Malaysia September 5, 2017 Construction and Materials ... · PDF fileThe earnings revision...

Malaysia│September 5, 2017

Strategy Note │ Alpha series

IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. IF THIS REPORT IS DISTRIBUTED IN THE UNITED STATES IT IS DISTRIBUTED BY CIMB SECURITIES (USA), INC. AND IS CONSIDERED THIRD-PARTY AFFILIATED RESEARCH.

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Malaysia Strategy Slower earnings growth momentum in 2Q17 but… ■ The earnings revision ratio deteriorated from 0.34x in 1Q17 to 0.26x in 2Q17, the

third-lowest ratio since 1Q08. ■ On top of this, earnings growth momentum slowed in 2Q17 to 2%, vs. 12% in 1Q17. ■ On a positive note, we see value emerging in selected stocks that have corrected. ■ We project EPS growth of 7% for 2017F and 8% for 2018F. ■ We maintain our end-2017 KLCI target at 1,790. Our revised top three picks are

Axiata (replacing Sime Darby), Gamuda, and Tenaga Nasional.

Underachievers continue to trump overachievers in 2Q17 Among the 124 companies that we actively cover, 9% reported results that were above expectations in 2Q17 vs. 11% in 1Q17. The number of companies with results that were below our expectations increased from 32% in 1Q17 to 35% in 2Q17.

Earnings revision ratio was third lowest since 1Q08 Our revision ratio (number of forecasts upgraded vs. number of forecasts downgraded) fell further to 0.26x in 2Q17 vs. 0.34x in 1Q17. This revision ratio figure is the third-lowest attained since 1Q08. We were again disappointed by the high ratio of companies whose results came in below our expectations. These companies were mainly from the agribusiness, auto, media and healthcare sectors. Tech was the only outperformer.

2Q net profit growth slowed to 2% yoy and fell 0.8% qoq 2Q17 market earnings growth slowed to 2% yoy (1Q17: 12% yoy) due to slower earnings growth from agribusiness and banking sectors. However, Malaysian corporates remain on track to deliver their first year of positive earnings growth, after two consecutive years of negative growth. We project market earnings growing by 7% in 2017F and 8% in 2018F.

Maintaining KLCI target of 1,790 for end-2017 We maintain our end-2017 KLCI target of 1,790, which is still based on a 3-year average P/E of 16x. We continue to like the construction, utilities and small-cap sectors. During the results season, we upgraded our ratings for 11 stocks as value emerges following share price corrections. We continue to advise investors to take profit on cyclical stocks that have done well and switch to more defensive sectors.

Changes to our top picks We have revised our top picks. Stocks added to our top big-cap picks list are Axiata, RHB Bank and AirAsia (replacing IHH, Mah Sing and IJM). In the mid to small cap picks list, we added Bonia, Unisem and Inari (replacing CCK, Sasbadi and Oceancash Pacific). Our revised top three picks are Axiata (replacing Sime), Gamuda and Tenaga Nasional.

Figure 1: 2Q17 results by sector

SOURCES: CIMB, COMPANY REPORTS

Malaysia

Highlighted companies

Axiata Group ADD, TP RM6.00, RM4.93 close

We expect Axiata’s core EPS to rebound a strong 29%/50% in FY18F/19F due to a) much higher contributions from XL, 2) net profit breakeven for Airtel by end-2018, and 3) cessation in equity accounting for Idea's losses post-merger with Vodafone.

Gamuda ADD, TP RM6.15, RM5.34 close

Gamuda is the frontrunner in the rail tunnelling tenders totalling RM41bn across all projects. In the short term, resolution to the sale of its 40%-owned Splash is the key event catalyst that may lead to special dividends.

Tenaga Nasional ADD, TP RM15.70, RM14.28 close

Tenaga offers resilient organic earnings growth potential. In Malaysia; it is building four new power plants, which should raise its generation earnings in 2017-2020F, in our view. In addition, stronger earnings driven by the new assets it acquired in the past one year, is another potential re-rating catalyst for the stock.

FBMKLCI performance in 2016 and 2017

Insert

Analyst(s)

Ivy NG Lee Fang, CFA

T (60) 3 2261 9073 E [email protected]

1,550

1,600

1,650

1,700

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1,800

1,850

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2016 2017

Recommendation Results vs.

Q-o-Q Y-o-Y expectations

CIMB Stocks Universe -0.6% 2.0%

Agribusiness NEUTRAL -35.8% 26.5% Below

Automotive UNDERWEIGHT nm nm Below

Aviation NEUTRAL 40.6% 34.4% In-line

Banking & Finance NEUTRAL 1.7% 18.8% Below

Chemicals NEUTRAL -32.5% 24.5% In-line

Conglomerate OVERWEIGHT 166.0% 34.8% In-line

Construction and Materials OVERWEIGHT 14.2% -19.7% In-line

Consumer NEUTRAL -5.2% -10.0% In-line

Healthcare NEUTRAL -52.2% -47.4% Below

Industrial Goods and Services OVERWEIGHT -7.0% 20.5% In-line

Insurance OVERWEIGHT -16.4% -20.1% In-line

Media NEUTRAL 62.5% -15.3% Below

Oil Equipment and Services NEUTRAL -2.0% -19.1% In-line

Property & REITs NEUTRAL -21.8% 16.5% In-line

Services OVERWEIGHT 14.0% 10.1% Below

Shipping UNDERWEIGHT -9.1% -0.6% In-line

Technology NEUTRAL -0.6% 26.8% Above

Telecommunications NEUTRAL -0.3% 2.3% In-line

Transport Infrastructure OVERWEIGHT 7.4% 9.9% In-line

Travel & Leisure NEUTRAL -1.7% -7.1% In-line

Utilities OVERWEIGHT 20.6% -19.8% In-line

2Q17 performance

Malaysia│Strategy Note – Alpha Series│September 5, 2017

2

KEY CHARTS

Revision ratio deteriorates in 2Q17 Our revision ratio (number of forecasts upgraded vs. number of forecasts downgraded) fell to 0.26x in 2Q17 vs. 0.34x in 1Q17. This is because a lower number of companies in our universe posted earnings that were above our expectations in 2Q17 compared to those in 1Q17.

More underachievers vs. overachievers Of the 124 companies that we track, 35% missed our expectations during the 2Q17 results season, higher than the 32% that missed our earnings during the 1Q17 season. The percentage of companies that beat expectations fell from 11% in 1Q17 to 9% in 2Q17. Those companies whose results were in line with our expectations declined from 57% to 56%.

Slower yoy earnings growth in 2Q17 2Q17 earnings rose 2% yoy, thanks to better performances from the banking, agribusiness, aviation, chemical and technology sectors. This is slower compared to the 11.8% yoy growth achievement in 1Q17, largely due to the higher earnings base in 2Q16 (+8.4% qoq). However, 2Q17 earnings fell 0.6% qoq, mainly due to weaker earnings in the healthcare, agribusiness and chemical sectors.

KLCI’s premium widens vs. the region Malaysia’s prospective P/E premium over the region widened slightly from 5-9% in May 2017 to 6-9%, currently. We believe this could be due to EPS cuts during the earnings season.

SOURCE: CIMB RESEARCH, COMPANY REPORTS

0.61

0.32 0.41 0.43

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Positive momentum for market

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1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Companies beating expectations Companies meeting expectations Companies coming below expectations

5.5%

-6.1%-7.2%

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qoq chg yoy chg

As at 05 Sep 17

2016 2017F 2018F 2019F 2016 2017F 2018F 2019F

FBMKLCI 18.7x 16.7x 15.5x 14.4x -1% 12% 8% 8%

FSSTI 13.5x 14.8x 13.7x 12.8x 11% -9% 8% 7%

JCI 25.4x 16.5x 14.4x 13.3x 39% 54% 14% 8%

SET 17.2x 16.1x 14.6x 13.3x 28% 7% 10% 10%

Simple Region x KL avg 18.7x 15.8x 14.2x 13.2x 26% 17% 11% 8%

KLCI PER premium vs region 0% 6% 9% 9%

---------------Core EPS Growth-----------------------------------Core PE--------------------


3

Figure 2: Sector Comparisons - Big cap picks


Figure 3: Sector Comparisons – Mid and Small cap picks


Share price Target Price

(local curr) (local curr) CY2017 CY2018 CY2017 CY2018 CY2016 CY2017 CY2018 CY2017 CY2018 CY2016 CY2017

AirAsia Berhad AIRA MK Add 3.32 3.51 2,598 12.1 10.1 65.8% 1.25 1.09 26.7% 11.8% 11.5% 8.5 8.2 3.6% 1.8%

Astro Malaysia ASTRO MK Add 2.68 3.25 3,269 20.2 18.8 1.4% 22.34 22.34 111.3% 109.9% 118.9% 9.4 8.9 4.5% 4.9%

Axiata Group AXIATA MK Add 4.93 6.00 10,387 36.7 28.6 -12.9% 1.83 1.78 6.5% 4.9% 6.3% 6.4 5.5 1.6% 1.4%

Bumi Armada BAB MK Add 0.74 0.94 1,010 9.7 5.4 35.7% 0.71 0.63 -1.6% 7.6% 12.2% 11.2 8.4 0.0% 0.0%

Gamuda GAM MK Add 5.34 6.15 3,067 18.2 16.2 6.4% 1.83 1.79 9.6% 10.1% 11.2% 17.9 16.3 2.2% 2.2%

MY E.G. Services MYEG MK Add 2.12 2.68 1,790 29.6 19.9 47.9% 11.73 8.30 43.3% 46.0% 48.8% 25.1 16.6 0.8% 1.2%

RHB Bank Bhd RHBBANK MK Add 5.05 5.96 4,741 10.2 9.2 -10.0% 0.79 0.74 9.2% 8.1% 8.3% na na 2.4% 2.9%

Sime Darby Bhd SIME MK Add 9.00 10.00 14,331 27.6 25.9 1.8% 1.57 1.58 5.6% 5.9% 6.1% 26.9 16.6 2.7% 2.6%

Tenaga Nasional TNB MK Add 14.28 15.70 18,921 11.3 11.4 -4.1% 1.39 1.29 14.6% 13.0% 11.8% 6.8 6.6 2.7% 3.6%

YTL Power International YTLP MK Add 1.41 1.80 2,561 16.4 14.9 -13.2% 0.86 0.86 6.8% 5.3% 5.8% 12.1 12.9 5.3% 5.0%

Average 19.2 16.0 11.9% 4.43 4.04 23.2% 22.3% 24.1% 13.8 11.1 2.6% 2.6%

P/BV (x) Recurring ROE (%) EV/EBITDA (x) Dividend Yield (%)Company Bloomberg Ticker Recom.

Market Cap

(US$ m)

Core P/E (x) 3-year EPS

CAGR (%)

xxx

Share price Target Price

(local curr) (local curr) CY2017 CY2018 CY2017 CY2018 CY2016 CY2017 CY2018 CY2017 CY2018 CY2016 CY2017

Bonia Corporation BON MK Add 0.57 0.82 107 13.4 12.2 -4.9% 1.03 0.97 7.6% 7.9% 8.2% 4.9 4.3 2.2% 2.2%

DRB-Hicom DRB MK Add 1.58 2.35 715 na 92.2 na 0.52 0.52 -9.0% -5.7% 0.6% 11.8 7.5 0.0% 0.0%

EITA Resources Bhd EITA MK Add 1.70 2.40 52 10.0 8.6 14.7% 1.37 1.23 17.2% 14.6% 15.0% 5.5 5.6 2.5% 3.1%

Inari-Amertron Bhd INRI MK Add 2.54 2.75 1,192 20.4 16.6 21.2% 5.52 4.89 26.2% 29.5% 31.2% 14.3 11.9 2.8% 3.7%

Kossan Rubber Industries KRI MK Add 7.20 7.55 1,078 23.0 18.1 4.4% 4.00 3.60 18.6% 17.9% 20.9% 14.1 11.5 1.5% 2.0%

LBS Bina Group LBS MK Add 1.93 2.55 306 11.0 7.9 16.4% 1.07 1.00 10.3% 9.3% 12.5% 9.2 6.1 5.4% 5.8%

Muhibbah Engineering MUHI MK Add 2.85 3.36 321 10.4 9.9 16.6% 1.29 1.23 11.7% 12.7% 12.8% 4.2 3.6 1.9% 2.1%

Unisem UNI MK Add 4.10 5.00 704 15.2 13.2 8.4% 1.97 1.81 12.6% 13.1% 14.3% 6.8 5.7 2.7% 2.9%

Average 14.8 22.3 11.0% 2.10 1.91 11.9% 12.4% 14.4% 8.9 7.0 2.4% 2.7%

P/BV (x) Recurring ROE (%) EV/EBITDA (x) Dividend Yield (%)Company Bloomberg Ticker Recom.

Market Cap

(US$ m)

Core P/E (x) 3-year EPS

CAGR (%)


4

2Q17 results review

ANALYSIS OF THE REPORTING SEASON

Of the 124 companies that we track, 35% missed our expectations during the recently-concluded reporting season. This is higher than the 32% that missed during the May results season. On top of this, the percentage of companies that beat our expectations fell from 11% (1Q17) to 9% (2Q17). Only the technology sector posted earnings that were above expectations. The sectors that disappointed in terms of earnings delivery in 2Q17 included the banking and finance, healthcare, media, services and agribusiness sectors.

Figure 4: 2Q17 results vs. our forecasts


Figure 5: Performance relative to expectations in the reporting seasons


Revision ratio

Our revision ratio (number of forecasts upgraded vs. number of forecasts downgraded) deteriorated to 0.26x in 2Q17, from 0.34x in 1Q17. The latest revision ratio is the third-lowest since 1Q08. The yoy earnings growth slowed

Above In line Below Total Above In line Below

Agribusiness 0 3 4 7 0 43 57

Automotive 0 0 3 3 0 0 100

Aviation 0 2 0 2 0 100 0

Banking & Finance 0 8 1 9 0 89 11

Chemicals 1 0 1 2 50 0 50

Conglomerate 1 0 1 2 50 0 50

Construction and Materials 2 7 2 11 18 64 18

Consumer 1 9 5 15 7 60 33

Healthcare 0 3 2 5 0 60 40

Industrial Goods and Services 0 4 8 12 0 33 67

Insurance 0 2 0 2 0 100 0

Media 0 1 3 4 0 25 75

Oil and Gas 2 0 3 5 40 0 60

Property & REITs 1 12 3 16 6 75 19

Services 0 1 1 2 0 50 50

Shipping 0 1 0 1 0 100 0

Technology 2 7 0 9 22 78 0

Telecommunications 1 2 1 4 25 50 25

Transport Infrastructure 0 1 1 2 0 50 50

Travel & Leisure 0 3 1 4 0 75 25

Utilities 0 4 3 7 0 57 43

Total 11 70 43 124 9 56 35

--- 2Q17 vs. our forecasts --- ---------------- % ----------------

Title:

Source:

Please fill in the values above to have them entered in your report

8%11%

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1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Companies beating expectations Companies meeting expectations Companies coming below expectations


5

from 12% in 1Q17 to 2% in 2Q17 due to weaker earnings growth from the utilities, industrials, healthcare, insurance, media as well as travel and leisure sectors. Positive earnings surprises came mainly from the technology sector.

Figure 6: Revisions up/revisions down (x)


Market earnings growth

2Q17 market earnings were up 2% yoy due to stronger earnings growth from the agribusiness, aviation and technology sectors. These more than offset the earnings declines from the healthcare, construction and material, utilities, oil and gas, as well as media sectors.

On a qoq basis, 2Q17 earnings fell 0.6%, mainly due to weaker earnings from the property, agribusiness and healthcare sectors. Seasonal factors were partly responsible for the weaker qoq earnings. On top of this, the declines in net profit were also due to provisions for receivables, volatile raw material costs, and margin squeeze in selected sectors due to competition.

Figure 7: Qoq and yoy growth rates in core net profit for CIMB universe


Changes in our estimates

In the past three months, we have revised up our CY17F and CY18F market core net profit forecasts by 3.3% and 4.7%, respectively. This is an improvement from the negative earnings revision of 1.7% registered in 1Q17. The positive earnings revisions came mainly from the inclusion of Lotte Chemical in our

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qoq chg yoy chg


6

earnings universe, as well as earnings upgrades for Bumi Armada, UMW Oil and Gas and Axiata.

We added Lotte Chemical’s earnings into our market earnings projection following our initiation note on 23 Aug 2017 with an Add call and target price of RM8.50. We project Lotte Chemical’s net profit to grow by 22% in FY18F and 28% in FY19F, driven by capacity growth of 9% and 18%, respectively.

We upgraded Axiata’s FY17-19F net profit forecasts by 13.7-24.5% to reflect stronger earnings from Dialog and Robi, and the cessation of equity accounting for Idea's losses from 4Q18F onwards.

We raised Bumi Armada’s FY17F core net profit by 31% as new FPSO revenue streams are starting earlier than forecast. We lowered our FY17-19F core loss forecasts for UMW Oil and Gas by 25-56% on the back of a downward revision in operating costs, as UMW-OG had embarked on cost-cutting efforts.

Figure 8: Quarterly earnings revisions

SOURCE: CIMB RESEARCH, COMPANY

CIMB vs. Bloomberg consensus estimates

Following our latest earnings revision, we now expect the KLCI’s CY17F net profit to grow by 7.2% (8.2% core net profit growth estimated after 1Q17 results), higher than the Bloomberg consensus’ 5.9% EPS growth (4.8% EPS growth after 1Q17 results). Our 2018 and 2019 KLCI core net profit growth of 8% and 7.5%, respectively (7.8% and 7.5% growth post 1Q17 results), are also much higher than the consensus’ +6.1% and -1.2%, respectively. Our more optimistic earnings forecasts against consensus for FY17F stem from our more bullish view of the earnings prospects of the banking sector.

Figure 9: CIMB vs. consensus KLCI EPS growth

SOURCES: CIMB, BLOOMBERG

Net profit-to-GDP growth ratio

We forecast that the KLCI’s net profit-to-nominal GDP growth ratio will turn positive to 1.1x in 2017 and 1.2x in 2018, after two consecutive years when net profit trailed behind the country’s GDP growth.

Title:

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End Nov-15 End Feb-16 End May-16 End Aug-16 End Nov-16 End Feb-17 End May-17 End Aug-17

CY16 FY17 FY18

CY17F CY18F CY19F

CIMB estimates 7.2% 8.0% 7.5%

Bloomberg consensus 5.9% 6.1% -1.2%


7

Figure 10: FBM KLCI’s net profit growth to nominal GDP growth ratio (x)

SOURCES: BNM, CIMB ESTIMATES

Figure 11: Quarterly real GDP growth vs. FBM KLCI

SOURCES: CIMB ESTIMATES, BNM

Title:

Source:


0.1

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2Q17 Real GDP yoy = 5.8%


8

VALUATIONS AND RECOMMENDATIONS

Following the latest results season, we revise down our 2017F market EPS growth to 7.2% (compared with 8.2% EPS growth, three months back), due mainly to earnings downgrades at DIGI, Maybank, Tenaga, Petronas Dagangan, Sime Darby and IHH. Given the strong earnings growth registered in 1H17, our projection suggests that market earnings growth for the 2H17F will likely be slightly weaker compared to 1H17’s.

We maintain our KLCI target for end-2017 at 1,790 to reflect the three-year moving average P/E of 16x.

Our preferred sectors continue to be: i) construction, for newsflows and new orderbook from major infrastructure jobs like the RM28bn MRT2 project; ii) utilities, for their defensive earnings and laggard play; and iii) selected smaller cap stocks for their superior earnings growth.

Figure 12: FBMKLCI's 12M forward core P/E and standard deviation

SOURCES: CIMB, COMPANY REPORTS, BLOOMBERG

Figure 13: Sensitivity of FBMKLCI level at various P/E multiples

SOURCES: CIMB ESTIMATES

FBMKLCI = 1,773

12m PE = 16.5x

5

7

9

11

13

15

17

19

21

23

25

Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

+3SD

+2SD

+1SD

-1SD

-2SD

-3SD

3-yr moving avg

FBMKLCI = 1,773

12m PE = 16.5x

(x)

FBMKLCI 12M Forward P/E (x)

1,773 16.5

Mean 1,722 16.0

+1SD 1,796 16.7

+2SD 1,870 17.4

+3SD 1,945 18.1

-1SD 1,647 15.3

-2SD 1,573 14.7


9

Figure 14: Price-to-book ratio of FBMKLCI

SOURCES: CIMB, BLOOMBERG, COMPANY REPORTS

Figure 15: Sectoral reported core net profit and related valuations


Figure 16: FBMKLCI Statistics


Title:

Source:


1.0

1.5

2.0

2.5

Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

(x)

CY2017 CY2018 CY2017 CY2018 CY2017 CY2018 CY2017 CY2018 CY2017 CY2018

Agribusiness 19.7% 11.0% 24.5 22.1 2.2 2.1 9.0% 10.0% 2.3% 2.3%

Automobiles and Parts nm 58.4% nm 17.4 1.7 1.7 5.3% 9.7% 2.7% 4.2%

Aviation -44.4% 19.0% 13.2 11.1 1.3 1.1 10.8% 10.6% 1.6% 1.9%

Banks & Finance 8.9% 8.1% 13.0 12.1 1.4 1.3 10.9% 10.8% 4.0% 4.2%

Chemicals 3.9% 10.4% 15.4 13.9 1.6 1.4 11.2% 10.8% 2.4% 2.5%

Conglomerates 111.5% 50.4% 36.2 24.1 1.4 1.4 3.7% 5.4% 2.9% 3.4%

Construction and Materials -1.0% 8.6% 18.1 16.7 1.4 1.4 7.8% 8.6% 2.5% 2.7%

Consumer 5.4% 12.7% 24.3 21.6 6.1 5.8 26.0% 27.7% 3.5% 3.7%

Healthcare -0.8% 25.7% 51.2 40.7 2.2 2.1 4.4% 5.3% 0.6% 0.7%

Industrial Goods and Services 8.9% 20.1% 23.5 19.6 3.6 3.3 16.2% 17.7% 1.9% 2.3%

Insurance -3.2% 10.1% 16.1 14.7 0.1 0.1 22.1% 22.1% 3.0% 3.3%

Media -10.7% 11.6% 21.5 19.3 4.4 4.4 20.1% 22.9% 6.1% 5.1%

Oil Equipment and Services 18.3% 59.5% 33.6 21.9 1.3 1.3 4.0% 6.0% 2.7% 2.1%

Property & REITs 3.9% 14.3% 19.1 16.9 1.2 1.2 6.6% 7.2% 4.2% 4.1%

Services 127.6% 118.8% 20.3 9.3 3.6 2.8 18.3% 33.8% 2.5% 3.8%

Shipping 8.5% -20.5% 64.3 80.8 3.7 3.6 6.0% 4.6% 0.5% 0.5%

Technology 33.3% 23.8% 20.4 16.4 4.0 3.5 21.2% 23.0% 1.9% 2.5%

Telecommunications -2.7% 5.6% 26.2 25.0 3.8 3.7 15.1% 15.2% 3.1% 3.6%

Transport Infrastructure 14.0% 12.8% 28.0 25.0 2.5 2.4 9.2% 10.0% 2.7% 3.0%

Travel & Leisure 20.7% 18.3% 18.7 15.8 1.3 1.2 6.9% 7.8% 1.7% 1.8%

Utilities -5.2% 2.4% 13.7 13.4 1.5 1.4 11.4% 11.0% 3.7% 3.9%

-----Div yield----------Earnings growth----- -----------Core PE----------- -----------P/BV----------- -----Recurring ROE-----

FBMKLCI Statistics 2015 2016 2017F 2018F 2019F

Core P/E (x) 18.5x 18.7x 17.5x 16.2x 15.0x

Core Net Profit Growth (%) 2.5% -0.9% 7.2% 8.0% 7.5%

P/BV (x) 2.0x 1.8x 1.7x 1.6x 1.5x

Dividend yield (%) 2.9% 3.1% 3.4% 3.5% 3.7%

Non-bank net gearing (%) 29.6% 29.4% 27.5% 23.4% 18.6%

Recurring ROE 10.7% 9.9% 10.0% 10.1% 10.1%


10

Regional comparison

Malaysia’s prospective P/E premium over the region has widened from 5-9% in May 17 to 6-9% currently. We believe this was mainly due earnings cuts during the recent results season.

Figure 17: Regional valuations

SOURCES: CIMB, BLOOMBERG

Portfolio investment flows

The net portfolio funds flow turned positive in 2Q17 after three consecutive quarters of outflows. 2Q17’s net portfolio fund inflows were RM16bn against fund outflows of RM31.9bn in 1Q17.

Figure 18: Quarterly net portfolio fund flows into Malaysia

SOURCES: BNM

Recommendation changes

We upgraded eleven stocks over the past three months, against six in the quarter before that, while the number of downgrades fell from 15 to 11 stocks. Our downgrade-to-upgrade ratio improved from 3.3x (May 2017) to 1x currently. The key upgrades were Axiata, AirAsia, Affin, Bumi Armada and Bonia to Add. Many of our downgrades came from the banks, industrial and consumer sectors and they were either due to weaker-than-expected earnings prospects or limited upside to share price, following their strong performance in the market.

As at 05 Sep 17

2016 2017F 2018F 2019F 2016 2017F 2018F 2019F

FBMKLCI 18.7x 16.7x 15.5x 14.4x -1% 12% 8% 8%

FSSTI 13.5x 14.8x 13.7x 12.8x 11% -9% 8% 7%

JCI 25.4x 16.5x 14.4x 13.3x 39% 54% 14% 8%

SET 17.2x 16.1x 14.6x 13.3x 28% 7% 10% 10%

Simple Region x KL avg 18.7x 15.8x 14.2x 13.2x 26% 17% 11% 8%

KLCI PER premium vs region 0% 6% 9% 9%

---------------Core EPS Growth-----------------------------------Core PE--------------------

Title:

Source:


-70,000

-50,000

-30,000

-10,000

10,000

30,000

50,000

1Q-0

8

3Q-0

8

1Q-0

9

3Q-0

9

1Q-1

0

3Q-1

0

1Q-1

1

3Q-1

1

1Q-1

2

3Q-1

2

1Q-1

3

3Q-1

3

1Q-1

4

3Q-1

4

1Q-1

5

3Q-1

5

1Q-1

6

3Q-1

6

1Q-1

7

Fund inflow s in 2Q17 = RM16.0bn

Higher quarterly inflow on record in 2Q11 = RM48bn

Massive outflows in 3Q08 = RM55.3bn

Massive outflows in 4Q08 = RM33.2bn

RMm


11

Figure 19: Recommendation changes over the past 3 months

CIMB's big cap picks

AirAsia

AirAsia recently disposed of its 50% stake in AACOE for US$100m, and we think it can get a similar price for its 25% stake in AAE. It is also close to the disposal of a 70% stake in AAC. We believe all of the proceeds will be distributed as special dividends next year, with the above disposals worth RM1.16/share, excluding GTR. Meanwhile, the operating environment in Malaysia is strong and AirAsia should see stronger yields in 2H17F. Maintain Add, with a target price of RM3.51, based on 9x CY18F P/E and adding RM1.16/share in special dividends.

Astro Malaysia

We like Astro for its relatively defensive earnings compared to other media players and lower susceptibility to the volatile adex market. We expect stronger earnings in FY18F driven by higher ARPU on the back of the sports package price revision and higher take-up of value-added services. Moreover, we also project lower content costs in FY18F due to a reduction in sporting events

Upgrades

Affin Holdings (H to A) - Attractive valuation and benefits from Affinity

AirAsia Berhad (H to A) - Special dividend to be declared soon, while operating performance

strong

Axiata (H to A) - Strong 29%/50% core net profit recovery in FY18F/19F and attractive valuations

Bonia (H to A) - Better cost controls and shaving off loss-making boutiques to improve margins

Bumi Armada (H to A) - Existing projects nearing full acceptance, while also bidding for new

contracts

Eco World International (H to A) - Attractive valuations

Karex (R to H) - Share price have corrected significantly since our downgrade. We expect strong

performance from margin improvement in the tender segment

Magnum (R to H) - Share price retraced 18.5% since last downgrade, estimated FY17-19F

dividend yields of 5.3-5.6% appear attractive

Pharmaniaga (H to A) - We expect earnings to improve sequentially, while share price should be

boosted by higher supply of drugs to MOH and newsflow on renewal of the Concession agreement

UMW Oil & Gas (R to H) - Share price corrected significantly since the announcement of rights

issue

Unisem (H to A) - Better earnings visibility in 2H17 and attractive valuation

Downgrades

BANKS (O to N) - Negative impact from MFRS 9 and unattractive valuations

BIMB (A to H) - Negative impact from plan for Maybank i-shares

Berjaya Food (H to R) - Rich valuations of 25x FY18F P/E

Bison Consolidated (A to H) - Growth prospects fairly priced in

Bison Consolidated (H to R) - Share price has run ahead of fundamentals and concerned on

share price overhang from placement

BREWERS (O to N) - Sector's risk-reward profile is now less attractive but dividend yields

continue to remain supportive

Cypark Resources (A to H) - Rich valuation; earnings growth prospects reflected in share price

Eco World Development (A to H) - Margin risks and limited share price upside

Felda Global Ventures (H to R) - Concerns over uncertainties on its future direction following the

suspension of the group's CEO and CFO for an indefinite period of tim

GHL Systems (A to H) - Rich valuation; share price has appreciated 70% ytd

GHL Systems (H to R) - Rich valuation; share price running ahead of fundamental

Hong Leong Bank (H to R) - Rich valuation; highest P/E among Malaysian banks

Kawan Food (A to H) - Stock valuation is not cheap

Malaysian Pacific Industries (A to H) - Rich valuation; share price has appreciated 80% since

upgrade in Jan-17

Top Glove (A to H) - Share price have appreciated more than 14% since our upgrade. Valuations

have priced in the sector's improved supply-demand dynamics leading to better glove demand

Note: A = ADD, H = HOLD, R = REDUCE, O = OVERWEIGHT, N = NEUTRAL, U = UNDERWEIGHT


12

compared to FY17. The stock also offers attractive CY17-18F yields of 4.9%-5.3%.

Axiata Group

We expect Axiata's core EPS to rebound 29%/50% yoy in FY18F/19F due to: a) much higher contributions from XL on strong revenue growth and better EBITDA margin, 2) Airtel Bangladesh reaching net profit breakeven by end-2018, and 3) cessation in equity accounting for Idea's losses post merger with Vodafone, possibly completing in 4Q18. Celcom's revenue has stabilised in the last three quarters and we expect earnings to be stable yoy in FY18F, then grow 10% in FY19F. As per Axiata's guidance, dividend payout ratio should revert to 85% in FY18F, from 50% in FY16-17F. Axiata's FY18F EV/OpFCF of 15.0x is at a 12% discount to the ASEAN telco average and should drop further to 10.2x in FY19F. Axiata is our top Malaysian telco pick.

Bumi Armada

We believe there are four positives that should drive BAB's share price in the next six months. First, the LukOil contract for the Armada Installer in the Caspian Sea has been extended into 2018. Second, BAB should receive final acceptance for the FPSO Olombendo by 3Q/4Q17F. Third, FPSO Kraken has already been receiving cashflows from mid-2017 and should achieve final acceptance by 3Q/4Q17F. Last, the FPSO Karapan Armada Sterling 3 achieved final acceptance on 22 Jul and its full charter hire should contribute to the 3Q17F results. Our SOP-based target price remains RM0.94 and we have an Add call.

Gamuda

In 2H17, we expect Gamuda to benefit from larger-value contract awards, backed by its targeted win of RM10bn by end-2017. Key projects include a sizeable portion of the RM55bn East Coast Rail Link (ECRL) and RM9bn LRT 3's tunnelling package. Gamuda remains our top pick for the rail theme. Other potential newsflow in 2H17 that could be positive for the share price include those relating to MRT 3 (circle line) and KL-Singapore HSR. Key catalysts are contract wins and revival of the sale of the 40%-owned water asset Splash.

My E.G. Services

The successful nationwide launch of the GST monitoring (GSTM) Phase 1 (target 50.000 F&B outlets nationwide) would be a potential rerating catalyst for the stock. Currently GSTM's focus is the Klang Valley but the company is targeting a nationwide launch in 2H. Another potential catalyst for the stock is the government’s finalisation of the proposed 50 land sites for MyEG to build foreign worker accommodation hostels nationwide.

RHB Bank

RHB Bank remains an Add and our top pick for the sector given (1) the benefits from the IGNITE 17 transformation programme, and (2) its attractive valuation. Its FY18 P/E of about 9.1x is below the five-year average of 10.4x (for RHB Bank) and the sector’s average of 12x. The IGNITE 17 transformation programme would help the group to improve its (1) operating efficiency, (2) fee income generation, and (3) market share in its preferred market segments, such as SME banking.

Sime Darby

We like Sime Darby for the expectation of a share price rerating on its plans to demerge and list its plantation and property arms, as well as better earnings prospects in view of the recovery in new equipment orders in future quarters. We expect these factors to boost sentiment on the stock.

Tenaga Nasional


13

Tenaga offers strong organic earnings growth potential. In Malaysia, it is building four new power plants, which should raise its generation earnings in 2017-2020F, in our view. Stronger earnings driven by the new assets it acquired in the past one year is another potential re-rating catalyst for the stock. The stock trades at 11x CY18 P/E, below the utilities sector mean of 13x.

YTL Power

We believe YTL Power's profit has bottomed in FY6/17 as the earnings of Power Seraya have improved, while the losses of YES have narrowed. We also think that its share price has not reflected the value of its power plant projects in Indonesia and Jordan, which can potentially generate double-digit rates of return.

CIMB’s smaller cap picks

Bonia

Going forward, we think that the group should be able to fully reap the benefits of the closure of its non-profitable licensed brands boutiques, as well as capture the full-year profit contribution from its Braun Buffel (BB) Indonesia stores in FY18F.

DRB-Hicom

We like DRB-Hicom's earnings recovery story driven by the Proton-Geely proposed joint venture (JV). We expect Geely to drive Proton’s earnings recovery, on the back new initiatives such as platform sharing, technology transfer, etc. Moreover, we also expect DRB to benefit following the consolidation of its logistics assets under Pos Malaysia, riding on the growing e-commerce activities.

EITA Resources

Potential catalysts over the next few months include securing one of the packages for the MRT Phase 2 elevator jobs. The winner of this job should be announced in the next 3-6 months. In addition, we understand tenders for the LRT elevator jobs should be out soon. The company stands a good chance of securing the MRT2 and LRT3 elevator jobs as it is the only major domestic player in this market segment.

Inari-Amertron

Management maintained its 15% annual revenue growth guidance in FY18-19, driven by robust RF demand and higher volume loading in IOT, IIS and ISL. We believe Inari’s growth prospects remain intact driven by its strategy of diversifying earnings beyond RF. We expect an EPS CAGR of 19% in FY17-20F. Inari remains our top pick in the Malaysian semiconductor sector.

Kossan Rubber

Kossan Rubber Industries is our top pick in the glove sector. We expect strong earnings momentum beginning 2H17, in tandem with a 34% increase in production capacity by end-2018. While the group's capacity has remained unchanged at 22bn pieces annually since end-2015, Kossan is adding 7.5bn annual capacity in phases by 1H18, with the first 3bn by end-3Q17. Valuations are also lagging behind its peers at 17x CY18 P/E, vs. Top Glove at 18.2x CY18 P/E and Hartalega at 28x CY18 P/E.

LBS Bina Group

LBS has consistently grown its new property sales by more than 20% in the past two years, thanks to its focus on mass-market residential property. This year, it aims to grow its sales by another 23% via the launch of more affordable township projects. Stronger sales performance is the key potential rerating catalyst for LBS's share price.


14

Muhibbah Engineering

At an attractive CY17-18 P/E of 9-10x (30-40% discount to 15x sector P/E), Muhibbah remains our top small/mid-cap pick for the growth in domestic marine/port infra contracts. Potentially stronger earnings in 2H17F would be driven by its robust Cambodian airport concessions, higher infra margins and de-gearing move that arises from a substantial overseas variation order (VO) claims. Key catalysts are contract wins, potential M&A deal for cranes ops, and strong quarterly results.

Unisem

We expect Unisem to record stronger earnings in 2H17F driven by resilient industry demand outlook and its strategic shift towards advanced packaging portfolio. We expect narrowing losses from its Batam operations in FY17F vs. the RM27m net loss in FY16 due to restructuring exercise, with the appointment of a new management team and investment in equipment to increase automation. The stock trades at 13x CY18 P/E, below the sector mean of 15x.

Figure 20: CIMB’s picks

Company Price TP Upside MCap Target price basis 3-year

% (RMm) CY17E CY18E CAGR CY17E CY18E CY17E CY18E CY17E CY18E

Big caps (Mkt Cap > RM10bn)

Tenaga Nasional 14.28 15.70 9.9% 80,811 12.5x CY18 P/E 11.3 11.4 0.0% 12.8% 11.8% -5.4% -0.9% 3.6% 3.5%

Sime Darby Bhd 9.00 10.00 11.1% 61,208 SOP 27.6 25.9 6.0% 5.7% 5.8% 15.5% 6.6% 2.6% 2.9%

IHH Healthcare Bhd 5.99 6.99 16.7% 49,352 SOP 58.8 46.1 6.0% 3.8% 4.6% -3.2% 27.5% 0.4% 0.4%

Axiata Group 4.93 6.00 21.7% 44,361 SOP 36.7 28.6 -9.3% 5.0% 6.3% -15.8% 28.5% 1.4% 3.0%

RHB Bank Bhd 5.05 5.96 18.0% 20,251 DDM 10.2 9.2 3.7% 8.4% 8.3% 4.0% 11.1% 2.9% 3.3%

Malaysia Airports Holdings 9.00 9.52 5.8% 14,933 DCF 45.6 26.8 214.4% 3.8% 6.4% 26.3% 70.1% 1.6% 2.8%

Astro Malaysia 2.68 3.25 21.2% 13,962 DCF 20.2 18.8 4.5% 111.0% 119.1% 7.4% 7.4% 4.9% 5.3%

Gamuda 5.34 6.15 15.1% 13,098 10% discount to RNAV 18.2 16.2 6.4% 10.1% 11.2% 8.7% 12.2% 2.2% 2.2%

IJM Corp Bhd 3.34 3.87 15.9% 12,117 10% discount to RNAV 17.7 17.0 -0.2% 9.0% 9.4% -1.0% 4.2% 3.0% 3.4%

Lotte Chemical Titan 5.09 8.50 67.0% 11,569 5.5x FY18F EV/EBITDA 8.9 7.3 34.1% 11.5% 10.4% -28.4% 22.4% 2.4% 3.1%

AirAsia Berhad 3.32 3.51 5.7% 11,095 9x CY18F P/E 12.1 10.1 76.5% 11.8% 11.5% -50.8% 19.9% 1.8% 2.1%

YTL Power International 1.41 1.80 27.7% 10,940 SOP 16.4 14.9 -7.7% 5.3% 5.8% -18.7% 10.0% 5.0% 6.7%

Mid caps (Mkt Cap RM5bn > RM10bn)

Sunway Bhd 4.34 4.97 14.5% 8,926 10% discount to RNAV 15.4 14.6 -11.1% 8.5% 9.9% -2.6% 6.0% 3.0% 3.0%

MY E.G. Services 2.12 2.68 26.4% 7,645 25.2x CY18 P/E 29.6 19.9 53.8% 46.1% 48.9% 50.3% 48.6% 1.2% 1.7%

Inari-Amertron Bhd 2.54 2.75 8.3% 5,091 18x CY18 P/E 20.4 16.6 26.2% 29.5% 31.2% 36.6% 22.6% 3.7% 3.7%

Mid caps (Mkt Cap RM1bn > RM5bn)

Affin Holdings 2.55 2.96 16.1% 4,955 DDM 8.8 8.2 18.0% 6.4% 6.6% -0.3% 7.9% 4.5% 4.9%

Kossan Rubber Industries 7.20 7.55 4.8% 4,604 19x CY18 P/E 23.0 18.1 7.8% 18.2% 20.9% 17.1% 27.0% 2.0% 2.8%

UOA Development 2.60 2.85 9.6% 4,506 20% discount to RNAV 11.7 14.5 -7.0% 9.3% 7.5% -6.7% -19.0% 5.8% 5.8%

Bumi Armada 0.74 0.94 27.9% 4,312 SOP 9.7 5.4 40.1% 7.6% 12.2% nm 78.3% 0.0% 0.0%

Mah Sing Group 1.48 1.85 25.0% 3,578 20% discount to RNAV 11.2 15.1 -11.1% 9.4% 6.8% -8.4% -25.5% 4.4% 3.4%

Syarikat Takaful Malaysia 4.01 4.52 12.7% 3,301 DDM 17.2 15.5 9.2% 24.7% 24.2% 9.2% 11.1% 2.9% 3.2%

DRB-Hicom 1.58 2.35 48.8% 3,055 SOP na 92.2 nm -5.7% 0.6% nm nm 0.0% 0.0%

Unisem 4.10 5.00 22.0% 3,009 15x CY18 P/E 15.2 13.2 13.3% 13.4% 14.3% 22.8% 15.3% 2.9% 3.2%

Eco World International 1.10 1.15 4.2% 2,640 RNAV na 10.7 nm -7.6% 9.1% nm nm 0.0% 0.0%

Panasonic Manufacturing Malaysia 38.70 42.00 8.5% 2,351 17x CY18F P/E 16.7 15.7 - 16.8% 16.9% 4.5% 6.9% 3.8% 4.1%

Bermaz Auto Berhad 1.87 2.15 15.1% 2,155 13x CY18 P/E 14.0 11.2 -1.9% 33.8% 45.0% 3.1% 25.5% 7.4% 8.7%

Hap Seng Plantations 2.63 2.89 9.9% 2,103 16x CY18 P/E 17.1 14.6 14.4% 5.9% 6.8% -1.0% 17.6% 3.8% 4.6%

Taliworks Corporation 1.42 1.73 21.7% 1,717 10% discount to RNAV 22.6 21.2 45.8% 6.7% 7.1% 22.9% 6.6% 5.6% 5.7%

Muhibbah Engineering 2.85 3.36 17.9% 1,369 30% discount to RNAV 10.4 9.9 16.6% 12.7% 12.8% 21.6% 5.8% 2.1% 2.1%

LBS Bina Group 1.93 2.55 32.1% 1,309 30% discount to RNAV 11.0 7.9 25.1% 9.6% 12.5% 2.5% 37.9% 5.8% 3.8%

Pharmaniaga Bhd 4.18 4.90 17.2% 1,086 18.7x CY18F P/E 20.2 15.9 -6.8% 10.1% 12.8% 17.7% 26.5% 4.5% 5.7%

Small caps (Mkt Cap < RM1bn)

Prestariang 1.78 2.59 45.5% 858 SOP 25.6 10.1 71.5% 20.0% 41.2% 273.3% 155.1% 2.2% 3.4%

Dagang NeXchange 0.48 0.75 56.9% 842 SOP 12.5 10.5 68.7% 15.5% 16.2% 25.1% 18.7% 1.0% 2.1%

Tune Protect Group Bhd 1.05 1.71 62.9% 789 DDM 12.8 12.0 -3.4% 12.0% 12.0% -28.9% 6.8% 3.5% 3.8%

Thong Guan Industries 4.18 5.72 36.8% 554 13x CY18 P/E 7.7 6.1 23.6% 14.9% 16.9% -1.7% 27.1% 2.8% 2.8%

Bonia Corporation 0.57 0.82 45.3% 455 16.8x CY19 P/E 13.4 12.2 -1.1% 7.9% 8.2% 8.8% 10.0% 2.2% 2.2%

YSP Southeast Asia Holdings 2.68 3.50 30.6% 366 SOP 14.6 12.6 8.8% 8.8% 9.7% 20.5% 15.7% 3.8% 4.4%

Sasbadi Holdings 0.81 1.38 71.4% 337 20% disc. 16x FY18 P/E 13.6 7.9 42.5% 16.6% 25.2% 52.1% 72.6% 3.0% 4.7%

CCK Consolidated Holdings Bhd 0.98 1.28 30.8% 305 15x CY18 P/E 13.7 11.5 25.7% 9.3% 10.3% 19.2% 19.3% 2.6% 3.1%

AWC Berhad 1.09 1.20 9.8% 288 SOP 14.4 12.7 20.9% 14.8% 15.1% 10.9% 13.0% 2.1% 2.5%

EITA Resources Bhd 1.70 2.40 41.2% 221 12x CY18 P/E 10.0 8.6 19.6% 14.4% 15.0% -7.6% 15.6% 3.1% 3.6%

Bioalpha Holdings 0.25 0.37 48.0% 202 20x CY18 P/E 20.2 13.3 37.0% 12.0% 16.4% 39.5% 51.1% 0.0% 0.0%

Oceancash Pacific Bhd 0.70 0.88 25.9% 155 SOP 12.9 10.9 17.9% 14.9% 15.6% 18.3% 19.0% 1.2% 1.3%

Core P/E (x) Recurring ROE (%) Core EPS Growth --- Div Yield ---


15

Figure 21: Stocks with Add calls, by category

SOURCES: CIMB


16

Figure 22: Appendix: Companies' 2Q17 results and comments


Company Chg to EPS est.

FYE Period CIMBS Consensus Y-o-Y Q-o-Q YTD (fwd year) Comments

Agribusiness

Felda Global Ventures Dec 2QFY17 -87.8% -90.1% (259) (173) 112 -13% to -27%Lower sugar earnings coupled with lower-than-expected FFB

output

Genting Plantations Dec 2QFY17 -12.5% -16.9% 222 7 155 -11% to -13%Higher depreciation charges as the group changed its

accounting policy for oil palm trees

Hap Seng Plantations Dec 2QFY17 2.5% -7.4% 46 (15) 73 -Higher CPO selling prices (+23% yoy) as well as stronger

FFB output (+3% yoy)

IOI Corporation Jun 4QFY17 -15.0% -9.9% 213 (4) 9 -1% to -4%Stronger plantation and assoc. earnings trumps weaker mfg

division and FV derivatives losses

Jaya Tiasa Holdings Jun 4QFY17 -10.5% -10.0% (47) (63) 14 -Core NP boosted as stronger plantation contribution trumps

weaker timber earnings

Kuala Lumpur Kepong Sep 3QFY17 -8.5% -9.4% (31) (57) 9 -Weaker manufacturing margin offsets higher selling CPO selling

prices and output

Ta Ann Dec 2QFY17 8.2% 12.8% 15 (15) 75 -Stronger plantation contribution more than offset weaker timber

earnings

Automotive

Bermaz Auto Apr 4QFY17 -14.8% -11.1% (58) (16) (38) -5% to -8% Lower sales volume and higher opex due to forex

Tan Chong Motor Holdings Dec 2QFY17 55.5% 135.8% (31) (30) 26 -18% to -23% Widening losses due to lower sales volume and higher opex

UMW Holdings Dec 2QFY17 -173.4% -156.1% 351 1,460 184 -6% to +54% Higher opex from auto and M&E divisions

Aviation

AirAsia Dec 2QFY17 -51.8% -47.4% 52 94 (41) -0.43% to -3.6%Better MAA profits and lower IAA and AAP losses, partially

offset by lower TAA profits.

AirAsia X Dec 2QFY17 -152.6% -131.1% 388 (293) (130) 0%Weaker yields and ringgit, partially offset by the rise in revenue

on the back of better load factors.

Banking & Finance

Affin Holdings Dec 2QFY17 -4.4% -2.5% 8 23 6 - A surge in fee income.

Alliance Financial Group Mar 1QFY18 -1.9% 6.0% 2 15 2 - An upturn in credit costs

BIMB Holdings Dec 2QFY17 -6.6% -3.8% (6) (10) 3 -3% to -4% A plunge in credit costs

Bursa Malaysia Dec 2QFY17 7.4% 4.2% 20 5 17 - Higher equity trading income

Hong Leong Bank Jun 4QFY17 -0.7% 1.0% 5 3 10 - Wider margins

Maybank Dec 2QFY17 -7.7% -5.8% 43 (3) 30 -1.5% to -2.9% Lower loan loss provisioning

Public Bank Dec 2QFY17 -8.7% -2.3% 6 7 4 - A slight decline in non-int. income

RHB Bank Dec 2QFY17 1.1% 2.1% 43 0 9 - Lower impairment loss

Chemicals

Petronas Chemicals Group Dec 2QFY17 42.0% 37.8% 109 (23) 114 - Improve in plant utilization rate and olefins margin

Conglomerates

DRB-Hicom Mar 1QFY18 -35.0% -15.5% (9) (46) (9) -10% to -37% Reduce losses at Proton

Sime Darby Jun 4QFY17 6.6% -3.0% 25 65 69 -4% to + 2%Stronger plantation and motor div. earnings more than offset

weaker property earnings

Construction and Materials

EITA Resources Sep 3QFY17 237.4% - (81) (67) 29 - Bidding for MRT2 and LRT3 jobs

Gamuda Jul 3QFY17 -3% -1% 10 3 5 - Strong construction earnings

IJM Corporation Mar 1QFY18 -20% -20% 12 (43) 12 - Strong growth for ports and construction

Lafarge Malaysia Dec 2QFY17 >100% >100% (361) (18) (356) - Competitive pricing and weak demand

MRCB Dec 2QFY17 -49% -52% (57) 252 416 - Strong construction billings

Muhibbah Engineering Dec 2QFY17 +18% +19% 41 49 33 - Rising margins and associate earnings

Salcon Dec 2QFY17 >100% - (128) 139 (164) - Sustained losses

Signature International Jun 4QFY17 - - (69) 189 (58) -29% Hit by higher chipboard prices

Sunway Bhd Dec 2QFY17 +7% +9% 31 82 24 - High order book driven earnings

WCT Holdings Dec 2QFY17 +11% +17% 74 (1) 41 - Downside to propety margins

YTL Corporation Jun 4QFY17 +5% -5% (39) 29 (28) - Weak cement and utilities earnings

Deviation in ann. core % growth in net profit


17

Figure 23: Appendix: Companies' 2Q17 results and comments (continued)




Consumer

7-Eleven Malaysia Dec 2QFY17 -29.5% -40.4% (33) 27 (41) -11% to -11.5% . Higher operating costs caused margin compression

Berjaya Food Apr 4QFY17 -39.9% -21.8% (49) (66) (26) -21% Softer performance due to weaker KRR operations

Bioalpha Holdings Dec 2QFY17 -92.8% - 71 209 (67) - Stronger revenue from all markets in 2Q

Bison Consolidated Oct 2QFY17 0.4% 6.0% 20 (3) 15 - Higher revenue from increased number of stores

Bonia Corporation Jun 3QFY17 52.4% 33.8% 23 (29) 10 - Better cost controls as well as lower discounts offered

BAT Dec 2QFY17 -11.7% -14.0% 13 26 (12) - Sales volume recovery and lower illicit sales

Carlsberg Brewery Dec 3QFY16 19.2% 2.7% 5 (22) 7 -Revenue expanded due to higher volume growth and better

product mix

CCK Consolidated Holdings Dec 2QFY17 -10.1% -6.0% 45 20 49 No changeStrong contribution from retail was slightly affected by weaker

poultry contribution

Fraser & Neave Holdings Sep 3QFY17 7.7% 8.0% (16) (28) (2) - Core net profit slid due to higher operating costs

Heineken Malaysia Bhd Dec 2QFY17 -26.1% -21.7% 1 26 (1) - Better operating efficiencies helped to mitigate fall in revenue

Kawan Food Dec 2QFY17 -35.4% - (2) 25 7 -18% Weak export revenue

MSM Malaysia Dec 2QFY17 -160.1% -195.5% (191) (38) (168) -28% to -34% Locked in raw sugar cost at a higher price

Nestle (M) Dec 2QFY17 17.2% 11.2% (12) (23) 1 -Earnings grew on the back of higher export and domestic sales

and improved cost controls

QL Resources Mar 1QFY18 -21.4% -24.0% 0 10 0 - Growth dragged by weaker MPM segment

Healthcare

Hovid Bhd Jun 4QFY17 -103.6% -103.5% (204) 267 (102) -16.3% to -27.6%Hit by revocation of manufacturing licenses for both plants,

leading to insufficient products to sell

IHH Healthcare Bhd Dec 2QFY17 -34.8% -40.6% (54) (57) (36) -4.2% to -7.9% Affected by pre operating costs from new hospitals, weaker lira

KPJ Healthcare Dec 2QFY17 -9.5% -10.0% 6 (16) 9 +0.8% to +1.2% Seasonal weakness in patient volumes due to Ramadan period

Pharmaniaga Bhd Dec 2QFY17 6.4% -8.0% (35) (49) (14) No change 2Q17 results were affected by revamp works on several plants

YSP Southeast Asia Holdings Dec 2QFY17 12.9% 8.9% 11 (46) 14 No changeHigher raw material costs affected qoq performance in 2Q17, in-

line post excluding forex losses

Industrial Goods and Services

AWC Berhad Jun 4QFY17 -14.9% -15.7% (37) 41 3 -6.3% to -12.0%Slower-than-expected progress billing and margin

compression in environment division

Daibochi Plastic & Packaging Dec 2QFY17 -25.0% -25.5% (15) (11) (14) -6% Weak export revenue

Hartalega Holdings Mar 1QFY18 -6.9% -40.1% 61 3 61 No Change Higher sales volume and better cost efficiences

Karex Berhad Jun 4QFY17 -19.1% -17.0% (66) (66) (48) -16.5% to -17.1% Margin squeeze in tender segment

Kossan Rubber Industries Dec 2QFY17 -8.0% -14.0% 11 (2) (0) No change Weak TRP performance offset higher glove sales volume

Oceancash Pacific Bhd Dec 2QFY17 -25.0% -23.7% (7) 25 18 No change In-line with expectations, awaiting stronger 2H

Supermax Corp Jun 4QFY17 -15.1% -23.7% 20 (58) (33) -10.8% to -14.3% Another tax shocker in 4QFY17

Thong Guan Dec 2QFY17 -20.2% - (5) 5 (3) -15.3% Strong RM-US$ is not positive for company

Tomypak Dec 2QFY17 -28.5% - (22) (37) 20 -15.8% Weak export sales and higher raw material costs

Top Glove Aug 3QFY17 -4.7% -8.0% 24 (6) (21)

-3.5% for FY17F,

+0.9% to +3.5% for

FY18-19F

Higher sales volume and increase in ASPs

Wellcall Holdings Sep 3QFY17 -20.9% - 5 17 13 -9.8% Hit by higher rubber prices

Insurance

Syarikat Takaful Malaysia Dec 2QFY17 5.8% 3.7% (2) (22) 10 - Single-digit premium growth

Tune Protect Group Dec 2QFY17 -19.1% -27.2% (51) 9 (49) - Lower travel insurance premium

Media

Astro Malaysia Jan 1QFY18 +2% +1% 5 30 5 - Lower D&A and finance cost

Media Chinese Int'l Mar 1QFY18 -50% -54% (50) (47) (50) -31% to -37% Lower adex across all segments, but higher travel sales

Media Prima Dec 2QFY17 -238.5% -231.2% (65) 125 (163) -50% to -135% Lower adex and higher opex from new digital initiatives

Star Media Group Dec 2QFY17 -64.8% -55.7% (69) 24 (65) -36% to -39% Lower print adex (-23% ) and higher opex



18





Oil and Gas

Bumi Armada Dec 2QFY17 -42.3% -8.9% 194 39 158 -11.1% to +30.8%Higher FPSO and OMS contribution, coupled with lower

depreciation expense.

Perisai Petroleum Dec 2QFY17 -36.3% 31.2% 3,237 4 (1,816) 0% Higher interest expense and larger share of associate loss.

Petronas Dagangan Dec 2QFY17 -22.1% -19.8% (14) (9) (1) -5.19% to -5.34%Less favourable inventory costs as PDB entered 2Q,

exarcebated by the drop in sales volume.

Sapura Energy Jan 1QFY18 -60.5% -66.4% (74) (71) (74) -112% to +26%Weaker-than-expected dirlling rates and utilisation levels, which

is expected to trend lower in the near future.

UMW Oil & Gas Dec 2QFY17 -31.0% -66.9% (31) (53) (7) +25.1% to +56.1%Higher rig utilisation rate and lower losses from the oilfield

segment.

Property & REITs

Axis REIT Dec 2QFY17 -5.4% -4.0% 2 1 2 -

Additional contribution from newly-acquired Scomi Facility

coupled with lower expenses and positive portfolio rental

reversions

CMMT Dec 2QFY17 -6.4% -4.1% (1) (1) (1) -Weaker performances from its assets in Klang Valley dragged

net property income

Eastern & Oriental Mar 1QFY18 47.2% 57.8% 563 (40) 563 - Revenue from existing launches

Eco World Development Oct 2QFY17 -25% -20% (3) 60 0 -19% to +34% Profit margin weaker than expected

Eco World International Oct 2QFY17 -20% +11% 1 (10) 7 -7% to -23% Higher admin expenses

IGB REIT Dec 2QFY17 -0.7% -3.6% 3 (10) 3 -Positive rental reversions and stable occupancy rates at both its

assets

KLCCP Stapled Group Dec 2QFY17 -2.0% -4.0% 1 (2) (1) -Dragged by weaker hotel performance as a resultof higher

operating costs

LBS Bina Group Dec 2QFY17 -3.5% -2.4% 41 19 44 - Strong new sales launches expected in 2H17

Mah Sing Group Dec 2QFY17 -5% -6% (17) 0 (16) - Higher sales and admin expenses

MRCB-Quill REIT Dec 2QFY17 -2.5% 0.2% 43 (5) 48 -Additional contribution from newly-acquired Menara Shell and

positive portfolio rental reversions

Selangor Properties Oct 2QFY17 -276.0% - 151 (84) - +32% to +87% Lower than expected tax rate

SP Setia Dec 1QFY17 -48% -53% (10) (80) (10) - Expect lumpy earnings in 2Q and 3Q17

Sunway REIT Jun 4QFY17 -0.8% 0.9% 12 (5) 5 -0.8% to -1.0%Growth in retail and office segments offsets weaker hotel

performance

UEM Sunrise Dec 2QFY17 -55% +39% 75 71 165 - Johor sales remained weak

UOA Development Dec 2QFY17 +13% +12% 34 286 (5) - Expect faster work progress in remaining quarters

Services

Prestariang Dec 2QFY17 - - 46 128 21 - Expect stronger 2H with SKIN construction profit

Sasbadi Holdings Aug 3QFY17 -25.0% -20.0% (36) (54) (2) -25-38% Slower-than-expected MLM earnings so far

Shipping

MISC Dec 2QFY17 -50.3% -46.3% (1) (9) (9) 0%AET, heavy engineering and offshore segment were weaker

yoy, partially offset by better LNG profits.

Technology

Aemulus Holdings Bhd Sep 3QFY17 13.9% 38.0% 2,311 16 1,219 +15% to +19% Higher tester unit shipment volume from 4600 model

Dagang NeXchange Dec 2QFY17 -18.7% -18.1% - Higher contribution from both IT and energy segments

GHL Systems Bhd Dec 2QFY17 -8.9% -4.5% - Stronger contribution from shared services

IFCA MSC Dec 2QFY17 -34.9% - 500 50 184 - Cost cutting measures showing results

Inari-Amertron Bhd Jun 4QFY17 -2.3% 6.5% 13 5 38 +2% Better product mix and favorable currency movement

Malaysian Pacific Industries Jun 4QFY17 3.4% 5.2% 26 (12) 27 +5 to +6% Benefit from stronger US$ and better product mix

MY E.G. Services Jun 4QFY17 - - 17 10 42 - Earnings growth coming from rehiring program

Uchi Technologies Dec 2QFY17 5.4% 9.8% 66 14 22 +8% to +13% Higher than expected shipment volume

Unisem Dec 2QFY17 -8.7% -2.7% 21 (1) 27 - Benefit from stronger US$ and better product mix

Telecommunications

Axiata Group Dec 2QFY17 25.6% -7.7% (5) 21 (23) +13.7 to 24.5 Strong XL, Dialog, Ncell & Robi more than offset Idea losses

DiGi.com Dec 2QFY17 -10.9% -9.7% (11) (4) (9) -8.6 to -12.0% . Lower revenue but higher margin on one-time savings

Maxis Dec 2QFY17 -6.3% 4.6% 13 (6) 10 - Weak prepaid revenue was offset by higher postpaid

Telekom Malaysia Dec 2QFY17 0.1% 2.9% 24 (9) 18 -1.7% to +1.1% Tepid revenue growth buffered by higher broadband revenue



19





Transport Infrastructure

Malaysia Airports Holdings Dec 2QFY17 -49.3% -67.5% 58 10 59 0%

Malaysian operations grew on the back of higher pax traffic

and lower depreciation charges. ISG, however, reported a

core net loss as duty-free revenues fell.

Westports Holdings Dec 2QFY17 -57.2% -53.0% (7) 6 (7) -0.83% to -1.7% Lower volume recorded, coupled with higher fuel costs.

Travel & Leisure

Berjaya Sports Toto Apr 4QFY17 -1.6% -3.4% (38) 61 (18) -8.8 to -9.3% Higher-than-expected prize payout ratio clips earnings

Genting Bhd Dec 2QFY17 2.6% -42.4% 47 (1) 58 +0.5 to +3.9% Improved EBITDA thanks to GENS and GENP

Genting Malaysia Dec 2QFY17 -27.4% -35.0% (44) (19) (7) -1.6 to 4.6% Higher operating costs clipped earnings

Magnum Dec 2QFY17 12.8% -16.9% 175 91 (0) - Helped by lower prize payout ratio

Utilities

Cypark Resources Oct 2QFY17 -43.1% -49.6% (27) (14) (5) -8% Earnings driven by non-RE divisions

Gas Malaysia Dec 2QFY17 -4.9% -9.8% 6 29 (2) - Smoother earnings after implementation of IBR

Malakoff Dec 2QFY17 31.1% 7.9% 13 (11) 5 -4% Expect a lower 2H17 earnings due to lower tariff at SEV

Petronas Gas Dec 2QFY17 -1.5% -1.5% 4 (9) 4 - Stable earnings despite higher maintenance cost

Taliworks Corporation Dec 2QFY17 -22% +3% (80) (14) (60) - Higher water provisions relating to Splash

Tenaga Aug 3QFY17 -3.1% -5.4% (18) 32 (8) -3% to-5% Higher than expected deferred tax in 9MFY17

YTL Power Jun 4QFY17 -2.4% -7.3% (52) 23 (37) +2% to +3% Narrowing losses from mobile broadband



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This research report is not an offer of securities in Indonesia. The securities referred to in this research report have not been registered with the Financial Services Authority (Otoritas Jasa Keuangan) pursuant to relevant capital market laws and regulations, and may not be offered or sold within the territory of the Republic of Indonesia or to Indonesian citizens through a public offering or in circumstances which constitute an offer within the meaning of the Indonesian capital market law and regulations.

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New Zealand: In New Zealand, this report is for distribution only to persons who are wholesale clients pursuant to section 5C of the Financial Advisers Act 2008.

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Recipients of this report are to contact CIMB Research Pte Ltd, 50 Raffles Place, #19-00 Singapore Land Tower, Singapore in respect of any matters arising from, or in connection with this report. CIMBR has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only. If you have not been sent this report by CIMBR directly, you may not rely, use or disclose to anyone else this report or its contents.

If the recipient of this research report is not an accredited investor, expert investor or institutional investor, CIMBR accepts legal responsibility for the contents of the report without any disclaimer limiting or otherwise curtailing such legal responsibility. If the recipient is an accredited investor, expert investor or institutional investor, the recipient is deemed to acknowledge that CIMBR is exempt from certain requirements under the FAA and its attendant regulations, and as such, is exempt from complying with the following : (a) Section 25 of the FAA (obligation to disclose product information); (b) Section 27 (duty not to make recommendation with respect to any investment product without having a reasonable basis where you may be reasonably expected to rely on the recommendation) of the FAA; (c) MAS Notice on Information to Clients and Product Information Disclosure [Notice No. FAA-N03]; (d) MAS Notice on Recommendation on Investment Products [Notice No. FAA-N16]; (e) Section 36 (obligation on disclosure of interest in securities), and (f) any other laws, regulations, notices, directive, guidelines, circulars and practice notes which are relates to the above, to the extent permitted by applicable laws, as may be amended from time to time, and any other laws, regulations, notices, directive, guidelines, circulars, and practice notes as we may notify you from time to time. In addition, the recipient who is an accredited investor, expert investor or institutional investor acknowledges that a CIMBR is exempt from Section 27 of the FAA, the recipient will also not be able to file a civil claim against CIMBR for any loss or damage arising from the recipient’s reliance on any recommendation made by CIMBR which would otherwise be a right that is available to the recipient under Section 27 of the FAA, the recipient will also not be able to file a civil claim against CIMBR for any loss or damage arising from the recipient’s reliance on any recommendation made by CIMBR which would otherwise be a right that is available to the recipient under Section 27 of the FAA.

CIMB Research Pte Ltd ("CIMBR"), its affiliates and related companies, their directors, associates, connected parties and/or employees may own or have positions in securities of the company(ies) covered in this research report or any securities related thereto and may from time to time add to or dispose of, or may be materially interested in, any such securities. Further, CIMBR, its affiliates and its related companies do and seek to do business with the company(ies) covered in this research report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory, underwriting or placement services for or relating to such company(ies) as well as solicit such investment, advisory or other services from any entity mentioned in this report.

As of September 4, 2017, CIMBR does not have a proprietary position in the recommended securities in this report.

CIMB Research Pte Ltd does not make a market on the securities mentioned in the report.

CIMB Securities Singapore Pte Ltd does not make a market on the securities mentioned in the report.

CIMB Bank Berhad, Singapore branch does not make a market on the securities mentioned in the report.

South Korea: This report is issued and distributed in South Korea by CIMB Securities Limited, Korea Branch (“CIMB Korea”) which is licensed as a


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cash equity broker, and regulated by the Financial Services Commission and Financial Supervisory Service of Korea. In South Korea, this report is for distribution only to professional investors under Article 9(5) of the Financial Investment Services and Capital Market Act of Korea (“FSCMA”).

Spain: This document is a research report and it is addressed to institutional investors only. The research report is of a general nature and not personalised and does not constitute investment advice so, as the case may be, the recipient must seek proper advice before adopting any investment decision. This document does not constitute a public offering of securities.

CIMB is not registered with the Spanish Comision Nacional del Mercado de Valores to provide investment services.

Sweden: This report contains only marketing information and has not been approved by the Swedish Financial Supervisory Authority. The distribution of this report is not an offer to sell to any person in Sweden or a solicitation to any person in Sweden to buy any instruments described herein and may not be forwarded to the public in Sweden.

Switzerland: This report has not been prepared in accordance with the recognized self-regulatory minimal standards for research reports of banks issued by the Swiss Bankers’ Association (Directives on the Independence of Financial Research).

Thailand: This report is issued and distributed by CIMB Securities (Thailand) Company Limited (“CIMBS”) based upon sources believed to be reliable (but their accuracy, completeness or correctness is not guaranteed). The statements or expressions of opinion herein were arrived at after due and careful consideration for use as information for investment. Such opinions are subject to change without notice and CIMBS has no obligation to update its opinion or the information in this research report.

If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient are unaffected.

CIMB Securities (Thailand) Co., Ltd. may act or acts as Market Maker, and issuer and offerer of Derivative Warrants and Structured Note which may have the following securities as its underlying securities. Investors should carefully read and study the details of the derivative warrants in the prospectus before making investment decisions.

AAV, ADVANC, AMATA, ANAN, AOT, AP, BA, BANPU, BBL, BCH, BCP, BCPG, BDMS, BEAUTY, BEC, BEM, BJC, BH, BIG, BLA, BLAND, BPP, BTS, CBG, CENTEL, CHG, CK, CKP, COM7, CPALL, CPF, CPN, DELTA, DTAC, EA, EGCO, EPG, GFPT, GLOBAL, GLOW, GPSC, GUNKUL, HMPRO, INTUCH, IRPC, ITD, IVL, KBANK, KCE, KKP, KTB, KTC, LH, LHBANK, LPN, MAJOR, MALEE, MEGA, MINT, MONO, MTLS, PLANB, PSH, PTL, PTG, PTT, PTTEP, PTTGC, QH, RATCH, ROBINS, S, SAWAD, SCB, SCC, SCCC, SIRI, SPALI, SPRC, STEC, STPI, SUPER, TASCO, TCAP, THAI, THANI, THCOM, TISCO, TKN, TMB, TOP, TPIPL, TRUE, TTA, TU, TVO, UNIQ, VGI, WHA, WORK.

Corporate Governance Report:

The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information.

The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that date. CIMBS does not confirm nor certify the accuracy of such survey result.

Score Range: 90 - 100 80 - 89 70 - 79 Below 70 or No Survey Result

Description: Excellent Very Good Good N/A

United Arab Emirates: The distributor of this report has not been approved or licensed by the UAE Central Bank or any other relevant licensing authorities or governmental agencies in the United Arab Emirates. This report is strictly private and confidential and has not been reviewed by, deposited or registered with UAE Central Bank or any other licensing authority or governmental agencies in the United Arab Emirates. This report is being issued outside the United Arab Emirates to a limited number of institutional investors and must not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose. Further, the information contained in this report is not intended to lead to the sale of investments under any subscription agreement or the conclusion of any other contract of whatsoever nature within the territory of the United Arab Emirates.

United Kingdom: In the United Kingdom and European Economic Area, this report is being disseminated by CIMB Securities (UK) Limited (“CIMB UK”). CIMB UK is authorized and regulated by the Financial Conduct Authority and its registered office is at 27 Knightsbridge, London, SW1X7YB. Unless specified to the contrary, this report has been issued and approved for distribution in the U.K. and the EEA by CIMB UK. Investment research issued by CIMB UK has been prepared in accordance with CIMB Group’s policies for managing conflicts of interest arising as a result of publication and distribution of investment research. This report is for distribution only to, and is solely directed at, selected persons on the basis that those persons: (a) are eligible counterparties and professional clients of CIMB UK; (b) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Order”), (c) fall within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations etc”) of the Order; (d) are outside the United Kingdom subject to relevant regulation in each jurisdiction, or (e) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with any investments to which this report relates may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as “relevant persons”). This report is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this report relates is available only to relevant persons and will be engaged in only with relevant persons.

Where this report is labelled as non-independent, it does not provide an impartial or objective assessment of the subject matter and does not constitute independent “investment research” under the applicable rules of the Financial Conduct Authority in the UK. Consequently, any such non-independent report will not have been prepared in accordance with legal requirements designed to promote the independence of investment research and will not subject to any prohibition on dealing ahead of the dissemination of investment research. Any such non-independent report must be considered as a marketing communication.

United States: This research report is distributed in the United States of America by CIMB Securities (USA) Inc, a U.S. registered broker-dealer and a related company of CIMB Research Pte Ltd, CIMB Investment Bank Berhad, PT CIMB Securities Indonesia, CIMB Securities (Thailand) Co. Ltd, CIMB Securities Limited, CIMB Securities (India) Private Limited, and is distributed solely to persons who qualify as “U.S. Institutional Investors” as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. This communication is only for Institutional Investors whose ordinary business


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activities involve investing in shares, bonds, and associated securities and/or derivative securities and who have professional experience in such investments. Any person who is not a U.S. Institutional Investor or Major Institutional Investor must not rely on this communication. The delivery of this research report to any person in the United States of America is not a recommendation to effect any transactions in the securities discussed herein, or an endorsement of any opinion expressed herein. CIMB Securities (USA) Inc, is a FINRA/SIPC member and takes responsibility for the content of this report. For further information or to place an order in any of the above-mentioned securities please contact a registered representative of CIMB Securities (USA) Inc.

CIMB Securities (USA) Inc does not make a market on other securities mentioned in the report.

Neither CIMB Securities (USA) Inc., nor its affiliates have managed or co-managed a public offering of any of the securities mentioned in the past 12 months.

CIMB Securities (USA) Inc., or its affiliates have received compensation for investment banking services from Axiata Group in the past 12 months.

Neither CIMB Securities (USA) Inc., nor its affiliates expects to receive or intends to seek compensation for investment banking services from any of the company mentioned within the next 3 months.

Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (Thai IOD) in 2016, Anti-Corruption 2016

AAV – Very Good, n/a, ADVANC – Very Good, Certified, AEONTS – Good, n/a, AMATA – Excellent, Declared, ANAN – Very Good, Declared, AOT – Excellent, Declared, AP – Very Good, Declared, ASK – Very Good, Declared, ASP – Very Good, Certified, BANPU – Very Good, Certified, BAY – Excellent, Certified, BBL – Very Good, Certified, BCH – not available, Declared, BCP - Excellent, Certified, BEM – Very Good, n/a, BDMS – Very Good, n/a, BEAUTY – Good, Declared, BEC - Good, n/a, BH - Good, Declared, BIGC - Excellent, Declared, BJC – Good, n/a, BJCHI – Good, Declared, BLA – Very Good, Certified, BPP – not available, n/a, BR - Good, n/a, BTS - Excellent, Certified, CBG – Good, n/a, CCET – not available, n/a, CENTEL – Very Good, Certified, CHG – Very Good, n/a, CK – Excellent, n/a, COL – Very Good, Declared, CPALL – not available, Declared, CPF – Excellent, Declared, CPN - Excellent, Certified, DELTA - Excellent, Declared, DEMCO – Excellent, Certified, DIF – not available, n/a, DTAC – Excellent, Certified, EA – Very Good, Declared, ECL – Good, Certified, EGCO - Excellent, Certified, EPG – Good, n/a, GFPT - Excellent, Declared, GLOBAL – Very Good, Declared, GLOW – Very Good, Certified, GPSC – Excellent, Declared, GRAMMY - Excellent, n/a, GUNKUL – Very Good, Declared, HANA - Excellent, Certified, HMPRO - Excellent, Declared, ICHI – Very Good, Declared, INTUCH - Excellent, Certified, ITD – Good, n/a, IVL - Excellent, Certified, JAS – not available, Declared, JASIF – not available, n/a, JUBILE – Good, Declared, KAMART – not available, n/a, KBANK - Excellent, Certified, KCE - Excellent, Certified, KGI – Good, Certified, KKP – Excellent, Certified, KSL – Very Good, Declared, KTB - Excellent, Certified, KTC – Excellent, Certified, LH - Very Good, n/a, LPN – Excellent, Declared, M – Very Good, Declared, MAJOR - Good, n/a, MAKRO – Good, Declared, MALEE – Very Good, Declared, MBKET – Very Good, Certified, MC – Very Good, Declared, MCOT – Excellent, Declared, MEGA – Very Good, Declared, MINT - Excellent, Certified, MTLS – Very Good, Declared, NYT – Excellent, n/a, OISHI – Very Good, n/a, PLANB – Very Good, Declared, PLAT – Good, Declared, PSH – not available, n/a, PSL - Excellent, Certified, PTT - Excellent, Certified, PTTEP - Excellent, Certified, PTTGC - Excellent, Certified, QH – Excellent, Declared, RATCH – Excellent, Certified, ROBINS – Very Good, Declared, RS – Very Good, n/a, SAMART - Excellent, n/a, SAPPE - Good, n/a, SAT – Excellent, Certified, SAWAD – Good, n/a, SC – Excellent, Declared, SCB - Excellent, Certified, SCBLIF – not available, n/a, SCC – Excellent, Certified, SCN – Good, Declared, SCCC - Excellent, Declared, SIM - Excellent, n/a, SIRI - Good, n/a, SPA - Good, n/a, SPALI - Excellent, Declared, SPRC – Very Good, Declared, STA – Very Good, Declared, STEC – Excellent, n/a, SVI – Excellent, Certified, TASCO – Very Good, Declared, TCAP – Excellent, Certified, THAI – Very Good, Declared, THANI – Very Good, Certified, THCOM – Excellent, Certified, THRE – Very Good, Certified, THREL – Very Good, Certified, TICON – Very Good, Declared, TIPCO – Very Good, Certified, TISCO - Excellent, Certified, TK – Very Good, n/a, TKN – Good, n/a, TMB - Excellent, Certified, TNR – not available, n/a, TOP - Excellent, Certified, TPCH – Good, n/a, TPIPP – not available, n/a, TRUE – Very Good, Declared, TTW – Very Good, Declared, TU – Excellent, Declared, TVO – Very Good, Declared UNIQ – not available, Declared, VGI – Excellent, Declared, WHA – not available, Declared, WHART – not available, n/a, WORK – not available, n/a.

Companies participating in Thailand’s Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) under Thai Institute of Directors (as of October 28, 2016) are categorized into:

- Companies that have declared their intention to join CAC, and

- Companies certified by CAC

Rating Distribution (%) Inv estment Banking clients (%)

Add 51.2% 5.5%

Hold 35.7% 3.1%

Reduce 11.9% 0.1%

Distribution of stock ratings and inv estment banking clients for quarter ended on 30 June 2017

1288 companies under cov erage for quarter ended on 30 June 2017


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CIMB Recommendation Framework

Stock Ratings Definition:

Add The stock’s total return is expected to exceed 10% over the next 12 months.

Hold The stock’s total return is expected to be between 0% and positive 10% over the next 12 months.

Reduce The stock’s total return is expected to fall below 0% or more over the next 12 months.

The total expected return of a stock is defined as the sum of the: (i) percentage difference between the target price and the current price and (ii) the forward net dividend yields of the stock. Stock price targets have an investment horizon of 12 months.

Sector Ratings Definition:

Overweight An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a positive absolute recommendation.

Neutral A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral absolute recommendation.

Underweight An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a negative absolute recommendation.

Country Ratings Definition:

Overweight An Overweight rating means investors should be positioned with an above-market weight in this country relative to benchmark.

Neutral A Neutral rating means investors should be positioned with a neutral weight in this country relative to benchmark.

Underweight An Underweight rating means investors should be positioned with a below-market weight in this country relative to benchmark.

Malaysia September 5, 2017 Construction and Materials ... · PDF fileThe earnings revision...

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