PP16795/03/2013(031743) Jul-16

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1 Friday, 14 July, 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 PP16795/03/2013(031743) Reports Published Economics Malaysia Economics: BNM extending interest rate hold Results Review Hua Yang 1QFY18 (Below): Earnings to remain subdued Corporate News Economic News Axiata, iflix ink non-binding MoU to expand strategic collaboration Two FGV directors to remain despite stating wish to resign DNeX appointed accounting software reseller in Malaysia, Indonesia MMC sells 51% stake in Kotug Asia for RM4.1m AsiaBio adds DGB Asia into its investment portfolio Sunway buys KL land from Genting chief to develop RM1.1bn project Overnight policy rate stays at 3%, economic growth to pick up Malaysia s economy to continue to improve in 2Q Malaysia s SME GDP contribution to exceed 40% Malaysia, Indonesia discuss outstanding bilateral trade issues Malaysia wields cheap currency to beat peers in export race Bullish bets dip in most Asia forex, sentiment towards ringgit improves ECB to announce winding down of bond purchases in Sept: WSJ Bursa Malaysia Close Change +/- Change % FBMKLCI 1, FBMEMAS 12, FBM100 12, FBMEMAS Shariah 12, FBM Hijrah Shariah 13, Volume (m) 1, Value (MYR m) 2, FBMKLCI YTD performance 6.83 KLCI Performance KLCI Year-End Target: 1,800 points Regional Indices Commodities (Last Close) Close Change +/- Change % YTD Change (%) Close Change +/- Change % DJIA 21, 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 26, 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 3.54 Local Insti , , KLIBOR 12-mth 3.63 Local Retail yr MGS 3.75 Foreign yr MGS 3.97 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 % UMW Holdings % UMW Oil & Gas Corp % UEM Sunrise % Axiata Group % Uzma % Digi.Com % Kossan Rubber % Sapura Energy % Econpile % Eversendai % 2

3 REPORTS PUBLISHED Malaysia Economy Economics BNM extending interest rate hold OPR maintain at 3.0% Policy statement remains largely neutral BNM highlighted policy uncertainties and commodity price volatility remain as global risks Malaysian economy is expected to register higher growth in 2017 Expect no change in OPR in 2017 In line with expectations, Bank Negara Malaysia (BNM) kept the Overnight Policy Rate (OPR) at 3.0% for its sixth straight MPC meeting on 13 July 2017, as policymakers said that the current stance is supportive of economic activity. Chart 1: Overnight Policy Rate (OPR) Source: Bank Negara Malaysia, BIMB Securities Schedule of Monetary Policy Committee Meetings for 2017 MPC Meeting Result 18 and 19 January 2017 (Wednesday and Thursday) Maintain at 3.0% 1 and 2 March 2017 (Wednesday and Thursday) Maintain at 3.0% 11 and 12 May 2017 (Thursday and Friday) Maintain at 3.0% 12 and 13 July 2017 (Wednesday and Thursday) Maintain at 3.0% 6 and 7 September 2017 (Wednesday and Thursday) - 8 and 9 November 2017 (Wednesday and Thursday) - Source: Bank Negara Malaysia, BIMB Securities 3

4 CORPORATE NEWS Axiata, iflix ink non-binding MoU to expand strategic collaboration Axiata and subscription video on demand service iflix have signed a non-binding MoU with regards to the expansion of their strategic collaboration. The regional collaboration is to bring the best in entertainment to more than 125m Axiata s customers in 6 countries. With existing partnerships with Celcom Axiata Bhd in Malaysia and Dialog Axiata PLC in Sri Lanka, the collaboration is intended to extend at PT XL Axiata Tbk in Indonesia, Smart Axiata Co Ltd in Cambodia, Robi Axiata Limited in Bangladesh and Ncell Private Limited in Nepal. The expansion of Axiata's collaboration with iflix was a testament to Axiata s commitment to innovation, offering its customers the best digital features and services available. (Source: The Edge) Two FGV directors to remain despite stating wish to resign Two of FGV s directors; Datuk Dr Omar Salim and Datuk Noor Ehsanuddin Mohd Harun Narrashid will remain on its board despite previously expressing their intention to resign. Omar and Noor Ehsanuddin had communicated their intention to resign from the board several weeks ago. Upon considering the current state of affairs in FGV and the way forward that has been accepted by the government on June 19, Sulaiman had personally requested all members of the board to stay on. His request was in line with the government s aim to improve FGV s corporate governance and business controls and undertake a comprehensive business review, as well as to uphold the integrity and spirit of impartiality of the ongoing inquiry. (Source: The Edge) DNeX appointed accounting software reseller in Malaysia, Indonesia DNeX s wholly-owned subsidiary Dagang Net Technologies SB has been appointed as the reseller of Financio, a cloud-based accounting software, in Malaysia and Indonesia. Designed for users with little accounting knowledge, Dagang Net will target to sell Financio to startup firms, small business owners and micro small and medium enterprises. Financio will serve a relatively untapped market to meet the unique needs of today s entrepreneurs and small companies who are looking for a user-friendly accounting software solution to help them grow their businesses. (Source: The Edge) MMC sells 51% stake in Kotug Asia for RM4.1m MMC s wholly-owned unit Johor Port Bhd has disposed its 5.1m shares equivalent to a 51% stake in Kotug Asia SB to Kotug Malaysia SB for RM4.1m cash, which is part of its ongoing internal restructuring exercise. Following completion of the stake disposal, Kotug Asia has ceased to be a subsidiary of Johor Port. The disposal is not expected to have any material effect on the earnings, net assets and gearing of MMC for the financial year ending Dec 31, Kotug Asia is part of Netherlands-based Kotug International, which provides oil and gas support services specialising in the areas of terminal towage, harbour towage, offshore operations and salvage operations. (Source: The Edge) AsiaBio adds DGB Asia into its investment portfolio AsiaBio has become a substantial shareholder in DGB Asia Bhd after acquiring shares in the latter through a private placement. DGB Asia is the 5 th ACE-listed companies in which AsiaBio owns a substantial stake. The other 4 are VSolar Group Bhd, Focus Dynamics Group Bhd, NetX Holdings Bhd and AT Systematization Bhd. AsiaBio s wholly-owned unit Perfect Power Group Ltd paid RM1.84m to acquire 48.9m shares in DGB Asia at sen apiece. Following the acquisition, AsiaBio holds a 9.09% stake in the enlarged share capital of DGB Asia, a software and technology services provider that owns an automatic identification and data capture (AIDC) technology. The entry into DGB Asia was due to its interest in the AIDC technologies which it wants to expand in Southeast Asia. (Source: The Edge) Sunway buys KL land from Genting chief to develop RM1.1bn project Sunway is acquiring 4.53 acres of freehold land in Jalan Belfield to undertake a mixed-use development featuring serviced apartments and lifestyle retail units with a combined gross development value of RM1.1bn. Sunway s wholly-owned unit, Sunway City Sdn Bhd via Sunway Innopark Sdn Bhd signed a sales and purchase agreement with Genting Bhd s chairman and chief executive Tan Sri Lim Kok Thay, his mother Puan Sri Lee Kim Hua and three beneficial owners, to buy the land for RM165m. The purchase price which works out to RM per sq ft was arrived at based on a willing-buyer willing-seller basis, after taking into account the development potential and the internal rate of return. Based on its feasibility studies, the development will take 5 years and the project is expected to be launched by the second half of (Source: The Edge) 4

5 ECONOMIC NEWS Overnight policy rate stays at 3%, economic growth to pick up Bank Negara Malaysia's (BNM) Monetary Policy Committee (MPC) has decided to maintain the Overnight Policy Rate (OPR) at 3% as the current stance of the monetary policy is accommodative and supportive of economic activity. The decision to maintain the OPR was made during its meeting on Thursday based on several positive factors on the local and global fronts. The domestic financial markets have been resilient. Also, the ringgit has remained stable with a more balanced demand and supply of foreign currencies following the implementation of the 2 financial market development measures. Banking system liquidity remains sufficient with financial institutions continuing to operate with strong capital and liquidity buffers. (Source: StarBiz) Malaysia s economy to continue to improve in 2Q Malaysia s economy is expected to further improve in the 2Q of this year with exports likely to increase amid continuous strong domestic demand and private expenditure as seen in the 1Q. 1Q s GDP growth of 5.6% indicated a strong growth from overall perspective. Malaysia were able to achieve over 5% growth for 2Q given the strong trade for May 2017 which has exceeded forecasts, growing by 31.5% to RM153.3bn against RM116.6bn a year ago. It was reported earlier that Malaysian exports rose 32.5% to RM79.4bn and imports by 30.4% to RM73.91bn, resulting in a trade surplus of RM5.49bn, the 235 th consecutive month of trade surplus since (Source: Bernama) Malaysia s SME GDP contribution to exceed 40% The Malaysian Small and Medium Entreprises (SME) sector contribution to the country s gross domestic product (GDP) is expected to exceed 40% and on track to achieve the target of 41% of the GDP. The target set in the SME Masterplan could be achieved if Malaysia were to maintain its SME development pace at 6.7%. In the recent period between 2011 and 2015, SME grew at average annual rate of 6.7%, outperforming the overall average growth of economy of 5.3%. Currently 97% of business establishments in Malaysia are SMEs, which contributed 37% to the country s GDP, 65% to employment, and nearly 18% to exports. (Source: Bernama) Malaysia, Indonesia discuss outstanding bilateral trade issues The 3 rd Malaysia-Indonesia Joint Trade and Investment Committee (JTIC) Ministerial Meeting in Kuching discussed several key outstanding issues affecting bilateral trade between Malaysia and Indonesia. The meeting reviewed the 1970 Border Trade Agreement: trade restriction on Tebedu-Entikong border; recognition of Malaysia s halal logo by the Indonesian authority; cooperation in intellectual property issues; standards and recognition; and cooperation and collaboration on issues related to palm oil products. They discussed ways forwards to address specific concern from both sides, that is enhancing bilateral trade and investment ties and reinforcing the border trade. Indonesia is Malaysia s 8 th largest trading partner and the 3 rd largest among the Asean countries, adding that total trade between Malaysia and Indonesia in 2016 was RM57.09bn. (Source: Bernama) Malaysia wields cheap currency to beat peers in export race When the global trade rebound came this year, Malaysia held 1 advantage over its peers: the cheapest currency in Southeast Asia. The ringgit is down more than 7% against the dollar in the past year, even after recovering in Exports from Indonesia to Vietnam are surging but Malaysia s shipments are growing the fastest, accelerating to a 7-year high of 33% in May. After a couple of years of slowing growth, declining investor sentiment and a corruption scandal involving a state-owned investment fund, Malaysia s fortunes are turning. The World Bank raised the nation s growth forecast in June by the most in East Asia, inflation is easing and foreign investors are more bullish on the stock market. That s taking the pressure off the central bank to add more stimulus to the economy after last year s interest-rate cut. (Source: Bloomberg) Bullish bets dip in most Asia forex, sentiment towards ringgit improves Bullish bets on most emerging Asian currencies eased in the last 2 weeks as a sell-off in bonds amid global monetary tightening boosted US Treasury yields and brightened the outlook for the dollar, putting emerging market currencies under pressure. Sentiment toward the Chinese yuan and the Malaysian ringgit improved further, however, with long positions in both currencies touching their largest in a month. Treasuries and benchmark European bond yields resumed their march upwards, having paused on Monday, as the focus shifted back to the pace of monetary tightening in the world's largest economies. Investors were estimated to have trimmed their bullish bets on most emerging Asian currencies. (Source: Reuters) ECB to announce winding down of bond purchases in Sept: WSJ The ECB is likely to signal in September that its 2.3trn bond-buying program would be gradually wound down next year. Financial markets overwhelmingly expect the ECB to decide in September on the future of its stimulus policy beyond the end of this year, with analysts split between those who expect a one-off reduction and a definitive tapering of the program. ECB President Mario Draghi opened the door last month to tweaks to the bank's stimulus policy, but with the aim of maintaining, rather than tightening, the current easy financing conditions. (Source: Reuters) 5

6 ECONOMIC CALENDAR Date Time Country Event Period Survey Actual Prior Revised 07/14/ :30 NE Trade Balance May b -- 07/14/ :30 JN Industrial Production MoM May F % -- 07/14/ :30 JN Industrial Production YoY May F % -- 07/14/ :30 JN Capacity Utilization MoM May % -- 07/14/ :00 FI Current Account Balance May b -- 07/14/ :00 LN Current Account Balance May m -- 07/14/ :00 CZ Current Account Monthly CZK May -4.30b b -- 07/14/ :00 EC Trade Balance SA May 20.2b b -- 07/14/ :00 EC Trade Balance NSA May b -- 07/14/ :00 IT Trade Balance EU May m -- 07/14/ :00 IT Trade Balance Total May m -- 07/14/ :00 IR Current Account Balance 1Q m -- 07/14/ :00 PD Current Account Balance May 335m m -- 07/14/ :00 PD Trade Balance May -21m -- 86m -- 07/14/ :00 PD Exports May 15900m m -- 07/14/ :00 PD Imports May 16100m m -- 07/14/ :30 US CPI MoM Jun 0.10% % -- 07/14/ :30 US CPI Ex Food and Energy MoM Jun 0.20% % -- 07/14/ :30 US CPI YoY Jun 1.70% % -- 07/14/ :30 US CPI Ex Food and Energy YoY Jun 1.70% % -- 07/14/ :30 US CPI Core Index SA Jun /14/ :30 US CPI Index NSA Jun /14/ :30 US Real Avg Weekly Earnings YoY Jun % 0.50% 07/14/ :30 US Real Avg Hourly Earning YoY Jun % -- 07/14/ :00 BE Trade Balance May m -- 07/17/ :00 CH Industrial Production YoY Jun 6.50% % -- 07/17/ :00 CH Industrial Production YTD YoY Jun 6.70% % -- 07/17/ :00 CH GDP YoY 2Q 6.80% % -- 07/17/ :00 CH GDP YTD YoY 2Q 6.80% % -- 07/17/ :00 IR Trade Balance May m -- 07/18/ :00 HU Central Bank Rate Decision 18-Jul 0.90% % -- 07/18/ :30 US Import Price Index MoM Jun -0.20% % -- 07/18/ :30 US Import Price Index ex Petroleum MoM Jun 0.10% % -- 07/18/ :30 US Import Price Index YoY Jun % -- 07/18/ :30 US Export Price Index MoM Jun 0.10% % -- 07/18/ :30 US Export Price Index YoY Jun % -- 07/19/ :00 PD Sold Industrial Output MoM Jun 2.30% % -- 07/19/ :00 PD Sold Industrial Output YoY Jun 3.90% % -- 07/19/ :00 PD Construction Output YoY Jun 9.90% % -- 07/20/ :50 JN Trade Balance Jun 490.0b b b 07/20/ :50 JN Trade Balance Adjusted Jun 125.5b b -- 07/20/ :50 JN Exports YoY Jun 9.50% % -- 07/20/ :50 JN Imports YoY Jun 14.40% % -- 07/20/ :00 CZ Export Price Index YoY May % -- 07/20/ :00 CZ Import Price Index YoY May % -- 07/20/ :00 EC ECB Current Account SA May b -- 07/20/ :00 EC Current Account NSA May b -- 07/20/ :30 IT Current Account Balance May m -- 07/20/ :45 EC ECB Main Refinancing Rate 20-Jul 0.00% % -- 07/20/ :45 EC ECB Marginal Lending Facility 20-Jul 0.25% % -- 07/20/ :45 EC ECB Deposit Facility Rate 20-Jul -0.40% % -- 07/20/2017 PO Current Account Balance May m -- 07/20/2017 CH FX Net Settlement - Clients CNY Jun b

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