in May 2015, with the latest Sea Surface Temperatures anomaly map showing an eastward migration of strengthening warm anomalies over the past four months, and their gradual rise towards the surface. According to Malaysia’s Meteorology Department, the El Nino conditions will continue through the northern hemisphere summer and there is a greater than an 80% chance that it will last through 2015. The recent confirmation and strengthening of El Nino may result in below-average rainfall to this region especially in 2H15. And this may bring about potentially below-average yields for CPO production that could last till 2016 (depending on the intensity of El Nino).
That said, the effect of potential below-average rainfall (typical of an El Nino) has yet to be felt on the ground. As such we believe the market has yet to attach any weather risk premium in the current CPO price as the intensity of this El Nino has yet to be established. Unless a strong El Nino develops, we believe the impact on CPO price and FFB output may be relatively muted-to-moderate as there are several other near-term headwinds. Besides weather risk, the market is wary of the ample global soybean supply which has weighed down on CPO price while elsewhere, the discretionary biofuel demand has literally disappeared as the crude oil price slump since 2H14 has made it economically not viable for the users.
Other anticipated domestic developments
Domestic policy direction over the next few months, we believe, will focus on meeting the growth and fiscal targets, and maintaining an accommodative monetary policy to support growth. We expect Bank Negara to keep the benchmark interest rate, i.e. overnight policy rate (OPR) unchanged at 3.25% throughout this year. Also, efforts will be geared towards obtaining strong buy-ins for the 11th Malaysia Plan (11MP; 2016-2020) which was unveiled on 21 May 2015 and approved by the Lower House of Parliament at the late hours of 15 Jun 2015. The 11MP has since moved on to the Upper House of Parliament. Apart from the National Budget 2016 which is targeted to be tabled in Parliament on 23 Oct 2015, there are no other macro blueprints due to be released this year.
Malaysia’s calendar of major events in 2H 2015
Politics
None in 2015 (Sarawak state election is due in Jun 2016)
Macros
Bank Negara’s Monetary Policy statements 9 Jul, 3 Sep, 5 Nov
2Q-3Q 2015 GDP release 13 Aug, 12 Nov
2016 National Budget, 2015/2016 Economic Report 23 Oct
Capital market
FBMKLCI component stocks review # 21 Dec
Securities Commission’s Shariah-compliant stock list release * 27 Nov
# Semi-annual review – using data from last day of trading in May and November and implemented after the third Friday in June and December.
* Semi-annual review – the SC’s Shariah Advisory Council will announce the Shariah compliant companies on the last Friday of May and November.
Source: Bank Negara Malaysia, Maybank KE (compilation)
July 02, 2015 20
Strategy
Potential surprise
A potential surprise could be an early Sarawak state election, which is not due until Jun 2016. Recent murmurings on the ground do suggest the possibility of an early election this year. We do not expect any surprises in the political outcome as the incumbent ruling coalition (Barisan Nasional) remains strong in state seat support. Development remains a key agenda for the state government and coupled with higher oil royalty requested by the state government, we expect rising construction activities over the longer term, for new public infrastructure and social amenities.
Sarawak state elections State
10th 9th 8th 7th 6th
Polling day 16 Apr 2011 20 May 2006 27 Sep 2001 7-8 Sep 1996 27-28 Sep 1991
Source: Media
July 02, 2015 21
Strategy
STRATEGY
Remain watchful over the next few months
We reiterate that recent external developments and uncertainties do point towards continuous (or potentially higher) volatility for global capital markets especially in 3Q15. If eurozone eventually finds a breakthrough to deal with Greece’s debt problem to avoid a messy ‘Grexit’, if we are right in that US does raise interest rate from Sep 2015, and if China’s macro data points do not negatively surprise in a big way, then we should expect a relatively calmer year-end for global capital markets. At the domestic front, with the uncertainty of Fitch’s sovereign debt rating downgrade behind us, the other watchpoint will be 1MDB’s debt issue. Our base case assumes that Prime Minister Najib will resolve the issue by year end.
Defensive near-term, long long-term
Taking the above into consideration, we maintain our defensive strategy call for Malaysia equities, especially for 3Q15. We however expect to see improved sentiment towards year-end as concerns over external vulnerabilities dissipate, fund flows stabilise, and as we look towards corporate earnings growth recovering in 2016 (corporate bottomlines will get an additional boost from a 1-ppt rate cut in income tax from FY16).
Beyond the near-term turbulences however, we think there remain good fundamental reasons for investors to continue positioning for the medium and longer term. Continuous fiscal efforts, healthy banking and corporate balance sheets and strong domestic liquidity are some of the key reasons. In addition, the KLCI’s premium valuation gap against its regional peers has narrowed considerably. Any weakness in the broad market is therefore an opportunity to accumulate, in our view.
§ Malaysia government’s financial position stays well managed: (i) fiscal deficit reduction remains be a key focus with implemented structural reforms providing the evident to this – subsidy reductions to control government opex, GST to broader the revenue base; (ii) government debt, at 52.7% of GDP in end-2014, is manageable while contingent liabilities will add another e.15.3%. At below 70% in total, this is still below crisis levels. The targets under the 11MP are to achieve a balanced budget and a debt-to-GDP ratio of 45%, both by 2020.
§ Banks’ capital position stays strong to support growth with an industry CET1 ratio of 12.3%, core capital ratio of 13.1% and risk-weighted capital ratio of 15.1% at end-May 2015. Banks’ asset quality remain strong with the industry’s gross NPL ratio at a low 1.59% at end-May 2015 while loan loss coverage was at 100.6%.
§ Corporate balance sheets are healthy to support growth. Bank Negara’s statistics show that business sector debt-to-equity ratio was stable at 42.7% at end-Sep 2014, while interest coverage ratio was at 6.4x.
§ Household (HH) debts are under control. Although at 85% of GDP as at end-2014, HH financial asset to total HH debt ratio stood at a high 214% at end-Sep 2014, based on Bank Negara’s data, while HH liquid financial asset to total HH debt ratio was at a comfortable 150.4%. Prudential measures introduced since 2010 have been successful in
July 02, 2015 22
Strategy
curbing the growth rate especially in personal financing by the non-bank financials.
§ There is upside potential for Malaysia when commodity prices, especially crude oil price rebound. Embedded in our forecasts are USD60/bbl Brent ASP for 2015, and USD70/bbl for 2016. We estimate that every USD10/bbl change could impact our real GDP projection by +/-0.3 ppts.
KLCI’s premium valuation gap has narrowed considerably
Compared against its regional peers, we note that the KLCI’s PER premium valuation gap has narrowed quite considerably of late, as the chart below would show. Excluding the PSEI, the gap (with STI, SET, JCI), which ranged 1.5x-5.3x in end-2013, has narrowed to 0.8x-1.7x presently. Hence, the notion that Malaysia is ‘pricey’ is no longer true anymore.
KLCI’s valuation gap to other regional markets have narrowed (12M fwd PER)
Source: Bloomberg consensus (data), Maybank KE (computation)
Regional valuations Malaysia Singapore Thailand Indonesia Philippines Vietnam
Benchmark index KLCI STI SET JCI PSEI VNI
- 30 Jun 2015 1,706.6
3,317.3
1,504.6
4,910.7
7,564.5
593.1
PER (x)
- 2015 16.2 13.8 15.1 15.1 19.7 13.2
- 2016 14.8 12.6 13.3 13.0 17.5 11.1
EPS growth (%)
- 2015 5.2% -3.5% 13.6% 3.4% 6.9% -1.7%
- 2016 9.7% 9.0% 13.8% 16.1% 12.8% 18.7%
- 2Y CAGR 7.4% 2.6% 13.7% 9.6% 9.8% 8.0%
ROE (%)
- 2015 12.1 10.4 12.8 18.5 12.1 14.9
- 2016 12.4 10.5 13.7 18.6 12.2 15.7
P/B (x)
- 2015 1.9 1.2 2.0 2.5 2.7 2.0
- 2016 1.8 1.2 1.8 2.2 2.4 1.7 Source: Maybank KE
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KLCI STISET JCIPSEI
July 02, 2015 23
Strategy
Maintaining our year-end target - at mean valuations
We leave our end-2015 KLCI target of 1,830 pts unchanged, which implies 15.9x 12M forward (2016) PER, which is at 0.3SD above its mean (since 2001) of 15.4x while +1SD is 17.2x. Based on 1 Jul 2015 close of 1,728, the KLCI trades at 16.4x/15.0x 2015/2016 core earnings and 15.6x on 12M forward core earnings, which is at its mean valuation again. On a trailing P/BV basis, the KLCI trades at 1.95x, which is also at its mean (since 2001) of 1.95x. Market risk premium was at 2.4% on 1 Jul 2015, which was the high for the year, while the lowest range for this year is at 1.9% (2014: 1.4%-2.1% range).
KLCI‘s 12M forward PER, at 15.6x (1 Jul) KLCI’s trailing P/B: 1.95x (1 Jul)
Source: Maybank KE, Bloomberg Source: Bloomberg, Maybank KE (chart)
KLCI: Equity risk premium, at 2.4% (1 Jul) KLCI’s dividend yield: 3.24% (1 Jul)
Source: Maybank KE, Bloomberg Source: Bloomberg, Maybank KE (chart)
Stronger rerating potential, risks
We believe a stronger re-rating for the KLCI will come when corporate earnings growth shows a stronger uptrend (they have disappointed in the last few quarters) and commodity prices strengthen. Conversely, the risks are further disappointments in corporate earnings and commodity prices weakening further.
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(x) 1-Yr forward PER Mean +1 SD -1 SD
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July 02, 2015 24
Strategy
Thematic investing
Thematic investing in 2H15 will remain on: (i) major infrastructure project roll-outs which will be positive for the construction sector as this will extend their earnings visibility, and (ii) the continued strength in the USD which will be positive for the net exporters, i.e. glove producers, technology companies, petrochemicals (PCHEM). The continued strength in the USD will however be negative for corporates with USD debts due to higher debt servicing costs and repayments. We reproduce below our updated chart on corporates’ USD debt exposure at their recent quarterly balance sheet dates.
Apart from that, (iii) the upcoming Sarawak state elections should see more construction projects being awarded over the next few months. Beyond the state elections, Sarawak’s SCORE development will continue relentlessly, while higher oil royalty requested by the state government should filter into more development and infrastructure spending over the longer term. Lastly, (iv) confirmation of a strong El Nino (which should be known in 2-3 months’ time, if it happens) will be positive for the palm oil plantation sector in providing a long-awaited lift to CPO prices.
The above thematics (except for the El Nino potential) are not new as we have highlighted in our ‘2015 Outlook and Lookouts’ issued on 18 Dec 2014. The other thematic which we had highlighted back then – M&As to unlock values - is unlikely to materialise this year. We had earlier highlighted the following which we now think are potentials for 2016: (a) REIT-ing of property retail assets by WCT, (b) property asset injection into SP Setia by PNB to streamline operations/landbanks and improve on cost management, (c) port assets injection into NCB by MMC or a listing of MMC’s port operations (Johor Port, Pelabuhan Tg Pelepas), (d) listing of Sime Darby’s motor, Indonesian plantation, property divisions.
Based on the above considerations, we continue to OVERWEIGHT the construction, glove producer and technology sectors into 2H15. Our sector weight on plantation remains a NEUTRAL pending the confirmation of a stronger El Nino but we already have bottom-up stock BUYs, which are based on valuations.
USD denominated debts of Malaysia PLCs
Source: Maybank KE (computation)
82%
79%
96%
46%44%
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80%
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SAKP
AirA
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meAx
iata
IOIC
GENT
UMW
HBA
BTN
BMa
xisSu
nway
IJMC
AirA
sia X
YTLP
Telek
om IHH
Astro
FGV
SPSB
USD debt (MYRm) (LHS) % of total debt (RHS)
July 02, 2015 25
Strategy
Shariah investing revisited
Since 2013, we have been advocating a rising exposure in the Shariah stocks. Our views then (and they still hold) were for the Shariah stocks to continue re-rating given that: (i) Shariah funds will continue to grow rapidly in size; (ii) we foresee rising foreign participation, as the Securities Commission’s revised Shariah screening methodology (since Nov 2013) adopts more international practices; and (iii) there is ‘scarcity’ of Shariah-compliant stocks even on a regional basis. The EPF’s recent proposal to introduce Shariah-compliant retirement savings in addition to the existing retirement scheme would create the “largest Shariah fund of its kind in the world”. The launch date for this new Shariah-compliant retirement savings will likely be in 2016, the earliest.
We think that EPF’s proposal for Shariah-compliant retirement savings will eventually be well taken up with the Muslim population in this country making up a sizeable 61% of the total population (in 2010). EPF has 6.66m active members end-2014, with a total savings of MYR440.3b. The pace of re-rating for the Shariah stocks will depend on: (i) the ‘migration’ phase of EPF members electing to switch to Shariah-compliant retirement savings, and (ii) the number of members opting for this. The latter will, in turn, determine the base size for this new Shariah-compliant fund under EPF.
(Shariah stocks under our coverage are highlighted in pages 44-46.)
FBM Hijrah Shariah and FBM Emas Shariah have re-rated, trading at higher valuations (one-year forward PERs) than the KLCI and FBM Emas … we think the re-rating will continue
Note: At 30 Jun 2015, the FBM Hijrah Shariah traded at a 2.2 PER multiple above the KLCI, while the FBM Emas Shariah traded at a 1.4 PER multiple above the FBM Emas Source: Maybank KE
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July 02, 2015 26
Strategy
SECTOR OUTLOOK
Sector Weight Our thoughts
Automotive Neutral A challenging year
Developments. Post GST implementation on 1 Apr 2015, car prices were adjusted down by 1% on average (mostly national and Japanese marques). While this was positive and is expected to support 2015 TIV, the 1% average price reduction was not a major kicker for the sector given that (i) price reduction was insignificant to the total cost of owning a car and (ii) consumer sentiment is weaker in view of higher cost of living post GST implementation. Also, price reductions will be partially offset by GST charges on (i) service and maintenance of the vehicle, (ii) spare part replacements, (iii) general insurance and (iv) petrol (RON 97 has a GST charge, RON 95 is GST-exempt).
As a result, 5M15 reported TIV contracted 3.6% to 264.7k units, accounting for 40% of our full-year forecast of 660k units (-1% YoY). We have expected 1H15 TIV to contract by 3-5% YoY to ~320k units against a high base in 1H14 (+6% YoY to 333k units) in our sector outlook note (dated 2 Jan 2015).
Outlook. We expect Jun-Jul TIV to strengthen further, aided by pre-Hari Raya sales campaigns. Thereafter, we expect slower TIV sales in Aug-Sep before picking up again in Oct-Dec on year-end sales campaigns. We make no change to our 2015 TIV forecast of 660k units (-1% YoY) as we expect TIV to recover further in 2H15 on aggressive sales campaigns by dealers in order to meet their targets. However, we caution that stronger TIV during sales periods will erode profitability margins due to the A&Ps.
Stock picks. We remain selective on our picks and prefer auto players with significant presence in the economical car segment (energy efficient vehicles) who are not net USD importers. As such, we reiterate our BUY call on MBM, a purer proxy to Perodua’s growth. Our BUY call is premised on (i) stellar Perodua vehicle sales growth by its 22.6%-owned Perodua (5M15 TIV: +19% YoY), (ii) strong ~5 months order backlog for A-segment Axia (recorded 119k bookings since Sep 2014 launch; delivered 75.3k units as at end-May 2015) and (iii) undemanding valuations (7.4x CY16 PER, 0.9x FY14 PBV) despite a 20% YTD gain in share price.
BAuto remains a BUY for its positive exposure in JPY and earnings growth potential from new model launches and footprint in high-TIV growth market, the Philippines (4M15 TIV: +21%).
Meanwhile, we stay sideline on UMWH and TCM as we remain cautious of their (i) USD-denominated component costs and (ii) high inventories which is slow-moving due to intense competition from Honda. Elsewhere, we note that DRB-Hicom (DRB MK, Not-rated) and Oriental Holdings (ORH MK, Not-rated) should benefit from Honda’s strength in vehicle sales (5M15 TIV: +17% YoY to 34.9k units) via their associates/ investment stakes of 34% and 15% respectively.
2015E 2016E
PER (x) 16.8 13.7
Earnings Growth (%)
(2.8) 23.1
ROE % 9.4 11.5
Banking & Finance
Neutral NIM preservation is proving difficult
Developments & Outlook. On an annualized basis, industry loan growth has been just 6.1% for the first five months of the year and will have to pick up pace if our domestic loan growth forecast of 7.8% for the year is to be achieved. This growth rate is predicated on a moderation in household (HH) loan growth to 8.4% in 2015 from 9.9% in 2014 and non-HH loan growth of 7% (2014: 8.5%).
NIM compression has been more severe than expected and banks have been guiding for a larger NIM contraction this year, stemming principally from high funding costs. We have since taken cognizance of management’s guidance and we are now estimating a larger 11bp compression in 2015 NIM versus 6bps previously.
Taking the above and various other factors into consideration such as a normalization in credit costs, offset by higher cost efficiencies and a recovery in non-interest income, we project operating profit growth of 6.5% for 2015 (for the banking groups in our coverage ex- BIMB, HLFG), with net profit growth of 5.1%. For 2016, we estimate faster operating profit growth of 8.6% (predicated on a smaller NIM compression of 5bps) and net profit growth of 8.9%, buoyed by a 1-ppt cut in the corporate tax rate in 2016 to 24%. Stripping out CIMB’s volatile earnings, we project aggregate net profit growth of just 3.4%/5.5% in 2015/2016.
Capital raising is one of the themes for 2015, with RHB, HL Bank and HLFG coming to the market for equity, for which we estimate the potential amounts to be MYR2.5b, MYR2.7b and MYR1.2b.
In view of the earnings downgrade in the recent 1Q15 results reporting season, we expect a 1-ppt decline in aggregate ROEs to 12.4% in 2015 from 13.4% in 2014. This does not as yet account for the capital raising exercises above nor CIMB’s MSS costs, all of which will further dilute returns.
Stock picks. Our BUYs include BIMB, which we believe is an alternative proxy to Syarikat Takaful (STMB MK, Not Rated), which currently contributes to 20% of group net profit. Stripping out STMB’s market cap from BIMB’s would value Bank Islam at a P/BV of just 1.1x, which we believe is unjustified given prospective ROEs of about 14%. We like HL Bank as well for its emphasis on non-interest income growth and its focus on SME lending. HLFG offers a more holistic exposure to the financial services of the Hong Leong Group, which includes the fast growing insurance division.
2015E 2016E
PER (x) 12.5 11.5
Earnings Growth (%)
4.5 8.2
ROE % 12.0 13.0
July 02, 2015 27
Strategy
Sector Outlook (continued)
Sector Weight Our thoughts
Building materials
Cement: Neutral
Steel: Neutral
Unexciting for now
Developments. In 1Q15, local demand for building materials was higher YoY. Additionally, production costs were benign given the falling coal price, iron ore and coke prices. Both LMC and Ann Joo posted better 1Q15 earnings on margin recovery and a surge in pre-GST purchases.
Outlook. We expect the demand for both local cement and steel to sustain on the concurrent rollout of mega infrastructure and property projects (KVMRT2, Tun Razak Exchange, Warisan Merdeka, etc). However, earnings upside for both the cement and steel players are limited due to: (i) the commencement of new cement capacities from YTL Cement, LMC and Hume in mid-2015 to 2016; and (ii) heightened steel dumping activity from China.
Stock picks. We have a HOLD call on Ann Joo as we see limited excitement for the stock. That said, downside to the share price is also limited as valuations are supported by trough valuation.
2015E 2016E
PER (x) 22.5 19.1
Earnings Growth (%)
26.1 17.6
ROE % 8.3 9.8
Construction Overweight Swinging into action
Developments. The 11MP (2016-2020) unveiled in May 2015 has reinforced our confidence in the construction sector as it reaffirmed on critical infrastructure projects (especially urban rails) that would forge ahead. Higher government development expenditure at MYR260b (+16%) compared to e.MYR223.5b spent under 10MP lend support to the reaffirmations.
In 1H15, tendering for several mega projects - Penang Transport Master Plan (PTMP) PDP role, KVLRT 3 PDP role and KL118 Tower main building works - have also kicked off. At the same time, both the KVLRT 3 and KVMRT 2 projects have progressed further as their rail alignments were put on display for public comments in May 2015 for three months. In East Malaysia, PM Najib launched a portion of the Pan Borneo Highway construction in Mar 2015 which kick-started the MYR27b works.
In terms of specific job wins, IJM has continued to ramp up its orderbook with phase 1 Kuantan Port expansion works (MYR1.2b) and a building construction contract (MYR539m) added on in 1H15. Meanwhile, both WCT and Eversendai won projects from the Middle East and some are related to the Qatar World Cup 2022. As a result, the outstanding orderbooks of IJM, WCT and Eversendai at end-Mar 2015 were higher than end-2014 after incorporating the normal recognition of works in 1Q15. Gamuda, Hock Seng Lee, Kimlun and Sunway’s outstanding order books were lower at end-Mar 2015 compared to end-Dec 2014 due to higher burn rates vis-a-vis job wins.
(MYR m) YTD job wins Outstanding @ Mar 2015
Outstanding @ Dec 2014
Gamuda * - 1,300 1,600 IJM Corp 1,739 7,000 6,600 WCT Holdings 840 2,644 1,996 Eversendai 864 2,000 1,800 Hock Seng Lee - 870 950 Kimlun 600 1,230 1,420 Sunway 447 2,760 3,100
* Outstanding as at Apr 2015, Jan 2015
Outlook. We expect sentiment to pick up in 2H15 and 2016, on the back of strong news flow on major projects’ tenders and awards. The slowdown in residential property sales seen todate will impact the construction sector, but we expect this to be cushioned by works from the infrastructure projects and commercial developments especially in the Klang Valley, Penang and Sarawak. Therefore, the key investment themes for the sector would be: i) the roll out of mega infrastructure projects, ii) government land redevelopments and iii) rising construction activities in Sarawak as we loom closer to the state election.
i) With the reaffirmations in the 11MP, mega infrastructure projects will continue to contribute significant news flow in terms of job awards and tendering activities. The key positive developments expected in 2H15 include: i) PTMP PDP (MYR10-15b) award, ii) KVLRT 3 PDP (MYR9b) award and iii) signing of the KVMRT 2 PDP agreement. With tendering activities for KVMRT 2 (MYR28b) and KVLRT 3 (MYR9b) expected in 4Q15 and 1Q16 respectively, and awards are expected to start in mid-2016, new job flows in the sector will pick up strongly in 2016.
ii) The 11MP also promotes the transit-oriented developments that would include the major government land redevelopment projects that are located near public transportation hubs such as Tun Razak Exchange (TRX), RRIM land, KL118 Tower and Bandar Malaysia. Tendering for the KL118 Tower superstructure works (MYR3b) has started and is expected to be awarded soon. The RAPID, Pengerang project that is also highlighted under the 11MP could also contribute civil construction sub-contract works.
2015E 2016E
PER (x) 17.2 15.2
Earnings Growth (%)
11.2 13.1
ROE % 9.4 10.7
Source: Maybank KE
July 02, 2015 28
Strategy
Sector Outlook (continued)
Sector Weight Our thoughts
Construction Overweight iii) Construction job awards in Sarawak could also accelerate ahead of the Sarawak state election to be held before Jun 2016. More construction works could come from the Pan Borneo Highway, hydro-electric power plants, infrastructure construction at the SCORE nodes, urbanization projects and rural developments in Sarawak.
Job win prospect. Based on Construction Industry Development Board (CIDB) data, the total new contracts awarded in 2014 of MYR150b (+14% YoY) was a record high. The robust job awards in 2014 were driven by mainly non-residential and residential property projects. Although we expect slower job awards in 2015 due to the subdued property market, we expect job awards to rebound in 2016 with the mega infrastructure projects awards. Meanwhile, raw material prices outlook remain favorable to contractors due to the low crude oil price and potential oversupply issue in the building materials sector.
Stock picks. We prefer construction groups with exposure to mega infrastructure projects and Sarawak construction.
§ Our top BUY pick is Gamuda as the main beneficiary of the upcoming positive developments in the sector including the PTMP PDP award and signing of the KVMRT 2 PDP agreement. The potential job wins from these two mega projects would provide long term earnings visibility to its construction division. The total project value of the KVMRT 2 and PTMP PDP could exceed expectation.
§ IJM Corp is also a BUY as a potential beneficiary of the upcoming rail projects, for civil construction works. Its record high outstanding construction orderbook of MYR7b and strong unbilled property sales of MYR1.7b would drive earnings growth. Potential job wins from the KVMRT 2, KVLRT 3, and internal property projects especially The Light Commercial Phase would provide positive replenishment to its orderbook. Furthermore, there is still embedded value in its strategically located property land bank that has high appreciation potential. In addition, there are potential value enhancing corporate exercises at its toll roads, and young and fast-growing oil palm plantation.
§ CMS is our Top Sarawak pick as the main beneficiary of the anticipated robust construction activities in Sarawak being a key construction materials supplier in Sarawak. In addition, it is also eyeing the construction works including the Pan Borneo Highway. Further M&As due to its strong balance sheet would also boost sentiment. Hock Seng Lee would also ride on Sarawak’s urbanisation and SCORE development. The long awaited second phase of the Kuching centralized wastewater system that would boost its orderbook significantly.
Consumer NEUTRAL A matter of getting used to the new normal
Developments. 1Q15 results for consumer stocks under our coverage were up both YoY and QoQ, in line with expectations. This was mainly driven by pantry loading or pre-GST stocking activities by consumers. Post GST implementation on 1 Apr 2015, we understand that beverage players such as Carlsberg, Guinness and FMCG players like OldTown have passed on certain savings coming from the replacement of the old sales tax with the new GST. As for Padini and BAT, they have chosen to absorb the GST (wholly/partially); retailers like AEON and 7-Eleven have passed on the GST to consumers.
Outlook. At 72.6 in 1Q15, the latest MIER Consumer Sentiment Index reading was the lowest in 6 years. We remain cautious for at least 3-4 months into the GST implementation as it would cap sentiment, but we expect a pick up towards year end as consumers adapt to the new normal. Due to strong promotions/discounts immediately post-GST, we expect 2Q15 margins to be weaker.
On a separate note, Retail Group Malaysia expects an average of 4.9% YoY growth in retail sales in 2015, driven by deferred spending, festive season shopping, year-end sales and consumer behavior normalizing. This is similar to our in-house Malaysia consumer sector’s average topline growth of 4.8%. Valuation wise, the sector is trading fair with an average sector PER of 18.5x for 2016.
Retail sales quarterly growth rate (%) 2014 2015F 1Q 4.9 3.8* 2Q 5.3 3.5 3Q 2.0 4.8 4Q -0.8 6.9 Calendar Year 3.4 4.9 * Actual; Source: Retail Group Malaysia
Stock picks. Neutral on the consumer sector – we presently have no BUYs in the sector as we sit through the initial GST-led weakness in sentiment. That said, we continue to prefer stocks with resilient demand and the potential for quicker demand recovery. All in, we expect the GST implementation to have less of an impact on staples names such as MSM, QL Resources, Nestle, in this order. Decent average dividend yield of 3.9% should provide support to share prices.
2015E 2016E
PER (x) 28.4 26.2
Earnings Growth (%)
9.5 8.6
ROE % 13.3 14.4
July 02, 2015 29
Strategy
Sector Outlook (continued)
Sector Weight Our thoughts
Gaming Casinos –Neutral
Chips are still all in on GENM, stand on GENT
Developments. In terms of corporate exercise, 1H15 was quite exciting for the wider Genting Group. On 12 Feb 2015, GENS broke ground on its 50%-owned Resorts World Jeju in February (capex: USD1.8b). On 5 May 2015, GENT broke ground on its 100%-owned Resorts World Las Vegas (capex yet to be determined). On 11 May 2015, GENM announced that it plans to sell its 18% stake in GENHK.
In terms of 1Q15 earnings, only GENM delivered while GENS and GENT disappointed. For GENM, higher daily win per units (1Q15: USD450, 1Q14: USD423) and lower staff costs at Resorts World New York City helped offset higher junket commissions, direct debates and staff costs at Resorts World Genting; and lower VIP volume and win rate, as well as higher bad debts at Genting UK.
For GENS, lower-than-expected VIP volume of SGD12.4b (forecast: SGD16.1b), a below-theoretical VIP win rate of 2.5% (forecast: 2.85%) and still-high provisions for doubtful debts of SGD76.3m or 25% of VIP GGR (forecast: 9%) caused 1Q15 earnings to disappoint. As GENT derives 40-50% of its earnings from GENS, its 1Q15 results also disappointed.
Outlook. GENM expects Resorts World Genting to remain resilient despite implementation of the 6% GST on 1 Apr 2015. Another ~800 rooms at Tower 2A will open in mid-2015. Genting UK will also benefit from Resorts World NEC when it opens in 2H15. Resorts World Bimini, will also benefit from (i) its jetty operating on a full-year basis and (ii) its 200-room Hilton Hotel opening in Mar 2015.
We are less sanguine on GENS though. GENS guided that VIP volume will remain weak and bad debts will remain high for at least another quarter. The only consolation is that the higher margin mass market segment has remained resilient and has received a boost from the soft opening of Genting Hotel Jurong on 30 Apr 2015 with 144 rooms. The remaining 413 rooms should open soon.
By extension, we are also less sanguine on GENT. The only exciting thing to look out for at GENT is its final plans for Resorts World Las Vegas (RWLV). GENT originally earmarked a capex budget of USD4b for RWLV but we understand that the final capex budget, that will be determined by Aug 2015, will be much lower. In that time, GENT may incur USD30m-USD50m in consultation fees.
Stock picks. Maintain BUY call and MYR4.60 TP on GENM. We continue to like it, not only for its much more stable operations vis-à-vis the Macanese, Singapore and Philippine casino operators, but also its MYR5b Genting Integrated Tourism Plan (GITP) at RWG that will raise room inventory by ~35% by 2018 (includes ~2,300 rooms at Tower 3 and Tower 4).
Maintain HOLD call and SGD0.97 TP on GENS and also maintain HOLD call and MYR9.30 TP on GENT. While GENT derives 20-30% of its earnings from GENM, as opposed to 40-50% of its earnings from GENS, we prefer GENM over GENT for its more direct exposure to the GITP. We still opine that RWLV will be value accretive to GENT but it is not scheduled to open until 2017-2018.
Casino
2015E 2016E
PER (x) 16.2 14.3
Earnings Growth (%)
17.2 13.1
ROE % 7.3 8.3
Gaming NFOs –Neutral
Double whammy from GST
Developments. Early in 1H15 on 17 Jan 2015, Pan Malaysian Pools (Not Listed) varied 3D Jackpot from 2 sets of 3D numbers to 3 sets of 3D numbers and raised the minimum jackpot from MYR100k to MYR600k. On 21 Mar 2015, BST replaced Mega Toto 6/52 with Grand Toto 6/63. That said, we understand that both developments hardly improved their sales.
MAG’s 1Q15 net profit of MYR90.8m (+10% YoY, +48% QoQ) was above expectations at 36% of our full year estimate but this was due to a lower-than-expected prize payout ratio which we estimate at 61% or 2ppts below our forecast. BST’s 4QFY4/15 net profit of MYR77.5m (+10% YoY, -11% QoQ) and FY4/15 net profit of MYR342.2m (+0% YoY) were within expectations.
Outlook. Notwithstanding the decent results, since 1 Apr 2015, (i) the NFOs have been absorbing the 6% GST and (ii) no remedial actions have been taken. The GST will be applied as per the following formula: (gross sales – gaming tax – pool betting duty – prize payout ratio) X6/106. We estimate that the 6% GST will negatively impact NFO EPS estimates by 10% on a full-year basis.
Not only does the 6% GST serve as an additional tax to the NFOs, it also threatens revenue by cutting the disposable incomes and therefore, gambling budgets of gamblers. In fact, MAG and BST warned that their sales have been challenging since 1 Apr 2015. We still assume that gaming revenue/draw for MAG and BST will ease 2% in 2015.
Stock picks. With MAG and BST trading at mid-teen PER multiples, we do not find their valuations compelling without strong revenue and earnings growth potential. BST may also lose its Philippines Charity Sweepstake Office (PCSO) concession (~10% of pretax-profit) in August. Maintain HOLD on MAG and BST. At this juncture, we much prefer GENM, in the broader gaming sector.
NFO
2015E 2016E
PER (x) 13.9 13.5
Earnings Growth (%)
(1.4) 2.6
ROE % 18.3 18.8
Source: Maybank KE
July 02, 2015 30
Strategy
Sector Outlook (continued)
Sector Weight Our thoughts
Glove producers
Overweight Overcapacity concern eased
Developments. The new nitrile glove capacity that came into the market YTD was well absorbed by the strong demand in US and Europe. Meanwhile, the persistently low rubber prices and rising USDMYR are also in the glove players’ favour. Both Kossan and Top Glove posted double-digit YoY earnings growth in 1Q15 while Hartalega’s earnings was affected by the start-up cost at its new capacity site. Additionally, Malaysia’s gas tariff is scheduled to increase by 10.3% in Jul 2015.
Outlook. Given that the new nitrile capacity was well-absorbed by the market and there was minimal price competition in the nitrile space, we believe market’s concern on the supply overhang has eased. Moreover, we think the impact of the upcoming gas price hike will have a muted impact on the glove-makers’ earnings given that gas bills account for only 5-9% of local glove-makers’ total costs.
Stock picks. Our top BUY pick is Top Glove as a laggard play, having underperformed its big cap peers YTD and trading at a lower CY16 PER of 16x, compared to Hartalega and Kossan’s 22x and 18x respectively. We also have a BUY call on Kossan given its volume-driven earnings growth ahead and relatively lower valuation, compared to Hartalega. We are neutral on Hartalega as we think its share price has already reflected its superior growth prospects.
2015E 2016E
PER (x) 21.6 19.2
Earnings Growth (%)
27.2 12.4
ROE % 18.1 20.4
Media Neutral GST to weight for a while
Developments. 5M15 total gross adex was down 7% YoY. By segment, both FTA TV and newspaper gross adex eased 8% YoY. This is despite the low 5M14 base caused by a combination of higher electricity tariffs (from 1 Jan 2014) and the MH370 tragedy (8 Mar 2014) which caused advertisers to cut back on ad spend.
More pertinently, May 2015 total gross adex fell 7% YoY, the second month after the implementation of the 6% GST (Apr 2015: -11% YoY). While May 2015 total gross adex indicates a marginal MoM rebound in adex sentiment (+14% MoM), private sector ad spend continues to contract YoY more than public sector ad, causing total ad spend to ease YoY overall. One consolation is that newsprint prices have remained very low at ~USD500/tonne thanks to low oil prices.
Thanks to low newsprint prices, MCIL’s FY3/15 results outperformed by 11%. Star’s 1Q15 results were within expectations due to (i) staff cost savings and (ii) right-sizing of its Sarawakian operations. That said, MPR’s 1Q15 results disappointed due to negative operating leverage from easing TV adex YoY. ASTRO’s 1QFY1/16 results were within expectations but leading indicators (e.g. net additions, HD subscribers and SuperPack subscribers) were weakening.
5M15 gross adex by medium (MYRm) 5M15 5M14 % YoY FTA TV 1,162.9 1,259.0 (7.6) Newspapers 1,737.8 1,880.6 (7.6) Magazines 51.1 49.4 3.4 Radio 174.6 175.8 (0.7) Cinema 18.0 18.6 (3.0) In-Store Media 69.3 59.0 17.6 Total 3,213.7 3,442.2 (6.6)
Source: Nielsen Media Research
Outlook. We recently cut our 2015 total gross adex growth forecast from -5% to -8%. Our 2015 total gross adex forecast of -8% assumes that monthly total gross adex will ease 11% YoY six months in total (in tandem with our house view on the impact the 6% GST will have on consumer sentiment) before normalising at -5% YoY for the last three months of 2015.
Behind the scenes, the roll-out of the digital terrestrial television broadcasting platform by MyTV should be monitored. We understand that MyTV will have the capacity to roll-out 30 TV channels in 2016 (from the existing 7 channels). If new TV channels are introduced, they will fragment the TV industry (both free-to-air and pay) potentially leading to market share loss for ASTRO and MPR.
Stock picks. We rate all the media companies under our coverage at HOLD: ASTRO, MPR, STAR and MCIL. While ASTRO is not invulnerable (there have been marginal reductions in the number of subscribers), it is the most resilient of all the media companies under our coverage as more than 80% of its revenue is derived from its stable subscriber base versus adex revenues.
The earnings outlook for the latter three are not nearly as resilient but with their share prices approaching BVPS, especially for MCIL (1.3x CY15 P/BV) and MPR (1.0x CY15 P/BV), and dividend yields of >4%, we do not foresee much more downside risk to media sector earnings and valuations. Maintain NEUTRAL on the media sector.
2015E 2016E
PER (x) 19.2 17.0
Earnings Growth (%)
9.1 13.5
ROE % 24.3 27.6
Source: Maybank KE
July 02, 2015 31
Strategy
Sector Outlook (continued)
Sector Weight Our thoughts
Oil & Gas Neutral Cost down, shape up
Developments. Oil price is finding a new equilibrium after the sharp fall in 2014. Unlike last year, the sector reflects a subdued outlook. Capital discipline, cost controls, capex/opex cuts shaped the developments in the sector to-date. The development of shale oil and OPEC’s decision to maintain production output at 30m bpd over the next six months further create a supply shock to the global oil market.
On the domestic front, progress has been slow, with a trickling of new project awards. PETRONAS is prioritizing key projects (Canada, Azerbaijan, RAPID) and has been constantly engaging with vendors to look at various avenues to cut costs (i.e. renegotiate contracts, emphasis on management efficiency). PETRONAS is also adopting a cost reduction alliance (CORAL) 2.0 strategy to inculcate a cost conscious mindset in light of the low oil price environment.
Outlook. The mid-term outlook is for a range of USD40-73/bbl over the next 2 years. Oil price is unlikely to break the USD80/bbl as shale oil plays a ‘price ceiling role’ due to the higher production costs and production flexibility. However, shale development, especially in US, which the market has under-estimated (4m bpd of world’s output) is unlikely to replace OPEC as a swing producer. OPEC’s recent abdication as a swing producer has contributed to the global oil market returning to a fully free market for the first time in over 80 years. The decision on this has led to oil price volatility. OPEC’s next meeting, scheduled for 4 Dec 2015 and the prospect of Iran returning in full force to the world oil market once sanctions are lifted will be closely monitored to assessing the direction of oil price.
The local service providers are generally facing a challenging period, seeing much business distortion (i.e. contract re-negotiations, price discounts, project delays). The exploration-to-development business chain (i.e. fabrication, drilling) is facing a tougher outlook versus operations in the production value chain, as these operations tend to be more oil price sensitive and cuts in capex. Following are the snapshots of expectations for sub-sectors across the O&G value chains:
· Offshore fabrication / process equipment / pipeline / coating: Low oil price signals the end of building cycle. 2015 would be a year of order intake disappointment for the fabrication sector. It faces: (i) replenishment risk and (ii) margin pressure. Recovery for new orders will likely to kick-off in 2016.
Companies in this space are: (i) fabricators - MMHE, SAKP, TH Heavy, BHIC, Muhibbah Engineering, KKB Engineering, (ii) process equipment – KNM, APB Resources and (iii) pipe coating - Wah Seong Corp.
· Offshore drilling: The jack-up drilling market is facing early contract terminations and disruption in utilization due to slowdown in E&P activities. Drilling operators in SEA are seeing weakness in DCRs (USD120k-140k) for 2015 vs. USD145k-160k in 2014.
The weakness will be further depressed by 56 newbuilds (7%) set to enter the market in 2015. Of the 56 unit, 29 are speculative rigs (25 built in China, 4 in Singapore). For this, buyers of these rigs will defer deliveries to 2016 in hope of an improved outlook. In this depressed market, we see M&A opportunities for these speculative rigs, at sub-yard price sale. With new supplies joining the fray, we expect scrapping of ageing rigs to intensify. 63% (532 units) is over 30 years old.
Companies in this space are UMWOG, Perisai, Coastal Contracts and SAKP.
· OSV operations: The OSV market, in our view is at much risk in this downcycle, affected by the supply demand-supply imbalances. OSVs charters can be terminated early by just giving a 1-month notice period. DCRs are facing intense pressure (15-25% YoY). Similar to the drilling market, newbuilds with 2015 deliveries will be deferred to 2016-17 to cushion the slowdown.
Companies in this space are Alam Maritim, Icon Offshore, SILK and Perdana.
· FPSO: Expects: (i) delays in tenders, affecting 235 projects in the planning pipeline and (ii) fewer awards in 2015 but the situation will not be as bad as in 2009. The market is only expecting 5-8 new awards this year before a rebound in 2016.
Companies in this space: BArmada, Yinson, Perisai, MMHE and E.A Technique.
Stock picks. We are positive on operators in the production space. Business in more defensive, less affected by capex cuts and oil price volatility and offers strong earnings growth with undemanding valuations. Contracts are more solid, long term and bankable that is not subjected to cancellation of convenience. Yinson, BArmada and KNM are our preferred picks in the sector.
2015E 2016E
PER (x) 17.8 15.7
Earnings Growth (%)
(13.3) 13.7
ROE % 6.7 7.6
Source: Maybank KE
July 02, 2015 32
Strategy
Sector Outlook (continued)
Sector Weight Our thoughts
Petrochem Neutral Back to normal levels
Developments. 1Q15 saw the worst plunge in petrochemical ASPs since the 2008-09 global financial crisis. This was due to destocking exercise and customers acquiring on a spot consignment basis only. Aside from that, PCHEM has managed to achieve an average 90% plant utilisation rate thanks to minimal downtime on factory maintenance.
Outlook. PCHEM’s factory utilization rate should remain at high levels in 2Q15 as there is no major scheduled maintenance. Petrochemical ASPs have risen sharply after the Chinese New Year in Feb as the market settled and the demand recovers.
Stock pick. We fairly value PCHEM at 19.2x 2015 PER which is at a 10% premium to regional peers. Currently trading at 18.5x, we recommend a HOLD for its attractive 2.7% dividend yields, and the fact that it has the strongest balance sheet in the industry with zero debt and MYR9.4b of cash.
2015E 2016E
PER (x) 18.5 15.4
Earnings Growth (%)
11.5 19.9
ROE % 11.1 13.3
Plantation Neutral Expect stronger CPO price towards end 2015 due to changing weather
Developments. While an El Nino has been confirmed by the Australia Bureau of Meteorology (ABM) since May 2015, the effect of potential below-average rainfall (typical of an El Nino) has yet to be felt on the ground. As such we believe the market has yet to attach any weather risk premium in the current CPO price as the intensity of this El Nino is not yet established. Unless a strong El Nino develops, we believe the impact on CPO price and FFB output may be relatively muted-to-moderate as there are several near-term headwinds.
Besides weather risk, the market is wary of the ample global soybean supply which has weighed down on CPO price. The record soybean planting intentions by the US farmers during this 2015 spring period have added to concerns. And there is a good chance that South American farmers may also continue to plant record soybean this September as the Brazilian Real and Argentinian Peso currencies have remained weak against the US dollar, boosting the competitiveness of farmers there.
Elsewhere, the discretionary biofuel demand has literally disappeared overnight as the crude oil price slump since 2H14 has made it economically not viable for the users. Although priced in, it is estimated that approximately 2-3m MT of vegetable oil demand has been lost from the energy segment.
Price outlook. Without an El Nino affecting production, without a slowdown in soybean planting, or a strong rebound in crude oil price, we believe CPO price outlook will remain muted as it trades sideways in 3Q15 (during this seasonally high production period) before moving upwards at year end towards MYR2,400-2,500/t.
Our 2014/2015 CPO ASP forecasts are unchanged for now at MYR2,400/t and MYR2,500/t respectively. We believe the El Nino intensity will be made clearer over the next 2-3 months.
Strategy. We maintain our NEUTRAL call on the sector. Although Malaysia plantation stocks continue to trade at a premium over their regional peers, their valuations are not overly excessive on a single-market stand-alone basis at 23x 2015 earnings, supported by ample liquidity, and strategic landbank primed for property development for selected planters.
Our top BUY in large-cap space is Genting Plantations as we expect it to post a 10% 2014-17 CAGR in FFB output. Earnings may surprise on the upside from more land disposals at its Iskandar township development. Its valuation is also supported by our diluted-RNAV of MYR14.08/sh.
In the mid-cap space, we like Sarawak Oil Palms (BUY) for its medium-term growth prospects driven by our forecast of 11% 2014-17 CAGR in FFB production and upcoming property earnings contribution. Its attractive 15.5x 2015 PER valuation has yet to factor in property development potentials in Miri whereby part of its 5,000 ha estate land located at the edge of Miri city is ripe for conversion into property townships in the coming years.
2015E 2016E
PER (x) 23.4 18.4
Earnings Growth (%)
(3.9) 26.6
ROE % 8.6 10.9
Source: Maybank KE
July 02, 2015 33
Strategy
Sector Outlook (continued)
Sector Weight Our thoughts
Property (developers)
Neutral Cautious buying mood prevails
Developments: Sales in 1H15 failed to meet expectations on weaker consumer sentiment and tighter lending conditions by the banks. As expected, there was no rush into property purchases pre-GST implementation on 1 Apr 2015. Despite slower sales, most developers maintain their 2015 sales targets except for SP Setia and Tropicana which cut their sales targets by 13% and 30% respectively on slower-than-expected local and overseas sales (SP Setia’s Battersea Power Station Phase 3’s take-up was slow at 56% since the launch in Oct 2014). Most developers have continued to focus on affordable housing and landed properties and put their high-end/luxury projects on the backburner.
Klang Valley remains as the core market for developers thanks to a growing population and improved infrastructure while many developers have postponed their launches in / switched focus to outside of Iskandar Malaysia due to rising competition and potential oversupply of high-rise mixed development projects there on aggressive launches by the Chinese developers. UEMS is looking to acquire land outside of Iskandar Malaysia as well as in the UK and Australia to reduce its dependency on Iskandar Malaysia projects and diversify its earnings base.
Eco World has emerged as one of the biggest land owners in Batu Kawan, Penang with the purchase of a 299.6-acre leasehold land for MYR61psf (including the lease of another 150 acres of land to be developed into a golf course) while Sunway has acquired a 17-acre leasehold and freehold land in Kelana Jaya for MYR386psf to strengthen its foothold in the Klang Valley and diversify its reliance on Iskandar Malaysia project. We also saw Gamuda’s property division diversifying overseas in Australia (Melbourne) and Singapore to ride out the slowdown in the domestic sector.
Mah Sing and Eco World have completed their fund raising exercises in 1H15 while Sunway’s property-construction demerge exercise is expected to be completed by early 3Q15. Two IPO listings involving domestic and overseas projects could happen in end-2015 or early 2016: (i) Aspen Group (with property projects in Penang island and mainland) and (ii) Eco World International (with three UK and one Australia projects). The listings could create some excitement in 4Q15-1Q16.
Outlook: The sector lacks of strong re-rating catalyst. While the valuations of some property stocks appear attractive, we advise investors to be selective, focusing on those with healthy balance sheets and low exposure to Iskandar Malaysia hotspots. From a top-down approach, we maintain our NEUTRAL call on the sector.
We remain cautious on the Malaysia property sector and expect the macro headwinds (GST implementation, volatile crude oil prices, weak MYR) and prolonged tightening property and lending measures to continue weighing on buyers’ sentiment. The slowdown in demand could last between six to eighteen months, we believe.
While the property sector is already weakening, we do not expect any policy easing to happen in the short-term especially when household (HH) debt has remain high at 85.0% of nominal GDP at end-2014. In our view, even if there is a potential cut in interest rate, we do not expect a significant impact on property demand. This is because that the key determining factor of property demand for now should be the ability to secure mortgages, instead of interest rate, which is still accommodative and attractive. Also, a lower OPR indicates a weaker economic outlook which may not bode well for buyers’ sentiment.
We think the most notable downside risks for the developers include: 1) higher-than-expected GST provisioning which would put pressure on operating margins. Thus far, SP Setia is the only company under our coverage that has made provisions for the GST impact on ongoing projects, and 2) weaker-than-expected sales.
Stock wise, property stocks under our coverage are presently trading at an average 35-63% discount to our RNAV estimates.
Stock picks. Our top BUY pick for the sector is SP Setia. We like SP Setia for its earnings defensiveness backed by MYR11b of unbilled sales as at end-May 2015 (2.0x of our FY10/15 revenue forecast) and strategically located landbank secured at cheap land costs (which allows it to be more flexible in pricing and product launches in times of uncertainty. Another BUY pick for the sector is Eco World. We like Eco World for its strong management team who has a proven track record.
2015E 2016E
PER (x) 10.7 9.2
Earnings Growth (%)
13.2 14.9
ROE % 8.9 10.4
Source: Maybank KE
July 02, 2015 34
Strategy
Sector Outlook (continued)
Sector Weight Our thoughts
Property (developers)
Neutral Developers under our coverage : Latest sales and unbilled sales Co FYE FY15
sales target (MYRm)
Actual sales (MYRm)
% of FY15 sales target
Unbilled sales (at latest quarterly results)
Mah Sing Dec 3,430 561 (3M FY15)
16% MYR5.1b as at end-Mar 2015, or 2.0x of our FY15 property revenue forecasts
Sunway Dec 1,200 186 (3M FY15)
16% MYR1.8b as at end-Mar 2015, or 1.1x of our FY15 property revenue forecasts
UEMS Dec 2,000 390 (3M FY15)
20% MYR3.9b as at end-Mar 2015, or 2.7x of our FY15 property revenue forecasts
Eco World Oct 3,000 1,187 (6M FY15)
40% MYR3.2b as at end-Apr 2015, or 4.1x of our FY15 property revenue forecasts
Glomac Apr 600 506 (12M FY15)
84% MYR796m as at end-Apr 2015, or 1.1x of our FY4/16 property revenue forecasts
SP Setia Oct 4,000 1,970 (6M FY15)
49% MYR11b as at end-May 2015, or 2.0x of our FY15 property revenue forecasts
* Glomac's actual sales for FY15; Source: Companies, Maybank KE
Property (REITs)
Neutral Sector lacks of near-term excitement
Developments. 10-year MGS yields have marginally changed by -7bps since beginning of the year (4.08% as at 1 Jan 2015), and lately stabilised around 4.0%. The recent MPC meeting in May 2015 was rate neutral as Bank Negara views the current interest level as accommodative and the risks of destabilising financial imbalances are contained.
YTD, the M-REIT sector (consists of seven trusts within our coverage) has recorded a decent gain of 3.6% by average share price performance which outperformed the KLCI’s YTD performance of -1.2%. The gain was led by KLCCP (+8.5%), followed by IGBREIT (+7.0%) and PavREIT (+6.1%).
Meanwhile, significant events that took place in 1H15 in the sector were: 1) the entry of MRCB as Quill REIT’s largest shareholder as part of the Platinum Sentral acquisition (completed in Mar 2015), and 2) the proposed acquisition of Tropicana City Mall and Tropicana City office Tower by CMMT (expected to complete in 3Q15). Hence, both REITS are expected to record higher rental income in 2H15 (MQREIT: 2Q15 onwards, CMMT: expected 4Q15 onwards) given the addition of those key assets into their portfolios. CMMT's acquisition, however, is not yield accretive.
Outlook:
Our Economics research team remains cautious on the post-GST macro data as the GST might impact economic activities and in turn influence Bank Negara’s benchmark interest rate decision. Nonetheless, the team maintains its OPR target at 3.25% for now, for 2H15.
M-REITs within our coverage currently trade at an average net yield of 5.74%, +173bps above the 10-year MGS yield of 4.0%. The spread has remained largely unchanged since early this year and still below its 10-year forward mean level of 231bps (currently at -1SD below mean). Looking ahead, we expect M-REITs’ unit prices to stay range bound in the short–term. While we do not expect large fluctuation in the bond yields (that could affect the attractiveness of M-REITs), the M-REIT sector lacks of strong re-rating catalysts. Hence, we are maintaining our NEUTRAL weight on the sector.
M&A activities are likely to remain low in the near-term as majority of the known potential asset acquisitions from Rights of First Refusal (ROFR) could only be materialised from 2017 onwards (i.e. Pavilion Mall extension, multiple office and mixed development assets from KLCCP). AXRB, however, could be acquiring more asset(s) in 2H15 as the trust is currently looking at seven industrial/ warehouse properties as potential acquisitions with total estimated value of MYR270m. Recently, AXRB has proposed to acquire an industrial property in Klang for MYR46m which marked its first acquisition out of the seven targeted assets for 2015.
In terms of organic growth, we are more incline and positive towards retail REITs whereby rental income growth could be supported by positive rental reversions and high demand for retail mall spaces, especially for major malls with premium locations such as Suria KLCC, Pavilion and MidValley Megamall.
Elsewhere, we remain cautious on the office space leasing market due to softer demand. Such risk could be more apparent for SunREIT’s Sunway Tower as Ranhill Worley Parsons, its largest tenant, may vacate its remaining tenancy of 92k sq.ft. NLA (34% of Sunway Tower’s office space) soon.
Stock picks. Our BUY picks are KLCCP and PavREIT. Both currently offer 14.1% and 18.4% of total return respectively while there are visible mid-term earnings growth catalysts via M&A activities.
2015E 2016E
PER (x) 19.2 17.2
Earnings Growth (%)
7.3 11.9
ROE % 6.0 6.7
July 02, 2015 35
Strategy
Sector Outlook (continued)
Sector Weight Our thoughts
Port infra Neutral Gaining market share at Malacca Straits
Developments. Excluding the Ocean 3-related overlapping services/ad hoc calls, Westports demonstrated robust volume growth of 12% YoY in 1Q15, led by the solid intra-Asia volume (+17% YoY). Meanwhile, NCB’s throughput also staged a strong recovery with a growth rate of 12% YoY in 1Q15, led by strong volume growth from its key customer Wan Hai.
Outlook. While global trade may soften in 2015, we expect Malaysia’s transshipment ports (Westports, Northport and Port Tanjung Pelepas (PTP)) to register a high single-digit throughput growth in 2015 as the transshipment ports eat into the market share of Port of Singapore Authority (PSA), with Ocean 3 and 2M using Westports and PTP as their respective regional hubs. Compared to PSA, we think the Malaysia’s transshipment ports are attractive to the shipping liners due to their competitive rates and comparable turnaround time.
Stock picks. We have a BUY on NCB given: (i) its earnings recovery story; (ii) further earnings upside from the imminent container tariff hike; and (iii) we think the increasing interest from MMC (which has raised its shareholding in NCB to 21.05% on 16 Jun 2015, from 15.7% previously) could lead to an M&A exercise for NCB. We have a HOLD call on Westports as we think market has already factored in the potential container tariff hike for the stock.
2015E 2016E
PER (x) 28.9 25.3
Earnings Growth (%)
3.4 14.4
ROE % 16.9 19.3
Telco Neutral Competition intensifies
Developments. In the mobile space, the GST took effect on 1 Apr 2015, and was initially imposed on the purchase of prepaid reloads. This was subsequently revised, and GST will now be charged upon usage. Our channel checks suggest the various revisions to GST treatments have had an adverse impact on the sale of prepaid reloads in the month of April. Domestic price points have also been falling, with Celcom taking the lead in the postpaid segment with price cuts, and other players following suit (or planning to follow).
Fixed-line players endured contrasting fortunes in 1Q15. TM’s earnings were impacted by seasonality and P1. TDC meanwhile, posted strong revenue and margin trends on the back of continued IRU sales.
Outlook. Mobile players are likely to report a weak set of numbers in 2Q15, given potentially weak revenue from prepaid (from GST confusion). Heading into 2H15, the industry would have to contend with the effects of the latest round of price cuts. These cuts have been quite sharp, and are a concern given that it was initiated by one of the big three (Celcom). At the time of writing, Maxis and UMobile have yet to announce their revised plans. It remains to be seen how long these price cuts would continue. The saving grace is that mobile operators now have some form of a buffer having successfully passed though GST.
Stock picks. Our relative preferences are now for Axiata (BUY, TP: MYR7.60) and Digi (HOLD, TP: MYR6.10) given their YTD underperformances. Expectations for Axiata are likely already at a low given the continued share price underperformance and management’s tepid guidance.
2015E 2016E
PER (x) 21.9 20.2
Earnings Growth (%)
11.0 8.8
ROE % 21.7 23.6
Transport (aviation)
Neutral A year of two halves
Developments. 1Q15’s generally poor earnings were expected and it is evident that the industry is still feeling the aftermath of the double tragedy in 2014. Yields and load factors were weak, and most airlines didn’t enjoy the benefits of lower fuel price fully due to partial oil hedge at higher prices. Demand was healthy but people are getting more selective.
Outlook. 2Q15 will likely see better earnings delivery on the back of lower fuel prices and a recovery in passenger traffic growth. In April 2015, the total passenger traffic growth at MAHB’s airports in Malaysia was +5.4% YoY which is a big improvement as the industry has seen negative growth since Aug 2014. AirAsia should see a slightly better quarter YoY, AirAsia X will reduce its operational losses due to capacity cuts and MAHB should benefit from the higher traffic numbers.
The big change will occur in 2H15. MAS would have reduced its headcount by 6,000 employees by the end of Aug 2015 and this means that significant capacity cuts at MAS are looming. This will rebalance the supply-demand and likely give pricing power in the hands of airlines.
Stock picks. Our sole BUY for the sector is AirAsia based on 9x FY15 PER target. AirAsia X and MAHB both remain as HOLD; AirAsia X due to a challenging business environment and MAHB due to unattractive valuation compared to its peers.
2015E 2016E
PER (x) 15.8 13.7
Earnings Growth (%)
NA 15.4
ROE % 6.4 7.4
Source: Maybank KE
July 02, 2015 36
Strategy
Sector Outlook (continued)
Sector Weight Our thoughts
Utilities
Neutral 1MDB dominates
Developments. 1MDB’s power assets are reportedly available for sale, with Tenaga supposedly being one of several interested parties. Sentiment on Tenaga has been adversely impacted by concerns over a potential bailout of 1MDB. The mere assumption of a greenfield project (Track 3B) from 1MDB’s hands has resulted in Tenaga’s share price being weak.
On the IPP front, the regulator is presently reviewing the potential extension of several expiring PPAs (including YTL Power and Port Dickson Power). Elsewhere, Malakoff Corp was listed in May 2015, thus providing investors exposure to a pure-play IPP.
Separately, Gas Malaysia was accorded a 10.3% selling price hike effective Jul 2015. Its FY15 spread has also been fixed at a minimum of MYR1.58/mmBTU. The company could move to an IBR (Incentive-based Regulation) regime as early as Jan 2016.
Outlook. The association of Tenaga with 1MDB would likely continue into 2H14. We note that TNB's base earnings are not under threat (fuel costs remain benign), so valuations will get more compelling if Tenaga’s share price weakness continues.
Meanwhile, it is now firmed that Gas Malaysia’s spreads are structurally lowered from the previous MYR2.02/mmBTU levels. The IBR mechanism for Gas Malaysia is similar to that of Tenaga’s regulated assets (where NOPAT = WACC x RAB), and cost assumptions are to be reviewed on a six-month interval. We understand the tariff revision has not yet been made “fully automatic”, thus there remain some element of earnings risk.
Stock picks. We continue to be bullish on Tenaga (BUY, TP: MYR16.00) as valuations (even on base-level earnings) are compelling. We view Tenaga’s management as having done a good job while looking out for the company’s interest. In any case, a final check-and-balance exists in the form of minority shareholders’ approval if Tenaga does proceed with the acquisition of 1MDB’s power assets.
For gas utilities, we continue to prefer Petronas Gas (HOLD, TP: MYR24.00) to Gas Malaysia (HOLD, TP: MYR2.65) due to its lower regulatory risk. Gas Malaysia’s selling prices can only trend higher given the scheduled step-up in its cost of subsidised gas (by PETRONAS).
2015E 2016E
PER (x) 14.2 13.3
Earnings Growth (%)
3.0 6.7
ROE % 12.5 13.4
Source: Maybank KE
Maybank KE Research Universe earnings growth, PERs, P/B, ROE (as at 1 Jul 2015) Earnings Growth (%) PE (x) P/B (x) ROE (%) Rec Sector CY 14A CY 15E CY 16E CY 14A CY 15E CY 16E CY 14A CY 15E CY 14A CY 15E NT Banking & Finance 0.8 4.5 8.2 13.0 12.5 11.5 1.6 1.5 12.4 12.0 NT Non-banking Finance 6.2 (1.3) 4.4 22.4 22.7 21.7 2.7 2.4 12.2 10.8 NT Building materials (28.3) 26.1 17.6 28.3 22.5 19.1 1.9 1.9 6.7 8.3 NT Consumer 6.9 9.5 8.6 31.1 28.4 26.2 3.9 3.8 12.6 13.3 NT Automotive (12.3) (2.8) 23.1 16.4 16.8 13.7 1.6 1.6 10.0 9.4 OW Construction, Infra 0.3 11.2 13.1 19.1 17.2 15.2 1.8 1.6 9.2 9.4 NT Gaming – NFO (12.0) (1.4) 2.6 13.7 13.9 13.5 2.6 2.6 19.2 18.3 NT Gaming – Casino (16.5) 17.2 13.1 19.0 16.2 14.3 1.3 1.2 6.6 7.3 OW Gloves (0.1) 27.2 12.4 27.4 21.6 19.2 4.5 3.9 16.4 18.1 NT Media (1.1) 9.1 13.5 21.0 19.2 17.0 4.8 4.7 22.8 24.3 NT Oil & Gas 14.7 (13.3) 13.7 15.5 17.8 15.7 1.3 1.2 8.2 6.7 NT Petrochemicals (21.6) 11.5 19.9 20.6 18.5 15.4 2.2 2.0 10.6 11.1 NT Plantation (11.3) (3.9) 26.6 22.4 23.4 18.4 2.1 2.0 9.4 8.6 NT Property – Developer 3.9 13.2 14.9 12.1 10.7 9.3 1.1 1.0 9.0 9.0 NT Property – REIT 6.5 7.3 11.9 20.6 19.2 17.2 1.2 1.2 6.1 6.0 OW Semicon/Tech 89.5 29.6 12.6 18.0 13.9 12.3 5.6 4.0 31.3 28.5 NT Telco (5.3) 11.0 8.8 24.3 21.9 20.2 4.9 4.8 20.1 21.7 NT Transport – Aviation (83.4) 588.8 15.4 108.6 15.8 13.7 1.3 1.0 1.2 6.4 NT Transport – Shipping 27.1 8.1 (4.7) 18.7 17.3 18.1 1.3 1.2 7.0 7.0 NT Transport – Ports 10.9 3.4 14.4 29.9 28.9 25.3 5.1 4.9 17.0 16.9 NT Utilities 10.9 3.0 6.7 14.7 14.2 13.3 1.9 1.8 13.2 12.5 Stocks under cvrg (1.6) 6.6 10.9 18.0 16.9 15.2 2.0 1.8 11.0 11.0
OW = Overweight; UW = Underweight; NT = Neutral; Source: Maybank KE
July 02, 2015 37
Strategy
BOTTOM-UP STOCK PICKS We highlight below stocks which still offer values after yesterday’s lift-off in the broad market, our defensive BUYs, our thematics BUYs. Narrowing our list further, our top BUYs for 2H15 are highlighted in page 41.
Category 1: Stocks which offer values - which have been sold down
We highlight below stocks in our BUY/HOLD list where their share prices have fallen >5% and they now offer higher upside (for BUYs) or >10% upside (for HOLDs) to our TPs. Of the list, we further highlight Tenaga and AirAsia, where both have been unfairly sold down on news flow relating to its potential acquisition of 1MDB’s power assets (Tenaga), and accusation of accounting anomalies (AirAsia). We also highlight Gamuda and HLFG.
§ We continue to be bullish on Tenaga; valuations are even more compelling now at 11.7x/10.6x calendarised 2015/2016 earnings. We view Tenaga’s management as having done a good job while looking out for the company’s interest. In any case, a final check-and-balance exists in the form of minority shareholders’ approval if Tenaga does proceed with the acquisition of 1MDB’s power assets.
§ We believe things will settle on AirAsia, and its fundamentals will be re-looked. The stock is cheap, trading at only 5.8x/6.2x 2015/2016 earnings and 1.0x FY14 P/B. Management reiterated that non-legal control over its units in Indonesia, Philippines, Thailand and India due to local aviation regulations has prevented a consolidation of their accounts. Operationally, we think that the ongoing cutting of routes and capacities by MAS would be positive for AirAsia in load factors and yields.
§ Gamuda remains the best proxy to infrastructure play in Malaysia. Aggressive selling by foreign investors has resulted in Gamuda’s foreign shareholding level falling to the lowest ever (based on our records), at 27% at end-May 2015 (end-Dec 2014: 29%). The previous low of its foreign shareholding was in end-Aug-Nov 2011, at 28%.
§ HLFG’s insurance units, particularly its 70%-HL Assurance and 30%-MSIG Insurans, is under-appreciated. Stripping out HLFG’s (i) 64% share of HL Bank’s market cap, (ii) 81% stake in HL Capital at an undemanding P/BV of 1.5x, from its market cap, investors are getting HLFG’s insurance business for virtually nothing, which we do not think is justified. HL Assurance is the 4th largest life insurer in Malaysia in total premiums while MSIG Insurance ranks among the top 3 in the general insurance industry. What is a short-term drag on HLFG’s share price is that HLFG and HL Bank will raise equity this year, but we expect sentiment to improve thereafter.
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Stocks (in our BUY/HOLD list) which offer values - which have been sold down Price TP Rec. EPS
(sen) PE (x) EPS
Growth (%)
ROE (%)
Div yld (%)
P/B (x)
Px chg (%)
1 Jul CY15F CY16F CY15F CY16F CY15F CY16F CY15F CY15F CY14A YTD
AirAsia 1.57 2.45 Buy 27.1 25.5 5.8 6.2 85.6 (5.9) 13.5 0.0 1.0 (41.5)
UEM Sunrise 0.99 1.27 Hold 8.3 9.0 11.9 11.0 (21.6) 7.8 5.4 2.4 0.7 (27.8)
Ecoworld 1.55 1.95 Buy 3.6 7.7 42.7 20.3 28.2 110.6 2.4 0.1 1.2 (10.1)
Tan Chong Motor 2.96 3.45 Hold 13.4 18.9 22.1 15.7 27.6 41.0 3.1 3.0 0.7 (8.8)
DiGi.Com 5.53 6.10 Hold 26.9 27.6 20.6 20.0 3.1 2.6 304.3 4.9 61.4 (8.4)
Sarawak Oil Palm 4.75 6.72 Buy 30.3 44.8 15.7 10.6 17.9 47.9 9.3 0.8 1.6 (7.0)
Tenaga 12.74 16.00 Buy 109.2 120.0 11.7 10.6 10.2 9.9 12.6 2.7 1.6 (7.0)
Axiata 6.46 7.60 Buy 34.4 38.1 18.8 17.0 20.3 10.8 13.6 3.7 2.7 (6.3)
HLFG 15.40 18.50 Buy 149.8 154.9 10.3 9.9 (3.9) 3.4 11.9 2.3 1.3 (5.2)
Gamuda 4.80 6.00 Buy 29.1 28.4 16.5 16.9 (4.2) (2.3) 11.2 2.5 2.0 (3.0)
SP Setia 3.16 4.07 Buy 26.8 32.8 11.8 9.6 60.5 22.3 11.0 5.1 1.0 (2.6)
Source: Maybank KE
Category 2: Stocks which offer values – despite having re-rated
We highlight 9 stocks in our BUY list where 6 of them are small-mid caps. Of the list, we further highlight BIMB, GENM, NCB and Harbour-Link.
§ We recommend BIMB for its deep value. Based on our forward end-2015 book value estimate of MYR3.84b for Bank Islam, the market currently prices Bank Islam at a P/B of just 1.1x for a prospective ROE of 14% which we do not think is justified. Our TP for BIMB pegs a 1.7x 2015 P/B multiple on Bank Islam.
§ We continue to like GENM, not only for its much more stable operations vis-à-vis the Macanese, Singapore and Philippine casino operators, but also its MYR5b Genting Integrated Tourism Plan (GITP) at Resorts World Genting that will raise room inventory by ~35% by 2018. This will provide the medium-term growth to its casino business.
§ On NCB, despite the share price run-up (+58% YTD), we remain positive on the stock given its earnings recovery story, a potential container tariff hike at Port Klang which we think has yet to be priced in, and a potential corporate exercise led by MMC, which just raised its shareholding in NCB to 21.05% (from 15.7%).
§ We initiated coverage on Harbour-Link on 9 Jun 2015. We like the stock as it is a dominant logistics player in East Malaysia, with a market share of >50% and a solid track record. Presently, it benefits from strong logistics demand from the local construction industry and industries at Samalaju Industrial Park. In our view, Harbour-Link offers an alternative exposure to Sarawak’s long-term growth potential (under the SCORE development) besides the home-grown construction players.
July 02, 2015 39
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Stocks (in our BUY list) which offer values – despite having re-rated Price TP Rec. EPS
(sen) PE (x) EPS
Growth (%)
ROE (%)
Div yld (%)
P/B (x)
Px chg (%)
1 Jul CY15F CY16F CY15F CY16F CY15F CY16F CY15F CY15F CY14A YTD
BIMB 4.09 4.80 Buy 36.7 38.9 11.1 10.5 3.1 5.8 16.0 3.7 2.1 0.5
Genting Malaysia 4.23 4.60 Buy 25.1 28.5 16.9 14.8 5.0 13.5 8.2 1.7 1.5 4.8
Bumi Armada 1.19 1.60 Buy 7.1 8.1 16.8 14.7 (10.1) 14.1 6.1 0.0 0.9 10.7
MBM Resources 3.44 4.20 Buy 36.7 46.6 9.4 7.4 27.9 27.0 8.8 2.7 0.9 20.1
Berjaya Auto 2.83 3.50 Buy 22.2 27.8 12.8 10.2 28.9 25.5 44.7 4.2 7.4 22.3
Inari Amertron 3.30 4.05 Buy 22.7 25.3 14.5 13.0 31.2 11.5 28.8 2.4 6.2 39.1
Vitrox Corp 3.44 4.05 Buy 25.9 30.0 13.3 11.5 24.5 15.8 28.0 2.2 4.6 53.4
NCB Holdings 3.55 5.20 Buy 9.2 14.2 38.8 25.0 54.7 55.0 3.0 2.0 1.2 58.4
Harbour-Link 2.76 3.65 Buy 28.6 30.7 9.7 9.0 29.7 7.3 17.9 2.1 2.0 74.7
Source: Maybank KE
Category 3: Stocks which offer defensive earnings
A new addition to our BUY list is Malakoff. Besides Malakoff, the two retail REITs in our BUY list – KLCC and Pavilion – continue to offer stable earnings, decent yields.
§ Malakoff has defensive characteristics in that it is primarily Malaysia-centric and its power purchase agreements have fuel cost pass-through clauses in place. There are also growth opportunities, either organic (due to Malaysia’s tight reserve margin, which means that new generation power plants will still be required beyond 2020) or inorganic (M&As). Its relisting on 15 May 2015 on has allowed it to deleverage to have more financing leeway for new projects.
Stocks (in our BUY list) which offer defensive earnings Price TP Rec. EPS
(sen) PE (x) EPS
Growth (%)
ROE (%)
Div yld (%)
P/B (x)
Px chg (%)
1 Jul CY15F CY16F CY15F CY16F CY15F CY16F CY15F CY15F CY14A YTD
Malakoff Corp 1.80 2.00 Buy 9.8 12.3 18.4 14.6 1.0 25.5 8.3 4.1 1.6 0.0
KLCC Prop 7.02 7.65 Buy 37.0 38.9 19.0 18.1 (5.0) 5.1 6.1 4.9 1.1 7.2
Pavilion REIT 1.50 1.70 Buy 7.8 8.4 19.2 17.9 1.3 7.7 6.0 4.7 1.2 5.4
Source: Maybank KE
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Category 4: Stocks for thematic investing
Our list below highlights 8 BUYs for our four thematics/mini-thematics.
§ Roll-out of major infrastructure projects. We like Gamuda as the main beneficiary of the upcoming positive developments in the construction sector including the Penang Transport Master Plan PDP award and signing of the KVMRT 2 PDP agreement. It is also vying for works for the Gemas-Johor Bahru double track rail and Pan Borneo Highway.
§ Sarawak state election. Cahya Mata Sarawak is our Top Sarawak pick as the main beneficiary of the anticipated robust construction activities in Sarawak being a key construction materials supplier in Sarawak. In addition, it is also eyeing the construction works in Sarawak including the Pan Borneo Highway. Besides Cahya Mata Sarawak, Hock Seng Lee would also ride on Sarawak’s urbanisation and the SCORE development.
§ USD strength, and MERS (?). Inari and Vitrox are our two BUYs in the technology sector, while Top Glove is our top BUY in the glove sector. Besides benefiting from the USD strength (although this is normally passed on), the recent MERS outbreak in the region will continue to draw focus on the healthcare sector, which would include the glove producers like Top Glove. That aside, higher plant efficiencies which will continue to improve will compensate for the upcoming scheduled gas tariff hikes and the recovery of the MYR vs USD in the future.
§ El Nino. GENP and Sarawak Oil Palm are our two top BUYs in the plantation sector, before considering the El Nino potential. If El Nino’s strength grows, that will be a ‘bonus’ to our BUY calls for both stocks.
Stocks (in our BUY list) for thematic investing Price TP Rec. EPS
(sen) PE (x) EPS
Growth (%)
ROE (%)
Div yld (%)
P/B (x)
Px chg (%)
1 Jul CY15F CY16F CY15F CY16F CY15F CY16F CY15F CY15F CY14A YTD
Gamuda 4.80 6.00 Buy 29.1 28.4 16.5 16.9 (4.2) (2.3) 11.2 2.5 2.0 (3.0)
Cahya Mata Swk 5.33 5.00 Buy 25.9 32.3 20.6 16.5 19.4 24.7 13.4 2.0 3.0 36.4
HSL 1.86 2.15 Buy 17.3 20.8 10.8 8.9 23.6 20.2 14.3 1.8 1.7 10.4
Top Glove 6.68 7.10 Buy 39.8 41.5 16.8 16.1 22.7 4.4 15.8 3.0 2.9 52.5
Inari Amertron 3.30 4.05 Buy 22.7 25.3 14.5 13.0 31.2 11.5 28.8 2.4 6.2 39.1
Vitrox Corp 3.44 4.05 Buy 25.9 30.0 13.3 11.5 24.5 15.8 28.0 2.2 4.6 53.4
Genting Plant 9.99 11.26 Buy 48.3 61.1 20.7 16.4 (2.0) 26.5 8.9 1.0 2.0 0.6
Sarawak Oil Palm 4.75 6.72 Buy 30.3 44.8 15.7 10.6 17.9 47.9 9.3 0.8 1.6 (7.0)
Source: Maybank KE
Category 5: Shariah
Our top BUY in this category is BIMB being one of only two Shariah compliant stocks in the financial sector, the other being its 60%-subsidiary, Syarikat Takaful, whose share price has strongly outperformed (+79% YTD).
July 02, 2015 41
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Top BUYS
Narrowing the above lists further, we highlight below our top BUY list for 2H15.
Top BUYs for 2H15 Price TP Rec. EPS
(sen) PE (x) EPS
Growth (%)
Div yld (%)
ROE (%)
P/B (x)
Px chg (%)
1 Ju1 CY15F CY16F CY15F CY16F CY15F CY16F CY15F CY15F CY14A YTD
Large Cap
Tenaga 12.74 16.00 Buy 109.2 120.0 11.7 10.6 10.2 9.9 12.6 2.7 1.6 (7.0)
Axiata 6.46 7.60 Buy 34.4 38.1 18.8 17.0 20.3 10.8 13.6 3.7 2.7 (6.3)
Genting Malaysia 4.23 4.60 Buy 25.1 28.5 16.9 14.8 5.0 13.5 8.2 1.7 1.5 4.8
KLCC Prop 7.02 7.65 Buy 37.0 38.9 19.0 18.1 (5.0) 5.1 6.1 4.9 1.1 7.2
Gamuda 4.80 6.00 Buy 29.1 28.4 16.5 16.9 (4.2) (2.3) 11.2 2.5 2.0 (3.0)
BIMB 4.09 4.80 Buy 36.7 38.9 11.1 10.5 3.1 5.8 16.0 3.7 2.1 0.5
Top Glove 6.68 7.10 Buy 39.8 41.5 16.8 16.1 22.7 4.4 15.8 3.0 2.9 52.5
Small-mid Cap
Inari Amertron 3.30 4.05 Buy 22.7 25.3 14.5 13.0 31.2 11.5 28.8 2.4 6.2 39.1
NCB Holdings 3.55 5.20 Buy 9.2 14.2 38.8 25.0 54.7 55.0 3.0 2.0 1.2 58.4
MBM Resources 3.44 4.20 Buy 36.7 46.6 9.4 7.4 27.9 27.0 8.8 2.7 0.9 20.1
Source: Maybank KE
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Appendix 1
Dividend stocks (Maybank KE’s coverage: Stocks with more than 4% net yield) Stocks Rec Shr px at
1-Jul-15 Market Cap
(MYR m) TP (RM) 2015 Net
Yld (%) Upside to
TP (%) Potential total
returns (%)
Padini Holdings Hold 1.37 901.3 1.35 7.3 (1.5) 5.8
CMMT Hold 1.35 2,401.6 1.55 6.5 14.8 21.4
MRCB-Quill REIT Hold 1.18 780.4 1.17 6.4 (0.8) 5.5
Media Prima Hold 1.43 1,586.2 1.60 6.3 11.9 18.2
Berjaya Sports Toto Hold 3.26 4,382.7 3.22 6.3 (1.2) 5.1
Star Hold 2.47 1,822.8 2.50 6.1 1.2 7.3
Carlsberg Brewery Hold 12.50 3,845.3 13.20 5.7 5.6 11.3
Magnum Hold 2.67 3,804.0 2.75 5.6 3.0 8.6
Glomac Hold 0.80 577.8 1.03 5.6 29.6 35.1
Sunway REIT Hold 1.57 4,612.1 1.60 5.3 1.9 7.3
Axis REIT Hold 3.44 1,884.3 3.40 5.2 (1.2) 4.0
BAT (M) Hold 63.12 18,022.7 63.00 5.1 (0.2) 4.9
SP Setia Buy 3.16 8,179.0 4.07 5.1 28.8 33.9
MSM Malaysia Holdings Hold 5.26 3,697.7 5.50 4.9 4.6 9.4
DiGi.Com Hold 5.53 42,995.8 6.10 4.9 10.3 15.2
KLCC Prop Buy 7.02 12,673.4 7.65 4.9 9.0 13.8
MCIL Hold 0.61 1,020.8 0.65 4.7 7.4 12.1
Pavilion REIT Buy 1.50 4,523.9 1.70 4.7 13.3 18.0
Guinness Hold 14.44 4,362.3 14.00 4.5 (3.0) 1.5
Bursa Malaysia Hold 8.20 4,376.9 8.40 4.5 2.4 7.0
Astro Malaysia Holdings Hold 3.00 15,605.2 3.26 4.3 8.7 12.9
WCT Hold 1.45 1,574.1 1.80 4.3 24.1 28.4
IGB REIT Hold 1.32 4,566.3 1.45 4.2 9.8 14.1
Berjaya Auto Buy 2.83 3,226.5 3.50 4.2 23.7 27.9
Mah Sing Hold 1.61 3,879.2 2.22 4.2 37.9 42.1
AMMB Holdings Hold 6.05 18,235.8 6.10 4.1 0.8 4.9
Source: Maybank KE
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Appendix 2
Foreign shareholding of selected stocks under coverage (%)
Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Latest As at (month, year)
Malayan Banking 10.9 14.0 13.5 19.6 21.4 22.5 20.9 19-Jun-15
CIMB Group 42.4 42.6 38.1 40.4 33.8 32.7 30.9 31-Mar-15
Public Bank 26.5 26.5 26.1 31.2 30.7 31.0 31.0 31-Mar-15
Axiata Group 6.7 12.2 28.0 28.0 23.0 21.0 20.9 31-Mar-15
Sime Darby 14.2 15.3 17.3 19.5 17.4 13.9 # 13.7 31-Mar-15
Petronas Chemicals NA NA 9.0 9.0 12.0 8.5 8.5 31-Dec-14
Maxis * 8.6 8.3 7.3 7.5 7.5 6.7 6.8 31-Mar-15
Tenaga Nasional 9.4 10.5 10.8 15.0 27.8 25.8 26.9 31-Mar-15
Petronas Gas 2.4 2.0 3.0 3.0 3.0 3.0 3.0 30-Sep-14
Genting Berhad 36.0 42.0 42.0 45.0 45.0 46.0 47.0 31-Mar-15
Digi.com 6.8 9.0 12.9 12.6 12.5 15.6 15.8 31-Mar-15
IOI Corporation 22.0 19.0 17.0 17.6 18.0 17.4 # 17.5 30-Apr-15
Hong Leong Bank NA NA 7.7 8.1 8.1 9.5 9.1 31-Mar-15
SapuraKencana * NA NA NA 22.0 32.0 28.0 # 26.0 31-Mar-15
KL Kepong 16.4 19.3 18.5 15.0 12.7 12.4 # 12.3 31-Mar-15
Genting Malaysia 31.0 35.0 37.0 38.0 39.0 39.0 39.0 31-Mar-15
RHB Capital 5.6 12.4 11.6 8.9 8.3 9.5 9.5 31-Dec-14
AMMB Holdings 29.6 30.0 26.2 29.0 32.0 32.0 29.0 31-Mar-15
MISC Bhd 4.3 4.9 3.9 5.5 5.9 7.8 8.6 31-Mar-15
Telekom Malaysia 9.1 11.0 19.9 16.2 13.0 16.7 15.4 31-Mar-15
British American Tobacco 22.0 25.3 26.8 28.4 28.0 33.2 # 33.6 31-Mar-15
YTL Corporation 22.0 23.0 23.0 27.0 28.0 29.0 29.0 31-Dec-14
UMW Holdings 5.9 11.7 13.5 25.8 16.9 18.8 17.5 31-Mar-15
UEM Sunrise NA NA 14.6 17.3 14.9 13.1 13.0 30-Apr-15
Bumi Armada NA NA NA 18.0 12.3 13.2 13.2 30-Apr-15
Gamuda 35.0 36.0 33.0 37.0 40.0 29.0 27.0 31-May-15
YTL Power Int'l 5.0 5.0 9.0 8.0 9.0 12.0 12.0 31-Dec-14
S P Setia 24.0 24.0 17.6 1.7 8.8 8.1 8.0 30-Apr-15
AirAsia NA 51.4 51.0 48.3 50.2 60.8 54.0 31-Mar-15
IJM Corp NA NA 41.3 36.6 40.5 40.4 # 36.0 31-May-15
MAHB NA NA 9.5 11.3 15.0 18.9 19.6 31-Mar-15
Dialog Group NA NA NA 16.0 16.0 16.0 15.0 31-Mar-15
Genting Plantations NA NA 9.8 9.0 8.0 7.2 7.4 31-Mar-15
Sunway Berhad NA NA 21.8 20.5 14.2 8.1 8.7 30-Apr-15
MMHE NA 14.1 5.4 4.6 2.0 1.9 2.4 31-Mar-15
Mah Sing 17.7 16.7 20.9 24.8 23.7 19.2 17.1 30-Apr-15
WCT 9.0 14.0 14.0 10.0 13.0 10.7 # 10.0 15-May-15
Glomac NA NA NA NA 8.4 6.3 5.9 20-Apr-15
OldTown * NA NA NA NA 35.7 35.4 32.9 30-Apr-15
Market 20.4 21.9 22.7 23.9 23.2 23.8 23.2 31-May-15
* Maxis: Excludes Saudi Telecom’s 16.2% effective stake
* SapuraKencana: Includes Seadrill’s 8.2%
* OldTown: 4% at Feb 2012, 37% at Feb 2013
# As at 31 Jan 2015
Note: Highlighted/shaded are stocks which have foreign shareholding close to, or above 20% (based on latest data available) Sources: Companies, compiled by Maybank KE
July 02, 2015 44
Strategy Maybank KE Equity Research Stock Universe Ticker
Company FYE Price Market TP Rec Core Net Profit EPS CAGR PER PER PER ROE Div Yld PBV Price chg 1 Jul Cap CY14A CY15F CY16F CY14A
CY15F CY16F 14-16 CY14A CY15F CY16F CY15F CY15F CY15F YTD
MYR m MYR MYR m MYR sen (%) (x) (%) (%) (x) (%) Autos BAUTO MK Berjaya Auto * 4 2.83 3,227 3.50 Buy 196 253 317 17.2 22.2 27.8 27.2 16.4 12.8 10.2 44.7 4.2 5.7 22.3 MBM MK MBM Resources * 12 3.44 1,344 4.20 Buy 112 143 182 28.7 36.7 46.6 27.4 12.0 9.4 7.4 8.8 2.7 0.8 20.1 TCM MK Tan Chong * 12 2.96 1,932 3.45 Hold 69 88 124 10.5 13.4 18.9 34.2 28.2 22.1 15.7 3.1 3.0 0.7 (8.8) UMWH MK UMW Hldgs * 12 10.32 12,057 9.50 Hold 757 619 734 64.8 53.0 62.8 (1.6) 15.9 19.5 16.4 9.1 3.3 1.8 (3.2) Banking MAY MK Maybank 12 9.17 87,455 NR NR 6,716 6,892 7,249 74.2 72.3 72.9 (0.9) 12.4 12.7 12.6 12.0 6.1 1.6 3.6 AMM MK AMMB Holdings 3 6.05 18,236 6.10 Hold 1,649 1,621 1,634 61.5 58.4 58.6 (2.4) 9.8 10.4 10.3 10.8 4.1 1.2 (8.3) BIMB MK BIMB Holdings * 12 4.09 6,308 4.80 Buy 532 549 580 35.6 36.7 38.9 4.4 11.5 11.1 10.5 16.0 3.7 1.8 0.5 AFG MK AFG 3 4.44 6,874 4.90 Hold 536 564 607 37.7 39.6 42.0 5.5 11.8 11.2 10.6 11.9 4.8 1.4 (4.1) CIMB MK CIMB 12 5.54 47,033 5.60 Hold 3,159 3,627 4,520 38.1 46.9 52.2 17.1 14.5 11.8 10.6 9.2 3.4 1.2 0.5 HLBK MK Hong Leong Bk 6 13.42 24,140 15.70 Buy 2,119 2,175 2,261 120.3 123.5 128.4 3.3 11.2 10.9 10.5 13.3 3.1 1.5 (3.0) HLFG MK HL Financial 6 15.40 16,213 18.50 Buy 1,627 1,570 1,623 155.9 149.8 154.9 (0.3) 9.9 10.3 9.9 11.9 2.3 1.2 (5.2) PBK MK Public Bank 12 18.84 72,751 19.50 Hold 4,519 4,864 5,233 117.0 126.0 136.0 7.8 16.1 15.0 13.9 16.8 3.1 2.5 4.7 RHBC MK RHB Capital 12 7.59 19,647 8.60 Hold 2,038 2,060 2,187 79.7 79.3 83.4 2.3 9.5 9.6 9.1 9.7 0.8 0.9 0.4 Building Materials AJR MK Ann Joo
12 0.96 481 1.05 Hold 23 48 57 4.5 9.2 10.9 55.6 21.3 10.4 8.8 4.4 2.2 0.5 (9.3)
Construction / Infra EVSD MK Eversendai * 12 0.94 727 1.00 Buy 37 64 65 4.8 8.2 8.4 32.3 19.6 11.5 11.2 6.6 1.7 0.8 20.5 GAM MK Gamuda * 7 4.80 11,548 6.00 Buy 700 675 659 30.3 29.1 28.4 (3.3) 15.8 16.5 16.9 11.2 2.5 1.8 (3.0) HSL MK HSL * 12 1.86 1,022 2.15 Buy 77 95 114 14.0 17.3 20.8 21.9 13.3 10.8 8.9 14.3 1.8 1.5 10.4 IJM MK IJM Corp * 3 6.77 12,092 7.80 Buy 537 647 739 36.9 43.9 50.2 16.6 18.3 15.4 13.5 7.3 2.2 1.1 4.7 LTK MK Litrak * 3 4.25 2,197 4.50 Buy 139 162 234 27.1 31.5 45.5 29.6 15.7 13.5 9.3 26.4 4.0 3.6 17.9 WCT MK WCT * 12 1.45 1,574 1.80 Hold 97 103 138 8.9 9.5 12.6 19.0 16.3 15.3 11.5 4.6 4.3 0.7 (7.4) CMS MK CMS * 12 5.33 5,726 5.00 Buy 221 264 329 21.7 25.9 32.3 22.0 24.6 20.6 16.5 13.4 2.0 2.8 36.4 KICB MK Kimlun Corp * 12 1.33 400 1.30 Hold 34 40 41 11.3 13.3 13.8 10.5 11.8 10.0 9.6 9.3 2.7 0.9 11.8 Consumer AEON MK AEON Co * 12 3.11 4,366 3.05 Hold 228 213 228 16.2 15.2 16.2 - 19.2 20.5 19.2 11.1 1.6 2.3 0.2 ROTH MK BAT (M) 12 63.12 18,023 63.00 Hold 902 937 936 315.9 328.1 327.6 1.8 20.0 19.2 19.3 171.9 5.1 33.0 (0.7) CAB MK Carlsberg 12 12.50 3,845 13.20 Hold 212 212 230 69.2 69.5 75.0 4.1 18.1 18.0 16.7 68.0 5.7 12.0 11.7 GUIN MK Guinness 6 14.44 4,362 14.00 Hold 205 215 222 67.8 71.2 73.5 4.1 21.3 20.3 19.7 55.4 4.5 11.3 19.0 PAD MK Padini Holdings * 6 1.37 901 1.35 Hold 80 80 97 12.2 12.2 14.7 9.8 11.2 11.3 9.3 19.8 7.3 2.2 (2.8) NESZ MK Nestle * 12 72.00 16,884 68.00 Hold 550 580 611 234.7 247.3 260.7 5.4 30.7 29.1 27.6 73.0 3.3 21.2 7.7 QLG MK QL Resources * 3 4.07 5,079 4.00 Hold 177 204 227 14.2 16.4 18.2 13.4 28.8 24.8 22.4 13.2 1.2 3.3 23.3 MSM MK MSM Malaysia * 12 5.26 3,698 5.50 Hold 257 275 262 36.6 39.2 37.2 0.8 14.4 13.4 14.1 13.5 4.9 1.8 9.1 OTB MK OldTown * 3 1.63 721 1.78 Hold 49 51 54 10.8 11.2 12.0 5.3 15.1 14.6 13.6 13.6 3.8 2.0 10.6 SEM MK 7 - Eleven 12 1.64 2,023 1.70 Hold 58 70 86 4.7 5.7 7.0 22.0 34.9 28.8 23.4 33.6 1.7 9.6 12.9 IHH MK IHH * 12 5.85 48,087 5.35 Hold 755 965 1,176 9.2 11.7 14.3 24.7 63.6 50.0 40.9 4.8 0.5 2.4 22.0 * Shariah compliant (under Securities Commission’s new Shariah compliant list effective 29 May 2015), # No longer Shariah compliant, @ Newly Shariah compliant; Source: Maybank KE
July 02, 2015 45
Strategy … continued Ticker
Company FYE Price Market TP Rec Core Net Profit EPS CAGRC
PER PER PER ROE Div Yld PBV Price 1 Jul Cap CY14A CY15F CY16F CY14A CY15F CY16F 14-16 CY14A CY15F CY16F CY15F
CY15F CY15F YTD
MYR m MYR MYR m MYR sen (%) (x) (%) (%) (x) (%) Gaming BST MK BToto 4 3.26 4,383 3.22 Hold 342 328 342 25.5 24.4 24.4 (2.2) 12.8 13.4 13.4 45.7 6.3 6.1 (4.1) MAG MK Magnum 12 2.67 3,804 2.75 Hold 255 260 262 17.9 18.3 18.4 1.4 14.9 14.6 14.5 10.5 5.6 1.5 1.4 GENT MK Genting Bhd 12 8.10 30,116 9.30 Hold 1,496 1,920 2,168 46.2 46.5 52.0 6.1 17.5 17.4 15.6 6.7 0.6 1.0 (8.3) GENM MK Genting Msia 12 4.23 23,984 4.60 Buy 1,358 1,426 1,618 23.9 25.1 28.5 9.2 17.7 16.9 14.8 8.2 1.7 1.4 4.8 Manufacturing HART MK Hartalega Hldgs * 3 8.57 7,031 8.50 Hold 216 259 314 27.7 32.7 39.5 19.6 31.0 26.2 21.7 18.0 1.7 4.6 22.8 KRI MK Kossan Rubber * 12 6.58 4,208 6.85 Buy 144 207 230 22.5 32.4 35.9 26.3 29.2 20.3 18.3 22.0 1.7 4.5 48.2 TOPG MK Top Glove * 8 6.68 4,126 7.10 Buy 201 247 258 32.4 39.8 41.5 13.2 20.6 16.8 16.1 15.8 3.0 2.7 52.5 Media ASTRO MK Astro Malaysia 1 3.00 15,605 3.26 Hold 513 683 801 9.9 13.1 15.3 24.5 30.4 22.9 19.6 95.7 4.3 16.9 1.3 MCIL MK MCIL 3 0.61 1,021 0.65 Hold 148 120 128 8.8 7.1 7.6 (7.0) 6.9 8.5 8.0 14.8 4.7 1.1 (19.3) MPR MK Media Prima 12 1.43 1,586 1.60 Hold 142 112 120 12.8 10.1 10.8 (8.2) 11.2 14.2 13.3 7.0 6.3 1.0 (16.1) STAR MK Star * 12 2.47 1,823 2.50 Hold 152 126 133 20.5 17.0 18.0 (6.3) 12.0 14.5 13.7 10.9 6.1 1.6 10.8 Oil & Gas AMRB MK Alam Maritim * 12 0.54 499 0.50 Sell 57 51 51 6.1 5.5 5.5 (5.0) 8.9 9.8 9.8 5.8 - 0.6 (14.3) DLG MK Dialog * 6 1.59 8,080 1.90 Buy 230 257 271 4.7 5.3 5.6 8.7 33.8 30.3 28.6 12.5 1.4 3.8 6.6 PETR MK Perdana Petro 12 1.53 1,145 1.70 Buy 87 58 122 12.0 8.0 16.7 18.0 12.8 19.1 9.2 8.3 - 1.7 37.8 ICON MK Icon Offshore * 12 0.45 524 0.25 Sell 59 9 30 5.0 0.8 2.5 (29.3) 8.9 55.6 17.8 0.8 - 0.5 (40.3) WSC MK Wah Seong * 12 1.43 1,102 1.25 Hold 140 101 97 18.0 13.0 12.5 (16.7) 7.9 11.0 11.4 8.7 3.5 1.0 21.1 MMHE MK MMHE * 12 1.23 1,968 1.32 Hold 173 139 119 10.8 8.7 7.4 (17.2) 11.4 14.1 16.6 5.0 - 0.7 (30.9) BAB MK Bumi Armada @ 12 1.19 6,981 1.60 Buy 400 427 488 7.9 7.1 8.1 1.3 15.1 16.8 14.7 6.1 - 1.0 10.7 YNS MK Yinson 1 3.05 3,150 4.35 Buy 136 159 169 13.2 15.5 16.3 11.3 23.1 19.7 18.7 10.1 0.7 2.0 13.4 BARAKAH MK Barakah * 12 0.93 757 1.15 Buy 85 70 98 9.8 8.1 11.3 7.4 9.4 11.4 8.2 16.6 - 1.6 18.9 KNMG MK KNMG * 12 0.62 1,202 1.00 Buy 38 112 133 2.4 7.0 8.3 86.0 25.8 8.9 7.5 5.0 - 0.4 30.8 PPT MK Perisai * 12 0.46 543 0.42 Sell 12 20 70 1.0 1.7 5.9 142.9 45.5 26.8 7.7 1.7 - 0.5 0.0 SAKP MK SapuraKencana @ 1 2.43 14,561 2.80 Hold 1,201 926 933 20.1 15.4 15.6 (12.0) 12.1 15.7 15.6 7.4 0.2 1.2 5.6 UMWOG MK UMW O&G * 12 1.74 3,762 1.85 Sell 249 155 244 11.5 7.2 11.3 (0.9) 15.1 24.2 15.4 4.6 - 1.1 (26.0) Plantation GENP MK Genting Plant * 12 9.99 7,734 11.26 Buy 380 372 471 49.3 48.3 61.1 11.3 20.3 20.7 16.4 8.9 1.0 1.8 0.6 IOI MK IOI Corp # 6 4.14 26,224 3.85 Hold 1,222 1,039 1,240 19.0 16.1 19.2 0.7 21.8 25.7 21.6 15.9 1.5 4.1 (12.9) KLK MK KL Kepong * 9 21.74 23,152 21.40 Hold 954 894 1,025 89.4 83.8 96.0 3.6 24.3 26.0 22.6 10.9 2.4 2.8 (3.0) SIME MK Sime Darby * 6 8.67 53,851 8.87 Hold 2,559 2,347 3,061 41.8 37.8 49.3 8.5 20.7 22.9 17.6 7.8 2.4 1.8 (5.1) FGV MK Felda Global * 12 1.64 5,983 1.94 Hold 96 342 443 2.6 9.4 12.1 115.7 63.1 17.4 13.6 5.2 3.2 0.9 (23.0) BPLANT MK Boustead Plant * 12 1.39 2,224 1.65 Buy 63 47 84 3.9 2.9 5.2 15.5 35.6 47.9 26.7 2.0 2.9 1.0 (1.3) SOP MK SOP * 12 4.75 2,089 6.72 Buy 113 133 197 25.7 30.3 44.8 32.0 18.5 15.7 10.6 9.3 0.8 1.4 (7.0) TSH MK TSH Resources * 12 2.26 3,064 2.32 Hold 137 134 164 10.2 10.0 12.2 9.4 22.2 22.6 18.5 10.4 1.3 2.4 (1.1) THP MK TH Plantations * 12 1.56 1,379 1.37 Hold 34 36 68 3.9 4.0 7.7 40.5 40.0 39.0 20.3 2.9 1.3 1.1 (7.0) TAH MK Ta Ann * 12 3.92 1,453 5.90 Buy 111 101 143 29.8 27.1 38.6 13.8 13.2 14.5 10.2 9.0 3.1 1.3 1.0 * Shariah compliant (under Securities Commission’s new Shariah compliant list effective 29 May 2015), # No longer Shariah compliant, @ Newly Shariah compliant; Source: Maybank KE
July 02, 2015 46
Strategy … continued
Ticker
Company FYE Price Market TP Rec Core Net Profit EPS CAGRC
PER PER PER ROE Div Yld PBV Price 1 Jul Cap CY14A CY15F CY16F CY14A CY15F CY16F 14-16 CY14A CY15A CY16F CY15F CY15F CY15F YTD
MYR m MYR MYR m MYR sen (%) (x) (%) (%) (x) (%) Non-Banking Finance BURSA MK Bursa Malaysia 12 8.20 4,377 8.40 Hold 198 204 220 37.2 38.2 41.2 5.2 22.0 21.5 19.9 27.0 4.5 5.8 3.4 MPHB MK MPHB Capital 12 1.78 1,273 2.07 Hold 54 45 40 7.6 6.3 5.6 (14.2) 23.4 28.3 31.8 2.9 - 0.8 (12.7) Technology INARI MK Inari Amertron * 6 3.30 2,399 4.05 Buy 129 169 189 17.3 22.7 25.3 20.9 19.1 14.5 13.0 28.8 2.4 4.2 39.1 VITRO MK Vitrox Corp * 12 3.44 802 4.05 Buy 49 61 71 20.8 25.9 30.0 20.1 16.5 13.3 11.5 28.0 2.2 3.7 53.4 Petrochemicals PCHEM MK Petronas Chem * 12 6.36 50,880 6.60 Hold 2,465 2,749 3,297 34.0 34.4 41.2 10.1 18.7 18.5 15.4 11.1 2.7 2.0 18.4 Property AXRB MK Axis REIT * 12 3.44 1,884 3.40 Hold 81 111 118 14.9 20.2 21.5 20.2 23.2 17.0 16.0 8.3 5.2 1.4 (3.5) KLCC MK KLCC Prop * 12 7.02 12,673 7.65 Buy 702 667 701 38.9 37.0 38.9 (0.0) 18.1 19.0 18.1 6.1 4.9 1.2 7.2 MSGB MK Mah Sing * 12 1.61 3,879 2.22 Hold 339 404 469 18.4 16.8 19.6 3.1 8.8 9.6 8.2 12.9 4.2 1.2 (2.7) QUIL MK Quill Capita 12 1.18 780 1.17 Hold 40 58 60 10.3 8.8 9.1 (6.2) 11.5 13.5 13.0 6.4 6.4 0.9 6.0 SPSB MK SP Setia * 10 3.16 8,179 4.07 Buy 421 677 830 16.7 26.8 32.8 40.1 18.9 11.8 9.6 11.0 5.1 1.0 (2.6) ULHB MK UEM Sunrise * 12 0.99 4,492 1.27 Hold 480 399 454 10.6 8.3 9.0 (8.1) 9.3 11.9 11.0 5.4 2.4 0.7 (27.8) SWB MK Sunway Berhad * 12 3.51 6,192 3.32 Hold 592 593 628 32.5 32.6 31.2 (2.0) 10.8 10.8 11.3 9.2 2.0 0.9 11.7 ECW MK Eco World * 10 1.55 3,665 1.95 Buy 17 77 162 2.8 3.6 7.7 64.3 54.7 42.7 20.3 2.4 0.1 1.0 (10.1) GLMC MK Glomac * 4 0.80 578 1.03 Hold 89 101 116 12.3 13.9 16.0 14.2 6.5 5.7 5.0 10.3 5.6 0.6 (16.9) CMMT MK CMMT 12 1.35 2,402 1.55 Hold 158 158 188 8.4 8.6 9.2 4.3 16.0 15.6 14.7 6.1 6.5 1.1 (2.8) SREIT MK Sunway REIT 6 1.57 4,612 1.60 Hold 239 275 311 8.1 9.4 10.6 14.1 19.3 16.7 14.8 7.5 5.3 1.3 6.2 IGBREIT MK IGB REIT 12 1.32 4,566 1.45 Hold 233 246 253 6.8 7.1 7.4 4.3 19.4 18.6 17.8 6.6 4.2 1.2 3.8 PREIT MK Pavilion REIT 12 1.50 4,524 1.70 Buy 232 236 253 7.7 7.8 8.4 4.4 19.5 19.2 17.9 6.0 4.7 1.1 5.4 Telecommunications DIGI MK DiGi.Com * 12 5.53 42,996 6.10 Hold 2,031 2,088 2,146 26.1 26.9 27.6 2.8 21.2 20.6 20.0 304.3 4.9 61.4 (8.4) T MK Telekom * 12 6.78 25,479 7.30 Hold 941 967 1,005 25.9 26.1 27.1 2.3 26.2 26.0 25.0 12.6 3.5 3.3 0.4 AXIATA MK Axiata * 12 6.46 55,605 7.60 Buy 2,446 2,950 3,273 28.6 34.4 38.1 15.4 22.6 18.8 17.0 13.6 3.7 2.6 (6.3) MAXIS MK Maxis * 12 6.49 48,733 7.40 Hold 1,718 1,896 2,165 22.9 25.3 28.8 12.1 28.3 25.7 22.5 40.1 3.9 11.0 (2.4) TDC MK Time dotCom * 12 6.85 3,931 6.20 Hold 127 159 181 22.2 27.7 31.6 19.3 30.9 24.7 21.7 6.4 1.2 1.6 41.8 Transport AIRA MK AirAsia 12 1.57 4,369 2.45 Buy 405 754 709 14.6 27.1 25.5 32.2 10.8 5.8 6.2 13.5 - 0.8 (41.5) AAX MK AirAsia X 12 0.22 892 0.30 Hold (406) 130 202 (17.1) 3.7 5.7 n.a. n.a. 5.8 3.8 9.9 - 0.6 (58.6) MAHB MK MAHB 12 6.50 10,785 6.75 Hold 149 133 264 11.1 9.6 19.0 30.8 58.6 67.7 34.2 1.5 0.6 1.0 1.6 WPRTS MK Westports * 12 4.25 14,493 4.50 Hold 512 515 572 15.0 15.1 16.8 5.8 28.3 28.1 25.3 27.2 2.7 7.6 28.7 NCB MK NCB Holdings * 12 3.55 1,669 5.20 Buy 28 43 67 5.9 9.2 14.2 54.9 60.0 38.8 25.0 3.0 2.0 1.2 58.4 HALG MK Harbour-Link * 6 2.76 502 3.65 Buy 40 52 56 22.1 28.6 30.7 18.0 12.5 9.7 9.0 17.9 2.1 1.7 74.7 MISC MK MISC * 12 8.13 36,291 8.70 Hold 1,943 2,100 2,002 43.5 47.0 44.8 1.5 18.7 17.3 18.1 7.0 1.5 1.2 13.5 Utilities TNB MK Tenaga * 8 12.74 71,900 16.00 Buy 5,593 6,165 6,774 99.1 109.2 120.0 10.1 12.9 11.7 10.6 12.6 2.7 1.5 (7.0) PTG MK Petronas Gas * 12 21.54 42,622 24.00 Hold 1,908 1,809 1,828 96.4 91.4 92.4 (2.1) 22.3 23.6 23.3 16.3 3.0 3.8 (1.5) GMB MK Gas Msia * 12 2.53 3,249 2.65 Hold 168 123 124 13.1 9.6 9.6 (14.4) 19.3 26.4 26.4 12.2 3.8 3.2 (19.0) MLK MK Malakoff Corp * 12 1.80 9,000 2.00 Buy 342 489 613 9.7 9.8 12.3 12.6 18.6 18.4 14.6 8.3 4.1 1.5 0.0 YTLP MK YTL Power 6 1.60 11,260 1.60 Hold 1,135 968 951 17.1 14.3 14.0 (9.4) 9.4 11.2 11.4 8.5 3.1 0.9 8.1 * Shariah compliant (under Securities Commission’s new Shariah compliant list effective 29 May 2015), # No longer Shariah compliant, @ Newly Shariah compliant; Source: Maybank KE
July 02, 2015 47
Strategy
Research Offices
REGIONAL
Sadiq CURRIMBHOY Regional Head, Research & Economics (65) 6231 5836 [email protected]
WONG Chew Hann, CA Regional Head of Institutional Research (603) 2297 8686 [email protected]
ONG Seng Yeow Regional Head of Retail Research (65) 6432 1453 [email protected]
ECONOMICS
Suhaimi ILIAS Chief Economist Singapore | Malaysia (603) 2297 8682 [email protected]
Luz LORENZO Philippines (63) 2 849 8836 [email protected]
Tim LEELAHAPHAN Thailand (66) 2658 6300 ext 1420 [email protected]
JUNIMAN Chief Economist, BII Indonesia (62) 21 29228888 ext 29682 [email protected]
STRATEGY
Sadiq CURRIMBHOY Global Strategist (65) 6231 5836 [email protected]
Willie CHAN Hong Kong / Regional (852) 2268 0631 [email protected]
MALAYSIA
WONG Chew Hann, CA Head of Research (603) 2297 8686 [email protected] • Strategy
Desmond CH’NG, ACA (603) 2297 8680 [email protected] • Banking & Finance
LIAW Thong Jung (603) 2297 8688 [email protected] • Oil & Gas Services- Regional
ONG Chee Ting, CA (603) 2297 8678 [email protected] • Plantations - Regional
Mohshin AZIZ (603) 2297 8692 [email protected] • Aviation - Regional • Petrochem
YIN Shao Yang, CPA (603) 2297 8916 [email protected] • Gaming – Regional • Media
TAN Chi Wei, CFA (603) 2297 8690 [email protected] • Power • Telcos
WONG Wei Sum, CFA (603) 2297 8679 [email protected] • Property
LEE Yen Ling (603) 2297 8691 [email protected] • Building Materials • Glove • Ports • Shipping
CHAI Li Shin, CFA (603) 2297 8684 [email protected] • Plantation • Construction & Infrastructure
Ivan YAP (603) 2297 8612 [email protected] • Automotive • Semiconductor • Technology
Kevin WONG (603) 2082 6824 [email protected] • REITs • Consumer Discretionary
LIEW Wei Han (603) 2297 8676 [email protected] • Consumer Staples
LEE Cheng Hooi Regional Chartist (603) 2297 8694 [email protected]
Tee Sze Chiah Head of Retail Research (603) 2297 6858 [email protected]
HONG KONG / CHINA
Howard WONG Head of Research (852) 2268 0648 [email protected] • Oil & Gas - Regional
Alexander LATZER (852) 2268 0647 [email protected] • Metals & Mining – Regional
Benjamin HO (852) 2268 0632 [email protected] • Consumer & Auto
Jacqueline KO, CFA (852) 2268 0633 [email protected] • Consumer Staples & Durables
Jessica NG (852) 2268 0678 [email protected] • Utilities & Renewable Energy
Ka Leong LO, CFA (852) 2268 0630 [email protected] • Consumer Discretionary & Auto
Karen KWAN (852) 2268 0640 [email protected] • Property & REITs
Mitchell KIM (852) 2268 0634 [email protected] • Internet & Telcos
Osbert TANG, CFA (86) 21 5096 8370 [email protected] • Transport & Industrials
Ricky WK NG, CFA (852) 2268 0689 [email protected] • Utilities & Renewable Energy
Steven ST CHAN (852) 2268 0645 [email protected] • Banking & Financials - Regional
Warren LAU (852) 2268 0644 [email protected] • Technology – Regional
INDIA
Jigar SHAH Head of Research (91) 22 6632 2632 [email protected] • Oil & Gas • Automobile • Cement
Anubhav GUPTA (91) 22 6623 2605 [email protected] • Metal & Mining • Capital Goods • Property
Vishal MODI (91) 22 6623 2607 [email protected] • Banking & Financials
Abhijeet Kundu (91) 22 6623 2628 [email protected] • Consumer
SINGAPORE
NG Wee Siang Head of Research (65) 6231 5838 [email protected] • Banking & Finance
Gregory YAP (65) 6231 5848 [email protected] • SMID Caps – Regional • Technology & Manufacturing • Telcos
YEAK Chee Keong, CFA (65) 6231 5842 [email protected] • Offshore & Marine
Derrick HENG, CFA (65) 6231 5843 [email protected] • Transport • Property • REITs (Office)
Joshua TAN (65) 6231 5850 [email protected] • REITs (Retail, Industrial)
WEI Bin (65) 6231 5844 [email protected] • Commodity • Logistics • S-chips
John CHEONG (65) 6231 5845 [email protected] • Small & Mid Caps • Healthcare
TRUONG Thanh Hang (65) 6231 5847 [email protected] • Small & Mid Caps
INDONESIA
Wilianto IE Head of Research (62) 21 2557 1125 [email protected] • Strategy
Rahmi MARINA (62) 21 2557 1128 [email protected] • Banking & Finance
Aurellia SETIABUDI (62) 21 2953 0785 [email protected] • Property
Isnaputra ISKANDAR (62) 21 2557 1129 [email protected] • Metals & Mining • Cement
Pandu ANUGRAH (62) 21 2557 1137 [email protected] • Infra • Construction • Transport• Telcos
Janni ASMAN (62) 21 2953 0784 [email protected] • Cigarette • Healthcare • Retail
Adhi TASMIN (62) 21 2557 1209 [email protected] • Plantations
PHILIPPINES
Luz LORENZO Head of Research (63) 2 849 8836 [email protected] • Strategy • Utilities • Conglomerates • Telcos
Lovell SARREAL (63) 2 849 8841 [email protected] • Consumer • Media • Cement
Rommel RODRIGO (63) 2 849 8839 [email protected] • Conglomerates • Property • Gaming • Ports/ Logistics
Katherine TAN (63) 2 849 8843 [email protected] • Banks • Construction
Ramon ADVIENTO (63) 2 849 8845 [email protected] • Mining
Michael BENGSON (63) 2 849 8840 [email protected] • Conglomerates
Jaclyn JIMENEZ (63) 2 849 8842 [email protected] • Consumer
Arabelle MAGHIRANG (63) 2 849 8838 [email protected] • Banks
THAILAND
Maria LAPIZ Head of Institutional Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 [email protected] • Consumer • Materials • Ind. Estates
Sittichai DUANGRATTANACHAYA (66) 2658 6300 ext 1393 [email protected] • Services Sector • Transport
Sukit UDOMSIRIKUL Head of Retail Research (66) 2658 6300 ext 5090 [email protected]
Mayuree CHOWVIKRAN (66) 2658 6300 ext 1440 [email protected] • Strategy
Padon VANNARAT (66) 2658 6300 ext 1450 [email protected] • Strategy
Surachai PRAMUALCHAROENKIT (66) 2658 6300 ext 1470 [email protected] • Auto • Conmat • Contractor • Steel
Suttatip PEERASUB (66) 2658 6300 ext 1430 [email protected] • Media • Commerce
Sutthichai KUMWORACHAI (66) 2658 6300 ext 1400 [email protected] • Energy • Petrochem
Termporn TANTIVIVAT (66) 2658 6300 ext 1520 [email protected] • Property
Jaroonpan WATTANAWONG (66) 2658 6300 ext 1404 [email protected] • Transportation • Small cap
Chatchai JINDARAT (66) 2658 6300 ext 1401 [email protected] • Electronics VIETNAM
NGUYEN Thi Ngan Tuyen, Head of Retail Research (84) 8 44 555 888 x 8081 [email protected] • Food & Beverage • Oil&Gas • Banking
TRINH Thi Ngoc Diep (84) 4 44 555 888 x 8208 [email protected] • Technology • Utilities • Construction
PHAM Nhat Bich (84) 8 44 555 888 x 8083 [email protected] • Consumer • Manufacturing • Fishery
NGUYEN Thi Sony Tra Mi (84) 8 44 555 888 x 8084 [email protected] • Port operation • Pharmaceutical • Food & Beverage
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APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES
DISCLAIMERS
This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.
The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives”) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice.
This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.
MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report.
This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect.
This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report.
Malaysia
Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.
Singapore
This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law.
Thailand
The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) does not confirm nor certify the accuracy of such survey result.
Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect.
US
This research report prepared by MKE is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations.
UK
This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.
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Disclosure of Interest Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies.
Singapore: As of July 02, 2015, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.
Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.
Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.
As of July 02, 2015, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.
MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the companies covered in this report.
OTHERS Analyst Certification of Independence The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.
Reminder Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.
Definition of Ratings
Maybank Kim Eng Research uses the following rating system BUY Return is expected to be above 10% in the next 12 months (excluding dividends) HOLD Return is expected to be between - 10% to +10% in the next 12 months (excluding dividends) SELL Return is expected to be below -10% in the next 12 months (excluding dividends)
Applicability of Ratings
The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.
DISCLOSURES Legal Entities Disclosures Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng Securities (“PTKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Maybank Kim Eng Securities JSC (License Number: 71/UBCK-GP) is licensed under the State Securities Commission of Vietnam.Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.
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ý Malaysia Maybank Investment Bank Berhad (A Participating Organisation of Bursa Malaysia Securities Berhad) 33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur Tel: (603) 2059 1888; Fax: (603) 2078 4194
ý Singapore Maybank Kim Eng Securities Pte Ltd Maybank Kim Eng Research Pte Ltd 9 Temasek Boulevard #39-00 Suntec Tower 2 Singapore 038989 Tel: (65) 6336 9090 Fax: (65) 6339 6003
ý London Maybank Kim Eng Securities (London) Ltd 6/F, 20 St. Dunstan’s Hill London EC3R 8HY, UK Tel: (44) 20 7621 9298 Dealers’ Tel: (44) 20 7626 2828 Fax: (44) 20 7283 6674
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Stockbroking Business: Level 8, Tower C, Dataran Maybank, No.1, Jalan Maarof 59000 Kuala Lumpur Tel: (603) 2297 8888 Fax: (603) 2282 5136
ý Hong Kong Kim Eng Securities (HK) Ltd Level 30, Three Pacific Place, 1 Queen’s Road East, Hong Kong Tel: (852) 2268 0800 Fax: (852) 2877 0104
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ý India Kim Eng Securities India Pvt Ltd 2nd Floor, The International 16, Maharishi Karve Road, Churchgate Station, Mumbai City - 400 020, India Tel: (91).22.6623.2600 Fax: (91).22.6623.2604
ý Philippines Maybank ATR Kim Eng Securities Inc. 17/F, Tower One & Exchange Plaza Ayala Triangle, Ayala Avenue Makati City, Philippines 1200 Tel: (63) 2 849 8888 Fax: (63) 2 848 5738
ý Thailand Maybank Kim Eng Securities (Thailand) Public Company Limited 999/9 The Offices at Central World, 20th - 21st Floor, Rama 1 Road Pathumwan, Bangkok 10330, Thailand Tel: (66) 2 658 6817 (sales) Tel: (66) 2 658 6801 (research)
ý Vietnam In association with Maybank Kim Eng Securities JSC 1st Floor, 255 Tran Hung Dao St. District 1 Ho Chi Minh City, Vietnam Tel : (84) 844 555 888 Fax : (84) 838 38 66 39
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ý South Asia Sales Trading Kevin FOY [email protected] Tel: (65) 6336-5157 US Toll Free: 1-866-406-7447
ý North Asia Sales Trading Alex TSUN [email protected] Tel: (852) 2268 0228 US Toll Free: 1 877 837 7635
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