PP16795/03/2013(031743) Jul-16

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1 Thursday, 3 August, 2017 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Research Team research@bimbsec.com.my PP16795/03/2013(031743) Corporate News Economic News TNB to raise RM2bn via sukuk Prestariang gets RM10m contract extension Petronas secures another block in Mexico Bank Islam, US based Cognizant to push ahead with digital banking Chemical Co of Malaysia, CCM Duopharma to be demerged Glomac proposes 1-for-10 bonus issue RAM sees Malaysia exports growth slower at 17.5% in June FPC discusses fiscal consolidation measures Trump signs Russia sanctions bill, Moscow calls it 'trade war' US private sector adds 178,000 jobs in July ADP China issues rules to curb state firms' overseas investment risks Foreign selloff in Jakarta amid weak spending Bursa Malaysia KLCI Performance Close Change +/- Change % 1820 FBMKLCI 1, FBMEMAS 12, FBM100 12, FBMEMAS Shariah 12, FBM Hijrah Shariah 13, Volume (m) 1, Value (MYR m) 1, FBMKLCI YTD performance KLCI Year-End Target: 1,800 points Regional Indices Commodities (Last Close) Close Change +/- Change % YTD Change (%) Close Change +/- Change % DJIA 22, 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 27, Soybean Oil SHCOMP 3, KOSPI 2, Forex TWSE 10, (per USD) BIMB (YE Forecast) Close Change +/- Change % STI 3, MYR JCI 5, JPY SET 1, EUR PSEi 7, SGD

2 Major Rates Daily Participation Market Insight % Participation Bought Sold Net KLIBOR 3-mth 3.43 (%) (MYR m) (MYR m) (MYR m) KLIBOR 6-mth 3.55 Local Insti , KLIBOR 12-mth 3.63 Local Retail yr MGS 3.70 Foreign yr MGS 4.01 Total , , Performance of BIMB Stock Coverage Top Gainers Source: Bank Negara Malaysia Top Losers Source: The Sun, BIMB Securities Research Close Change +/- Change % Close Change +/- Change % Kossan Rubber % Eco World % Gas Malaysia % SP Setia % Sunway Construction % Uzma % QL Resources % TSH Resources % Matrix Concepts % Padini % 2

3 CORPORATE NEWS TNB to raise RM2bn via sukuk Tenaga Nasional Bhd (TNB) aims to raise RM2bn via an auction of Islamic bonds, or sukuk. The issuance by TNB, in which state investor Khazanah is the biggest shareholder, comprises a RM500m 15-year tranche and a RM1.5bn 20-year tranche, with periodic distribution rates of 4.95% and 5.18% respectively. The sukuk programme, set up in July, is based on an agency-based contract known as wakala and is rated AAA by credit agency RAM ratings. AmInvestment Bank Bhd and Maybank Investment Bank Bhd will act as joint bookrunners for the sale. (Source: Reuters) Prestariang gets RM10m contract extension Prestariang s unit, Prestariang Systems SB (PSSB) has received an extended letter of award from the Ministry of Higher Education (MOHE) worth RM10m to distribute and manage Microsoft software licences for public higher education institutions in Malaysia. The contract extension was for 1 year, effective July 3, On Aug 23, 2011, PSSB entered into an agreement with MOHE for the contract under the Managing University Software as an Enterprise programme. The extended contract is expected to contribute positively to the future earnings, net assets per share and gearing of Prestariang Group. (Source: Bernama) Petronas secures another block in Mexico Petronas s subsidiary PC Carigali Mexico Operations, SA de CV, has been awarded shallow-water Block 6 in the Gulf of Mexico s Salina Basin. The Block 6 covered an area of about 559 sq km in water depths of between 30 and 80 metres. The block will be operated by PC Carigali Mexico in a 50:50 partnership with Ecopetrol, the national oil company of Colombia. Petronas executive vice president and chief executive officer (upstream) Datuk Anuar Taib pleased with their new partnership with Ecopetrol and he confident this will bring together their capabilities and expertise for a successful collaboration in the Mexico waters. Last year, Petronas was awarded deepwater Block 4 and Block 5 in a JV partnership following Mexico s 1 st ever auction of its deep water exploration areas. (Source: StarBiz) Bank Islam, US based Cognizant to push ahead with digital banking Bank Islam has inked a strategic collaboration with US-based Cognizant to lay the foundation of digital banking platform across the bank's entire network. By partnering with Cognizant to build a digitalised banking space, Bank Islam shall jointly develop Fintech solutions, such as peer to peer financing, crowdfunding, mobile payments, wealth management, and remittance platforms to develop innovative products and services at a competitive pricing. Through digitalisation, Bank Islam will be able to accelerate SME banking by providing business solutions for operational and expansion needs. Bank Islam will also be able to rapidly tap into the rural, underbanked segments and boost financial inclusion by overcoming cost and physical barriers. (Source: StarBiz) Chemical Co of Malaysia, CCM Duopharma to be demerged Chemical Co of Malaysia Bhd (CCM) has become the latest Permodalan Nasional Bhd (PNB)-controlled group to be put under a restructuring plan, which will see it divesting its pharmaceuticals business free of charge and raising funds totalling RM257.6m. CCM, which is owned just over 70% by the state-owned fund manager, announced a series of proposals ranging from a private placement and land disposal to the distribution of 73.37% equity interest in the country s largest pharmaceutical manufacturer CCM Duopharma Biotech Bhd to CCM s shareholders. CCM s unit CCM Marketing, which owes RM474.1m to its parent company (CCM), will transfer all its shares in CCM Duopharma to the latter as settlement. (Source: StarBiz) Glomac proposes 1-for-10 bonus issue Glomac Bhd proposes to undertake a bonus issue of up to 74.82m bonus shares on the basis of 1 bonus share for every 10 existing shares held in the company. Its board expected the proposed bonus issue to be completed by the 4QCY2017. The proposed exercise is aimed at rewarding the existing shareholders for their loyalty and continuing support, and to improve the liquidity and marketability of Glomac shares on the bourse. Glomac has an issued share capital of RM363.9m comprising 727.8m shares (including treasury shares). Following the proposed bonus issue, its share capital will swell to between RM395.8m (795.3m shares) and RM419.8m (823.0m shares). (Source: StarBiz) 3

4 ECONOMIC NEWS RAM sees Malaysia exports growth slower at 17.5% in June RAM Ratings expects Malaysia s export growth to slow down in June after the jump in May due to slower demand for exports from China and Singapore, after consecutive months of rapid build-up in capacity and re-stocking. The ratings agency expected June export growth to be a healthy 17.5% though slower than the steep 32.5% in May. Moreover, a high-base effect arising from the rebound in growth in June 2016 also contributed to the moderation. RAM Ratings also expected imports to expand at a slower pace of 12.6% which is nearly half of the preceding month s 30.4%. Imports are projected to decelerate in line with the moderation in exports. The upside support from re-exports vis-à-vis overall import growth in May is unlikely to carry through to June, thus further reducing its momentum. As such, the trade balance is projected to widen to RM9.4bn in June. (Source: StarBiz) FPC discusses fiscal consolidation measures The Fiscal Policy Committee (FPC) deliberated on fiscal consolidation measures in the strive to achieve a near-balanced budget in The FPC scrutinised the country's fiscal position and medium-term economic growth, as well as the fiscal risks, including the unexpected external liabilities to ensure that the government's exposure would be under control and minimal. Efforts will be focused to increasing efficiency and minimising leakages in revenue collection and expenditure. The 2018 Budget, which would focus on efforts to increase the people's earnings, boost investments, especially in public infrastructure and high-impact projects, and spur the digital economy through creativity and innovation. (Source: Bernama) Trump signs Russia sanctions bill, Moscow calls it 'trade war' Trump grudgingly signed into law new sanctions against Russia, a move amounted to a full-scale trade war and an end to hopes for better ties with the Trump administration. Congress overwhelmingly approved the legislation last week, passing a measure that conflicts with the Republican president's desire to improve relations with Moscow. Trump signed the bill behind closed doors, without the fanfare that has customarily accompanied his signing of executive orders. He criticized the measure as infringing on his powers to shape foreign policy, and he could make "far better deals" with governments than Congress can. Russian Prime Minister called the sanctions tantamount to a "full-scale trade war" and Trump administration had demonstrated "utter powerlessness." (Source: Reuters) US private sector adds 178,000 jobs in July ADP US private employers added 178,000 jobs in July, below economists' expectations. Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 185,000 jobs, with estimates ranging from 151,000 to 225,000 jobs added. Private payroll gains in the month earlier were revised up to 191,000 from an originally reported 158,000 increase. Economists polled by Reuters are looking for US private payroll employment to have grown by 180,000 jobs in July, down from a gain of 187,000 the month before. Total non-farm employment is expected to have increased by 183,000. The unemployment rate is forecast to tick down to 4.3% from the 4.4% recorded a month earlier. (Source: Reuters) China issues rules to curb state firms' overseas investment risks China's finance ministry has issued guidelines on overseas investment of state-owned enterprises (SOEs), amid a campaign to tighten controls on outbound investment and financial risks. SOEs have been leading China's "go out" drive with growing overseas investments, but they have encountered problems of low returns on investment and weak profitability. The guidelines will help strengthen financial management of overseas investment of state-owned enterprises, prevent financial risks and improve investment efficiency.the guidelines covered areas of investment decisions, financial management, cost control, dividend distribution and foreign exchange business. (Source: Reuters) Foreign selloff in Jakarta amid weak spending As Indonesians keep their wallets in their pockets, foreigners are pulling money from a stock market dominated by consumer companies. Consumer goods companies 2Q net income has dropped 31% yoy, while motorcycle sales fell 29% in June from May. Foreign funds responded by selling a net USD798m of local shares last month, even as they kept buying into most other Asian markets. No one is quite sure why spending has slowed so much, although a rise in religious tension, a decline in private investment and the timing of the Eid-al-Fitr holidays have been cited as reasons. Whether or not the downturn persists will be crucial for a market where many of the biggest companies are reliant on domestic demand. (Source: StarBiz) 4

5 ECONOMIC CALENDAR Date Time Country Event Period Survey Actual Prior Revised 08/03/ :30 JN Nikkei Japan PMI Services Jul /03/ :30 JN Nikkei Japan PMI Composite Jul /03/ :45 CH Caixin China PMI Composite Jul /03/ :45 CH Caixin China PMI Services Jul /03/ :30 UK Markit/CIPS UK Services PMI Jul /03/ :30 UK Markit/CIPS UK Composite PMI Jul /03/ :30 UK Official Reserves Changes Jul $491m -- 08/03/ :00 UK Bank of England Bank Rate 3-Aug 0.25% % -- 08/03/ :00 UK BOE Asset Purchase Target Aug 435b b -- 08/03/ :00 UK BOE Corporate Bond Target Aug 10b -- 10b -- 08/03/ :00 CZ Repurchase Rate 3-Aug 0.25% % -- 08/03/ :45 US Markit US Services PMI Jul F /03/ :45 US Markit US Composite PMI Jul F /03/ :00 US ISM Non-Manf. Composite Jul /04/ :00 GE Factory Orders MoM Jun 0.50% % -- 08/04/ :00 GE Factory Orders WDA YoY Jun 4.40% % -- 08/04/ :00 SP Industrial Output NSA YoY Jun % -- 08/04/ :00 SP Industrial Output SA YoY Jun 2.80% % -- 08/04/ :00 SP Industrial Production MoM Jun -0.20% % -- 08/04/ :00 IR Industrial Production MoM Jun % -- 08/04/ :00 IR Industrial Production YoY Jun % -- 08/04/ :30 US Trade Balance Jun -$44.5b -- -$46.5b -- 08/04/2017 RO Interest Rate Announcement 4-Aug 1.75% % -- 08/07/ :50 JN Official Reserve Assets Jul $1249.8b -- 08/07/ :00 GE Industrial Production SA MoM Jun % -- 08/07/ :00 GE Industrial Production WDA YoY Jun % -- 08/07/ :00 FI Trade Balance Jun P m -- 08/07/ :00 DE Industrial Production MoM Jun % -- 08/07/ :00 CZ Construction Output YoY Jun % -- 08/07/ :00 CZ Industrial Output YoY Jun 7.00% % -- 08/07/ :00 CZ Trade Balance National Concept Jun 18.0b b -- 08/07/ :00 LN International Reserves Jul m -- 08/07/ :00 PD Official Reserves Jul /07/2017 CH Foreign Reserves Jul $3075.0b -- $3056.8b -- 08/08/ :50 JN BoP Current Account Balance Jun b -- 08/08/ :50 JN BoP Current Account Adjusted Jun b -- 08/08/ :50 JN Trade Balance BoP Basis Jun b -- 08/08/ :00 GE Trade Balance Jun b -- 08/08/ :00 GE Current Account Balance Jun b -- 08/08/ :00 GE Exports SA MoM Jun % -- 08/08/ :00 GE Imports SA MoM Jun % -- 08/08/ :45 FR Trade Balance Jun m -- 08/08/ :45 FR Current Account Balance Jun b -- 08/08/ :00 SP House transactions YoY Jun % -- 08/08/ :00 HU Trade Balance Jun P 1118m m -- 08/08/ :00 GR Industrial Production YoY Jun % -- 08/08/2017 CH Imports YoY Jul 18.00% % -- 08/08/2017 CH Trade Balance Jul $45.35b -- $42.80b $42.75b 08/08/2017 CH Exports YoY CNY Jul 15.20% % -- 08/08/2017 CH Imports YoY CNY Jul 23.60% % -- 08/08/2017 CH Trade Balance CNY Jul b b -- 08/08/2017 CH Exports YoY Jul 11.00% % -- 08/09/ :50 JN Money Stock M2 YoY Jul %

6 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 6