PP16795/03/2013(031743) Feb-17

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1 Thursday, 8 February, 2018 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Research Team research@bimbsec.com.my PP16795/03/2013(031743) Reports Published Economics Malaysia economy: 2017 exports at the highest since 2005 Corporate News MMHE 4Q net profit at RM48m as heavy engineering segment returns to black Benalec declines Spring Gallery's RM186.63m offer for 12 plots of Melaka land Hibiscus' unit AOC to drill first side-track well by 1H18 MBSB completes acquisition of AFB Berjaya Assets raises stake in Berjaya Food to 2% Ayala to explore options to boost MCT's public shareholding spread Bursa Malaysia Close Chg +/- Chg % YTD Chg (%) FBMKLCI 1, FBMEMAS 13, FBM100 12, FBMEMAS Shariah 13, FBM Hijrah Shariah 14, Volume (m) 3, , Value (MYR m) 3, , Economic News US solar industry lost nearly 10,000 jobs in 2017 British banks running out of time to seek EU licences India's c.bank keeps repo rate at 6.00%; stance stays 'neutral' Property party over in Australia as biggest bank curbs lending Oil hits one-month low on US crude stocks build, record output KLCI Performance KLCI Year-End Target: 1,900 points Regional Indices Commodities (Last Close) Close Chg +/- Chg % YTD Chg (%) Close Chg +/- Chg % DJIA 24, Brent Crude (USD/bbl) NASDAQ 7, WTI Crude (USD/bbl) S&P 500 2, CPO (RM/MT) 2, FTSE 100 7, Gold (USD/ounce) 1, Nikkei , Latex (sen/kg) HSI 30, 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 3.69 (%) (MYR m) (MYR m) (MYR m) KLIBOR 6-mth 3.80 Local Insti , , KLIBOR 12-mth 3.90 Local Retail yr MGS 3.60 Foreign yr MGS 3.96 Total , , Performance of BIMB Stock Coverage Top Gainers Source: Bank Negara Malaysia Top Losers Source: The Sun, BIMB Securities Research Close Chg +/- Chg % Close Chg +/- Chg % Hartalega Holdings GHL Systems Felda Global Ventures Ikhmas Jaya Maxis Prestariang Top Glove Hibiscus Petroleum Petronas Gas Datasonic

3 Economics Malaysia Economy -line 2017 exports at the highest since 2005 Exports decelerated 4.7%; imports rose 7.9% in December Trade surplus narrows to RM7.3bn Slower export growth was driven by manufacturing sector Exports increase by 12.4% and imports up 14.4% in 4Q full year exports growth to 18.9% (+1.2% in 2016) and imports increase by 19.9% (+1.9% in 2016) Malaysia s exports growth at slower pace to 4.7% yoy to RM79.3bn from a significant 14.5% increase in the prior month. It marked the slowest exports growth in Similarly imports rose 7.9% yoy to RM72.1bn, following a 15.2% rise in the preceding month. Trade surplus narrowed for three consecutive months and posted at RM7.3bn in December. This making it the 242th consecutive month of trade surplus since November On monthly basis, exports and imports declined by -5.0% and -2.0% respectively. In seasonally adjusted terms, exports dropped 8.2% while imports fell by 9.8%. Total trade in December 2017 rose by 6.2% yoy to RM151.4bn and comapred to previous month it posted a decline of RM5.7bn or -3.6%. Total trade for 2017 amounted to RM1.8tn, grew by 19.4% compared with the same period of Exports totaled RM935.4bn, an increase of 18.9% while imports stood at RM838.1bn, rose by 19.9%. Trade surplus of RM97.2bn was recorded, higher by 10.3% yoy. The total value of trade, exports, imports and trade balance for 2017 had surpassed that of the whole of 2016, respectively. Chart 1: Malaysia: External Trade 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000-50% 40% 30% 20% 10% 0% -10% -20% Trade Balance (LHS) Export (RHS) Import (RHS) Source: Department of Statistics, BIMB Securities 3

4 CORPORATE NEWS MMHE 4Q net profit at RM48m as heavy engineering segment returns to black MMHE reported a net profit of RM48.13m for its 4QFY17, versus a net loss of RM119.67m in the same quarter last year, despite lower revenue, as its heavy engineering segment returned to black. The group's quarterly revenue fell 18% to RM247.95m from RM303.64m a year ago. Earnings per share was at 3 sen per share, compared to a loss per share of 7.5 sen in 4QFY16. It announced an interim dividend of 3 sen per share for the FY17, payable on March 8. Its heavy engineering segment recorded an operating profit of RM11.6m against RM34.4m loss last year, mainly from finalisation of completed projects in the current quarter. (Source: The Edge) Benalec declines Spring Gallery's RM186.63m offer for 12 plots of Melaka land Benalec has declined to sell 12 plots of land owned by its wholly-owned units in Pekan Klebang, Melaka Tengah, Melaka, to engineering solutions provider Spring Gallery for about RM186.63m. Its units Heritage Land SB, Klebang Property SB and Heritage Land Development received 3 letters of offer from Million Rich Development SB, a wholly-owned unit of Spring Gallery, on Jan 26. The plots, measuring a collective 4.44m sq ft, are all leasehold lands with their leases set to expire between April 2111 and Oct In making the offer at the time, Million Rich was planning to develop nine pieces of adjacent plots with a theme park operator and so the group believes the proposed acquisition would gain it access to prime land for future investment. (Source: The Edge) Hibiscus' unit AOC to drill first side-track well by 1H18 Hibiscus 50%-owned Anasuria Operating Co Ltd (AOC) is expected to drill and complete its first side-track well on the Guillemot-A field by the 1H18. The execution and completion of the side-track well located off the North Sea in United Kingdom is a planned production enhancement project at the Anasuria Cluster concession off the North Sea, which will unlock 1.01m barrels of oil from its current net 2P (proven and probable) reserves. AOC recently awarded a drilling rig contract to North Atlantic Drilling Ltd, a subsidiary of Seadrill Ltd an international drilling contractor that owns or leases a fleet of more than 50 drilling rigs. (Source: The Edge) MBSB completes acquisition of AFB MBSB has completed its acquisition of Asian Finance Bank (AFB) today. The RM644.95m acquisition was completed following MBSB s settlement of a balance cash consideration of RM357.2m as well as the allotment of the consideration shares in accordance with the terms of the sale and purchase agreement. Upon the listing of the consideration shares on Feb 8, 2018, an amount of RM24.81m representing the deposit paid on the portion of the purchase consideration settled via the consideration shares will be refunded to MBSB. The acquisition will pave the way for the non-bank lender to become a full-fledged Islamic bank. (Source: The Edge) Berjaya Assets raises stake in Berjaya Food to 2% Berjaya Assets has acquired a total of 3.55m shares in Berjaya Food, representing a 0.94% equity interest, for RM6.06m or RM1.71 a share. Following the acquisitions, BAssets now holds a total of 7.55m shares or a 2% equity interest in BFood. The purchases, undertaken by its wholly-owned subsidiary Sublime Cartel SB, were made at market prices and funded by internal funds. The acquisitions have no effect on the issued share capital or substantial shareholders shareholdings of BAssets as well as its net assets, earnings and gearing for the financial year ending June 30, The board of BAssts is of the opinion that the acquisitions are in the best interest of the BAssets group. (Source: The Edge) Ayala to explore options to boost MCT's public shareholding spread Philippine-listed Ayala Land Inc, its major shareholder via Regent Wise Investments Ltd (RWIL), intends to explore options to boost MCT's public shareholding spread. As at Feb 5, MCT's public shareholding spread stood at 24.65%. This does not comply with the Main Market listing requirements, which specified at least 25% of a company's listed shares must be in the hands of public shareholders. In view of this, RWIL will explore various options to rectify the public shareholding spread issue witin three months of the closing date of the offer, or such time frame as allowed by the authorities. The company will make the required announcement on the status of compliance of the public shareholding spread requirement. (Source: The Edge) 4

5 ECONOMIC NEWS US solar industry lost nearly 10,000 jobs in 2017 The US solar industry lost nearly 10,000 jobs last year, led by steep losses in mature markets like California and Massachusetts where installation growth has slowed. It was the first time employment has contracted in the fast-growing industry since the non-profit research firm The Solar Foundation began tracking solar jobs in Nationwide, solar employment fell 3.8% to 250,271 jobs in 2017 from a high of 260,077 in A drop in both utility-scale and residential solar installations, as well as industry jitters about tariffs on imported solar panels, were to blame for the decline. Employment in the solar industry far outpaces that of the coal, wind and nuclear energy industries, citing federal jobs data. (Source: Reuters) British banks running out of time to seek EU licences Britain-based banks looking to maintain their access to the euro zone after Brexit are running out of time to apply for licences and should not count on a deal about a transition period. With Britain due to leave the EU in March 2019, banks are set to lose their automatic access to the single market unless a transition period is agreed, which is currently uncertain. Any bank that wishes to relocate from the UK to the euro area should really have submitted its licence application already. But if it hasn t, it should do so by the end of the second quarter of 2018 at the latest. (Source: Reuters) India's c.bank keeps repo rate at 6.00%; stance stays 'neutral' The Reserve Bank of India on Wednesday kept its main repo rate at 6.00% and retained its neutral bias for a third consecutive policy meeting, warning of the need to focus both on inflation and on nurturing an economic recovery. All but two of 60 economists in a Reuters poll predicted the repo rate would be kept at the lowest level since November The reverse repo rate was held at 5.75%. The decision came after surging oil and food prices pushed India's annual consumer inflation to a 17-month high of 5.21% in December well above the RBI's 4% target. (Source: Reuters) Property party over in Australia as biggest bank curbs lending Australia s housing-market extravaganza is over. That s the call the nation s biggest mortgage-lender is making when it comes to its own money. In the past year, Commonwealth Bank of Australia has reduced its exposure to apartment developers by more than A$1bn (US$789m), or 23%, according to data included in its first-half earnings report, released in Sydney Wednesday. What s more, the bank included a chart highlighting its overall home-loan portfolio is growing notably slower than its competitors. It s also pulling back on loans to property investors, which rose just 0.5% compared to 7.5% growth for owner-occupier loans. Sydney house prices, which surged 75% between February 2012 and July, have now dropped 3.1% from their peak. (Source: Reuters) Oil hits one-month low on US crude stocks build, record output Oil prices fell to a one-month low on Wednesday after US data showed a build in inventories and record high crude production, raising worries of more selling that could expose speculators with big bets on upward momentum in crude prices. US West Texas Intermediate (WTI) crude fell $1.60, or 2.5%, to settle at $61.79 a barrel. WTI hit a low of $61.33, the lowest since Jan. 5. Volumes were heavy, with more than 957,000 front-month futures trading, far more than the average of 634,000 contracts over the last 200 days. Brent crude futures fell $1.35, or 2%, to $65.51 a barrel. US WTI prices have slid for four straight sessions, down 6% in that time. US crude inventories rose 1.9m barrels last week. (Source: Reuters) 5

6 ECONOMIC CALENDAR Date Time Country Event Period Survey Actual Prior Revised 02/08/ :50 JN BoP Current Account Balance Dec b b -- 02/08/ :50 JN BoP Current Account Adjusted Dec b b -- 02/08/ :50 JN Trade Balance BoP Basis Dec 520.4b b -- 02/08/ :00 GE Trade Balance Dec 21.0b b -- 02/08/ :00 GE Current Account Balance Dec 28.0b b -- 02/08/ :00 GE Exports SA MoM Dec -1.00% % -- 02/08/ :00 GE Imports SA MoM Dec -0.70% % 2.20% 02/08/ :00 DE Current Account (Seasonally Adjusted) Dec b -- 02/08/ :00 SO Trade Balance Dec m -- 02/08/ :00 SP Industrial Output NSA YoY Dec % -- 02/08/ :00 SP Industrial Output SA YoY Dec 4.00% % -- 02/08/ :00 SP Industrial Production MoM Dec -0.30% % -- 02/08/ :00 UK Bank of England Bank Rate Feb % % -- 02/08/ :00 UK BOE Asset Purchase Target Feb 435b b -- 02/08/ :00 UK BOE Corporate Bond Target Feb 10b -- 10b -- 02/08/2018 CH Trade Balance CNY Jan b b -- 02/08/2018 CH Exports YoY CNY Jan 2.60% % -- 02/08/2018 CH Imports YoY CNY Jan 5.30% % -- 02/08/2018 CH Trade Balance Jan $54.65b -- $54.69b -- 02/08/2018 CH Exports YoY Jan 10.70% % -- 02/08/2018 CH Imports YoY Jan 10.60% % -- 02/09/ :50 JN Money Stock M2 YoY Jan 3.60% % -- 02/09/ :50 JN Money Stock M3 YoY Jan 3.10% % -- 02/09/ :30 NE Manufacturing Production MoM Dec % -- 02/09/ :30 NE Manufacturing Production YoY Dec % -- 02/09/ :30 NE Industrial Sales YoY Dec % -- 02/09/ :00 FI Industrial Production MoM Dec % -- 02/09/ :00 FI Industrial Production WDA YoY Dec % -- 02/09/ :45 FR Industrial Production MoM Dec 0.10% % -- 02/09/ :45 FR Industrial Production YoY Dec 3.50% % -- 02/09/ :45 FR Manufacturing Production MoM Dec -0.50% % -- 02/09/ :45 FR Manufacturing Production YoY Dec 3.40% % -- 02/09/ :00 SO Construction Constant YoY Dec % -- 02/09/ :00 HU Trade Balance Dec P 455m m -- 02/09/ :00 LN Trade Balance Dec b -- 02/09/ :00 IT Industrial Production MoM Dec 0.80% % -- 02/09/ :00 IT Industrial Production WDA YoY Dec 1.90% % -- 02/09/ :00 IT Industrial Production NSA YoY Dec % -- 02/09/ :30 UK Industrial Production MoM Dec -0.90% % -- 02/09/ :30 UK Industrial Production YoY Dec 0.30% % -- 02/09/ :30 UK Manufacturing Production MoM Dec 0.30% % -- 02/09/ :30 UK Manufacturing Production YoY Dec 1.20% % -- 02/09/ :30 UK Visible Trade Balance GBP/Mn Dec /09/ :30 UK Trade Balance Dec /09/ :30 SV Industrial Production MoM Dec % -- 02/09/ :30 SV Industrial Production YoY Dec % -- 02/09/ :00 GR Industrial Production YoY Dec % -- 02/09/ :00 PO Trade Balance Dec m -- 02/10/ /15 CH Money Supply M1 YoY Jan 13.50% % -- 02/10/ /15 CH Money Supply M0 YoY Jan 4.20% %

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