PP16795/03/2013(031743) Jul-16

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1 Friday, 28 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 Results Review Tenaga Nasional 3QFY17 (Below): Weaker but warranted Corporate News FGV to offer plantation jobs to locals, cut dependency on foreign labour Batu Kawan buys 2.4% stake in Malay-Sino for RM17.7m Caring Pharmacy's 4Q net profit jumps 59.2% on higher sales Tasek Corp s 2Q net profit plunges 91.7%, declares 20 sen dividend Mesiniaga to gain RM6m from property disposal Censof signs MoU with Penang centre on training programmes Bursa Malaysia Close Change +/- Change % FBMKLCI 1, FBMEMAS 12, FBM100 12, FBMEMAS Shariah 12, FBM Hijrah Shariah 13, Volume (m) 1, Value (MYR m) 1, FBMKLCI YTD performance 7.82 Economic News Digital economy s contribution to GDP expected to exceed 20% by 2020 US durable goods, trade data point to pick-up in 2Q growth China factory sector seen maintaining solid growth in July UK targets preferential trade terms with Mexico after Brexit EU postpones decision on biodiesel anti-dumping duties EU's warns of possible delays to Brexit talks, London confident of schedule 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 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 8, 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 3.68 Foreign yr MGS 3.98 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 % WCT % UEM Sunrise % TSH Resources % Telekom Malaysia % Sunway Construction % Tambun Indah % Kimlun % Batu Kawan % Hartalega % My EG % 2

3 CORPORATE NEWS FGV to offer plantation jobs to locals, cut dependency on foreign labour FGV will open employment opportunities to locals, especially new generation settlers, for a career in the plantation industry in efforts to reduce dependency on foreign workers. The group is highly dependent on foreign labour with more than 35,000 foreign employees across the country and is in need of more workers to ensure daily operations run smoothly. The recruitment drive kicked off at the National Settlers Day celebrations 2017 in Putrajaya recently, where a recruitment booth was opened for visitors. Besides opportunities in the plantation division, FGV also offer career opportunities for the new generation of settlers who are keen to join uniformed units through its subsidiary, Felda Securities Services Sdn Bhd, which currently has 3,000 members, comprising largely settlers' children. (Source: The Edge) Batu Kawan buys 2.4% stake in Malay-Sino for RM17.7m Batu Kawan acquired a 2.4% stake in Malay-Sino Chemical Industries from its own major shareholder, Wan Hin Investments, for RM17.7m. The rationale of the deal was to provide an opportunity for Malay-Sino's minority shareholders including Wan Hin, which owns the majority of Batu Kawan's shares, to sell their investment in Malay-Sino, in view that Malay-Sino is a private limited company and there is illiquidity in its shares. The offer would allow Batu Kawan to increase its shareholding and control in Malay-Sino. The minority shareholders, 42 in total, collectively own 11.1% of Malay-Sino. (Source: The Edge) Caring Pharmacy's 4Q net profit jumps 59.2% on higher sales Caring Pharmacy 's net profit for the 4QFY17 grew by 59.2% to RM4.36m or 2 sen per share from RM2.74m or 1.26 sen per share in the corresponding quarter a year ago, mainly contributed by higher sales generated from existing outlets. This was in line with the group's revenue, which increased by 10.3% to RM119.5m in 4QFY17 as compared to RM108.3m recorded in 4QFY16. The higher revenue was mainly contributed by higher sales generated from existing outlets due to aggressive and extensive promotional campaign launched during FY17. (Source: The Edge) Tasek Corp s 2Q net profit plunges 91.7%, declares 20 sen dividend Tasek Corp s 2QFY17 plunged by 91.7% down to RM1.49m from RM17.96m seen in the previous year s corresponding quarter, due mainly to lower net revenue for its cement segment. Its quarterly revenue dipped 22.3% to RM134.98m from RM173.74m last year due to lower demand for cement in the domestic market and lower average net pricing for both cement and ready-mixed concrete. Meanwhile, its cumulative 6MFY17 net profit dropped 87.6% lower to RM5.05m from RM40.64m last year while revenue slid 22.5% at RM267.31m from RM344.72m due mainly to the prolonged price competition due to lower demand for cement in the domestic market. On prospects, the 3QFY17 is expected to be more challenging with the prolonged price competition for cement due to lower demand for cement and weak sentiment of the domestic property market. (Source: The Edge) Mesiniaga to gain RM6m from property disposal Mesiniaga expects to gain RM6m from its proposed disposal of a 5-storey commercial building on Jalan Larut, Penang, for RM15.9m. The building, which is being sold to Sparkle Gateway SB, was under utilised and an excess to the group, while no longer situated at a strategic location as it is far from the major customers in Penang. The 16-year-old building's original cost of investment was RM10.1m, with a net book value of RM8.5m as at Dec 31, Following the disposal, Mesiniaga can save RM40,000 operating expenses per month that was used for maintaining the property. Proceeds from the proposed disposal could be used to repay loans and fund the company's operations in the 4Q of 2017, and (Source: The Edge) Censof signs MoU with Penang centre on training programmes Censof through its 80%-owned subsidiary Knowledgecom Corp SB (KCom), inked a MoU with the Penang Skills Development Centre (PSDC) yesterday to offer Industry 4.0-certified training programmes. KCom and PSDC will jointly collaborate to develop and promote Industry 4.0 certification programmes across the whole of Malaysia and jointly set up the Centre of Excellence in Technology (CoET) in the Federal Territory. In addition, KCom has also been appointed as the exclusive technology partner to deliver and manage the Industry 4.0 programmes with all CoETs. The collaboration between KCom and PSDC aims to promote the National Empowerment in Certification and Training for Next Generation Workers (NECT-Gen Industry 4.0). (Source: StarBiz) 3

4 ECONOMIC NEWS Digital economy s contribution to GDP expected to exceed 20% by 2020 The contribution of Malaysia s digital economy to the gross domestic product (GDP) is expected to exceed the 20% target by 2020 from the current 17%. Communications and Multimedia Deputy Minister, Datuk Jailani Johari was confident the target could be achieved earlier than 2020, as Malaysia had started making waves in the digital economy. This is especially with the Digital Free Trade Zone (DTFZ) launched in March this year and lately, the Malaysia Digital Hub. Malaysia can also leverage on the Regional Comprehensive Economic Partnership and the DFTZ, where Malaysia small and medium enterprises can benefit from partnerships with big players like Alibaba. The global digital economy has been growing at an impressive rate of 10% a year. (Source: Bernama) US durable goods, trade data point to pick-up in 2Q growth New orders for key US-made capital goods unexpectedly fell in June, but a 5 th straight monthly increase in shipments suggested that business spending on equipment supported economic growth in the 2Q. Expectations that growth accelerated in the 2Q were also bolstered by other data showing a sharp narrowing in the goods trade deficit in June and increases in both retail and wholesale inventories. The pick-up in GDP, together with a tightening labor market, would likely keep the Fed on track to announce a plan to start reducing its USD4.2trn portfolio of Treasury bonds and mortgage-backed securities in September and raise interest rates in December for a 3 rd time this year. (Source: Reuters) China factory sector seen maintaining solid growth in July Activity in China's factory sector is expected to have grown again in July, with only a slight slowdown from June's 3-month high, suggesting momentum in the economy remains strong, despite a tighter policy environment. Analysts and government think tanks expect the economy to slow in the 2H of the year, as higher borrowing costs and a cooling property market begin to weigh. But the broad consensus among China watchers is that any slowdown would likely be modest and avoid a sharper deceleration, given steady domestic demand and rising exports, which likely helped the vast factory sector expand for the 12 th straight month in July. The government-affiliated Chinese Academy of Social Sciences (CASS) predicted China's 3Q GDP growth will be 6.8%, thanks to a steady expansion in consumption and investment. (Source: Reuters) UK targets preferential trade terms with Mexico after Brexit Mexico and Britain have begun informal talks on an agreement to maintain Britain's preferential trade deal with Mexico after Brexit. British international trade secretary Liam Fox told reporters on a visit to Mexico City that he hoped Mexico and the European Union (EU) would press ahead with concluding their updated free trade agreement. He and Mexican economy minister Ildefonso Guajardo have began a dialogue aimed at ensuring that the preferential agreements that the UK currently enjoys with Mexico remain in place. The British government supports the ambitious and speedy outcome to the free trade talks between Mexico and the EU and will later undertake a process to adopt the deal so it also applies to Mexico-British trade post-brexit. (Source: Reuters) EU postpones decision on biodiesel anti-dumping duties The EU postponed a vote designed to set its response to Argentina's successful World Trade Organization challenge to EU anti-dumping duties on biodiesel imports. The EU set duties in November 2013 of 8.8% to 20.5% for Indonesian producers and between 22% and 25.7% for Argentine producers, in both cases to apply for 5 years. The WTO upheld Argentina's complaint in an appeal ruling in October The major biodiesel exporter had called the EU measures protectionist and said they cost the country almost USD1.6bn in lost sales per year. The EU's case was based on Argentina's imposition of an export duty on the raw material, soybeans, which it argued allowed domestic producers to "dump" biodiesel at unfairly low prices. (Source: Reuters) EU's warns of possible delays to Brexit talks, London confident of schedule Talks between Britain and the EU on their future relationship are now less likely to start in October due to a lack of progress on Brexit divorce issues so far. The EU's top Brexit negotiator Michel Barnier briefed ambassadors from the 27 countries that will remain in the EU after Britain leaves in March 2019 on the outcome of the July round of the monthly divorce talks with London last week. The likelihood of starting the future relationship talks in October appeared to be decreasing. Britain's Brexit government department responded by saying it was confident it would make enough progress by October to move on to talks about the future relationship with the bloc. (Source: Reuters) 4

5 ECONOMIC CALENDAR Date Time Country Event Period Survey Actual Prior Revised 07/28/ :26 IA CPI YoY Jul % 11.00% -- 07/28/ :27 IA CPI MoM Jul % 0.50% -- 07/28/ :07 UE Dubai Airport Cargo Volume YoY Jun % 2.60% -- 07/28/ :10 CO Overnight Lending Rate 27-Jul 5.50% 5.50% 5.75% -- 07/28/ :00 SK Business Survey Manufacturing Aug /28/ :00 SK Business Survey Non-Manufacturing Aug /28/ :00 SK Industrial Production SA MoM Jun 1.60% -0.20% 0.20% -- 07/28/ :00 SK Industrial Production YoY Jun 1.10% -0.30% 0.10% 0.20% 07/28/ :00 SK Cyclical Leading Index Change Jun /28/ :01 UK GfK Consumer Confidence Jul /28/ :30 JN Jobless Rate Jun 3.00% % -- 07/28/ :30 JN Job-To-Applicant Ratio Jun /28/ :30 JN Overall Household Spending YoY Jun 0.50% % -- 07/28/ :30 JN Natl CPI YoY Jun 0.40% % -- 07/28/ :30 JN Natl CPI Ex Fresh Food YoY Jun 0.40% % -- 07/28/ :30 JN Natl CPI Ex Fresh Food, Energy YoY Jun -0.10% % -- 07/28/ :30 JN Tokyo CPI YoY Jul 0.10% % -- 07/28/ :30 JN Tokyo CPI Ex-Fresh Food YoY Jul 0.10% % -- 07/28/ :30 JN Tokyo CPI Ex-Fresh Food, Energy YoY Jul -0.10% % -- 07/28/ :50 JN Retail Sales MoM Jun 0.40% % -1.50% 07/28/ :50 JN Retail Trade YoY Jun 2.40% % 2.10% 07/28/ :50 JN Dept. Store, Supermarket Sales Jun -0.10% % -- 07/28/ :30 AU PPI QoQ 2Q % -- 07/28/ :30 AU PPI YoY 2Q % -- 07/28/ :30 SI Unemployment rate SA 2Q 2.30% % 2.20% 07/28/ :30 NE Producer Confidence Index Jul /28/ :30 FR GDP QoQ 2Q A 0.50% % -- 07/28/ :30 FR GDP YoY 2Q A 1.60% % -- 07/28/ :00 NO Retail Sales W/Auto Fuel MoM Jun % -- 07/28/ :00 FI House Price Index MoM Jun % -- 07/28/ :00 FI House Price Index YoY Jun % -- 07/28/ :45 FR CPI EU Harmonized MoM Jul P -0.40% % -- 07/28/ :45 FR CPI EU Harmonized YoY Jul P 0.80% % -- 07/28/ :45 FR CPI MoM Jul P -0.40% % -- 07/28/ :45 FR CPI YoY Jul P 0.70% % -- 07/28/ :45 FR Consumer Spending MoM Jun -0.40% % -- 07/28/ :45 FR Consumer Spending YoY Jun 1.00% % -- 07/28/ :00 SO PPI MoM Jun % -- 07/28/ :00 SO PPI YoY Jun % -- 07/28/ :00 SO Consumer Confidence Jul /28/ :00 SO Industrial Confidence Jul /28/ :00 TU Economic Confidence Jul /28/ :00 GE CPI Saxony MoM Jul % -- 07/28/ :00 GE CPI Saxony YoY Jul % -- 07/28/ :00 AS GDP SA QoQ 2Q P % -- 07/28/ :00 AS GDP NSA YoY 2Q P % -- 07/28/ :00 SZ KOF Leading Indicator Jul /28/ :00 AS PPI MoM Jun % -- 07/28/ :00 AS PPI YoY Jun % -- 07/28/ :00 SP GDP QoQ 2Q P 0.90% % -- 07/28/ :00 SP GDP YoY 2Q P 3.00% % -- 07/28/ :00 SP CPI MoM Jul P -0.80% % -- 07/28/ :00 SP CPI YoY Jul P 1.50% %

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