PP16795/03/2013(031743) Dec-16

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1 Monday, 11 December, 2017 Dec-16 Jan-17 Feb-17 Mar May-17 Jun Aug-17 Sep Nov-17 Dec-17 Research Team PP16795/03/2013(031743) Reports Published Economics Malaysia economy: Outflows extended to March Corporate News TNB to buy IT services provider for RM28m WCT bags RM211.5m job from DBKL MCT divests One City-linked unit for RM7.5m BAuto 2Q net profit down 27.52% on lower sales, compressed margins CCM Duopharma partners India's Natco Pharma to market Hepatitis C products in Malaysia SKH wins auction to buy R&A Telecom s Shah Alam factory for RM8.35m ManagePay to offer electronic payment solutions to Great Eastern Bursa Malaysia Close Chg +/- Chg % YTD Chg (%) FBMKLCI 1, FBMEMAS 12, FBM100 12, FBMEMAS Shariah 12, FBM Hijrah Shariah 13, Volume (m) 1, Value (MYR m) 2, Economic News Strong US job growth, rebound in wages bolster economy's outlook A tale of three central banks Oil edges up on Chinese demand, but weekly losses loom EU ready to start Brexit transition talks early in 2018 EU, Japan conclude world's largest free trade agreement Taiwan Nov exports hit record high aided by China, U.S. demand KLCI Performance KLCI Year-End Target: 1,790 points Regional Indices Commodities (Last Close) Close Chg +/- Chg % YTD Chg (%) Close Chg +/- Chg % DJIA 24, Brent Crude (USD/bbl) NASDAQ 6, WTI Crude (USD/bbl) S&P 500 2, CPO (RM/MT) 2, FTSE 100 7, Gold (USD/ounce) 1, Nikkei , Latex (sen/kg) HSI 28, Soybean Oil SHCOMP 3, KOSPI 2, Forex TWSE 10, (per USD) BIMB (YE Forecast) Close Chg +/- Chg % STI 3, MYR JCI 6, JPY SET 1, EUR PSEi 8, SGD

2 Major Rates Daily Participation % Participation Bought Sold Net KLIBOR 3-mth 3.43 (%) (MYR m) (MYR m) (MYR m) KLIBOR 6-mth 3.56 Local Insti , , KLIBOR 12-mth 3.63 Local Retail yr MGS 3.65 Foreign yr MGS 3.96 Total , Performance of BIMB Stock Coverage Source: Bank Negara Malaysia Source: The Sun, BIMB Securities Research Top Gainers Weekly Participation Close Chg +/- Chg % Participation (%) Bought (MYR m) Sold (MYR m) Net (MYR m) Westports Local Insti , , IOI Local Retail , , Gamuda Foreign , , Amway Total , , Dagang Nexchange Top Losers Close Chg +/- Chg % Nestle Ikhmas Jaya FGVH GHL Malakoff Source: The Sun, BIMB Securities Research 2

3 Jan'10 Jan'11 Jan'12 Jan'13 Jan'14 Jan'15 Jan'16 Jan'17 Market Insight REPORTS PUBLISHED US Economy Economics Solid job gains in November, but wages disappoint Hiring was solid in November with employers adding 228,000 new jobs The unemployment rate remains at 17-year low of 4.1% Wage growth rose less than expected. Labor force participation rate unchanged at 62.7% Jobs data showed continued strength in the US employment landscape The US economy churned out a solid 228,000 new jobs in November, which was better than expected. The print is particularly encouraging given that the distortions related to the storms this hurricane season have largely dissipated. Gains were widespread across major industries, with only information and federal government employment seeing declines. Employment growth on the goods side of the economy accelerated (+62k) on gains in construction (+24k) and manufacturing (+31k). The services sector posted a solid 159k new positions led by education & health (+54k) and business services (+46k). ober job gains, meanwhile, were trimmed to 244,000 from 261,000. The increase in jobs in September was raised to 38,000 from 18,000. Unemployment held steady at 4.1% last month but is down from 4.6% a year ago. The labor force participation rate was also unchanged at 62.7%, which we view positively considering the aging of the population weighing on overall participation. Wage growth remained muted in November. Average hourly earnings rose 0.2% mom, which was short of expectations and followed downward revisions to September and ober. The year-over-year rate rose to 2.5%, but has weakened since late last year. One offset to the tepid wage growth this month, however, was that workers were offered more hours at work. The average length of the work week edged up to 34.5 hours, which, along with the net jobs added, suggest income derived from the labor market has strengthened at 4.7% annualized rate the past three months. Chart 1: US Non-Farm Payrolls ( 000) Source: Bloomberg, BIMB Securities 3

4 CORPORATE NEWS TNB to buy IT services provider for RM28m TNB is acquiring an information technology related services company from Setia Haruman SB, the master developer of Cyberjaya, for RM28m cash. The acquisition of Setia Haruman Technology (SHTech) provides strategic capability for it to further enhance its services to customers. TNB has entered into a conditional sale and purchase agreement with Setia Haruman for the proposed acquisition of its wholly-owned subsidiary SHTech. The proposed acquisition will be funded via internal funds. Barring any unforeseen circumstances, the proposed acquisition is expected to be completed by the first quarter of (Source: The Edge) WCT bags RM211.5m job from DBKL WCT has bagged a RM211.52m contract from DBKL to undertake an elevated highway project from the interchange of Sprint Highway/Jalan Maarof to Sprint Highway/Jalan Semantan. WCT s wholly-owned subsidiary WCT has been awarded the project by DBKL, with the commencement date on Dec 11. The scope of works for the contract generally includes site clearance and demolition works, earthworks, drainage works, pavement works, road furniture and miscellaneous, elevated flyover and reinforced earth wall, retaining wall, street lighting and environmental protection works. The works under the contract are expected to be completed within the duration of 30 months. (Source: The Edge) MCT divests One City-linked unit for RM7.5m MCT is disposing of its wholly-owned unit which owns properties in the One City development in Subang Jaya, for RM7.5m. The selling price was agreed between both parties after taking into consideration loss-making One City Properties' net asset value of RM3.5m as at Nov 27. MCT is therefore expected to make a net gain of about M4 million from the disposal, which will be used for its working capital. The disposal is in line with its strategy to unlock value through monetisation and opportunistic divestments, while increasing the group s working capital for on-going property development projects. The group expects to complete the disposal by the first quarter of (Source: The Edge) BAuto 2Q net profit down 27.52% on lower sales, compressed margins BAuto recorded a 27.52% decline in net profit to RM22.2m for the 2Q17 due to lower sales and compressed margins from the clearing out of old Mazda CX-5 models. MMSB had seen lower production volume ahead of the launch of the new CX-5 models, which had been rolled out in ober. Meanwhile, revenue for the quarter slipped 0.3% to RM471.71m, from RM473.17m in the previous year, on the back of lower domestic sales volume of the Mazda2 model. Compressed gross profit margins had also weighed down earnings, especially in the 1st 5-month of the financial year. (Source: The Edge) CCM Duopharma partners India's Natco Pharma to market Hepatitis C products in Malaysia CCM Duopharma, the pharmaceutical arm of Chemical Company of Malaysia Bhd (CCM), has entered a collaboration with Natco Pharma Ltd of India to commercialise a range of Hepatitis C products in Malaysia. The collaboration is to improve access and affordability for patients who cannot afford the high cost of treatment for Hepatitis C in the country. A Voluntary License (VL) was issued by Gilead Sciences to Natco Pharma, which will allow generic versions of the costly drugs to be made accessible in Malaysia, where CCM Duopharma expects to benefit approximately 500,000 Hepatitis C patients. The VL will also enable CCM Duopharma to offer the generic products to both public and private hospitals in Malaysia. (Source: The Edge) SKH wins auction to buy R&A Telecom s Shah Alam factory for RM8.35m SKH won an auction bid to buy a semi-detached factory at RM8.35m in Shah Alam, whose registered owner is a unit of GN3 firm R&A Telecommunication Group Bhd. SKH s wholly-owned subsidiary Open Adventure SB made the successful bid for the two and a half storey property, which sits on a 2,041-sq metre freehold industrial land. The acquisition was meant to facilitate its expansion plan, whereby it will use it for inventory storage prior to distribution and assembly products of its own brand. The purchase consideration will be satisfied by the combination of internally-generated funds, bank borrowings, and fund raising exercise. SKH expects to complete the acquisition in the 2Q18. (Source: The Edge) ManagePay to offer electronic payment solutions to Great Eastern ManagePay has signed an agreement with the Great Eastern group to provide electronic payment solutions and services to the insurer. ManagePay s wholly-owned subsidiary ManagePay Services (MPay Services) has signed a merchant agreement with Great Eastern Life Assurance (Malaysia) and Great Eastern Takaful for the services. The duration of the agreement is for a period of 3 years, with a renewable term of 2 years. The agreement will contribute to revenue and bottom line of the company for the FYE18. (Source: The Edge) 4

5 ECONOMIC NEWS Strong US job growth, rebound in wages bolster economy's outlook US job growth increased at a strong clip in November and wages rebounded. Nonfarm payrolls rose by 228,000 jobs last month amid broad gains in hiring as the distortions from the recent hurricanes faded. The government revised data for ober to show the economy adding 244,000 jobs instead of the previously reported 261,000 positions. Employment gains in ober were boosted by the return to work of thousands of employees who had been temporarily dislocated by Hurricanes Harvey and Irma. November's report was the 1st clean reading since the storms, which also impacted September's employment data. Average hourly earnings rose 0.2% in November, after dipping 0.1% the prior month. That lifted the annual increase in wages to 2.5% from 2.3% in ober. The unemployment rate was unchanged at a 17-year low of 4.1%, amid a rise in the labour force. (Source: Reuters) A tale of three central banks Three central banks, meeting on both sides of the Atlantic, will highlight the diverging fortunes of the world's biggest economies as they head into 2018, after an exceptionally tranquil year. While the growth cycle in the US may be close to peaking, the euro zone is just getting comfortable with its economic run and Britain is weighed down by Brexit uncertainty, suggesting that their monetary policies will be out of sync for years to come. Indeed, the US Federal Reserve is all but certain to raise rates on Wednesday, likely predicting three more hikes for next year, even as the European Central Bank and the Bank of England will pledge on Thursday to maintain super low borrowing costs, downplaying for now, any talk of tighter policy. (Source: Reuters) Oil edges up on Chinese demand, but weekly losses loom Oil prices edged up helped by rising Chinese crude demand and threats of a strike in Africa's largest oil exporter. But prices were still on track for weekly losses amid concerns that rising US production could undermine OPEC-led supply cuts. Brent crude was up USD1.04 cents at USD63.24 a barrel, but heading for a weekly slide of just under 1%. US West Texas Intermediate (WTI) crude was at USD56.66 a barrel, up 97 cents from their last settlement. The contract was on track for a 1.2% loss on the week. China's crude oil imports rose to 9.01m bpd, the 2nd highest on record. Booming demand will push China ahead of the US as the world's biggest crude importer this year. US investment bank Jefferies forecast 2018 global oil demand growth of 1.5m bpd, driven by almost 10% demand growth in China. (Source: Reuters) EU ready to start Brexit transition talks early in 2018 The EU should be ready to start negotiating details of a post-brexit transition period with Britain early in the new year but talks on future trade will take longer. Both sides were already fairly clear on the structure of a transition period likely to last for around 2 years after Britain leaves the EU in March 2019 and involve London accepting almost all EU rules without having a say in making them. For negotiations to start on the principles of a future relationship, the EU would need more details from Britain on what it wants after the transition and would then have to draw up a fuller set of guidelines for negotiators probably at a summit in February or March, though possibly later. The intention would be to have a "framework" agreement on future relations ready by the time Britain leaves. Formal negotiations on a full free trade agreement would not, however, start until Britain is no longer a member. (Source: Reuters) EU, Japan conclude world's largest free trade agreement The EU and Japan concluded negotiations on a free trade deal to create the world's largest open economic area, signalling their rejection of the more protectionist stance of US President Donald Trump. The 2 parties had now finished a legal text that would open up trade for economies making up about 30% of global output. The deal, combining the 28-nation bloc and the world's third largest economy, will remove EU tariffs of 10% tariffs on Japanese cars and the 3% rate typically applied to car parts. For the EU, it will scrap Japanese duties of some 30% on EU cheese and 15% on wines, as well as allowing it to increase its beef and pork exports and gain access to large public tenders in Japan. (Source: Reuters) Taiwan Nov exports hit record high aided by China, US demand Taiwan's exports climbed to a record amount in November, beating expectations and shoring up confidence strong global demand for electronics will bolster the island's growth prospects in Taiwan's factories are an integral part of the global supply-chain for technology giants such as Apple Inc, and the economy is riding a robust exports cycle on strong demand around the world for new smartphones and other gadgets. Exports in November rose 14% from a year earlier. China and the US proved strong markets for the island's exports. Shipments to China jumped 16.8%, compared with 4.9% last month, and those to the US rose 14.6%, up from growth of 0.6%. Taiwan's November exports totalled US$28.88bn, up from US$27.54 bn in ober. (Source: Reuters) 5

6 ECONOMIC CALENDAR Date Time Country Event Period Survey Actual Prior Revised 12/11/ :50 JN Money Stock M2 YoY Nov 4.10% % -- 12/11/ :50 JN Money Stock M3 YoY Nov 3.50% % -- 12/11/ :00 DE Current Account (Seasonally Adjusted) 15.0b b -- 12/11/ :00 GR Industrial Production YoY % -- 12/11/ :00 PO Trade Balance m -- 12/11/ /15 CH Money Supply M2 YoY Nov 8.90% % -- 12/11/ /15 CH Money Supply M1 YoY Nov 12.90% % -- 12/11/ /15 CH Money Supply M0 YoY Nov 6.50% % -- 12/12/ :00 SO Construction Constant YoY % -- 12/12/ :30 US PPI Final Demand MoM Nov 0.30% % -- 12/12/ :30 US PPI Ex Food and Energy MoM Nov 0.20% % -- 12/12/ :30 US PPI Final Demand YoY Nov 2.90% % -- 12/12/ :30 US PPI Ex Food and Energy YoY Nov 2.40% % -- 12/13/ :50 JN Core Machine Orders MoM 2.70% % -- 12/13/ :50 JN Core Machine Orders YoY -3.90% % -- 12/13/ :00 SP House transactions YoY % -- 12/13/ :00 IT Industrial Production NSA YoY 0.80% % -- 12/13/ :00 IT Industrial Production WDA YoY 3.40% % -- 12/13/ :00 IT Industrial Production MoM 0.70% % -- 12/13/ :00 EC Industrial Production SA MoM 0.00% % -- 12/13/ :00 EC Industrial Production WDA YoY 3.20% % -- 12/13/ :30 US CPI MoM Nov 0.40% % -- 12/13/ :30 US CPI Ex Food and Energy MoM Nov 0.20% % -- 12/13/ :30 US CPI YoY Nov 2.20% % -- 12/13/ :30 US CPI Ex Food and Energy YoY Nov 1.80% % -- 12/13/ :30 US CPI Core Index SA Nov /13/ :30 US CPI Index NSA Nov /13/ :30 US Real Avg Weekly Earnings YoY Nov % 0.30% 12/13/ :30 US Real Avg Hourly Earning YoY Nov % 0.20% 12/14/ :00 US FOMC Rate Decision (Upper Bound) Dec % % -- 12/14/ :00 US FOMC Rate Decision (Lower Bound) Dec % % -- 12/14/ :30 JN Nikkei Japan PMI Mfg Dec P /14/ :00 CH Industrial Production YoY Nov 6.20% % -- 12/14/ :00 CH Industrial Production YTD YoY Nov 6.60% % -- 12/14/ :30 JN Industrial Production MoM F % -- 12/14/ :30 JN Industrial Production YoY F % -- 12/14/ :30 JN Capacity Utilization MoM % -- 12/14/ :30 NE Trade Balance b -- 12/14/ :00 LN Current Account Balance m -- 12/14/ :00 CZ Current Account Monthly CZK 3.10b b -- 12/14/ :00 UK Bank of England Bank Rate Dec % % -- 12/14/ :00 UK BOE Asset Purchase Target Dec 435b b -- 12/14/ :00 UK BOE Corporate Bond Target Dec 10b -- 10b -- 12/14/ :45 EC ECB Main Refinancing Rate Dec % % -- 12/14/ :45 EC ECB Marginal Lending Facility Dec % % -- 12/14/ :45 EC ECB Deposit Facility Rate Dec % % -- 12/14/ :00 PD Current Account Balance 135m m -- 12/14/ :00 PD Trade Balance 542m m -- 12/14/ :00 PD Exports 17800m m -- 12/14/ :00 PD Imports 17372m m -- 12/14/ :30 US Import Price Index MoM Nov 0.70% %

7 DEFINITION OF RATINGS BIMB Securities uses the following rating system: STOCK RECOMMENDATION BUY Total return (price appreciation plus dividend yield) is expected to exceed 10 in the next 12 months. TRADING BUY Share price may exceed 15 over the next 3 months, however longer-term outlook remains uncertain. HOLD Share price may fall within the range of +/- 10 over the next 12 months TAKE PROFIT Target price has been attained. Fundamentals remain intact. Look to accumulate at lower levels. TRADING SELL Share price may fall by more than 15 in the next 3 months. SELL Share price may fall by more than 10 over the next 12 months. NOT RATED Stock is not within regular research coverage. SECTOR RECOMMENDATION OVERWEIGHT The Industry as defined by the analyst s coverage universe, is expected to outperform the relevant primary market index over the next 12 months NEUTRAL The Industry as defined by the analyst s coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months UNDERWEIGHT The Industry as defined by the analyst s coverage universe, is expected to underperform the relevant primary market index over the next 12 months 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. Disclaimer The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of BIMB Securities Sdn may from time to time have a position in or either the securities mentioned herein. Members of the BIMB and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgements as of this date and are subject to change without notice. BIMB Securities Sdn accepts no liability for any direct, indirect or consequential loss arising from use of this report. Printed and published by BIMB SECURITIES SB ( X) A Participating Organisation of Bursa Malaysia Securities Level 32, Menara Multi Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, Kuala Lumpur Tel: Fax: Azharuddin Nordin Head of Research 7