PP16795/03/2013(031743) Jan-17

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1 Monday, 8 January, 2018 Jan-17 Feb-17 Mar Jun Aug Nov-17 Dec-17 Jan-18 Research Team research@bimbsec.com.my PP16795/03/2013(031743) Reports Published Economics US Economy: Job gains slow at end of 2017 Economics Malaysia Economy: Exports value reaches new record high in November News Flash MCT: No plans to delist but MGO proceeds; TP: RM 0.81 (Hold) Corporate News AMMB ends JV with ARA Asset, inks deal with Amcorp Prop to manage REIT MAHB's capex to rise 30% per year for airport upgrade Scomi Group's merger to proceed with engineering unit MGB acquires prop development firm for RM2.8m Eduspec partners Shenzhen-Hong Kong's PKU to promote STEM education in China Konsortium Transnasional group's lawsuit against Tan Chong unit dismissed Bursa Malaysia Close Chg +/- Chg % YTD Chg (%) FBMKLCI 1, FBMEMAS 13, FBM100 12, FBMEMAS Shariah 13, FBM Hijrah Shariah 14, Volume (m) 5, Value (MYR m) 3, Economic News US job growth slows in December; wages increase UK productivity growth hits 6-year high after weakest decade since 1820s Euro zone inflation slows, vindicating ECB's easy policy choice China aims to get more cross-border transactions done in yuan India sees slowest growth since 2014 as new tax roils economy OPEC oil cut adherence rises in Dec as Venezuela output slides KLCI Performance KLCI Year-End Target: 1,850 points Regional Indices Commodities (Last Close) Close Chg +/- Chg % YTD Chg (%) Close Chg +/- Chg % DJIA 25, 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 Market Insight % Participation Bought Sold Net KLIBOR 3-mth 3.44 (%) (MYR m) (MYR m) (MYR m) KLIBOR 6-mth 3.56 Local Insti , , KLIBOR 12-mth 3.64 Local Retail , , yr MGS 3.84 Foreign yr MGS 3.90 Total , , Performance of BIMB Stock Coverage Source: Bank Negara Malaysia Source: The Sun, BIMB Securities Top Gainers Weekly Participation Close Chg +/- Chg % Participation (%) Bought (MYR m) Sold (MYR m) Net (MYR m) Prestariang Local Insti , , Axiata Local Retail , , IOI Properties Foreign , , WCT Total , , TH Plantations Top Losers Research Close Chg +/- Chg % Westports IJM Plantations Supermax IHH Healthcare Hartalega Research Source: The Sun, BIMB Securities Research 2

3 Jan'10 Jan'11 Jan'12 Jan'13 Jan'14 Jan'15 Jan'16 Jan'17 REPORTS PUBLISHED Market Insight Economics US Economy Job gains slow at end of 2017 US economy creates 148,000 jobs in December The unemployment rate remains at 17-year low of 4.1% Labor force participation rate unchanged at 62.7% Slower hiring in December, but trend still strong The US job growth decelerated sharply in December. The economy created 148,000 jobs after averaging gains of 232,000 in the prior two months. The weaker outturn in December can be traced to the service sector. Notably, retail employment fell by 20,000 jobs in December as the industry continues to adjust to changing buying patterns both on a seasonal and long-term basis. Hiring also slowed in transportation & warehousing, professional & business services and education & health relative to November. Hiring in the goods-producing sector held up better, rising by 55,000 amid solid gains in construction and manufacturing. Private-sector hiring expanded by 146,000 whilst government payrolls edged up by 2,000. Revisions were relatively minor, subtracting 9,000 from payrolls in November and ober on net. However, the pattern of growth was reversed with November revised up (to 252,000 from 228,000) and ober revised down (to 211,000 from 244,000). The unemployment rate was unchanged at 4.1% in November. Household survey employment rose 104,000, while the labor force expanded by 64,000. The labor-force participation did not budge in 2017 despite more than 2 million jobs added. Participation rate stands at 62.7% in December. Average hourly earnings were up a relatively strong 0.3% in December and accelerated to 2.5% yoy (from a downwardly revised 2.4% in November). For 2017 as a whole, the US economy created just under 2.2 million jobs (December to December) slightly above its 2016 performance of 2.1 million. The unemployment rate fell 0.6 percentage points (from 4.7% last December); double the pace of decline in Chart 1: US Non-Farm Payrolls ( 000)

4 Jan'10 Jan'11 Jan'12 Jan'13 Jan'14 Jan'15 Jan'16 Jan'17 RM'bn % y-o-y Market Insight Malaysia Economy Economics Exports value reaches new record high in November Exports growth moderated to 14.4% yoy in November Imports rose by 15.2% in November Imports surpassed exports for four consecutive month Trade surplus narrowed to RM9.9bn Manufacturing sector maintained as a main driver of export Optimistic outlook for 4Q17 as momentum in global trade to continue Malaysia's exports expanded 14.4% yoy to RM83.5bn on higher manufactured goods demand. Exports continued to register a double digit growth for 12-consecutive months since December 2016 and reached the highest monthly export value ever recorded after the RM82.6bn registered in March Imports rose by 15.2% to RM73.6bn. Trade surplus narrowed to RM9.9bn and making it the 241th consecutive month of trade surplus since November On monthly basis, exports and imports increased by 1.5% and 2.4%, respectively. In seasonally adjusted terms, exports grew by 2.8% whilst imports rallied to 13.6%. Total trade in November 2017 increased by 14.8% yoy to RM157.1bn and compared to previous month it posted an expansion of RM2.9bn or 1.9%. Total trade for the first eleventh months of 2017 amounted to RM1.6tn, grew by 20.8% compared with the same period of Exports totaled RM856.0bn, an increase of 20.4% while imports stood at RM766.1bn, rose by 21.2%. Trade surplus of RM90.0bn was recorded, higher by 13.6% yoy. The total value of trade, exports, imports and trade balance for the first 11 months of 2017 had surpassed that of the whole of 2016, respectively Chart 1: Malaysia: External Trade 16.0 Trade Balance (LHS) Exports (RHS) Imports (RHS) Source: Department of Statistics, BIMB Securities 4

5 CORPORATE NEWS AMMB ends JV with ARA Asset, inks deal with Amcorp Prop to manage REIT AMMB is terminating its JV with Singapore-based ARA Asset Management (Malaysia) Ltd, and is instead signing a new agreement with Amcorp Properties to manage its real estate investment trust. AMMB s wholly-owned subsidiary AmInvestment (AIGB) signed the termination agreement as ARA Asset plans to dispose of its entire 30% shareholding in Am ARA REIT Holdings SdB. This confirms a report in the Dec edition of The Edge Malaysia weekly that ARA Asset may have to divest the 30% stake as it will be setting up its own REIT and there may be a conflict of interest. (Source: The Edge) MAHB's capex to rise 30% per year for airport upgrade MAHB is projecting a 30% rise in annual capex over the next 3 years, as it embarks on a programme to refurbish and upgrade its airports in Malaysia. The company will share the absolute figure only when we announce our year-end result for FY17. Capacity constraints need to be addressed in order to capture traffic growth in future. Apart from the KLIA, which has exceeded its capacity to handle 25m passengers per year since 2016, other airports in Langkawi, Kota Baru, Subang and Penang have all exceeded their capacity. Meanwhile, the airport operator will hold a soft launch of its airside terminal transfer service between KLIA and klia2 in the second quarter of (Source: The Edge) Scomi Group's merger to proceed with engineering unit Scomi Group's three-way-turned-two merger will now proceed with its engineering unit, after shareholders of Scomi Engineering agreed to the proposal today during a court convened meeting (CCM) here. Those who voted for the proposed merger represent 93.52% of the total value of votes held by non-interested Scomi Engineering shareholders, against 6.48% that voted against. On Aug 21 last year, Scomi Group proposed to consolidate its businesses by merging with its engineering and energy units, Scomi Engineering and Scomi Energy Services respectively, via a members' scheme of arrangement involving a share swap and an issuance of warrants. (Source: The Edge) MGB acquires prop development firm for RM2.8m MGB is acquiring property development firm Multi Court Developers SB for RM2.8m. Its unit MGB Land SB is acquiring the entire shareholding of Multi Court from Datuk Pang Shee Pak and Datuk Kok Chee Khung. Multi Court owns a 9.35-hectare land in Batu Pahat, Johor on which a Unit Perumahan Penjawat Awam 1Malaysia (PPA1M) project will be developed with an estimated gross development value of RM93.5m. Multi Court will receive a facilitation fund of RM14.6m from PPA1M for the project. The project is expected to commence from the second quarter of 2018 and is scheduled to be completed in (Source: The Edge) Eduspec partners Shenzhen-Hong Kong's PKU to promote STEM education in China Eduspec is teaming up with PKU-HKUST Shenzhen-Hong Kong Institution (PKU) to promote Science, Technology, Engineering, and Mathematics (STEM) education in schools in China. Eduspec signed an educational cooperation agreement with PKU today. The 3-year collaboration is for the promotion of STEM with Computer Science and also STEM with Robotics Programs in Chinese schools. Under the collaboration, Eduspec being a certified STEM programmes distributor in Asia for the Carnegie Mellon University Robotics Academy (CMRA) will provide PKU with the relevant authorisation documents and confirm that PKU is the teacher training and student examination and certification center for CMRA-Certified STEM Programs in China, including Hong Kong and Macau. (Source: The Edge). Konsortium Transnasional group's lawsuit against Tan Chong unit dismissed A lawsuit filed in August last year by Konsortium Transnasional and 6 companies linked to the group against Tan Chong Motor Holdings has been dismissed. The High Court has allowed its subsidiary Tan Chong Industrial Equipment SB's (TCIE) application to strike out the claim made by the 7 companies. The court has also dismissed an injunction application by the companies, namely Konsortium Transnasional, Transnasional Express SB, Plusliner SB, Syarikat Kenderaan Melayu Kelantan (SKMK), Syarikat Rembau Tampin SB (SRT), Kenderaan Langkasuka SdB (Langkasuka) and MHSB Properties SB. (Source: The Edge) 5

6 ECONOMIC NEWS US job growth slows in December; wages increase US job growth slowed more than expected in December amid a decline in retail employment, but a pick-up in monthly wage gains pointed to labor market strength that could pave the way for the Federal Reserve to increase interest rates in March. Nonfarm payrolls increased by 148,000 jobs last month. Retail payrolls fell by 20,300 in December, the largest drop since March, despite a strong holiday shopping season. Employment data for ober and November data were revised to show 9,000 fewer jobs created than previously reported. Job growth surged in ober and November after being held back in tember by back-to-back hurricanes, which destroyed infrastructure and homes and temporarily dislocated some workers in Texas and Florida. (Source: Reuters) UK productivity growth hits 6-year high after weakest decade since 1820s Britain's economic productivity perked up in the 3 months to the end of tember, growing at its fastest rate in more than 6 years, in contrast to its historically weak performance over the previous decade. Productivity in Britain has stagnated since the global financial crisis even more than in most other advanced economies, and has played a key role in squeezing Britons' living standards. Over the past 10 years productivity growth was the weakest since modern records began and appears to be the slowest since the early 1820s, when Britain was emerging from the Napoleonic wars. During the third quarter of 2017, output per hour worked grew by 0.9% compared with the 3 months before, its first rise since late 2016 and the biggest increase since the second quarter of (Source: The Straits Times) Euro zone inflation slows, vindicating ECB's easy policy choice Inflation in the euro zone slowed as expected in December, vindicating the European Central Bank's decision to keep its policy easy despite growing pressure from Germany and other richer euro zone countries. The ECB would continue buying bonds at least until tember and keep rates low well after to raise inflation to its 2% target. But policymakers from the Netherlands, Germany and other northern countries have voiced their worries about an overly easy policy while economic growth is strong. Prices in the euro zone grew by just 1.4% year on year last month, or 10 basis points slower than in the previous month due to smaller increases in food and energy prices. Once those components are stripped out, so called core inflation was stable at 1.1%. There is no great pressure on the ECB to unwind QE. (Source: Reuters) China aims to get more cross-border transactions done in yuan China will encourage companies to increase their use of yuan for settling cross-border trade deals and support foreigners' use of the currency for direct investments in the country. Beijing has been promoting the international use of the yuan since 2009, and yuan settlement accounted for 16.9% of China's total goods trade in A set of moves unveiled Friday will help improve policies on yuan cross-border businesses, create a sound business environment and serve the Belt and Road initiative. Banks are encouraged to innovate their financial products to help companies settle trade deals in yuan. The PBOC told Chinese banks to allow foreign investors to freely remit their yuan-denominated profits and dividends. (Source: Bloomberg) India sees slowest growth since 2014 as new tax roils economy India forecast its economy will expand at the slowest pace since Prime Minister Narendra Modi came to power in 2014, as a chaotic roll out of a new sales tax roiled supply chains and weakened demand. Gross domestic product will grow 6.5% in the year through March That compares with the 6.6% median estimate in a Bloomberg survey of 20 economists and 7.1% the previous year. While India is still among the world s fastest-growing nations, its expansion is far below potential. Modi s decision in 2016 to invalidate most of the country s cash and the implementation of the goods and services tax have weakened demand and revenue, forcing the government to borrow more. Room for monetary stimulus is also closing as inflation quickens, turning investors bearish on Indian bonds. (Source: Bloomberg) OPEC oil cut adherence rises in Dec as Venezuela output slides OPEC deepened compliance with an oil supply-cutting deal in December due to a further decline in Venezuelan output and extra cuts by Gulf exporters, showing strong commitment to the deal despite higher prices. Adherence to the curbs rose to 128% from 125% in November, the survey found. The UAE for the first time since the deal took effect in January 2017 pumped below its OPEC target, joining Saudi Arabia and Kuwait. The Organization of the Petroleum Exporting Countries is reducing output by about 1.2m bpd as part of a deal with Russia and other non-opec producers. The pact will run until the end of Oil hit its highest since 2015 this week, supported by falling inventories, strong demand and high OPEC compliance. Many producers, still suffering from a 2014 price collapse, are enjoying the rally and the extra revenues. (Source: Reuters) 6

7 Date Time ECONOMIC CALENDAR Coun try Event Period Survey Actual Prior Revised 01/08/ :00 GE Factory Orders MoM Nov 0.00% % -- 01/08/ :00 GE Factory Orders WDA YoY Nov 7.80% % -- 01/08/ :00 FI Trade Balance Nov P m -- 01/08/ :00 CZ Construction Output YoY Nov % -- 01/08/ :00 CZ Industrial Output YoY Nov 5.70% % -- 01/08/ :00 CZ Trade Balance National Concept Nov 5.3b b -- 01/08/2018 RO Interest Rate Announcement Jan % % -- 01/09/ :30 NE Manufacturing Production MoM Nov % -- 01/09/ :30 NE Manufacturing Production YoY Nov % -- 01/09/ :30 NE Industrial Sales YoY Nov % -- 01/09/ :00 GE Industrial Production SA MoM Nov 1.80% % -- 01/09/ :00 GE Industrial Production WDA YoY Nov 4.00% % -- 01/09/ :00 DE Current Account (Seasonally Adjusted) Nov 15.0b b -- 01/09/ :00 GE Trade Balance Nov 21.2b b -- 01/09/ :00 GE Current Account Balance Nov 25.5b b -- 01/09/ :00 GE Exports SA MoM Nov 1.20% % -0.30% 01/09/ :00 GE Imports SA MoM Nov 0.60% % -- 01/09/ :45 FR Trade Balance Nov -4700m m -- 01/09/ :45 FR Current Account Balance Nov b -- 01/09/ :00 SO Trade Balance Nov m -- 01/09/ :00 HU Trade Balance Nov P 675m m -- 01/09/ :00 LN Trade Balance Nov b -- 01/09/ :00 GR Industrial Production YoY Nov % -- 01/09/ :00 PO Trade Balance Nov m -- 01/10/ :00 FI Industrial Production MoM Nov % -- 01/10/ :00 FI Industrial Production WDA YoY Nov % -- 01/10/ :45 FR Industrial Production MoM Nov -0.50% % -- 01/10/ :45 FR Industrial Production YoY Nov 2.80% % -- 01/10/ :45 FR Manufacturing Production MoM Nov -1.10% % -- 01/10/ :45 FR Manufacturing Production YoY Nov 3.00% % -- 01/10/ :30 SW Industrial Orders MoM Nov % -- 01/10/ :30 SW Industrial Orders NSA YoY Nov % -- 01/10/ :30 UK Industrial Production MoM Nov 0.40% % -- 01/10/ :30 UK Industrial Production YoY Nov 1.80% % -- 01/10/ :30 UK Manufacturing Production MoM Nov 0.30% % -- 01/10/ :30 UK Manufacturing Production YoY Nov 2.80% % -- 01/10/ :30 UK Visible Trade Balance GBP/Mn Nov /10/ :30 UK Trade Balance Nov /10/ :30 SV Industrial Production MoM Nov % -- 01/10/ :30 SV Industrial Production YoY Nov % -- 01/10/ :00 IR Industrial Production MoM Nov % -- 01/10/ :00 IR Industrial Production YoY Nov % -- 01/10/ :30 US Import Price Index MoM Dec 0.40% % -- 01/10/ :30 US Import Price Index ex Petroleum MoM Dec 0.10% % -- 01/10/ :30 US Import Price Index YoY Dec 3.10% % -- 01/10/ :30 US Export Price Index MoM Dec 0.30% % -- 01/10/ :30 US Export Price Index YoY Dec % -- 01/10/2018 PD Poland Base Rate Announcement Jan % % -- 01/10/ /15 CH Money Supply M1 YoY Dec 12.60% % -- 01/10/ /15 CH Money Supply M2 YoY Dec 9.20% % -- 01/10/ /15 CH Money Supply M0 YoY Dec 5.60% %

8 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 8