You are on page 1of 66





Alexander Chia, ACA (603) 9280 8889

Fiona Leong Wai Yen (603) 9280 8886

Hoe Lee Leng, CPA (603) 9280 8860

Jeffrey Tan (603) 9280 8863

Kong Heng Siong kong.heng.siong@ (603) 9280 8866

Loong Kok Wen, CFA (603) 9280 8861

Ng Sem Guan, CFA (603) 9280 8878

Wan Mohd Zahidi Bin Wan Zakwan (603) 9280 8879

Stephanie Cheah Phaik May (603) 9280 8859

Muhammad Syafiq Bin Mohd Salam (603) 9280 8867

Soong Wei Siang (603) 9280 8865

Michelle Foong May Kuen (603) 9280 8890

<This page has been left blank intentionally>
List of Companies By Alphabetical Order

AirAsia X........5


Berjaya Food............9

Chin Hin Group.......11

Dagang NeXchange..........13


Elsoft Research..........17

Gadang Holdings...........19

Green Packet.............21

Harrison Holdings..........23

IQ Group Holdings.........25

Jaya Tiasa Holdings..........27

Matrix Concept Holdings.......29


Muhibbah Engineering......33

Notion Vtec.........35

OCK Group.....37

OCR Group.....39

Pesona Metro.....41

Power Root.........43

Priceworth Wood Products..........45

Reach Energy.....47

Samchem Holdings.......49

Sasbadi Holdings.......51

Yoong Onn Corporation........53

List of Companies By Industry Classification

Basic Materials
Chin Hin Group........11

Gadang Holdings.....19
Muhibbah Engineering....33
Pesona Metro.......41

Berjaya Food.......9
Harrison Holdings.....23
IQ Group...........25
Power Root.......43
Sasbadi Holdings.....51
Yoong Onn Corporation......53

Samchem Holdings......49

Oil & Gas

Reach Energy.......47

Matrix Concept Holdings............29
OCR Group...........39

Dagang NeXchange........13
Elsoft Research........17
Green Packet........21
Notion Vtec.......35

OCK Group.......37

Jaya Tiasa.....27

AirAsia X......5
RHB Research proudly presents the 13th edition of the RHB Malaysia Small Cap Companies Book 2017 that
contains a selection of what our analysts believe are interesting companies that have the potential to grow. In time,
we expect these small cap companies to be tomorrows mid and large caps. This Malaysia edition complements
similar efforts by our colleagues in Indonesia, Singapore and Thailand, that we believe is a unique compilation of
regional small cap ideas that we hope you will find useful.

The 2017 selection of small cap names comprise companies with market caps between MYR125m and MYR1,701m
and averaging MYR654m, representing 10 sectors. With RHB being one of the pioneers in institutionalising small cap
research, our efforts will now be supplemented by a government-funded research initiative on small and mid cap
companies. RHB welcomes this increase in resources to be expended on uncovering new jewels worthy of investor

RHB Research would like to acknowledge the time spent by the management of the featured companies to help us to
understand their companys business model, and thank them for allowing us to share our views and opinions. As
always, we remain grateful to all the institutional and retail clients of RHB Investment Bank for your continued interest
and support.

Alexander Chia
Head of Malaysia Research
RHB Research Institute Sdn Bhd

20 April 2017

Top Malaysia Small Cap Companies 2017
25 Jewels At a glance
Company name TP Mkt Cap P/E (x) P/B (x) Div Yield (%) ROE (%)
(MYR) (MYRm) FY16 FY17F FY16 FY17F FY16 FY17F FY16 FY17F

AirAsia X 0.50 1,701.0 7.6 7.3 1.6 1.3 n.a n.a 27.1 19.2

AWC 1.37 266.0 13.4 9.8 2.2 1.9 2.5 3.4 17.3 20.4

Berjaya Food^ 2.21 675.0 27.7 17.9 1.7 1.6 1.8 2.8 6.1 9.1

Chin Hin Group 1.40 521.0 14.4 12.3 1.5 1.5 3.4 4.1 15.0 12.2

Dagang NeXchange 0.71 703.0 5.0 3.7 1.7 1.3 3.7 5.0 55.2 39.2

Datasonic^ 1.84 1,579.0 23.3 14.3 5.6 4.6 1.9 3.1 25.7 35.2

Elsoft Research 2.15 443.0 12.0 12.4 4.5 4.2 4.9 6.2 34.3 34.9

Gadang^ 1.40 699.0 7.2 7.0 1.1 1.0 2.6 2.8 17.0 15.4

Green Packet 0.38 184.0 n.a n.a 1.6 1.4 n.a n.a (67.6) (0.2)

Harrisons 3.92 227.0 11.2 10.6 0.8 0.7 4.4 4.4 6.9 7.0

IQ Group^ 4.20 272.0 11.6 11.0 1.8 1.6 3.2 3.6 16.3 15.5

Jaya Tiasa 1.61 1,181.0 18.2 13.2 0.7 0.6 1.1 1.7 3.3 4.8

Matrix Concepts^ 2.80 1,431.0 7.0 6.7 1.4 1.3 5.6 6.0 21.4 20.3

MKH 4.00 1,235.0 7.7 7.0 1.0 1.0 2.3 2.9 17.2 20.2

Muhibbah Engineering 3.75 1,230.0 13.3 10.5 1.3 1.2 2.1 2.4 11.8 11.5

Notion VTec 1.27 224.0 36.1 8.8 0.8 0.7 1.2 3.4 1.9 9.1

O&C Resources 0.70 125.0 n.a 32.9 2.3 2.4 n.a n.a (11.1) 7.1

OCK Group 1.05 715.0 30.8 26.9 2.2 2.0 0.7 2.4 6.9 7.8

Pesona Metro 0.80 428.0 21.2 10.8 3.0 2.6 3.1 4.6 14.3 25.8

Power Root^ 2.82 698.0 13.7 12.2 2.8 2.6 5.3 5.8 20.8 22.0

Priceworth International 0.26 141.0 97.2 153.1 0.4 1.5 n.a n.a 0.4 1.2

Reach Energy 1.14 792.0 5.6 5.3 0.9 0.8 n.a 1.6 33.0 15.5

Samchem 3.10 258.0 17.3 6.4 2.2 3.0 2.4 1.2 12.9 41.0

Sasbadi 2.00 439.0 24.2 18.5 3.0 2.7 1.4 1.6 13.8 15.2

Yoong Onn Corp 1.40 178.0 8.5 7.7 1.0 0.9 3.6 4.1 12.1 12.4

Source: Bloomberg, RHB

Notes: All prices as at 14 March 2017, n.a = not available
^FY16-FY17 valuations refer to FY17-FY18 data

Market capitalisation of the Top 25 (MYRm) FY17F Return on Equity (ROE) of the Top 25 (%)

AirAsia X Samchem
Datasonic NeXchange

Matrix Concepts Datasonic^

MKH Elsoft Research

Muhibbah Engineering Pesona Metro

Jaya Tiasa Power Root^

Reach Energy AWC

OCK Group Matrix Concepts^

Dagang NeXchange MKH

Gadang AirAsia X

Power Root IQ Group^

Berjaya Food Reach Energy

Chin Hin Group Gadang^

Elsoft Research Sasbadi

Sasbadi Yoong Onn Corp

Pesona Metro Chin Hin Group

IQ Group Engineering

AWC Berjaya Food^

Samchem Notion VTec

Harrisons OCK Group

Notion VTec O&C Resources

Green Packet Harrisons

Yoong Onn Corp Jaya Tiasa

Priceworth Priceworth
International International

O&C Resources Green Packet

0 500 1,000 1,500 2,000 -10% 10% 30% 50%

Source: Bloomberg, RHB Source: Bloomberg, RHB

Note: ^FY17 valuations refer to FY18

Top Malaysia Small Cap Companies 2017
FY17F P/E of the Top 25 (x) FY17F Dividend Yield for Top 25 (%)

Priceworth International Elsoft Research

O&C Resources Matrix Concepts^

OCK Group Power Root^

Sasbadi Dagang NeXchange

Berjaya Food^ Pesona Metro

Datasonic^ Harrisons

Jaya Tiasa Chin Hin Group

Elsoft Research Yoong Onn Corp

Chin Hin Group IQ Group^

Power Root^ AWC

IQ Group^ Notion VTec

Pesona Metro Datasonic^

Harrisons Berjaya Food^

Muhibbah Engineering MKH

AWC Gadang^

Notion VTec OCK Group

Yoong Onn Corp Muhibbah

AirAsia X Jaya Tiasa

Gadang^ Sasbadi

MKH Reach Energy

Matrix Concepts^ Samchem

Samchem AirAsia X

Reach Energy O&C Resources

Dagang NeXchange Green Packet

Green Packet Priceworth

0 20 40 60 80 100 120 140 160 0% 2% 4% 6% 8% 10%

Source: Bloomberg, RHB Source: Bloomberg, RHB

Note: ^FY17 valuations refer to FY18 Note: ^FY17 valuations refer to FY18

Target: MYR0.50
AirAsia X Bhd Price: MYR0.41

Maintaining Positive Altitude Change

Price Close
AirAsia X Bhd (AAX MK)
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits

0.47 191
Continuing trend of earnings recovery/growth

0.42 171
Strong capacity expansion of 25% in 2017

0.37 151
Slower but continuing improvements in revenue yield

0.32 131
74% hedged jet fuel for 2017 provides good visibility on costs

0.27 111
Sustained recovery in earnings for associate airlines

0.22 91
Compelling, below peers P/E and EV/EBITDA valuations
150 Company Profile
AirAsia X is the long-haul, low-cost affiliate carrier of the AirAsia Group.
Vol m


It operates a core fleet of 30 A330-300s as at Dec 2016, each with a





seat configuration of 12 premium flatbeds and 365 economy seats. The

airline, which commenced its long-haul services in 2007, has 66 Airbus
Source: Bloomberg A330-900neos on order.

Stock Profile
Bloomberg Ticker AAX MK
Avg Turnover (MYR/USD) 6.10m/1.37m
Net Gearing (%) 11.6 25% growth in capacity without new aircraft. Although AirAsia X is
Market Cap (MYRm) 1,701m not adding any new aircraft in 2017, management is guiding for a 25%
increase in ASK. Growth in ASK would be driven by:
Beta (x) 0.86
i. The full-year impact of the capacity put in place in 2016;
BVPS (MYR) 0.31
ii. Higher aircraft utilisation;
52-wk Price low/high (MYR) 0.28 - 0.48
Free float (%) 50
iii. The redeployment of two wet lease aircraft back to scheduled
Although the Mauritius route is to be dropped, the carrier plans to
increase frequencies to Tehran, and introduce flights to Wuhan and
Major Shareholders (%) Hawaii later this year. We believe management may add one more new
Senior management & related 48.4 destination in Asia to deploy its spare capacity.
AIA 4.0
Capacity to grow faster if AirAsia X restarts flights to Europe. ASK
Norges Bank 1.5 growth could exceed 25% if AirAsia X manages to commence flights to
Europe later this year. Launch to European routes from Malaysia,
however, depends on availability of appropriate aircraft for lease.
Share Performance (%)
Slower but continuing improvements in revenue yield. While
1m 3m 6m 12m competition is likely to worsen with the addition of fresh capacity by
Absolute 1.2 10.8 7.9 78.3 Malindo Air and Malaysia Airlines we believe AirAsia X would be able
Relative 0.8 6.8 7.3 76.5 to report improvement in 2017 yield.
Management has highlighted that the carrier continues to increase its
average air fares by double digits, especially for high demand maturing
Shekhar Jaiswal +65 6232 3894 routes like Japan, Iran and South Korea. The forward booking numbers disclosed by AirAsia X remains encouraging, with higher YoY load
factors and average fares through to July. We forecast 8% yield
increases in 2017, down from the 14% (excluding fuel surcharge)
reported in 2016.

Top Malaysia Small Cap Companies 2017
Associate airlines to sustain improvement trend. In 2016, Thai Profit & Loss Dec-16 Dec-17F Dec-18F
Total turnover (MYRm) 4,007 4,944 5,316
AirAsia X (TAAX) witnessed strong improvements in operations as
Reported net profit (MYRm) 231 229 266
losses continued to narrow. We expect TAAX to turn profitable in 2017.
Recurring net profit (MYRm) 223 232 276

Meanwhile, Indonesia AirAsia X (IAAX) has suspended operations Recurring net profit growth (%) - 4.1 18.9
Recurring EPS (MYR) 0.05 0.06 0.07
starting Sep 2016. IAAX is undergoing restructuring, and operations are
Recurring P/E (x) 7.63 7.33 6.16
expected to resume in early 2H17. However, earnings from two aircraft
Return on average equity (%) 27.1 19.2 18.5
being leased to AirAsia should help sustain earnings and enable the P/B (x) 1.58 1.30 1.08
airline to report lower losses in 2017. P/CF (x) 4.99 2.74 3.88

Risk remains on the weakening of the MYR. The MYR has Source: Company data, RHB

depreciated from an average of MYR4.14/USD in 2016 to a spot price

of MYR4.47. We forecast the MYR to average MYR4.43, suggesting Balance Sheet (MYRm) Dec-16 Dec-17F Dec-18F
Total current assets 1,172 1,823 2,087
downside risks if the currency continues to weaken. This is as all of its
Total assets 4,507 5,079 5,424
debt and large portion of its operating cost are denominated in USD.
Total current liabilities 1,824 1,958 2,036
Total non-current liabilities 1,606 1,815 1,815
Total liabilities 3,430 3,772 3,851

Company Report Card Shareholders' equity 1,077 1,306 1,573

Total equity 1,077 1,306 1,573
Latest results. AirAsia X booked its fourth consecutive quarter of core Total liabilities & equity 4,507 5,079 5,424

profits in 4Q16 and its first full-year profit since its IPO. The carriers Total debt 1,160 1,160 1,160
Net debt 738 152 (86)
4Q16 revenue grew 39% YoY to MYR1,170m, while it reported a profit
of MYR106m in the same quarter vs a loss of MYR39m in 4Q15. Source: Company data, RHB

Balance sheet/cash flow. The long haul budget carriers net debt to Cash flow (MYRm) Dec-16 Dec-17F Dec-18F
equity has improved significantly to 0.69x as at end 2016 from 1.80x as Cash flow from operations 341 621 438
at end 2015. We expect it to report a net cash position in 2018. AirAsia Cash flow from investing activities (19) (35) (200)
X also reported a positive FCF in 2016, offering a FCF yield of 19%. Cash flow from financing activities (211) - -
Cash at beginning of period 313 422 1,008
ROE. The airlines ROEs turned positive for the first time as it reported Net change in cash 110 586 238
its first full-year profit in 2016 since its IPO. We believe 2016s ROE of Forex effects (1) - -

27% was exceptionally high and estimate the normalised ROE to range Ending balance cash 422 1,008 1,247

between 18-19% over the forecast years. Source: Company data, RHB

Dividend. AirAsia X does not pay any dividends.

Management. Mr Benyamin Ismail was appointed as CEO in Sep 2015.
Since he took over the reins of the airline, AirAsia X has witnessed a
strong turnaround in operations. This was followed by equally strong
recovery in earnings. The current management remains prudent and is
working closely with AirAsia to optimise its network.

We maintain a BUY rating on AirAsia X and value the carrier based on
average target P/E, P/BV and EV/EBITDAR multiples for 2017. Our TP
of MYR0.50 implies 2017F P/E of 9x and EV/EBITDA of 5x, which is
below the peer average.
The Asian (excluding AirAsia X) and global low cost carriers (LCCs) are
trading at weighted average multiples of 1FY P/Es 9.8x and 15.3x
respectively. Similarly, for EV/EBITDA, the average valuations are 6.8x
and 7.3x respectively.

Fair Value: MYR1.37
AWC Bhd Price: MYR1.02

Harnessing Green Growth

Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits
1.1 239 A unique, niche business that benefits from the go green initiative
STREAM AWCS is an internationally recognised brand with
0.8 179 presence in Malaysia, Singapore, Hong Kong & Abu Dhabi
0.7 159 Strong outstanding orderbook of MYR1.15bn as at 1 Jan 2017, and
0.6 139
strong potential for new contracts, especially STREAM projects and
0.5 119
facilities management
0.4 99
0.3 79
30 Company Profile
AWC is an investment holding company that provides integrated
Vol m

facilities management (IFM) and engineering services, specialising in




quality engineering services. The company provides total asset

management services such as integrated facilities management and
Source: Bloomberg engineering services to building owners. It is also an international
leader in the design and supply of automated pneumatic waste
Stock Profile collection system (AWCS) with a proven track record in Malaysia,
Bloomberg Ticker AWCF MK Singapore and Middle East. Known for harnessing new technology,
Avg Turnover (MYR/USD) 3.52m/0.79m AWC is at the forefront of green building services offering energy
Net Gearing (%) -30.1
management solutions.
Market Cap (MYRm) 266m
Beta (x) 0.50
BVPS (MYR) 0.55
52-wk Price low/high (MYR) 0.44 - 1.09 Solid facilities management division. Prospects at the facilities
Free float (%) 47 management division remain solid with recently-renewed concessions
to provide IFM to the Southern Region (comprising states of Johor,
Malacca, Negeri Sembilan) and Sarawak state building. We believe the
concessions would provide a stable stream of revenue in the facilities
Major Shareholders (%)
segment for the next 10 years, with the company receiving MYR52m pa
K-Capital SB 30.4 for the first five years, followed by MYR59m pa for the remaining five
EVLI Fund Management 4.6 years. As the company also carries out IFM work under the commercial
and healthcare segment, we believe the segment would continue to
account for 39-43% of FY17-FY19 revenue.
Huge potential in environment. In the environment division, AWC
Share Performance (%) elevated itself as one of the market leaders for waste collection system
1m 3m 6m 12m under the brand STREAM. This division has more than doubled in
Absolute (3.8) 14.6 23.6 134.5 FY16, due to improvements in all the geographical regions (Malaysia,
Singapore UAE and Hong Kong). Significantly, the STREAM system
Relative (4.2) 10.6 23.0 132.7
has been installed in the underground areas of Al Raha beach. As the
beach area is currently only 15% occupied, AWC is expected to pull
over MYR150-200m worth of contracts over the next 10 years.
Muhammad Syafiq Bin Mohd Salam Similarly, in Singapore, the Housing & Development Board has made it
+603 9280 8867 compulsory to have the AWCS installed in all its future buildings as well as its old buildings that going through major renovations. We expect
AWC to continue to benefit from strong demand for AWCS in the future.

Top Malaysia Small Cap Companies 2017
Profit & Loss Jun-16 Jun-17F Jun-18F

Plumbing & rainwater harvesting expert. The engineering division Total turnover (MYRm) 249 304 339
Reported net profit (MYRm) 17 24 26
has recently expanded with the completion of the acquisition of two new
Recurring net profit (MYRm) 17 24 26
companies, namely Qudotech Sdn Bhd (Qudotech) and DD Techniche Recurring net profit growth (%) 118.2 37.4 10.2
Sdn Bhd (DDT). After the acquisitions, Qudotech managed to secure Recurring EPS (MYR) 0.08 0.10 0.12
close to MYR100m worth of contracts for plumbing works. These DPS (MYR) 0.03 0.03 0.04
include some high profile projects such as KL118 Tower, The Astaka, Dividend Yield (%) 2.5 3.4 3.7
Iskandar Malaysia, Puteri Cove Residences, The Sentral Residence Recurring P/E (x) 13.42 9.77 8.86
and Signature Tower, Tun Razak Exchange. We expect plumbing and Return on average equity (%) 17.3 20.4 18.6

rain water harvesting to provide synergies to AWC and present cross- P/B (x) 2.16 1.85 1.48
P/CF (x) 59.88 24.87 54.20
selling opportunities to win more contracts.
Source: Company data, RHB

Balance Sheet (MYRm) Jun-16 Jun-17F Jun-18F

Company Report Card Total current assets 198 231 256
Total assets 241 277 302
Strong orderbook. Revenue in 1HFY17 rose 46% while profit Total current liabilities 101 118 111
expanded by a greater 113%. We expect results to continue to be Total non-current liabilities 4 6 7
strong, driven by a large outstanding orderbook of MYR1.15bn as at 1 Total liabilities 105 124 118
Jan 2016 with approximately MYR428m to be recognised up to 30 Jun Shareholders' equity 107 124 155
2018. We expect STREAM to continue to gain momentum from Minority interests 29 29 29
securing contracts for high profile developments in Malaysia, Singapore, Other equity - 0 0
Total equity 135 153 184
Hong Kong and Abu Dhabi
Total liabilities & equity 241 277 302
Balance sheet/cash flows. The company has been in a net cash Total debt 1 10 10

position for many years given managements prudent balance sheet Net debt (44) (46) (57)

approach. As at Dec 2016, AWC was able to maintain its strong net Source: Company data, RHB
cash position of MYR86.4m
Cash flow (MYRm) Jun-16 Jun-17F Jun-18F
ROE. AWC recorded double-digit ROE in FY16 due to higher Cash flow from operations 4 9 4
contributions from the environmental division that commands better Cash flow from investing activities (9) 3 3
margins. Cash flow from financing activities 2 (6) (8)
Cash at beginning of period 54 45 56
Dividend. Despite having no fixed dividend policy, AWC paid 2.5 sen of Net change in cash (3) 6 (1)
dividend in FY16 translating to a dividend payout of 32.8%. We expect a Ending balance cash 50 51 55
payout ratio of at least 20% going forward. Source: Company data, RHB

Management. All three divisions are helmed by three different

managing directors (MDs)/CEOs with more than 20 years of experience
in their respective areas. The group is led by its MD, Dato Ahmad
Kabeer, who is also the largest shareholder in the company.

Pegging the stock to 11x 2018 P/E, we arrive at a fair value of
MYR1.37. We like AWC for its huge potential in the environmental
division and the companys strong outstanding orderbook of
MYR1.15bn. We believe the company deserves to trade at 11x P/E,
which is its 3-years P/E average.

Target: MYR2.21
Berjaya Food Price: MYR1.81

Starbucks The Flag Bearer

Price Close
Berjaya Food (BFD MK)
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits
2.3 105

2.1 97
Consistent solid performance by Starbucks
1.9 88
Efforts being put in to reduce earnings drag from KRR
1.7 80
Potential re-rating if KRR is disposed
1.5 72
Company Profile
1.3 63
Berjaya Food develops and operates the Kenny Rogers Roasters
1.1 55
10 restaurant chain as well as Starbucks Coffee caf chain in Malaysia and
other Southeast Asian countries. The company also develops and
4 operates Jollibean Foods, which consists of Jollibean, Kopi Alley, Sushi
Deli and DanGo brand in Singapore and Malaysia.
Vol m





Source: Bloomberg
Starbucks to continue shining. Prices of Starbucks products were
Stock Profile raised by 8-9% in January, as a measure to pass through higher costs
Bloomberg Ticker BFD MK primarily arising from unfavourable forex movements. This, together
Avg Turnover (MYR/USD) 0.67m/0.15m with plans to open c.25 stores per year and forecasted SSSG of 4-7%
Net Gearing (%) 53.8 pa for FY17F-19F, are expected to result in the coffee chain continue
Market Cap (MYRm) 675m
being the main pillar driving the groups growth moving forward.
Beta (x) 0.73 Turning KRR around. Management is also working towards
BVPS (MYR) 1.08 rationalising KRR both in Indonesia and Malaysia. New promotional
52-wk Price low/high (MYR) 1.27 - 2.12 strategies have been implemented to reach out to consumers while
non-performing outlets have been lined up for closure. As such, we
Free float (%) 35
expect the earnings drag from KRR to be reduced gradually with these
measures in place.

Major Shareholders (%)

Potential re-rating as pure Starbucks play. As KRR remains
uninspiring in terms of performance and may require strenuous effort to
Berjaya Corp. Berhad 43.5
be turned around, a disposal would not be surprising, in our view.
Norges Bank 5.1 Should a disposal at a reasonable price materialise, we believe it would
Perbadanan Nasional Berhad 4.7 be earnings accretive and could potentially be a re-rating catalyst for
BFood as a pure Starbucks play. Starbucks Corp (SBUX US, NR) is
currently trading at a forward P/E of 27x in the US (source: Bloomberg).
Share Performance (%)
1m 3m 6m 12m
Absolute 5.8 13.8 16.0 (11.7) Company Report Card
Relative 5.4 9.8 15.4 (13.5) Latest results. 9MFY17 (Apr) core net profit of MYR14.7m was 25.4%
lower YoY, dragged down by losses in KRR Malaysia and Indonesia.
During the same period, revenue grew 9.4% to MYR454.0m, thanks to
Alexander Chia +603 9280 8889 aggressive Starbucks outlet expansion. Balance sheet / Cash flow. As of 9MFY17, net gearing stood at 0.59x,
with the bulk of borrowings associated with the acquisition of a 50%
stake in Starbucks Malaysia in Sep 2014.
ROE. We forecast the group to deliver double-digit ROEs in FY18F-

Top Malaysia Small Cap Companies 2017
19F, driven by projected solid performance at Starbucks. Profit & Loss Apr-16 Apr-17F Apr-18F
Total turnover (MYRm) 554 584 653
Dividend. Dividend payout is forecasted at 4/6/7 sen in FY17F-19F Reported net profit (MYRm) 37 25 38
(yields of 2-4%), as we believe capex commitments for store expansion Recurring net profit (MYRm) 21 25 38
and efforts in paring down borrowings may restrain more generous Recurring net profit growth (%) (19.0) 17.1 54.3
Recurring EPS (MYR) 0.06 0.07 0.10
payouts in the near term.
DPS (MYR) 0.05 0.03 0.05
Management. The group is helmed by CEO, Dato Francis Lee, who Dividend Yield (%) 2.9 1.8 2.8

has been with the Berjaya Group since 1994. He was the key person Recurring P/E (x) 32.39 27.66 17.93
Return on average equity (%) 9.4 6.1 9.1
who turned KRRs business around in Malaysia when it was on the
P/B (x) 1.73 1.67 1.60
verge of collapse in 1998. P/CF (x) 15.12 22.67 11.06

Source: Company data, RHB

Recommendation Balance Sheet (MYRm) Apr-16 Apr-17F Apr-18F

Total current assets 116 124 130
BUY with TP of MYR2.21. We continue to like BFood our investment Total assets 747 774 791
case is based on the robust growth at Starbucks, which should propel Total current liabilities 181 199 202
BFood to register earnings growth of 17%/54% over the next two years. Total non-current liabilities 178 176 173
Meanwhile, the potential disposal of KRR, if it happens, should provide Total liabilities 358 375 375
an immediate boost to BFoods earnings in our view, after removing Shareholders' equity 400 412 431
Minority interests (11) (13) (15)
projected losses at the division. We value BFood with a DCF-derived
Other equity - 0 (0)
(WACC: 7.4%, TG: 1%) TP of MYR2.21, which implies FY18F P/E of
Total equity 389 399 416
21.9x, below its 5-year average forward P/E of 28.1x. BUY maintained. Total liabilities & equity 747 774 791
Total debt 229 245 240
Net debt 191 215 213

Source: Company data, RHB

Cash flow (MYRm) Apr-16 Apr-17F Apr-18F

Cash flow from operations 46 30 62
Cash flow from investing activities (37) (42) (42)
Cash flow from financing activities 39 4 (24)
Cash at beginning of period 38 38 30
Net change in cash 48 (7) (4)
Ending balance cash 86 30 27

Source: Company data, RHB

Fair Value: MYR1.40
Chin Hin Group Price: MYR1.03

One-Stop Building Materials Centre

Price Close
Chin Hin Group (CHIN MK)
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits
1.05 129

1.00 124 Starken AAC is an up and coming star given Chin Hins
0.95 119
aggressive expansion plans
0.90 114 In the midst of bumping up its precast and wire mesh capacity,
0.85 109
which would support higher production and earnings
0.80 104 We foresee continued efforts to look for value accretive M&As after
0.75 99
two successful acquisitions in late 2016
0.70 94
Company Profile
40 Chin Hin Group (Chin Hin) is an integrated builders conglomerate that
Vol m

provides building materials and services to the construction and building




industries. The groups history can be traced back to 1974 when its
founder, Datuk Chiau Beng Teik took over his familys hardware shop in
Source: Bloomberg Alor Setar, Kedah, under the name of Chop Chin Hin.

Stock Profile Through hard work and perseverance, the group has evolved from a
small hardware outfit into one of the largest building materials
Bloomberg Ticker CHIN MK
distributors in Malaysia. Chin Hin has expanded into the supply of
Avg Turnover (MYR/USD) 1.58m/0.35m ready-mixed concrete through multiple points of sales throughout the
Net Gearing (%) 58.6 country. Towards the end of 2009, its present group MD, Chiau Haw
Market Cap (MYRm) 521m Choon joined his father, which lead to further expansion and
Beta (x) 0.92 diversification of the group into various manufacturing operations which
BVPS (MYR) 0.71 complement its existing business these include venturing into wire
mesh products, metal roofing systems, Autoclaved Aerated Concrete
52-wk Price low/high (MYR) 0.80 - 1.17
(AAC), and pre-cast concrete products. Today, Chin Hin has grown into
Free float (%) 30 a one-stop centre for the building and construction industries in

Major Shareholders (%)

Divine Inventions 60.0 Highlights
Beng Teik Chiau 9.7
Starken AAC an up and coming star. After a few years of market
education, many contractors have started to adopt Starken AAC as a
substitute for traditional bricks and mortar. The group has just finalised
its acquisition of 50.6 acres of land in Kota Tinggi, Johor for MYR22m,
Share Performance (%) to set up a 600,000 m3 AAC block plant on the site, on top of its
1m 3m 6m 12m existing capacity of 375,000 m3.
Absolute 15.7 17.7 19.8 This new plant is targeted to commence operations by mid-2018 to
Relative 15.3 13.7 19.2 ease the current delivery lead time of up to six months. The Johor
production line would be interchangeable between manufacturing AAC
blocks and wall panels.
Ng Sem Guan, CFA +603 9280 8878 The Housing and Development Board of Singapore (HDB) has accepted Starkens wall panels for their government affordable housing
project. This plant would be geared up to increase the production
quantity of wall panels to cater to rising demand from the local market
as well as neighbouring countries.

Top Malaysia Small Cap Companies 2017
Casting up precast and wire mesh capacity. Precast concrete is Profit & Loss Dec-16 Dec-17F Dec-18F

another lucrative business for Chin Hin. Its 2016 precast capacity of Total turnover (MYRm) 1,061 1,187 1,303
Reported net profit (MYRm) 45 43 54
45,000 tonnes pa (tpa) would increase to 300,000 tpa in 2017, with four
Recurring net profit (MYRm) 34 43 54
new plants at Serendah, Bidor and Rawang. The new plants at Bidor Recurring net profit growth (%) 12.3 25.3 26.4
and Rawang have been operational since January, with contributions Recurring EPS (MYR) 0.07 0.08 0.11
expected as soon as 1Q17. Separately, it also plans to set up a new DPS (MYR) 0.04 0.04 0.05
100,000-tonne precast plant adjacent to its new AAC plant in Johor, Dividend Yield (%) 3.4 4.1 5.2
operational by early 2018. With the Governments continued initiatives Recurring P/E (x) 14.39 12.25 9.69
in the water and sewerage sector, prospects for the precast concrete Return on average equity (%) 15.0 12.2 14.4

business are looking bright. Elsewhere, it installed the worlds latest P/B (x) 1.54 1.45 1.35
P/CF (x) 86.42 5.32 7.39
wide-body fast-speed CTS welder in Dec 2016, which increased
production capacity by 24,000 tpa to 96,000 tpa positive earnings Source: Company data, RHB

contributions are expected from FY17.

Balance Sheet (MYRm) Dec-16 Dec-17F Dec-18F
Vertical integration via M&A. Leveraging on its network of 4,000 Total current assets 449 437 470
customers, the group is aggressively adopting its vertical integration Total assets 817 810 842
strategy in expanding its product range that offers better margins. Last Total current liabilities 434 416 430
Total non-current liabilities 46 36 26
year, it acquired Midah Industries and Epic Diversity. These acquisitions
Total liabilities 480 451 456
would further expand Chin Hins product portfolio to include hollow
Shareholders' equity 338 359 386
metal doors, fire rated roller shutters, and other products that fetch Other equity - 0 -
higher margins. Furthermore, the acquisitions were supported by PBT Total equity 338 359 386
guarantees of MYR3m in aggregate each for the next two years. Led by Total liabilities & equity 817 810 842
a young and driven management team, we expect the group to continue Total debt 319 280 270
to be on the lookout for value accretive M&As. Meanwhile, its Net debt 245 211 203

distribution of building materials, ready-mixed concrete and other Source: Company data, RHB
segments should continue to benefit from the booming infrastructure
construction sector in Malaysia although softer new property Cash flow (MYRm) Dec-16 Dec-17F Dec-18F
development may cap its upside. Cash flow from operations 6 98 70
Cash flow from investing activities (59) (25) (20)
Cash flow from financing activities (62) (78) (53)
Cash at beginning of period 180 74 69
Company Report Card Net change in cash (115) (5) (2)
Forex effects 9 - -
Latest results. Excluding revaluation surplus of MYR13.8m and one-off Ending balance cash 74 69 67
listing expenses of MYR2.9m, Chin Hin reported a core net profit of Source: Company data, RHB
MYR34m in FY16 or up 12.3% YoY.
Balance sheet/cash flow. Chin Hins net gearing of 0.74x as at end-
FY16 is deemed reasonable being in the trading business.
ROE. The decent earnings helped Chin Hin to keep its ROE at the
commendable double-digit levels.
Dividend. While it does not have a formal dividend policy, management
has verbally committed to a generous payout ratio of 50%.
Management. Founded by Datuk Chiau Beng Teik, presently his son
Mr Chiau Haw Choon is in charge of the day-to-day operations together
with a team of professional managers.

We believe Chin Hin is the best proxy to ride the infrastructure boom in
Malaysia. The young and dynamic management team has put in
continuous effort to expand existing capacity and improve operational
efficiency, while the board is aggressively looking for value accretive
M&As to vertically integrate its existing business. With projected
bottomline growth of 25.3%/26.4% in FY17F-18F, we believe it
deserves to trade at a higher target FY18F P/E of 13x vs the industry
valuation range of 10-13x. We have a fair value of MYR1.40.

Fair Value: MYR0.71
Dagang NeXchange Price: MYR0.41

Transforming By Diversification
Dagang NeXchange (DNEX MK)
Price Close Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits
0.47 220

0.42 197
Beneficiary of higher crude oil price
0.37 173
Stable earnings from IT segment
0.32 150
Scalable RFID expertise
0.27 127

0.22 103 Company Profile

0.17 80
250 Dagang NeXchange (DNeX) is a provider of IT services to the
Government, through the National Single Window (NSW) concession. It
is also involved in other IT infrastructure for the Government. DNeX
owns a stake in Anasuria Cluster, an oilfield in the North Sea.
Vol m





Source: Bloomberg
Beneficiary of higher crude oil price. DNeX owns 30% of Ping
Stock Profile Petroleum, which in turn owns 50% of the Anasuria Cluster, an oil & gas
Bloomberg Ticker DNEX MK field located in the North Sea. The field has an estimated remaining
Avg Turnover (MYR/USD) 12.0m/2.68m lifetime of 20 years, with 2P reserves at 40.4mbbls of oil and 27.9bscf of
Net Gearing (%) -39.8 natural gas. The field is served by a floating, production, storage and
offloading (FPSO) vessel jointly owned by Ping Petroleum and Anasuria
Market Cap (MYRm) 703m
Hibiscus, the other stakeholder in the Anasuria Cluster.
Beta (x) 1.00
BVPS (MYR) 0.32 The cluster is a brownfield asset with positive cash flows. We estimate
52-wk Price low/high (MYR) 0.20 - 0.44
that every 5% movement in crude oil price would increase valuations of
the cluster by 19%. Apart from its stake in Anasuria Cluster, DNeX
Free float (%) 69
owns 80% of DNeX Oilfield Services, the only local player for directional
drilling. The drilling arm has secured a USD70m umbrella contract from
Major Shareholders (%)
Stable earnings from IT segment. DNeX is the exclusive operator of
Censof 17.9 the NSW, which facilitates trade and customs arrangements for the
Arcadia Acres 13.3 private sector and the customs department. The concession has been
extended until Sep 2018 after which the new uCustoms system would
be operational in parallel with the NSW. Apart from NSW, DNeX is also
the service provider for the eWork permit system, for the rehiring of
Share Performance (%)
illegal foreign workers from 15 countries.
1m 3m 6m 12m RFID expertise. Owing to its expertise in radio frequency identification
Absolute 39.7 68.8 47.3 87.5 (RFID), DNeX has been appointed as the contractor and operator for
Relative 37.5 63.8 45.3 85.3 the Vehicle Entry Permit (VEP) and Road Charges (RC) system project.
Capex for the project is estimated at MYR45m while the 5-year
operations and maintenance contract is valued at MYR105m. DNeX
has also been appointed as the project consultant for VEP & RC for the
Wan Mohd Zahidi +603 9280 8879 Thai-Malaysia border, and other borders into Thailand.

Top Malaysia Small Cap Companies 2017
Company Report Card Profit & Loss
Total turnover (MYRm)
Reported net profit (MYRm) 139 188 199
Latest results. DNeXs FY16 earnings came in at MYR132m, an
Recurring net profit (MYRm) 139 188 199
increase of 735% from its FY15 earnings, largely attributed to
Recurring net profit growth (%) 1,139.9 34.8 6.0
contributions from the Anasuria cluster. Recurring EPS (MYR) 0.08 0.11 0.11
DPS (MYR) 0.02 0.02 0.02
Balance sheet/cash flow. DNeX currently has zero borrowings as it
Dividend Yield (%) 3.7 5.0 5.3
pared down debt from its fund raising exercise in mid-2016. Cash Recurring P/E (x) 5.04 3.74 3.53
position stood at MYR67m. We understand that DNeX would be utilising Return on average equity (%) 55.2 39.2 31.4
a portion of its cash for a second brownfield asset. P/B (x) 1.74 1.27 0.98
P/CF (x) 7.88 2.62 2.60
ROE. ROE for FY16 came in at 55.2%, attributed to higher earnings
Source: Company data, RHB
coming from its energy segment.
Dividend. DNeX paid a DPS of 1.5sen for FY16, translating to a payout Balance Sheet (MYRm) Dec-16 Dec-17F Dec-18F
ratio of 19%. Total current assets 145 302 472
Total assets 457 615 785
Management. The company is led by its group managing director, Total current liabilities 44 49 58
Zainal Abidin Jalil, a former CEO at Malakoff Corporation. Datuk Total non-current liabilities 12 12 12
Samsul Husin, DNeXs executive deputy chairman, provides a steady Total liabilities 56 62 70
hand in the IT segment. Shareholders' equity 404 554 713
Minority interests (2) 0 3
Other equity - (0) 0
Total equity 402 554 715

Recommendation Total liabilities & equity

Net debt

We like DNeX after its transformation, given that it has a diversified Source: Company data, RHB
revenue stream from both IT services as well as the energy segment.
Cash flow (MYRm) Dec-16 Dec-17F Dec-18F
Its IT services business provides both recurring income from the NSW Cash flow from operations 89 268 270
facilitation, as well as new growth opportunities through its RFID Cash flow from investing activities (126) (10) (10)
expertise. Cash flow from financing activities 101 (38) (40)
Cash at beginning of period 46 72 221
The energy segment is a beneficiary of higher crude oil price from its Net change in cash 64 221 221
stake in the Anasuria Cluster, as well as improved work orders for its Ending balance cash 110 293 441
directional drilling arm. Source: Company data, RHB

We value DNeX at MYR0.71 using an SOP valuation. Its IT segment is

valued at FY17 P/E of 10x, while its Anasuria Cluster is valued using
DCF at a discount rate of 10%, on par with other oilfield valuations.

Target: MYR1.84
Datasonic Group Price: MYR1.17

Full Year Boost From MyKad And Passports

Price Close
Datasonic Group (DSON MK)
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits
1.70 117

1.60 111 Existing MyKad and passport contracts to drive earnings growth for
1.50 104
1.40 98 Potential winning of new jobs could spark further re-rating
1.30 91 BUY, with our MYR1.84 TP based on 25x 2017F P/E
1.20 85

1.10 78 Company Profile

1.00 72
20 Datasonic Group (Datasonic) is principally involved in the provision of
15 ICT solutions that include:
i. Smart card personalisation services;
Vol m

ii. Customisation of large-scale government ICT solutions;




iii. Project management;

iv. Technical consultancy services.
Source: Bloomberg

Stock Profile Highlights

Bloomberg Ticker DSON MK
MyKad orders to normalise. After two consecutive quarters of minimal
Avg Turnover (MYR/USD) 3.11m/0.70m MyKad deliveries, Datasonic has received an order of 1m units each for
Net Gearing (%) 29.7 its MyKad and MyKad consumables for 4QFY17. We believe this return
Market Cap (MYRm) 1,579m of orders likely indicate that the inventory levels at the National
Beta (x) 0.46 Registration Departments branches have normalised. We expect future
deliveries to largely match the current demand at 3.3-3.5m copies pa.
BVPS (MYR) 0.21
As for the foregone two quarters of orders, we believe deliveries would
52-wk Price low/high (MYR) 1.13 - 1.61 be backloaded as we move closer towards the expiry of the current
Free float (%) 41 contract in Dec 2019.
Potential 5-year renewal of passport polycarbonate page. As for its
existing passport polycarbonate page contract, the group has fully
Major Shareholders (%) delivered all 10m pieces to the Immigration Department despite the
Dato Abu Hanifah Noordin 33.7 contract only officially expiring in Jan 2018. The early completion of
delivery was due to better-than-expected demand, as the current run-
Chew Ben Ben 24.9
rate hovers around 2.6-2.7m copies pa vs initial estimates of 2m pieces
pa. To ensure continuous supply to the public, Datasonic has secured
an additional order of 2.8m pieces to last until the original expiry date of
Jan 2018. Beyond that, as we are now less than one year away from
Share Performance (%) the official expiry of the contract. Thus, we expect management to soon
start talks on a potential 5-year renewal of this passport polycarbonate
1m 3m 6m 12m
page provision. This potential renewal could worth some MYR300-
Absolute 1.7 (8.6) (18.2) (15.8) 400m and would likely commence on Feb 2018.
Relative 1.3 (12.6) (18.8) (17.6)
Contribution from passport booklets. On its new role as the official
supplier of the national passport booklets effective Dec 2016,
management highlighted that it is currently finalising a sub-contracting
Kong Heng Siong +603 9280 8866 agreement with Percetakan Keselamatan Nasional SB for interim supply up to May. We expect this to be wrapped up by end of this
Come 1 Jun, Datasonic is to commence its own production of passport
booklets with its new UNO and Intaglio printers. These two new printing
machines cost MYR40-45m.

Top Malaysia Small Cap Companies 2017
We expect official commissioning by May, with commercial production Profit & Loss Mar-16 Mar-17F Mar-18F
to commence by 1 Jun. Total turnover (MYRm) 241 324 346
Reported net profit (MYRm) 63 68 110
Eyeing new initiatives. Beyond its existing operations, Datasonic is Recurring net profit (MYRm) 63 68 110
eyeing to provide driving licenses as well as road tax stickers for on-the- Recurring net profit growth (%) 9.2 7.7 62.7
road vehicles. According to official statistics from the Road Transport Recurring EPS (MYR) 0.05 0.05 0.08
Department of Malaysia, there are 26m registered vehicles on the road DPS (MYR) 0.03 0.02 0.04
Dividend Yield (%) 2.6 1.9 3.1
and 14.7m registered drivers as at 2015.
Recurring P/E (x) 25.11 23.32 14.33
Based on ASPs of MYR7.50-8.00 per driving license and MYR2.50-3.00 Return on average equity (%) 26.9 25.7 35.2

per road tax sticker, this could translate into an annual revenue stream P/B (x) 6.44 5.59 4.60
P/CF (x) 21.11 20.10 10.10
of close to MYR100m. We understand that the group is now finalising its
proposal with an official submission. A presentation to the relevant Source: Company data, RHB
authorities is likely to take place by May or June. We have yet to
capture this potential earnings stream into our current forecasts. Balance Sheet (MYRm) Mar-16 Mar-17F Mar-18F
Total current assets 213 227 288
Total assets 405 439 486
Total current liabilities 83 86 82
Company Report Card Total non-current liabilities 77 70 61
Total liabilities 160 157 142
Latest results. We are forecasting for an earnings CAGR of 32.1% for Shareholders' equity 245 283 343
FY16-18. This is as we expect new earnings stream from the Minority interests (0) (0) (0)
commencement of its passport booklet contract, as well as full-year Total equity 245 283 343
Total liabilities & equity 405 439 486
contributions from its passport chip job (this started in May 2016).
Total debt 125 115 99
We also expect a potential improvement in its overall profitability Net debt 82 84 (3)
margins, as we gather from our channel checks that management is Source: Company data, RHB
looking to secure raw materials for the polycarbonate page from a new
supplier. This could result in some MYR10-15m in cost savings pa. We Cash flow (MYRm) Mar-16 Mar-17F Mar-18F
gather that negotiations are currently ongoing, with official supply to Cash flow from operations 75 79 156
take place likely by mid-2017. Cash flow from investing activities (46) (50) (20)
Cash flow from financing activities (41) (40) (66)
Balance sheet/cash flow. As at Dec 2016, Datasonic is sitting on a Cash at beginning of period 49 43 31
cash pile of MYR36.8m and total borrowings of MYR143.6m. While its Net change in cash (12) (12) 71
implied net gearing of 42.8% may seem high at first glance, we note Ending balance cash 37 31 102

that its net receivables registered at MYR182.2m. Over 90% of the Source: Company data, RHB
balance is due from the Government for the groups provision of MyKad
and national passports. Moving forward, we expect its balance sheet to
strengthen in tandem with its improving earnings prospects.
Dividend. Management does not have a fixed dividend policy at this
point. We expect Datasonic to declare DPS of 3-4 sen for FY17-18.
Management. The management team is led by group MD Dato Abu
Hanifah and deputy MD Mr Chew Ben Ben. The duo holds an effective
58% stake in the group on a combined basis. Dato Abu Hanifah was
the president and managing partner of Ernst & Whinney for nine years,
and also served as the president of the Malaysian Institute of
Accountants for 13 years until 2000. Mr Chew, meanwhile, started his
career in the investment industry in 1989. He joined Datasonic in 2006.

Maintain BUY. We continue to like this counter, given its unique status
as the largest security solutions provider in the country. Management is
actively working on new income sources to help replenish its orderbook.
As such, we maintain our BUY recommendation, with our TP of
MYR1.84 based on 25x 2017F P/E.

Fair Value: MYR2.15
Elsoft Research Price: MYR1.63

Growing Its Testing Equipment Segment

Price Close
Elsoft Research (ELSR MK)
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits
1.8 141
1.7 134 Increasing adoption of automotive LED lighting to spur long-term
demand for Elsofts testing and burn-in systems
1.4 113 Introduction of more sophisticated LED modules in next-generation
1.3 106
smartphones could spark demand over the medium term
1.2 99
1.1 92 Our MYR2.15 fair value is based on 15x 2018 P/E
1.0 85
0.9 78
71 Company Profile
2 Elsoft is a manufacturer of test equipment for the semiconductor
2 industry focusing primarily on the light-emitting diode (LED) lighting
components for the automotive and smartphone segments.
Vol m





Source: Bloomberg
Automotive segment a long-term catalyst. 45-50% of Elsofts 2016
Stock Profile revenue came from the automotive segment. According to market
Bloomberg Ticker ELSR MK expert LEDinside, the transition of global automotive lighting to light-
Avg Turnover (MYR/USD) 0.15m/0.03m emitting diode (LED) light sources from traditional light bulbs
Net Gearing (%) -44.8 accelerated further in 2016. Developed markets have steadily migrated
Market Cap (MYRm) 443m
to a high portion of LED light sources, while emerging countries, too,
have started to follow suit. Its latest research data showed that 2016
Beta (x) 1.00
exterior LED lighting market value reached USD1.57bn and is projected
BVPS (MYR) 0.39 to grow at CAGR of 6% to 2020. Ultimately, we believe the transition
52-wk Price low/high (MYR) 0.93 - 1.66 could propel long-term demand growth for Elsofts automotive testing
Free float (%) 50 and burn-in solutions. The group is currently conducting R&D on
developing high-speed LED tile testers. We expect it to roll this out
commercially by 2H17.
Major Shareholders (%) New smartphone LED modules could spark demand. Elsoft derives
Tan Cheik Eaik 24.9
35-40% of its 2016 revenue from the smartphone-related LED testing
segment. Although the double-digit growth era for global smartphone
Tan Ai Jiew 13.9
shipments is likely over (industry expert International Data Corporation
Koay Kim Chiew 11.7 estimates that global shipments grew by 2.3% in 2016, from 10.4% in
2015), we believe the progressive introduction of increasingly
sophisticated LED modules would likely sustain demand growth for
Share Performance (%) Elsofts testing solutions over the medium term. We highlight that new
1m 3m 6m 12m LED modules would typically require investments in new testing
equipment given potential differences in form factors, specifications
Absolute 1.9 22.3 35.8 26.1 as well as technical requirements. We gather that the group is in the
Relative 1.5 18.3 35.2 24.3 midst of delivering new testers for 2017 flagship smartphones.
Solar industry is next. Beyond that, management is currently
developing new automated testing equipment for the solar cell industry.
Kong Heng Siong +603 9280 8866 We understand Elsoft is currently working closely with its customer to meet technical specifications as well as testing efficiency. We estimate
that each of these new testers is worth close to MYR500,000. This, if it
materialises, could mark its penetration into the solar industry with more
orders likely to be secured over the next 12-24 months.

Top Malaysia Small Cap Companies 2017
Company Report Card Profit & Loss
Total turnover (MYRm)
Reported net profit (MYRm) 31 36 39
2016 results review. Elsoft closed 2016 with record-high core earnings
Recurring net profit (MYRm) 31 36 39
of MYR30.8m (+43.1% YoY), boosted predominantly by its smartphone
Recurring net profit growth (%) 43.1 16.0 9.9
segment (which booked a 92.3% YoY jump in revenue). We are Recurring EPS (MYR) 0.14 0.13 0.14
forecasting earnings CAGR of 12.9%, going forward. This takes into DPS (MYR) 0.08 0.10 0.11
account higher orders under its smartphone segment to cater for the Dividend Yield (%) 4.9 6.2 6.8
next-generation smartphone LED components to be launched in Aug or Recurring P/E (x) 11.96 12.38 11.27
Sep 2017. Return on average equity (%) 34.3 34.9 35.3
P/B (x) 4.51 4.15 3.82
Balance sheet/cash flow. Elsoft has been able to maintain zero debt P/CF (x) 11.49 14.31 12.87
since listing. Its net cash (inclusive of other liquid investments) position Source: Company data, RHB
stood at MYR45.1m as at Dec 2016. We expect free cash flow to
remain healthy going forward, at MYR30-35m pa. Balance Sheet (MYRm) Dec-16 Dec-17F Dec-18F
Total current assets 73 80 87
ROE. Owing to its clean balance sheet and stringent costs control with
Total assets 112 121 131
a total headcount of 70-75 people, the groups ROE closed at an above- Total current liabilities 13 14 15
average level of 34.3% in 2016. Total non-current liabilities 1 1 1
Total liabilities 13 14 15
Dividend. We foresee the possibility of the company continuing to Shareholders' equity 98 107 116
reward its shareholders, as Elsoft has been steadily paying dividends Other equity 0 0 0
ranging from 0.7 sen to 8 sen per share since its listing (after adjusting Total equity 98 107 116
for a 1-for-2 bonus issue completed in Dec 2016). We expect Elsoft to Total liabilities & equity 112 121 131
declare DPS of 10-11 sen for FY17 and FY18 respectively, based on Net debt (45) (48) (51)
our assumption of a payout ratio of 70-80%. This translates to appealing Source: Company data, RHB
yields of over 6% pa.
Cash flow (MYRm) Dec-16 Dec-17F Dec-18F
Management. Mr Tan Cheik Eaik, who helms the company as its CEO, Cash flow from operations 32 31 34
is an engineer with more than 20 years of experience. He specialises in Cash flow from investing activities (18) (1) (1)
the areas of test metrology and embedded application system designs Cash flow from financing activities (18) (27) (30)
that contribute to the fundamentals of the Elsoft group. He is assisted by Cash at beginning of period 15 12 14
Mr Koay Kim Chew, another electrical engineer, who manages the Net change in cash (4) 3 3
companys technological direction as chief technology officer. Mr Koay Forex effects 0 - -

also plays a role in the companys hardware and software design and Ending balance cash 11 14 18

development. Source: Company data, RHB

Pegging it to 15x 2018 P/E, we arrive at a fair value of MYR2.15. Our
target P/E is in line with the range of 10-15x P/Es that we peg to export-
oriented technology counters under our coverage. It is further supported
by its relatively more stable earnings track record and superior
profitability margins.

Target: MYR1.40
Gadang Holdings Price: MYR1.08

Well-Positioned For Next Growth Cycle

Price Close
Gadang Holdings (GADG MK)
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits

1.3 158 Outstanding orders provide medium term earnings visibility

1.2 145
Riding on local infrastructure boom with room to take on more jobs
1.1 132

1.0 120 Building up landbank at prime locations

0.9 107

0.8 94 Oil palm plantations and hydro power plant are long term growth
0.7 81
Company Profile
Vol m

Gadang Holdings (Gadang) is involved in civil engineering and




construction, property development, water supply, mechanical and

electrical engineering services, and oil palm plantation.
Source: Bloomberg

Stock Profile
Bloomberg Ticker GADG MK Highlights
Avg Turnover (MYR/USD) 5.11m/1.15m Outstanding orders provide medium term earnings visibility. We
Net Gearing (%) -7.0 are confident that Gadang would be able to at least maintain its robust
Market Cap (MYRm) 699m earnings recorded in FY16 for next two financial years. The outstanding
Beta (x) 0.94 construction orderbook (MYR527m), that is partly made up of variation
order (VO) claims and unbilled property sales (MYR187m) as at Nov
BVPS (MYR) 0.95
2016, should provide strong earnings visibility over the next 12-18
52-wk Price low/high (MYR) 0.76 - 1.32 months. Separately, its utilities unit continues to churn out stable
Free float (%) 56 earnings from four water supply concessions in Indonesia more than
offsetting minor losses at its plantations division.
Beneficiary of local infrastructure boom. Gadang has established
Major Shareholders (%) itself as a niche player in large-scale earthworks contracts. While the
Meloria SB 13.5 company has yet to win any major construction jobs thus far in FY17, its
Sumber Raswira SB 12.6 track record in the Mass Rail Transit (MRT) Line 1 suggests a good
Franklin Resources Inc. 5.1 chance that it would play a role in MRT Line 2. It is also keen on
participating in Light Rail Transit 3 (LRT3), High Speed Rail (HSL)
projects, and other infrastructure projects. Meanwhile, we deem our
MYR300-500m annual orderbook replenishment assumption for the
Share Performance (%) next two years to be conservative, given its present tenderbook of more
1m 3m 6m 12m than MYR3bn, with many other pipeline projects scheduled to be called
Absolute 0.0 14.9 (3.2) 31.1 for tender or awarded in the coming months.
Relative (0.4) 10.9 (3.8) 29.3
Building up landbank at prime locations. On top of its existing
landbank, Gadang was recently awarded the development rights for a
24.08-acre plot called R3-1 within the Kwasa Damansara township, by
Ng Sem Guan, CFA +603 9280 8878 master developer, Kwasa Land SB, with estimated GDV of MYR700m. First launch, expected by end-2018 or early-2019, would be driven by
surrounding developments. Separately, the company recently acquired
a piece of leasehold commercial land located in Damansara Perdana,
Petaling Jaya, Selangor.

Top Malaysia Small Cap Companies 2017
The land was transacted at MYR55.69m, and measures approximately Profit & Loss May-16 May-17F May-18F

10,779 square meters (2.664 acres), with a 99-year leasehold interest. Total turnover (MYRm) 675 609 745
Reported net profit (MYRm) 95 97 100
We believe the company may eventually carry out mixed commercial
Recurring net profit (MYRm) 95 97 100
development on this land given that the current zoning for the said land Recurring net profit growth (%) 58.4 2.3 3.3
is commercial, with an allowable plot ratio of 1:4. Recurring EPS (MYR) 0.16 0.15 0.15
DPS (MYR) 0.03 0.03 0.03
Long-term growth engines in place. Aside from the two main
Dividend Yield (%) 2.6 2.6 2.8
business units above, Gadangs management expects its 2,600 acres of Recurring P/E (x) 6.77 7.20 6.97
planted oil palm with average maturity of 4-5 years to start contributing Return on average equity (%) 20.8 17.0 15.4
positive results from FY18. Meanwhile, contributions from its 60%- P/B (x) 1.32 1.14 1.01
owned 9MW new hydro power plant in Indonesia should begin from P/CF (x) na 13.13 9.62
FY19. We understand that there is good potential for tariffs to be Source: Company data, RHB
revised higher for its power supply agreement, which would directly
boost IRR for the said project. Balance Sheet (MYRm) May-16 May-17F May-18F
Total current assets 1,011 1,007 1,166
Total assets 1,223 1,259 1,421
Total current liabilities 375 333 391
Company Report Card Total non-current liabilities 311 307 327
Total liabilities 686 640 718
Latest results. After a slow 1QFY17, Gadang made a comeback with Shareholders' equity 529 612 694
PAT of MYR27.9m in 2QFY17, thanks to variation order claims Minority interests 7 8 9
received, together with the completion of certain construction projects, Other equity - 0 0
and progressive claims for its property projects. Total equity 536 619 702
Total liabilities & equity 1,223 1,259 1,421
Balance sheet/cash flow. The company ended FY16 with a small net Total debt 223 297 367
cash position, which should allow Gadang to take on more projects. The Net debt (71) (43) (61)
company have room to leverage on its solid balance sheet and decent Source: Company data, RHB
cash flows.
ROE. Gadangs ROE surged to 20.8% in FY16 on the back of robust Cash flow (MYRm) May-16 May-17F May-18F
Cash flow from operations (8) 53 73
earnings from most of its business units. Although we project marginal
Cash flow from investing activities (113) (67) (36)
contraction in ROEs on the back of higher shareholders funds, the ratio Cash flow from financing activities 76 59 52
is likely to remain decent, at high-teen levels going forward. Cash at beginning of period 175 132 177
Net change in cash (45) 45 88
Dividend. Despite having no fixed dividend policy, Gadang has been
Forex effects 2 - -
paying dividends at a payout ratio of about 20% since FY12. With solid Ending balance cash 132 177 266
medium term earnings visibility, we expect a similar payout ratio going
Source: Company data, RHB
Management. The company is helmed by managing director-cum-CEO
Tan Sri Dato Kok Onn. He has more than 40 years of experience in the
construction sector.

Gadang remains a BUY supported by its strong earnings visibility, as
well as its potential to win more projects in the near future. The stock is
currently trading at approximately 7x forward P/E vs its peers low teens
P/Es this is another strong reason to accumulate the stock, in our
view. Our SOP-based TP is unchanged, at MYR1.40.

Fair Value: MYR0.38
Green Packet Price: MYR0.27

Green Is The New Black

Price Close
Green Packet (GRPB MK)
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits
0.32 128

0.30 121
Vying to be an end-to-end provider of smart services and the IoT
0.28 113
webe (formerly P1 Networks) has ceased to be equity accounted
from 4Q16

0.26 106
Earnings are at an inflection point
0.24 98

0.22 91 Company Profile

0.20 83
100 Green Packet is a technology-based company originally founded in
Silicon Valley. It is principally involved in the provision of solutions and
40 devices for various telecommunications technologies. The firm is also
engaged in the wholesaling of voice traffic.
Vol m





Source: Bloomberg At an inflection point (webe is history). Having posted cumulative
losses since 2010, FY17 would be at an earnings inflection point for
Stock Profile
Green Packet as the company no longer bears the losses from webe
Bloomberg Ticker GRPB MK Telekom Malaysias (TM) converged 4G operator from 4Q16. To
Avg Turnover (MYR/USD) 3.70m/0.83m recap, the companys stake in webe was reduced to 18.9% in 3Q16
Net Gearing (%) 83.7 (from 31.1%) after TM exercised its rights under an earlier convertible
Market Cap (MYRm) 184m medium-term notes (MTN) programme. We expect the profitable core
Beta (x) 0.80 segments of communications and solutions to drive a steady stream of
recurring earnings moving forward, with the new digital investments
BVPS (MYR) 0.19
fuelling a stronger earnings recovery from FY18.
52-wk Price low/high (MYR) 0.22 - 0.31
Free float (%) 25 Internet of Things (IoT) and smart services the icing on the cake.
Green Packet has singled-out e-services and IoT to be the new growth
engines and has embarked on several related M&As to strengthen its
Major Shareholders (%) execution capabilities. Among the notable acquisitions were a 22%
stake in listed Yen Global (Yen) for MYR18.2m (Aug 2016) and a 20%
Puan Chan Cheong 31.6
stake in Shenzhen Memo Technology Co Ltd (Memohi) for MYR6.4m.
Gemtek Technology Co Ltd 3.8 Yens subsidiary, Atilze Digital SB (Atilze) is rolling out the long range,
Lembaga Tabung Haji 1.9 low power wide area (LoRA) network in the country, which would be
used for the deployment of IoT via embedded sensors.

Share Performance (%) Emerging financial technology (fintech) play. Green Packet has put
1m 3m 6m 12m in place a payment platform to provide end-to-end solutions for its
digital ambitions. In Aug 2016, it purchased an 80% stake in WOL a
Absolute 14.9 (1.8) 12.5 5.9
Bank Negara Malaysia (BNM) e-wallet license holder for MYR9m to
Relative 14.5 (5.8) 11.9 4.1
facilitate cashless and card-less transactions. The company has also
set-up a mobile wallet application Kiple ( to tap on the
rapidly-growing e-commerce segment. Green Packet is also
Jeffrey Tan +603 9280 8863 collaborating with the Government on a cashless/smart payment card that would eventually be rolled out in schools nationwide. The smart
preloaded card would eventually replace cash payments by students at
cafeterias, canteens and bookshops, and would ride on WOLs
infrastructure. We see good potential for recurring revenues from the
project, given the captive market and high volume of transactions.

Top Malaysia Small Cap Companies 2017
Profit & Loss Dec-16 Dec-17F Dec-18F
Total turnover (MYRm) 372 419 486
Company Report Card Reported net profit (MYRm) (64) (0) 10
Recurring net profit (MYRm) (64) (0) 10
Latest results. Green Packet booked headline earnings of MYR1.2m in
Recurring net profit growth (%) (34.9) (99.6) -
4Q16. This brought FY16 reported earnings to MYR71.5m on the back Recurring EPS (MYR) - 0.08 - 0.00 0.01
of MYR371.8m in revenue. Full-year numbers were, however, impacted Recurring P/E (x) na na 19.72
by several one-offs, most notably the gain dilution of interest in webe, Return on average equity (%) (67.6) (0.2) 6.9
fair value gain of long-term investments on the reclassification from P/B (x) 1.58 1.43 1.30
interest in webe, and related impairments/write-offs. P/CF (x) 6.91 13.30 na

Source: Company data, RHB

Stripping-out the one-offs, and share of webe losses (effectively ceased
to be equity accounted from 4Q16), Green Packet posted an operating Balance Sheet (MYRm) Dec-16 Dec-17F Dec-18F
profit (EBIT) of MYR8.8m in 4Q16 (FY16: MYR13.9m). This compares Total current assets 229 231 262
with an EBIT loss of MYR3m in 4Q15 (FY15: MYR8.1m profit). Total assets 462 462 493
Total current liabilities 114 101 117
Total non-current liabilities 218 218 218
ROE. The firm has been bleeding red ink since FY10 due to the
Total liabilities 332 319 335
extended losses at webe, which ceased to be equity accounted in Shareholders' equity 130 144 158
3Q16. Minority interests 0 0 0
Other equity - 0 0
Dividend. Green Packet does not observe a formal dividend policy and Total equity 130 144 158
has not been paying diviends due to its operational losses. We do not Total liabilities & equity 462 462 493

expect any dividends to be declared in the medium term either, as cash Total debt 216 216 216
Net debt 155 120 111
is deployed for suitable M&As.
Source: Company data, RHB

Balance sheet. The companys debt stood at MYR216.4m in FY16. Cash flow (MYRm) Dec-16 Dec-17F Dec-18F
This is largely made up of the exchangeable bonds (MTN) issued as Cash flow from operations 30 15 (10)
part of TMs acquisition of webe in 2014. The MTN is to be converted Cash flow from investing activities (23) (2) (3)
into shares in webe by TM when fully redeemed by 2022 (no cash Cash flow from financing activities 16 19 -
repayment) and backed by its investment cost in webe (to be offset at Cash at beginning of period 72 61 96

the point of full redemption). Green Packets balance sheet is backed by Net change in cash 23 32 (13)
Ending balance cash 95 93 83
a strong cash balance of MYR61.1m.
Source: Company data, RHB

Management. Green Packet is majority owned by founder and

controlling shareholder Mr Puan Chan Cheong who has a 31.6% stake.
Mr Puan is a successful entrepreneur with over 20 years of diversified
business experience. He was previously the CEO of webe (afer
relinquishing his position as group managing director/CEO of Green
Packet in Oct 2014). Mr Puan is currently a non-independent, non-
executive director with the firm, providing strategic advice and vision.
The day-to-day operations of Green Packet are led by group CEO Mr
Tan Kay Yen and CFO Mr Liew Kok Seong alongside a team of senior

Fair value of MYR0.38. We apply a SOP valuation on the stock,
ascribing target EV/EBITDA multiples of 10x and 9x respectively on the
projected FY18 EBITDA of its legacy communications and solutions
businesses. At the same time, we value the new digital ventures (IoT
and fintech) based on acquisiton prices and/or market valutions to be
conservative. This translates into a fair value of MYR0.38, or an implied
11.6x FY18F EV/EBITDA. We believe the valuations are fair,
considering the anticipated recovery in earnings and the revenue
scability of its new businesses weighing-in potential execution risks
and the gestation period involved.

Fair Value: MYR3.92
Harrisons Holdings (Malaysia) Price: MYR3.32

Established Player Expanding Its Wings

Harrisons Holdings Malaysia (HHM MK)
Price Close Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits
3.7 129
3.6 125 Long presence with established network throughout Malaysia
Consistent dividend of 15 sen being declared for FY12-15
3.3 113
regardless of group performance
3.2 110 Employs more aggressive strategies to expand new agencies and
3.1 106
to gain further penetration into rural markets
3.0 102
2.9 98
94 Company Profile
Harrisons Holdings (Malaysia) (Harrisons) is involved in the sales,
100 marketing, warehousing and distribution for fast-moving consumer
goods (FMCG), building materials and engineering products, fine wines,
Vol th

agricultural and industrial chemicals, and the operation of shipping,




logistics and travel agencies. It has approximately 400 principals and

distributes about 11,000 product items over 10,000 accounts spread
Source: Bloomberg throughout Malaysia. The group has a track record of long-standing
principals, such as Nestle Malaysia, Heineken Malaysia (previously
Stock Profile Guinness Anchor), Hume Cemboard Industries SB (a member of the
Bloomberg Ticker HHM MK Hong Leong group of companies) and Maersk Line.
Avg Turnover (MYR/USD) 0.01m/0.00m
Net Gearing (%) 3.0
Market Cap (MYRm) 227m Highlights
Beta (x) 0.55
Long and stable presence in the industry. Harrisons has over 90
BVPS (MYR) 4.55 years in the business of sales, marketing, and distribution, mainly for
52-wk Price low/high (MYR) 2.90 - 3.63 FMCG and building materials. Currently, the group has 29 branches
Free float (%) 39 strategically located throughout Malaysia:
i. 13 in West Malaysia;
ii. Nine in Sabah;
Major Shareholders (%) iii. Seven in Sarawak.
Bumi Raya International 40.9 For the FMCG segment, we believe the group can tap on its extensive
Dunway Holdings Ltd 6.7 distribution network to achieve higher sales, which should bode well
UBS AG Singapore 6.7 with its strategy to gain deeper market penetration, especially in rural
areas. Moreover, Harrisons has long-term renowned principals, such as
Nestle Malaysia, Fraser & Neave Holdings (F&N), Heineken Malaysia,
Colgate-Palmolive Malaysia SB, Reckitt Benckiser (Malaysia) SB, SCA
Share Performance (%) Hygiene Malaysia SB, Thai Glico Co Ltd and Kao (Malaysia) SB,
1m 3m 6m 12m whereby the demand for the products under these brands is more likely
Absolute 3.1 0.6 5.4 15.3 to be inelastic amid this economic environment.
Relative 2.7 (3.4) 4.8 13.5 Consistent dividends declared for FY12-15. The group has been
declaring 15 sen dividend annually for the last four years, regardless of
its performance. While there is no dividend policy, we think that
Lim Jia Yi +603 9280 8873 Harrisons is likely to declare a 15 sen dividend for FY16-18F, implying an attractive yield of 4.4%.

Top Malaysia Small Cap Companies 2017
Deploying a more aggressive approach to improve group Profit & Loss Dec-16 Dec-17F Dec-18F

performance. Since FY16, Harrisons has adopted a more aggressive Total turnover (MYRm) 1,500 1,534 1,571
Reported net profit (MYRm) 20 21 23
approach to secure new agencies in order to attain higher sales. On top
Recurring net profit (MYRm) 20 21 23
of that, we gather that management is looking into adding more Recurring net profit growth (%) 39.7 5.5 5.9
warehouses, which is likely to strengthen its storage capacity. Besides, Recurring EPS (MYR) 0.30 0.31 0.33
the group is also working on reducing operation costs and looking into Recurring P/E (x) 11.18 10.60 10.00
upgrading to a new IT system in order to increase operational efficiency. Return on average equity (%) 6.9 7.0 7.2
Notably, the group was able to maintain EBIT margins of around 2% for P/B (x) 0.76 0.73 0.70

the last four quarters, despite operating in a challenging economic P/CF (x) 7.45 4.25 6.64

environment. Source: Company data, RHB

Balance Sheet (MYRm) Dec-16 Dec-17F Dec-18F

Total current assets 578 602 621
Company Report Card Total assets 641 676 694
Total current liabilities 340 364 369
Latest results. Harrisons FY16 core net profit of MYR20.4m was a
Total non-current liabilities 1 1 1
40% YoY improvement. This was on the back of higher GPMs as well Total liabilities 341 365 370
as lower opex, financing costs and effective tax rate. Shareholders' equity 300 311 324
Minority interests 0 0 0
Balance sheet/cash flow. As of FY16, Harrisons has net gearing of Other equity - (0) (0)
0.08x, which allows the group the option to secure debt financing in the Total equity 300 312 324
event of future geographical expansion or acquisition activity. Total liabilities & equity 641 676 694
Meanwhile, we expect higher capex to be incurred in FY17F for the Total debt 130 131 132
upgrading of new IT systems, which would eventually help to increase Net debt 23 9 2
operational efficiency. Source: Company data, RHB

ROE. ROE stood at 6.9% in FY16. We expect it to grow to 7% in

Cash flow (MYRm) Dec-16 Dec-17F Dec-18F
FY17F, supported by earnings growth. Cash flow from operations 31 54 34

Dividend. So far, no dividend has been declared for FY16. For the last Cash flow from investing activities 3 (12) (1)
Cash flow from financing activities (47) (25) (25)
four years, Harrisons has been declaring 15 sen dividend after the
Cash at beginning of period 123 107 122
financial year end. Ceteris paribus, we expect the group to declare a 15 Net change in cash (14) 16 7
sen dividend for FY16-18F. Ending balance cash 109 123 129

Management. Harrisons is led by group managing director Mr Chan Source: Company data, RHB
Poh Kim, who has more than 25 years of experience in the group.

We value Harrisons at fair value of MYR3.92, based on FY17F P/E of
12.5x. Our FY17F P/E is derived from its 5-year historical +1SD level,
as we think that Harrisons has a well-established distribution network
with a stable, long-term customer base. Besides, the assigned P/E is
below its recent high of 15.9x in 2016.

Target: MYR4.20
IQ Group Price: MYR3.09

Illuminating Brighter Prospects

Price Close
IQ Group (IQGH MK)
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits
3.3 168

3.1 158 Export-oriented business that is set to benefit from a stronger USD
2.9 148 against MYR
2.7 138
Resilient demand for energy-saving products set to support
2.5 128
revenue growth

2.3 118

2.1 108
Ongoing research and development initiatives to develop new
1.9 98
products, in order to drive business growth in the long run
1.7 88
1 Company Profile
1 IQ Group (IQ) is involved in the designing and manufacturing of a range
of passive infrared sensors, motion sensor light controllers, wireless
Vol m

door entry and chimes products, which are mainly distributed in the US,




Europe, Japan and South-East Asia.

Source: Bloomberg

Stock Profile
Bloomberg Ticker IQGH MK Beneficiary of stronger USD against MYR. IQ is an export-oriented
Avg Turnover (MYR/USD) 0.45m/0.10m company with >96% of its products being exported to continental
Net Gearing (%) -46.2 Europe, the UK, Japan and the US. As 80% of its exports are
Market Cap (MYRm) 272m
denominated in USD, we expect the group to continue to record
favourable growth in revenue along with the stronger USD against
Beta (x) 0.43
BVPS (MYR) 1.72
52-wk Price low/high (MYR) 1.85 - 3.15 Resilient demand for energy-saving products. We expect IQ to
achieve organic growth in sales volume over the years, as demand for
Free float (%) 16
energy-saving products remains intact. According to Strategic Energy
Technologies Information Systems (SETIS) featured article in Feb
2015, LED: Lighting The Way To An Energy-Efficient Future, it expects
Major Shareholders (%) stronger penetration of LED lighting products in Europe in the upcoming
Sensorlite Ltd 40.5 years, as they are more efficient and durable. We believe this bodes
Chen Wen-Chin 21.0 well for IQ, as LED lighting is the largest contributor (39% of FY16
sales) for the group.
Emphasis on ongoing product research and development to drive
business growth. Moving forward, we look forward to more meaningful
Share Performance (%) contributions from its new product under the Lumiqs brand, over the
next 2-3 years. Lumiqs represents its light-emitting diode (LED)
1m 3m 6m 12m
products, which allow the user to save up to 90% of energy costs
Absolute 5.1 26.1 57.7 58.5 through intelligent-lighting solutions, whereby the motion sensor
Relative 4.7 22.1 57.1 56.7 technology ensures lighting only illuminates when it is required. As
management remains focused on new product development, we believe
that contribution from any new products developed would be an added
Lim Jia Yi +603 9280 8873 advantage to support business growth in the long run.

Top Malaysia Small Cap Companies 2017
Company Report Card Profit & Loss
Total turnover (MYRm)
Reported net profit (MYRm) 21 23 25
Latest results. Its 9MFY17 net profit of MYR22m was fairly strong, as it
Recurring net profit (MYRm) 21 23 25
came in at 107% of FY17F earnings, surpassing its previous full-year
Recurring net profit growth (%) (0.7) 12.2 5.4
earnings. The robust performance was thanks to the improvement in Recurring EPS (MYR) 0.24 0.27 0.28
revenue, stronger USD, and higher sales of products with higher DPS (MYR) 0.10 0.10 0.11
margins. Dividend Yield (%) 3.2 3.2 3.6
Recurring P/E (x) 12.99 11.62 11.02
Balance sheet/cash flow. As at 3QFY17, IQs net cash stood at Return on average equity (%) 16.3 16.3 15.5
MYR59.3m with no borrowings on hand. P/B (x) 1.99 1.80 1.64
P/CF (x) 16.55 7.52 9.56
ROE. We expect IQ to achieve ROE of 16.3% in FY17F, supported by
Source: Company data, RHB
earnings growth.
Dividend. A total of 5 sen had been declared as at 9MFY17. For the full Balance Sheet (MYRm) Mar-16 Mar-17F Mar-18F
year, we expect a 10 sen dividend to be declared. Total current assets 144 163 182
Total assets 172 189 207
Management. IQs management is founded by Mr Kent Chen Wen- Total current liabilities 33 36 38
Chin, who is the executive chairman. Mr Daniel John Beasley is the Total non-current liabilities 2 2 2
managing director/CEO, and has more than 20 years of experience in Total liabilities 35 37 40
the group. Shareholders' equity 137 151 166
Minority interests 0 0 0
Other equity - (0) 0
Total equity 137 151 166
Recommendation Total liabilities & equity 172 189 207
Net debt (48) (70) (84)
We maintain our BUY recommendation, with an unchanged TP of Source: Company data, RHB
MYR4.20, based on 15x FY18F P/E. We think that the stock deserves
this valuation, premised on the stronger in-house USD/MYR forecast of Cash flow (MYRm) Mar-16 Mar-17F Mar-18F
4.43, strong balance sheet with increasing cash piles over the years, Cash flow from operations 16 36 28
and rising dividends. Cash flow from investing activities (7) (5) (5)
Cash flow from financing activities (16) (9) (10)
Cash at beginning of period 26 20 42
Net change in cash (6) 22 14
Forex effects 1 - -
Ending balance cash 20 42 56

Source: Company data, RHB

Target: MYR1.61
Jaya Tiasa Holdings Price: MYR1.23

Palm Oil To Bolster Growth

Price Close
Jaya Tiasa Holdings (JT MK)
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits
1.60 117

1.50 110
A leader in the timber industry
1.40 104
Significant contributions from the oil palm division going forward
1.30 97
Beneficiary of a weaker MYR against the USD
1.20 90
Company Profile
1.10 84
Jaya Tiasa Holdings (Jaya Tiasa) is involved in the manufacturing and
1.00 77
20 distribution of plywood, logs and other timber products. It is also
15 involved in the cultivation of oil palms.
Vol m





Timber giant in Sarawak. Jaya Tiasa is one of Malaysias largest

Source: Bloomberg timber companies. It has timber concessions of over 700,000ha in
Sarawak. While its timber division has been the groups bread and
Stock Profile butter, the subdued timber outlook affected by macroeconomic forces
Bloomberg Ticker JT MK has seen slower growth in recent times. The tightening of state
Avg Turnover (MYR/USD) 1.71m/0.38m regulations has also hampered log production, which had already been
Net Gearing (%) 49.6 dragged down further by weaker global demand. Plywood prices have
Market Cap (MYRm) 1,181m
also been weak. We estimate that it has fallen by over 11% as at Dec
2016 from its high of USD500 per cu m in Mar 2016.
Beta (x) 1.00
BVPS (MYR) 1.94 Palm oil segments turnaround. The weak timber outlook has been
52-wk Price low/high (MYR) 1.06 - 1.55 offset by Jaya Tiasas turnaround at its oil palm operations, which
started development in 2002. The group has a sizeable oil palm estate
Free float (%) 38
with an estimated 69,589ha of plantable area to date. Of this, over 54%
of its trees are in the prime mature age as at end-FY16 (Jun). This is
estimated to rise to 65% as at end FY17.
Major Shareholders (%)
Jaya Tiasas plantation average age profile stands at approximately
Tiong Toh Siong Holdings 21.7
eight years and FFB yields can potentially be as high as 22.3 tonnes
Genine Chain Ltd 9.4 per ha. Coupled with strong CPO prices currently, with 1HFY17
Amanas SB 5.2 averaging at MYR2,791/tonne, we believe the group is on track to post
record earnings in its palm oil division.
Beneficiary of a weak MYR. Timber companies are highly sensitive to
Share Performance (%) fluctuations in the MYR/USD. This is as the bulk of their revenues are
1m 3m 6m 12m denominated in USD while the majority of their costs are in MYR. As
Absolute (11.0) (6.9) 1.7 (12.2) such, Jaya Tiasa is a beneficiary of the weak MYR outlook ahead.
Relative (12.6) (11.3) 0.1 (13.8) Our house assumption has forecasted for MYR/USD at 4.43/4.25 for
FY17-18 respectively. We estimate that every MYR0.10/USD change
could impact the groups earnings by up to 10-12%.
Stephanie Cheah +603 9280 8859

Top Malaysia Small Cap Companies 2017
Company Report Card Profit & Loss
Total turnover (MYRm)

Latest results. Jaya Tiasas recent 2QFY17 results disappointed Reported net profit (MYRm) 59 90 113
Recurring net profit (MYRm) 65 90 113
slightly due to lower contributions from the timber division. Its palm oil
Recurring net profit growth (%) 39.3 37.3 26.0
segment, however, was able to offset timbers lower contributions due Recurring EPS (MYR) 0.07 0.09 0.12
to higher yields and the current favourable CPO prices. The latter, DPS (MYR) 0.01 0.02 0.03
realised for 2QFY17 at MYR2,760 per tonne, also helped in offsetting Dividend Yield (%) 1.1 1.7 2.1
declining production volumes as a result of weather conditions. Recurring P/E (x) 18.18 13.24 10.50
Return on average equity (%) 3.3 4.8 5.9
Balance sheet/cash flow. As at Dec 2016, Jaya Tiasas net gearing is P/B (x) 0.65 0.63 0.60
at 56%. We estimate this to improve to 50% in FY17 on stronger cash P/CF (x) 8.30 6.37 5.17
flow and profit generation. Source: Company data, RHB

ROE. The group achieved an ROE of 3% in FY16, but we expect this to

Balance Sheet (MYRm) Jun-16 Jun-17F Jun-18F
grow to 5%/6% in FY17-18 respectively on the back of its palm oil
Total current assets 308 329 403
segment. An upside risk would be stronger-than-expected contributions Total assets 3,245 3,245 3,280
from its timber segment. Total current liabilities 682 679 694
Total non-current liabilities 735 665 595
Management. Jaya Tiasa is helmed by the Tiong family. Sarawak
Total liabilities 1,416 1,344 1,289
tycoon Tan Sri Tiong Hiew King is a major shareholder in the group, Shareholders' equity 1,819 1,889 1,976
with an over 22% stake. His family members also sit on the board of Minority interests 9 12 15
directors. Other equity - 0 0
Total equity 1,828 1,901 1,991
Total liabilities & equity 3,245 3,245 3,280
Total debt 1,077 1,007 937
Recommendation Net debt 1,020 943 809

We like Jaya Tiasa for its strong palm oil outlook, as we project for the Source: Company data, RHB

groups 3-year earnings CAGR to grow at 22%. As plywood prices are

seen to have bottomed in 2016, we also expect stronger contributions Cash flow (MYRm) Jun-16 Jun-17F Jun-18F
Cash flow from operations 143 186 230
from this segment going forward.
Cash flow from investing activities (214) (90) (70)
Our SOP-derived TP of MYR1.61 implies a 28% upside to current share Cash flow from financing activities 95 (90) (95)

price as at the time of writing. This TP is based on a DCF value for Jaya Cash at beginning of period 25 57 64

Tiasas log operations, replacement value for its plywood unit and a Net change in cash 24 6 65
Forex effects 0 - -
target 17x FY17 P/E for its plantations division. Our implied FY17F P/E Ending balance cash 49 64 128
and P/BV is at 13x and 0.6x respectively.
Source: Company data, RHB

Target: MYR2.80
Matrix Concepts Holdings Price: MYR2.50

Growing Steadily
Matrix Concepts Holdings (MCH MK)
Price Close Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits
2.70 113
2.65 111 An affordable housing player within the Greater Klang Valley area

2.60 109
2.55 108 Sustainable dividend yields of about 6%
Potential beneficiary of a high-speed rail link
2.40 102
2.35 100 Company Profile
2.30 99
2.25 97 Matrix Concepts Holdings (Matrix) is a Negeri Sembilan-based
2.20 95
3 developer that currently has 1,903 acres of land with a total portfolio
2 GDV of over MYR9.6bn. The company concentrates mainly on
2 developing residential and commercial properties, as well as the sale of
industrial land in Seremban and Kluang areas. Over the years, it has
Vol m

successfully completed projects worth a GDV of MYR4.7bn on about





2,900 acres of land. Given the decent selling prices at its Bandar Sri
Sendayan (BSS) township, we view Matrix as an affordable housing
Source: Bloomberg player. The company has also recently expanded to Australia to raise
its market profile.
Stock Profile
Bloomberg Ticker MCH MK
Avg Turnover (MYR/USD) 0.83m/0.19m Highlights
Net Gearing (%) 13.3
Resilient sales from the affordable housing segment. Amidst the
Market Cap (MYRm) 1,431m slowdown in the property market, Matrix is still able to rake in
Beta (x) 1.00 commendable property sales. For 9MFY17 (Mar), the company
BVPS (MYR) 1.78 achieved MYR837m in sales. Hence, full-year sales are likely to exceed
52-wk Price low/high (MYR) 2.30 - 2.65 the MYR1bn mark. More than 90% of the sales amount was secured
Free float (%) 43 from its two township projects, namely BSS and Taman Seri Impian. As
Matrix Global Schools in BSS becomes more popular and this township
matures, we believe the demand for houses there would continue to
pick up.
Major Shareholders (%)
Dato' Lee & family 60.0
Pipeline launches in FY17-18. Management has maintained the same
sales target of MYR1bn going into FY18. For FY17-18, about MYR1bn
worth of new projects is slated for launch. The major ones include
Hijayu Resorts Homes Phases 2, 3, 4 and 5 which comprises semi-
detached and terrace homes as well as Ara Sendayan (land in Rasah
Share Performance (%) These developments have GDVs of MYR512m and MYR423m
1m 3m 6m 12m respectively, while the terrace homes at Ara Sendayan would be priced
Absolute 4.2 1.6 0.4 2.9 at MYR500,000-600,000 each. Given the location and pricing of these
Relative 2.2 (2.9) (0.9) 1.3 projects, we believe they would be well taken up. Meanwhile, Matrixs
project in Carnegie, Melbourne, is already 75% sold. Note that the firms
sales target excludes overseas sales.
Loong Kok Wen, CFA +603 9280 8861 Attractive landbank locations. We are positive on the long-term prospects of Matrixs landbank, particularly those located in
Seremban/Negeri Sembilan. Currently, the company has about 1,300
acres of land there.

Top Malaysia Small Cap Companies 2017
Apart from being located next to Sime Darbys Malaysia Vision Valley Profit & Loss Mar-16 Mar-17F Mar-18F

project, which has a GDV of about MYR25-30bn, the companys Total turnover (MYRm) 732 811 885
Reported net profit (MYRm) 210 203 221
landbank is also very close to the Kuala Lumpur-Singapore high-speed
Recurring net profit (MYRm) 210 203 221
rail link. The stop in Seremban is said to be near Bandar Ainsdale, Recurring net profit growth (%) 10.8 (2.9) 8.8
which is being developed by Sime Darby. Hence, Matrix should also Recurring EPS (MYR) 0.38 0.36 0.38
benefit from this, given its land proximity to this area. DPS (MYR) 0.16 0.14 0.15
Dividend Yield (%) 6.2 5.6 6.0
Recurring P/E (x) 6.64 7.03 6.66
Return on average equity (%) 26.7 21.4 20.3
Company Report Card P/B (x) 1.57 1.41 1.26
P/CF (x) na 6.50 7.83
Latest results. Matrixs 9MFY17 results were satisfactory. The
Source: Company data, RHB
company achieved MYR837m for its 9M sales. It is also set to surpass
the MYR1bn mark for its full-year sales. Management has set the same
Balance Sheet (MYRm) Mar-16 Mar-17F Mar-18F
MYR1bn sales target for FY18.
Total current assets 1,016 1,034 1,130
Balance sheet/cash flow. Matrixs balance sheet is solid, with a net Total assets 1,292 1,429 1,575

gearing of 16% as at 9MFY17. Total current liabilities 281 286 281

Total non-current liabilities 126 126 126
ROE. The companys ROE has been declining to around 20% now from Total liabilities 406 412 407
30% three years ago. This was largely due to the strong profits and, Shareholders' equity 886 1,017 1,167
Total equity 886 1,017 1,167
hence, retained earnings it has accumulated over the years.
Total liabilities & equity 1,292 1,429 1,575
Dividend. Matrix has a dividend payout policy of a maximum of 40%. Total debt 205 205 185

Based on our earnings forecasts, the dividend yield is around 6%. For Net debt 126 136 107

9MFY17, the company paid a DPS of 10 sen. Source: Company data, RHB

Management. Matrix is currently helmed by group MD and CEO Dato Cash flow (MYRm) Mar-16 Mar-17F Mar-18F
Lee Tian Hock, who oversees the companys business direction and Cash flow from operations (17) 220 188
overall strategy. Dato Lee has about 30 years of experience in the Cash flow from investing activities (27) (120) (49)
property development industry, having been involved in the Cash flow from financing activities 42 (149) (120)
development of Taman Rasah Jaya, which used to be Negeri Cash at beginning of period 97 78 69

Sembilans largest housing scheme at one time. Net change in cash (3) (49) 19
Ending balance cash 94 30 88
Matrixs deputy MD and COO is Mr Ho Kong Soon, who is responsible Source: Company data, RHB
for the companys daily operations. He has about 20 years of
experience in property development. Besides Dato Lee and Mr Ho,
another board member who has been crucial to the business is non-
independent non-executive chairman Dato Haji Mohamad Haslah.

We value Matrix at MYR2.80, based on a 25% discount to RNAV. The
stock is currently trading at only 7x P/E, supported by a dividend yield of

Fair Value: MYR4.00
MKH Bhd Price: MYR2.94

Growing In Prominence
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits
3.3 143

3.1 135
Prime beneficiary of MRT stations in Kajang/Cheras
2.9 126
Increasing contributions from plantations due to plantations
reaching prime age profile

2.7 118
Low valuation even after dilution for upcoming rights and bonus
2.5 110
2.3 101

93 Company Profile
MKH is a property developer with a vast array of developments ranging
1 from premium residential and commercial properties to affordable
dwellings. Some of its on-going and future projects are located adjacent
Vol m

to the upcoming Mass Rapid Transit (MRT) and Light Rail Transit (LRT)




stations. In 2008, MKH diversified its business into an oil palm

plantation in East Kalimantan, Indonesia, with 18,388ha of landbank
Source: Bloomberg currently. MKH is also involved in trading of building materials and
furniture manufacturing.
Stock Profile
Bloomberg Ticker MKH MK Highlights
Avg Turnover (MYR/USD) 1.15m/0.26m Growth momentum driven by its plantations division. We expect
Net Gearing (%) 39.9 the plantations division to lead MKHs earnings growth momentum in
Market Cap (MYRm) 1,235m the next few years, with EBIT contributions projected to rise to 34% of
Beta (x) 1.15 group EBIT by 2018 from 8.4% in FY16 (Sep). This is due to its age
BVPS (MYR) 3.10 profile entering the prime age of above 7 years from FY17 onwards
which could lead to an 11.6% YoY FFB growth in FY17 and reducing
52-wk Price low/high (MYR) 2.26 - 3.20
unit costs of a similar quantum. MKHs FFB yields in an El Nino year (of
Free float (%) 60 FY16) were still very decent at 25.69tonnes per ha, owing to the flat
geographical topography of its estates. For its estates at prime optimal
age, its FFB yields have hit as high as 32 tonnes per ha previously.
Major Shareholders (%) CPO unit costs are currently at MYR1,600 per tonne and this is
Tan Sri Dato' Chen Kooi Chiew 44.1 expected to decrease to average industry levels as FFB yields improve.
and family members Property development to provide stable earnings base. The bulk
Wong Yee Hui 3.9 (86%) of MKHs future property developments are in Kajang/Semenyih,
where it is developing a range of products including affordable and
premium dwellings, as well as commercial properties. These
developments could be a prime beneficiary of the three MRT stations
that are coming up in Kajang and Cheras, which should be completed
Share Performance (%) by the end of 2017. As at end-1QFY17, MKH has unbilled sales of
1m 3m 6m 12m MYR705m. It has planned launches of MYR1.64bn for FY17. Its total
Absolute (1.0) 0.7 4.3 28.9 remaining landbank GDV beyond 2017 is approximately MYR8.9bn. We
Relative (1.4) (3.3) 3.7 27.1 expect property earnings to decline by 20-25% in FY17 given the weak
market sentiment and tight lending conditions, but start to recover after
Hoe Lee Leng +603 9280 8860
Property investment provides recurring income. MKHs property
investment portfolio consists of two shopping complexes Plaza Metro
Kajang and Metro Point Complex, as well as several parcels of
commercial land, offices, shops and an international school Rafflesia
International School. MKH should continue to earn a steady income of
MYR30-40m and EBIT of MYR15-20m p.a. from this business.

Top Malaysia Small Cap Companies 2017
Company Report Card Profit & Loss Sep-16 Sep-17F Sep-18F

Total turnover (MYRm) 1,266 1,124 1,133

Latest results. MKH reported a core net profit of MYR45m (+39% YoY) Reported net profit (MYRm) 205 274 289
in 1QFY17. The higher profit was driven mainly by improved Recurring net profit (MYRm) 163 188 199

contributions from the plantations division (to EBIT of MYR25.6m from Recurring net profit growth (%) 35.2 15.4 5.5
Recurring EPS (MYR) 0.38 0.42 0.43
MYR1m in 1QFY16) offset by lower contributions from the property
DPS (MYR) 0.07 0.08 0.09
division (-30.6% YoY). The plantations division saw a significant Dividend Yield (%) 2.3 2.9 3.0
earnings improvement on the back of a 49% and 118% YoY jump in Recurring P/E (x) 7.72 6.95 6.84
CPO and PK prices achieved, respectively. The property division saw a Return on average equity (%) 17.2 20.2 19.0
decline in profits due to lower profit recognition after the handing over of P/B (x) 0.99 0.95 0.85
vacant possession of MKH Boulevard and completion of profit P/CF (x) 7.66 14.61 6.77
recognition on sales of Pelangi Semenyih in the preceding quarter. Source: Company data, RHB
Balance sheet/cash flow. At the end-FY16 (Sep), MKH had net
gearing of 41%, which was reasonable, in our view; operating cashflow Balance Sheet (MYRm) Sep-16 Sep-17F Sep-18F
Total current assets 1,255 1,172 1,213
stood at MYR150-250m pa, while interest cover was 6.8x. Going
Total assets 3,253 3,251 3,370
forward, MKH expects capex to remain relatively flattish at close to
Total current liabilities 1,868 1,708 1,663
MYR100m per year. We expect net gearing levels to start trending Total non-current liabilities 75 75 75
downwards from FY17, unless there are any new landbank acquisitions. Total liabilities 1,943 1,783 1,738
ROE. ROE has ranged between 8-16% over the last three years, with Shareholders' equity 1,276 1,433 1,598
Minority interests 34 34 34
MKH reinvesting its cash on cultivating its plantation areas as well as
managing its property landbank developments. We project MKHs ROE Other equity - 0 0
Total equity 1,311 1,467 1,632
to range between 12-13% over the next two years. . Total liabilities & equity 3,253 3,251 3,370
Dividend. MKH does not have an official dividend policy. It has been Total debt 839 839 839
paying a net DPS of 7-8sen over the last few years, which is a payout Net debt 534 585 528

ratio of 18-28% p.a.; we project net DPS of 7.5-8sen for FY17-18, which Source: Company data, RHB
implies a net payout of 16-18% and a net yield of 2.9-3% p.a..
Management. MKH is an owner-managed company with the Executive Cash flow (MYRm) Sep-16 Sep-17F Sep-18F
Cash flow from operations 164 90 201
Chairman, Managing Director and Deputy Managing Director positions
Cash flow from investing activities (111) (87) (125)
filled by the three brothers from the Chen family. In terms of succession Cash flow from financing activities (66) (31) (34)
planning, the Executive Chairmans son, Tan Sri Dato Chen Kooi Cash at beginning of period 269 305 254
Chiews son, Dato Chen Way Kian, is currently working in the Net change in cash (13) (29) 42
company, holding the position of Deputy Property Director. Ending balance cash 256 276 296

Rights and bonus issue. In December 2016, MKH proposed a Source: Company data, RHB
renounceable rights issue of up to 45.4m rights shares on a 1-for-10
basis at a price to be determined later and a bonus issue on the basis of
two bonus shares for one rights share of up to 90.8m new shares. The
maximum proceeds of MYR85.8m is to be utilized for infrastructure
development for the property division. This rights and bonus issue are
due to be completed by 2Q17 and would dilute MKHs EPS by 30-38%.
We have not imputed this exercise into our forecasts yet.
While MKHs property development business may be facing some
headwinds, we believe its prime landbank location in
Kajang/Semenyih/Cheras will bode well for it in the medium term, given
the increased connectivity near the three new MRT stations, as well as
its increasing focus on the affordable housing market. In the next few
years, its plantations division could rise in prominence, given the
increasing FFB yields leading to lower unit costs. While MKHs
plantation landbank is still relatively small, it continues to expand with its
latest acquisition in 2016 being 2,445ha of landbank in Kalimantan.
We value the company with SOP, using RNAV for property and P/E
targets for the plantation and other divisions; we attribute a 50%
discount to RNAV to value the property division, a 2018 P/E target of
15x for the plantation division (in line with other small plantation
companies) and 8x for the other divisions. We have diluted the share
base for rights and bonus issue, giving us a fair value of MYR4.00.

Target: MYR3.75
Muhibbah Engineering Price: MYR2.56

Construction Earnings Supported By Concession

Muhibbah Engineering (MUHI MK)
Price Close Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits
2.60 113

2.50 110
Orderbook of MYR1.73bn
2.40 107
Recovery in oil & gas sector would benefit its crane segment
2.30 104
Stable earnings from Cambodia Airports
2.20 101

2.10 98 Company Profile

2.00 95
5 Muhibbah Engineering (Muhibbah) is a niche global oil & gas and
infrastructure specialist that is involved in construction, crane
manufacturing, shipyard and concession business.
Vol m





Source: Bloomberg Orderbook of MYR1.73bn. The majority of Muhibbahs MYR1.73bn
orderbook came from its infrastructure, crane and shipyard division.
Stock Profile Muhibbah is concentrating on more marine and infrastructure jobs in
Bloomberg Ticker MUHI MK Malaysia as well as overseas to grow its orderbook. We understand that
Avg Turnover (MYR/USD) 1.94m/0.44m its current tenderbook stands at MYR5bn.
Net Gearing (%) 12.3 Crane business. Orderbook at its crane business stood at MYR620m
Market Cap (MYRm) 1,230m as of February. The orders are coming from the oil & gas, shipyard,
Beta (x) 1.95 construction and wind turbine industries. Its crane subsidiary
BVPS (MYR) 2.21 announced that it was awarded MYR64m worth of tower cranes orders
52-wk Price low/high (MYR) 2.11 - 2.56
in January, ensuring earnings visibility into FY17.
Free float (%) 67 Strong growth at its airports. Cambodia Airports passenger growth
came in 9% higher YoY in FY16, partly due to the completion of
terminal expansion at Phnom Penh and Siem Reap airports. We expect
FY17 to register passenger growth of 11%, driven by higher economic
Major Shareholders (%)
activities as well as growth in the tourism industry.
Mac Ngan Boon 11.6
Lembaga Tabung Haji 9.1
Universal Capital Resources 3.9
Company Report Card
Latest results. FY16 earnings came in MYR106m, flat when compared
Share Performance (%) to its FY15 earnings.
1m 3m 6m 12m Balance sheet/cash flow. Muhibbah was in a net cash position of
Absolute 5.3 18.5 10.3 11.3 MYR117m at the end of FY16. It grew its cash position by MYR108m
Relative 2.9 12.6 8.0 9.5 during the year.
ROE. For FY16, ROE came in at 11.8%.

Wan Mohd Zahidi +603 9280 8879 Dividend. Muhibbahs dividend payout ratio for the past three years has
been above 20%, translating into DPS of between 4-5 sen.
Management. Muhibbah is led by its group managing director, Mr Mac
Ngan Boon, who is also its co-founder. He has been the managing
director of the group since 1973.

Top Malaysia Small Cap Companies 2017
Profit & Loss Dec-16 Dec-17F Dec-18F
Total turnover (MYRm) 1,919 1,994 2,147

Recommendation Reported net profit (MYRm) 106 118 123

Recurring net profit (MYRm) 92 118 123
We have a BUY call on Muhibbah, and continue to be positive on the Recurring net profit growth (%) (14.3) 28.3 4.4

group as a beneficiary of the Refinery and Petrochemical Integrated Recurring EPS (MYR) 0.19 0.24 0.25
DPS (MYR) 0.05 0.06 0.06
Development (RAPID) project, as well as other infrastructure projects in
Dividend Yield (%) 2.1 2.4 2.5
West Malaysia. Recurring P/E (x) 13.32 10.50 10.06

The groups Cambodian airport concession should continue to provide Return on average equity (%) 11.8 11.5 11.0
P/B (x) 1.26 1.16 1.07
strong recurring earnings.
P/CF (x) 7.67 na 8.00
We value Muhibbah with an SOP methodology, arriving at our TP of Source: Company data, RHB
MYR3.75. Its core business is valued at FY17 P/E of 10x, while its
airport concession is valued using DCF with WACC of 12%. Balance Sheet (MYRm) Dec-16 Dec-17F Dec-18F
Total current assets 2,570 2,346 2,403
Total assets 3,859 3,710 3,843
Total current liabilities 2,337 2,029 2,016
Total non-current liabilities 140 149 139
Total liabilities 2,477 2,178 2,155
Shareholders' equity 978 1,066 1,158
Minority interests 405 466 530
Total equity 1,382 1,532 1,688
Total liabilities & equity 3,859 3,710 3,843
Total debt 618 534 468
Net debt (117) 188 152

Source: Company data, RHB

Cash flow (MYRm) Dec-16 Dec-17F Dec-18F

Cash flow from operations 159 (186) 154
Cash flow from investing activities (23) (60) (60)
Cash flow from financing activities (28) (143) (125)
Cash at beginning of period 577 735 346
Net change in cash 108 (390) (31)
Forex effects 46 - -
Ending balance cash 731 346 315

Source: Company data, RHB

Fair Value: MYR1.27
Notion VTec Price: MYR0.84

Strong Earnings Recovery In 2017

Price Close
Notion (NVB MK)
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits
1.0 239

0.9 216 Ramping up of capacity under its automotive segment would propel
0.8 193
earnings growth over the next 1-2 years
0.7 170 Eyeing for new jobs under its newly set-up division on the
0.6 148
manufacturing of industrial products
0.5 125 NOT RATED. The MYR1.27 fair value is based on 11x FY18F P/E
0.4 102

79 Company Profile
10 Notion VTec (Notion) is a leading precision engineering specialist and
6 manufacturer of high precision components for the HDD, digital camera,
automotive, consumer electronics, and air-conditioning industries.
Vol m





Source: Bloomberg Light at the end of the tunnel. Notion was hit by a series of
unfortunate events over the last five years, namely:
Stock Profile
i. A major flood at its Thailand facility in 2012;
Bloomberg Ticker NVB MK
ii. A fire accident in its Klang production plant in 2013;
Avg Turnover (MYR/USD) 1.59m/0.36m
iii. Losses from non-core investments in 2014;
Net Gearing (%) -22.0
iv. Losses suffered from its currency-related derivatives exposure in
Market Cap (MYRm) 224m
2015 and 2016.
Beta (x) 0.98
All these officially came to an end in end-2016. This is because Notion
BVPS (MYR) 1.16 has finalised its insurance claims and cleaned up its books by writing-off
52-wk Price low/high (MYR) 0.36 - 0.89 non-core investments, as well as settling all its derivatives exposure.
Free float (%) 69 Ramp-up for automotive components. For the firms automotive
segment, Notion currently manufactures an electronic braking system
(EBS) component known as a plunger. In FY16 (Sep), it delivered
Major Shareholders (%) approximately 13m units of plungers to two major customers. This is set
Choo Wing Hong 11.8 to scale up further going forward, as management is looking to expand
its capacity by 30% pa over the next two years. If this materialises, this
Choo Wing Onn 9.9
would increase Notions automotive exposure to close to 40% of total
Nikon Corp 9.4 revenue by FY18 (FY16: 33%).
Industrial products to gather pace. The company recently set up a
new division that is focused on the manufacturing of industrial products
Share Performance (%) at a core facility in Johor, Malaysia. Management is currently in talks
1m 3m 6m 12m with one of its existing customers to explore potential job opportunities.
Absolute 8.4 103.7 119.7 114.1 We understand that negotiations may be finalised in due course, with
Relative 8.0 99.7 119.1 112.3 target production set to commence by 2HFY17. We expect revenue of
MYR3m per month come FY18.
Going spot on forex. Notion derives all of its revenue in foreign
currency terms, ie USD/EUR/THB at 60%/30%/10% respectively in
Kong Heng Siong +603 9280 8866
FY16. Only about 5-10% of its costs are denominated in non-MYR currencies, mainly on raw material procurement. This coupled, with its
zero hedging policy going forward, makes Notion a prime beneficiary
should the current weakness in the MYR persist.
We are currently forecasting an average USD/MYR of 4.43 for 2017
and 4.25 thereafter, and EUR/MYR of 4.60 in the foreseeable future.
Top Malaysia Small Cap Companies 2017
Based on our calculations, every 10 cents change in the USD/EUR Profit & Loss Sep-16 Sep-17F Sep-18F

against the MYR could potentially lift its bottomline by 8-10%/5-6% Total turnover (MYRm) 230 267 319
Reported net profit (MYRm) 5 27 33
respectively, assuming all else remains constant.
Recurring net profit (MYRm) 6 26 31
Recurring net profit growth (%) - 309.9 22.1

Company Report Card Recurring EPS (MYR) 0.02 0.09 0.12

DPS (MYR) 0.01 0.03 0.03
1QFY17 results review. Notions 1QFY17 core earnings closed at a Dividend Yield (%) 1.2 3.4 4.2

commendable MYR2.5m. This was after stripping off gain on disposal of Recurring P/E (x) 36.13 8.81 7.22
Return on average equity (%) 1.9 9.1 10.1
MYR1.1m and unrealised forex gain of MYR3.2m. We are forecasting
P/B (x) 0.80 0.72 0.67
for FY17-18 core earnings of MYR25.6/MYR31.3m respectively (FY16: P/CF (x) 7.59 3.05 3.70
MYR5.4m). This is driven predominantly by the capacity expansion of
Source: Company data, Error! Bookmark not defined.
its automotive segment and potential new job wins under its industrial
products division. With its books now on a clean slate (non-core
Balance Sheet (MYRm) Sep-16 Sep-17F Sep-18F
investments have been written off and all forex hedging contracts have
Total current assets 140 190 227
been settled as at Sep 2016), we do not expect any further significant Total assets 342 385 414
non-operational items to drag down the firms operational performance. Total current liabilities 34 51 59
Total non-current liabilities 25 20 17
30% dividend policy. Notion closed Dec 2016 with net cash position of Total liabilities 59 71 76
MYR24.6m (9.1 sen per share). Management recently committed to a Shareholders' equity 284 314 338
dividend policy of 30% going forward. We believe the move is to reward Minority interests - 0 0
shareholders in the form of dividends upon its projected earnings Other equity - (0) 0
recovery. The payout could be in the form of cash distribution or shares, Total equity 284 314 338
as Notion now holds 2.2m treasury shares. It paid an interim DPS of 1 Total liabilities & equity 342 385 414
Total debt 20 10 5
sen in early January. We are imputing for DPS of 3-4 sen for FY17F-
Net debt (22) (69) (91)
18F, based on a payout ratio of 30%.
Source: Company data, Error! Bookmark not defined.
Management. Notions management team is led by executive chairman
Mr Thoo Chow Fah, one of its founders. Together with MD Mr Choo Cash flow (MYRm) Sep-16 Sep-17F Sep-18F
Wing Hong and ED Mr Choo Wing Onn, the trio of founding members Cash flow from operations 30 74 61
collectively own approximately 36% of the firm. Its second-largest Cash flow from investing activities (9) (25) (30)
shareholder, Nikon Corp (7731 JP, NR), came on board in early 2010 Cash flow from financing activities (16) (10) (13)
Cash at beginning of period 43 42 79
after taking up placement of new shares worth MYR34m back then.
Net change in cash 4 39 18
Based on our compilation, its institutional shareholdings currently stand
Forex effects (5) - -
at approximately 8-10%. Notion was first listed on Bursa Malaysia in Ending balance cash 42 81 98
Jun 2005, with an initial market cap of MYR47m.
Source: Company data, RHB
Other highlights. Management assured us that all future investments
would be channelled into its core business to achieve economies of
scale and enhance production efficiency. We do not foresee any non-
core investments over the next 1-2 years, as Notions focus would be
entirely on growing its automotive and industrial products divisions.

Based on its FY15 annual report, the firm has outstanding warrants of
38.6m as at 29 Jan 2016. They are convertible into ordinary shares at a
1:1 ratio and an exercise price of MYR1. Given that it is currently out-of-
money, we do not expect any conversions to take place upon their
expiry on 2 May 2017.
Pegging 11x FY18F P/E, we estimate that Notion could be worth as
much as MYR1.27 per share. Our target P/E is in line with the range of
10-15x P/Es that we peg to export-oriented technology counters under
our coverage. With its NTA per share closing at MYR1.10, we believe
Notion is deeply undervalued at this juncture. Our projected earnings
CAGR of 123.7% for FY16-18 is subject to forex volatility and are highly
reliant on capacity expansion under its plungers production division as
well as the commencement of its industrial products by 2HFY17.

Target: MYR1.05
OCK Group Price: MYR0.82

Malaysias Budding Regional Towerco

Price Close
OCK Group (OCK MK)
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits
0.90 124

0.85 119
Malaysias leading telecommunications network services provider
0.80 114
The only listed towerco in the country with a regional presence
0.75 109
Strong recurring revenues from site leasing and maintenance
0.70 104
Company Profile
0.65 99
OCK Group (OCK) is the largest telecommunication service provider in
0.60 94
Malaysia. It primarily focuses on the building and renting out of
10 telecommunication towers with a smaller segment focusing on trading.
6 The group is also involved in the renewable energy sector by virtue of
its ownership of a 1MW solar farm in Kelantan and its participation in
Vol m

the feed-in-tariff (FiT) scheme administered by the Sustainable Energy




Development Authority (SEDA).

Source: Bloomberg
Stock Profile
Enviable growth prospects. OCK is well positioned to capitalise on
Bloomberg Ticker OCK MK
the robust growth potential in the telecommunications and towerco
Avg Turnover (MYR/USD) 0.79m/0.18m sector given the aggressive LTE deployments by the local mobile
Net Gearing (%) 13.8 operators to meet data demand, network densification/optimisation
Market Cap (MYRm) 715m projects and mobile backhaul fiberisation. We expect the increase in
Beta (x) 1.40 tower lease rentals and site maintenance revenues to drive greater
BVPS (MYR) 0.41 recurring revenue contribution to over 35% in FY18 (FY16F: 18%).
52-wk Price low/high (MYR) 0.70 - 0.84 Over 3,000 towers under its portfolio. Following the recent
Free float (%) 41 acquisition of Southeast Asia Telecommunication Holdings (SEATH),
Vietnams largest independent towerco, OCK now has a portfolio of
over 3,000 ground-based and roof top towers across three markets.
The average tenancy ratio on its towers ranges from 1.2-1.3x.
Major Shareholders (%)
Management is looking to expand the regional towerco business, both
Aliran Armada SB 39.8 organically (own tower builds) and via opportunistic M&As in the
Lembaga Tabung Angkatan Tentera 13.8 medium to longer term. The general trend towards the outsourcing of
Low Hock Keong 2.0 passive infrastructure by telcos would benefit towercos including OCK.

Company Report Card

Share Performance (%)
Latest results. OCK booked its strongest ever quarterly revenue and
1m 3m 6m 12m
EBITDA of MYR112.7m (+7% YoY) and MYR22.9m (+15% YoY)
Absolute 6.5 3.1 4.5 18.0 respectively in 4Q16, driving FY16 revenue and earnings to a record
Relative 6.1 (0.9) 3.9 16.2 MYR407m (+29% YoY) and MYR25.8m (+5% YoY). The key growth
driver remains its telco network services (TNS) segment which grew a
commendable 31.4% YoY and contributed 83% to group revenue in
Jeffrey Tan +603 9280 8863 FY16. We expect the telecommunication network services (TNS) business to
post a strong revenue CAGR of 27.1% for FY16-18, underpinned by:
i. Emerging tower lease rentals in Myanmar and the recently
acquired SEATH, Vietnams largest independent towerco;

Top Malaysia Small Cap Companies 2017
ii. Strong pipeline of LTE network deployments in Malaysia; Profit & Loss Dec-16 Dec-17F Dec-18F
Total turnover (MYRm) 407 563 629
iii. Fiberisation and network optimisation projects; Reported net profit (MYRm) 26 35 38
Recurring net profit (MYRm) 30 35 38
iv. The managed services business in Malaysia and Indonesia. Recurring net profit growth (%) 38.1 14.6 11.1
Recurring EPS (MYR) 0.03 0.03 0.03
Balance sheet and cash flow. The group turned from a cash rich DPS (MYR) 0.01 0.02 0.02
(zero debt) position to a slight net debt position of MYR3.5m in 3Q16, Dividend Yield (%) 0.7 2.4 2.4
following the drawdown of a portion of the syndicated loan (totalling Recurring P/E (x) 30.83 26.89 24.21
USD40m) to fund its capex in Myanmar. Management is targeting Return on average equity (%) 6.9 7.8 7.7
longer-tem gearing levels of 1-1.2x with capex to be self-funding at the P/B (x) 2.21 1.99 1.78
towerco levels. We expect stronger operational cash flows going P/CF (x) 30.41 19.99 14.46

forward, underpinned by recurring tower lease rentals which would be Source: Company data, RHB
utilised to defray interest cost and recurring capex. There is a natural
hedge in that proceeds from lease rentals in Myanmar (for the initial Balance Sheet (MYRm) Dec-16 Dec-17F Dec-18F
three years of the master leasing agreement) are in USD, which Total current assets 487 431 485
corresponds to the USD payables (debt and capex). Total assets 815 850 989
Total current liabilities 268 207 255
ROE. The groups ROE has fallen slightly in recent years due to the Total non-current liabilities 110 144 158
strategic move to diversify into the regional towerco space, which Total liabilities 378 351 413

entails longer-term gestation and the upfront resources. We expect Shareholders' equity 422 468 524
Minority interests 15 31 52
ROEs to show progressive improvements over the medium to longer
Other equity - 0 0
term from the growth in site rentals and tenancies. Total equity 437 499 576

Dividend. OCK does not observe a formal dividend policy although we Total liabilities & equity 815 850 989
Total debt 146 200 248
believe this could change in the near future with a greater proportion of
Net debt 19 69 97
recurring revenues from the tower leasing business. Due to the high
Source: Company data, RHB
upfront capex required for towercos, the group has been reinvesting
most of its profits to grow its business. The board declared a nominal
Cash flow (MYRm) Dec-16 Dec-17F Dec-18F
0.6sen DPS in FY15, which translates into a dividend yield of under 1%.
Cash flow from operations 31 47 64
Management. The company was founded by major shareholder and Cash flow from investing activities (189) (111) (111)

Group managing director, Mr Sam Ooi Chin Khoon who has more than Cash flow from financing activities 179 74 70
Cash at beginning of period 164 127 131
20 years of experience in civil works and the tower sub-contracting
Net change in cash 20 9 23
business. Mr Ooi continues to actively spearhead the strategic plans Forex effects 7 7 7
and growth of the company and is instrumental in driving the groups Ending balance cash 191 144 160
regional towerco ambitions. OCK appointed Dr Yap Wai Khee, a
Source: Company data, RHB
telecommunications industry veteran (formerly with Axiata Group), as its
CEO in 2015 tasked with overseeing the towerco business and regional
forays. The management team is also represented by Mr David Low
(COO) and Ms Hillary Chua (CFO).

We value OCK Group based on a SOP methodolgy. We apply
independent discounted cashflow (DCF) valuations for its regional
towerco assets and ascribe suitable P/E multiples on the domestic
network contracting, green energy/power solutions and trading &
maintenance segments. The DCF valuation takes into account the
utility-like business of towercos, which yields a constant stream of
recurring lease revenues from long-dated non-cancellable master
leasing agreements with telcos. Our TP of MYR1.05 implies FY18F
EV/EBITDA of 9.5x, at a fair discount to its larger towerco peers in
Indonesia, which trade at 13-15x forward EV/EBITDA and the 12.5x
EV/EBITDA tagged to edotco Group (wholly-owned towerco of Axiata
Group) for its primary and secondary share placements exercise in
January. The discount also reflects OCKs significantly smaller market
capitalisation and share liquidity. BUY.

Fair Value: MYR0.70
O&C Resources Price: MYR0.525

It Gets Better By Change

Price Close
O&C Resources (ONC MK)
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits
0.71 151

0.66 140 A prime government affordable housing play

0.61 129
Earnings are set to see a sharp turnaround from FY17, given the
0.56 117
amount of projects in hand

0.51 106

0.46 95
Exponential growth at low single-digit P/E valuations
0.41 84

0.36 72 Company Profile

0.31 61
50 O&C Resources (O&C) was formally known as Takaso Resources
(Takaso). Takasos primary business is condom manufacturing under
20 the brands Playsafe and ROMANTIC. It is also involved in the trading of
Japlo baby products this includes baby apparels, infant milk and
Vol m

toiletries, amongst others. Mr Billy Ong Kah Hoe, via OCR Land




Holdings SB, emerged as a major shareholder in late 2014, and

currently holds a 35% stake in the company. After the new
Source: Bloomberg management team came on board in 2015, the firm received
shareholders approval in May 2016 to diversify into the property
Stock Profile business, and subsequently changed its name to O&C. In Jul 2016, it
Bloomberg Ticker ONC MK completed its fundraising exercise to raise about MYR33m, which is
Avg Turnover (MYR/USD) 0.88m/0.20m intended to finance the expansion in the property development
Net Gearing (%) 8.8 segment. This involved the issuance of irredeemable convertible
preference shares (ICPS), and warrants. Based on the issue price of
Market Cap (MYRm) 125m
MYR0.05 per ICPS and 10 ICPS to one new share, the implied
Beta (x) 1.05 conversion price is MYR0.50, while the warrants also have the same
BVPS (MYR) 0.22 exercise price.
52-wk Price low/high (MYR) 0.35 - 0.69
Free float (%) 50
A prime government affordable housing play. While O&C is looking
Major Shareholders (%)
to sell the incumbent business units that are loss making, it has already
successfully bagged a few strategic projects. These include the project
OCR Land Holdings SB 13.1
management consultancy (PMC) job from Yayasan Pahang for an
Nextplus Fortune SB 12.4 affordable housing development scheme in Pahang, and construction
Ong Kah Hoe 9.6 works for 1Malaysia Housing Programme (PR1MA) housing in Alor
Gajah and Bukit Jalil. The PMC job is estimated to yield a profit of
MYR92m over a 7-year period, while the Alor Gajah and Bukit Jalil
Share Performance (%) contracts are worth MYR256m.
1m 3m 6m 12m Under the PMC agreement, O&Cs 70%-owned subsidiary is to receive
Absolute 7.1 23.5 50.0 5.0 a fee of MYR5,500 for each property selling at less than MYR120,000,
Relative 6.7 19.5 49.4 3.2 and MYR8,000 for each property selling above MYR121,000. There are
a total of 25,000 units of affordable houses under the development
scheme. We understand that O&C has already previewed the first 1,200
units and the response has been overwhelming. The fees should come
Loong Kok Wen, CFA +603 9280 8861 in as soon as the sales and purchase agreements are signed around June/July.
Strengthening recurring income. In January, O&C signed a
memorandum of understanding (MOU) with Universiti Sains Islam
Malaysia (USIM) Nilai to provide 4,200 student accommodation units on

Top Malaysia Small Cap Companies 2017
a build-operate-transfer (BOT) basis. Management said it would likely Profit & Loss Jul-16 Jul-17F Jul-18F
Total turnover (MYRm) 38 83 182
sign this USIM contract officially by June. With this latest contract, O&C
Reported net profit (MYRm) (6) 4 18
would be able to have a sustainable stream of earnings over the long
Recurring net profit (MYRm) (6) 4 18
term, ie more than 20 years, as rental would be received after the Recurring net profit growth (%) (42.9) - 396.4
completion of construction. We understand that the on-campus student Recurring EPS (MYR) (0.03) 0.02 0.08
accommodation is still lacking. Hence, there should be more packages Recurring P/E (x) na 32.86 6.69
coming up from USIM and potentially other local education institutions. Return on average equity (%) (11.1) 7.1 30.3
P/B (x) 2.29 2.37 1.78
In the pipeline. O&C is also in the midst of bidding for a few other P/CF (x) na na na
PR1MA housing transit-oriented development projects in Pandan Jaya, Source: Company data, RHB
Pandan Indah and Cempaka, as well as some other locations. In the
meantime, it also has four other property projects (ie Kuantan, Melaka, Balance Sheet (MYRm) Jul-16 Jul-17F Jul-18F
Bangi and Jalan Yap Kwan Seng) to be launched with a combined GDV Total current assets 101 96 155
of MYR832m. Total assets 142 157 225
Total current liabilities 16 23 50
Earnings to turn around from FY17 (Jul). While FY16 saw O&C still in Total non-current liabilities 40 50 70
the red, we estimate a net profit of MYR3.6m for FY17 and MYR18.1m Total liabilities 56 73 120
for FY18. With the amount of property projects and MYR293m Shareholders' equity 52 51 69
construction orderbook in hand, earnings are set to turn around from Minority interests (0) 0 3
FY17. FY18 would see more material contributions from the property Other equity 33 33 33

projects. The gross margins for all the property projects are typically Total equity 86 84 105
Total liabilities & equity 142 157 225
around 20-25%, as industrialised building systems (IBS) are used.
Total debt 14 29 49
Net debt (21) 7 17
Company Report Card Source: Company data, RHB

Latest results. Based on O&Cs 1QFY17 results, net earnings turned

Cash flow (MYRm) Jul-16 Jul-17F Jul-18F
into positive territory as construction profits have started kicking in. Cash flow from operations (39) (3) (3)

Balance sheet/cash flow. O&C is currently in a net cash position. Cash flow from financing activities 20 - -
Cash at beginning of period 5 34 21
ROE. We expect ROE to grow significantly to +30-40% in FY18-19 from Net change in cash (19) (3) (3)
-8% in FY16 based on our earnings forecast. Ending balance cash (14) 31 18

Source: Company data, RHB

Dividend. We do not expect any dividend payouts, given that the
company is on expansionary mode.
Management. Mr Ong, who is currently the MD of O&C, holds a pivotal
role managing and overseeing all ongoing development projects. He
has more than 15 years of property development and construction
experience. His first project was Dahlia Villa in Petaling Jaya.
Meanwhile, the finance operation is managed by CFO Mr Bernard Tan,
who joined O&C in May 2016 from an accounting and advisory firm.

We value O&C at MYR0.70. Our valuations are based on a 20%
discount to RNAV, as we think the contract flow is strong, and cash flow
risk for most of its projects is rather low. We have not included the USIM
project into our valuations, which could potentially lift our RNAV per
share by 32 sen once it is officially signed. Note that, we have only
factored in the dilution impact from ICPS, as we do not expect most
warrants to be converted over the near term.
As the Government is now putting more emphasis on affordable
housing and PR1MA homes, O&C is well-positioned to capture some of
the construction works. Its potential exponential earnings growth
trajectory over the next 2-3 years should garner investors interest over
time. Given our earnings projection, O&Cs P/E would compress to only
7x in FY18 based on the current share price.

Fair Value: MYR0.80
Pesona Metro Holdings Price: MYR0.65

Riding On The Infrastructure Boom

Pesona Metro Holdings (PESONA MK)
Price Close Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits
0.75 207
0.70 194 A record construction outstanding orderbook of MYR2.1bn to keep
0.65 180 the company busy for the next 4-5 years

0.60 167
0.55 154
Value accretive SEP acquisition to offer stable earnings and cash
0.50 140 flow stream via its UNIMAP hostel concession
0.45 127
SKIP is still on the drawing board any approval ought to be
0.40 114
immediate catalysts to the companys share price
0.35 100
0.30 87
Company Profile
10 Pesona Metro started from humble beginnings in 1996 as a sub-
contractor. Since then, the company has grown from strength to
Vol m

strength to become a prominent and sustainable builder, with a




reputation for quality work that adds value to its stakeholders. In 2012,
the company was listed on the Main Market of Bursa Malaysia via the
Source: Bloomberg reverse takeover of Mithril.

Stock Profile
Bloomberg Ticker PESONA MK
Avg Turnover (MYR/USD) 1.72m/0.39m
Net Gearing (%) -43.7 Record outstanding orderbook of MYR2.1bn. In tandem with the
Market Cap (MYRm) 428m
countrys infrastructure boom, Pesona Metros job wins gathered pace
in 2015 after it secured MYR584m in new contracts, a YoY doubling.
Beta (x) 1.26
This positive momentum extended into 2016, with new order wins
BVPS (MYR) 0.25 amounting to MYR1.55bn.
52-wk Price low/high (MYR) 0.35 - 0.71
Meanwhile, the companys outstanding orderbook stands at a record
Free float (%) 25
high of MYR2.1bn as at 1 Jan. This implies a superior cover ratio of
5.4x, which has prompted management to be selective in bidding for
new jobs. We have prudently assumed MYR500-600m in FY17-18
Major Shareholders (%) respectively, way below the level achieved in FY16.
Kombinasi Emas SB 40.6
Incoming hostel concession a cash cow. In Feb 2014, Pesona Metro
Sincere Goldyear SB 17.0 was awarded a construction contract to build the hostel at University
Malaysia Perlis (UNIMAP) valued at MYR129.8m by SEP Resources
SB (SEP). The company subsequently entered into a share sale
agreement to acquire SEP which eventually became a concessionaire
Share Performance (%) of the hostel from its two individual bumiputera vendors in Aug 2014.
The price was set at MYR29.2m, comprising:
1m 3m 6m 12m
i. MYR27.2m via the issuance of 39.5m new Pesona Metro shares at
Absolute 8.3 18.2 64.6 78.1
MYR0.70 per share in two phases (70% in Phase 1 and 30% in
Relative 7.9 14.2 64.0 76.3 Phase 2);
ii. MYR1.5m in cash.
The company obtained shareholders approval for the proposed
Ng Sem Guan, CFA +603 9280 8878 acquisition of SEP in Dec 2016. Meanwhile, Phase 2s acquisition is still subject to the Public Private Partnership Units (UKAS) approval. Thus
we have only assumed for the 70% acquisition to be completed by end-
1Q17 in our model. We have ascribed a DCF value of MYR107.3m for
the entire SEP acquisition.

Top Malaysia Small Cap Companies 2017
Serdang-Kinrara-Putrajaya Expressway (SKIP) on the drawing Profit & Loss Dec-16 Dec-17F Dec-18F

board. In Apr 2015, Pesona Metro made a clarification to Bursa Total turnover (MYRm) 393 942 1,106
Reported net profit (MYRm) 20 40 48
Malaysia after Starbiz published an article that speculated the firm (30%
Recurring net profit (MYRm) 20 40 48
stake) and Putrajaya Perdana (70% stake) via Saluran Arena SB Recurring net profit growth (%) 71.3 98.4 20.4
(Saluran Arena) may be in the verge of securing an unnamed highway Recurring EPS (MYR) 0.03 0.06 0.07
concession in the Klang Valley worth more than MYR2.1bn. DPS (MYR) 0.02 0.03 0.04
Dividend Yield (%) 3.1 4.6 5.6
Although Pesona Metro has denied signing any concession agreement Recurring P/E (x) 21.24 10.75 8.96
that warranted immediate public disclosure, we think something is Return on average equity (%) 14.3 25.8 27.1
brewing. Putrajaya Perdanas website lists the privatisation of SKIP P/B (x) 2.97 2.60 2.27
under a future launch. We believe the Starbiz article refers to this P/CF (x) 14.85 3.64 10.07
expressway. Any official award of the expressway concession would Source: Company data, RHB
definitely be a positive catalyst for the stock, as it may add a new
income stream to Pesona Metro. It would also top up MYR630m into an Balance Sheet (MYRm) Dec-16 Dec-17F Dec-18F
orderbook that is already at a record high. The MYR630m is based on a Total current assets 259 329 385
theoretical 30% stake in Saluran Arena. Total assets 349 422 483
Total current liabilities 178 233 272
Total non-current liabilities 27 22 17
Total liabilities 205 254 289
Company Report Card Shareholders' equity 144 164 188
Minority interests - 3 6
Latest results. Pesona Metro posted net profit of MYR20m in FY16, up Other equity - 0 (0)
71.3% YoY. That said, we expect the company to almost double its Total equity 144 167 195
profit again in FY17. This is thanks to a record construction orderbook Total liabilities & equity 349 422 483
and contributions from SEP. Total debt 13 8 3
Net debt 7 (73) (73)
Balance sheet/cash flow. The company slipped into marginal net Source: Company data, RHB
gearing of 0.07x in FY16. However, robust cash generation plus
potential repayment of the amount owed by Budaya Positif SB upon its Cash flow (MYRm) Dec-16 Dec-17F Dec-18F
stage one acquisition may see Pesona Metro returning back into a net Cash flow from operations 29 117 43
cash position. Cash flow from investing activities (40) (18) (18)
Cash flow from financing activities (2) (25) (30)
ROE. As we expect a sharp surge in earnings in the coming years, we Cash at beginning of period 23 7 81
expect its ROE ratio to move up into the 20s from the teens currently. Net change in cash (13) 75 (5)
Forex effects (4) - -
Dividend. Despite having no fixed dividend policy, the company has Ending balance cash 7 81 76
been paying out more than 50% of its profit as dividends. Therefore, we
Source: Company data, RHB
have assumed a generous payout ratio of 50% moving forward.
Management. Pesona Metro is spearheaded by two brothers, Mr Wei
Hock Beng and Mr Wei Hock Kiong. The two hold an aggregate 57.3%
stake in the company. The former is the founder and current MD, with
over 24 years of experience in the construction industry.

We like Pesona Metro, as it offers direct exposure to the booming
infrastructure construction sector in Malaysia through its MYR2.1bn
record orderbook. This could keep the company busy for the next 4-5
Separately, the conclusion of SEPs acquisition ought to offer stable
earnings and cash flow stream via UNIMAPs hostel concession. We
also suspect that the SKIP expressway is still on the drawing board, and
any approval for this would be immediate catalysts for Pesona Metros
share price. This is because its offers another stream of stable earnings
and lifts its outstanding orderbook, which is at a MYR2.1bn record high.
Meanwhile, we derive a FV of MYR0.80 for this counter by valuing the
companys construction and manufacturing earnings at 12x FY18F P/E,
and include 70% of SEPs DCF value into its valuation.

Fair Value: MYR2.82
Power Root Price: MYR2.16

Journey To The East

Price Close
Power Root (PWRT MK)
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits
2.8 122
2.7 117 Robust export sales, further aided by strong USD

2.6 112
2.5 107 Strategic expansion plan in the pipeline
Generous dividends supported by a solid balance sheet and
2.2 92 healthy cash flows
2.1 87
2.0 82
1.9 77 Company Profile
1.8 72
3 Power Root, through its subsidiaries, is engaged in the manufacturing
2 and distribution of fast moving consumers goods (FMCG) and beverage
1 products. The company's products come under two categories instant
Vol m

and tinned, with brands such as Alicafe Premium Gold, Alitea Tarik,




Oligo and Per'l Cafe Premium Gold.

Source: Bloomberg
Stock Profile
Bloomberg Ticker PWRT MK Robust export sales to drive growth. Export sales jumped 34% YoY
and made up 44% of Power Roots revenue as of 9MFY17 (Mac), with
Avg Turnover (MYR/USD) 0.24m/0.05m
the Middle East being its key export market (77% of export sales).
Net Gearing (%) -24.5 Moving forward, we expect the focus to remain in the region where its
Market Cap (MYRm) 698m products are well received. We believe its commitment to set up a
Beta (x) 0.33 manufacturing plant in the Middle East would help in terms of sustaining
BVPS (MYR) 0.78 sales growth momentum over the longer term. Furthermore, Power
52-wk Price low/high (MYR) 1.92 - 2.75 Root would benefit from the strengthening USD given the significant
contributions from export sales, which are largely denominated in USD.
Free float (%) 5
UAE expansion to underpin long-term growth. Power Root is
expected to complete its new manufacturing plant in UAE in 2H18. The
Major Shareholders (%) expansion plan, which would incur capex of USD13-14m (MYR58-62m)
is projected to boost its annual capacity to 3.4m cartons from 1.8m
Chee Yen Low 20.0
cartons (+1.6m). Assuming production volume of 850,000 cartons at the
Say Swee How 19.6 upcoming plant, it would translate into additional sales of MYR140m
Fuei Boon Wong 18.8 (38% of FY16 revenue) based on managements estimates. The
company would also enjoy cost savings from not having to pay/lower
import tax that is imposed in the Middle East, which ranges between 5-
Share Performance (%) 25%.
1m 3m 6m 12m Steady dividend payouts. The company has a policy to distribute 50%
Absolute (5.7) 3.3 4.9 (8.9) of its net profit to shareholders. Even so, it has been paying out c.70%
Relative (6.1) (0.7) 4.3 (10.7) of its net profit over the last two years, supported by its sturdy balance
sheet and strong cash flows. We believe Power Root would be
appealing to yield-seeking investors as we are projecting 11.5 sen and
12.5 sen dividends to be declared in FY17F-18F, translating into decent
Alexander Chia +603 9280 8889 yields of 5.3-5.8%.

Top Malaysia Small Cap Companies 2017
Company Report Card Profit & Loss
Total turnover (MYRm)
Reported net profit (MYRm) 43 51 57
Latest results. 9MFY17 revenue grew 10.3% on the back of robust
Recurring net profit (MYRm) 46 51 57
export sales but core net profit was flattish at MYR34.2m due to a high
Recurring net profit growth (%) 5.9 11.6 11.9
base of comparison 9M16 sales were aided by post-GST restocking in Recurring EPS (MYR) 0.15 0.16 0.18
1QFY16, while higher marketing expenses were incurred in 9MFY17 vs DPS (MYR) 0.11 0.12 0.13
9MFY16, which we believe was due to the early timing of the Lunar Dividend Yield (%) 5.1 5.3 5.8
New Year in 2017. Recurring P/E (x) 14.15 13.70 12.24
Return on average equity (%) 18.5 20.8 22.0
Balance sheet / cash flow. As of Dec 2016, the company was in a net P/B (x) 2.72 2.78 2.60
cash position, with net cash of MYR31.1m, while generating healthy P/CF (x) 13.53 14.84 13.04
operating cash flows of MYR31.7m during the same period. Source: Company data, RHB

ROE. ROEs have ranged between 18-19% over the last few years, and
Balance Sheet (MYRm) Mar-16 Mar-17F Mar-18F
we expect it to be sustained on the back of projected steady business
Total current assets 244 260 266
Total assets 326 343 366

Dividend. The company has a dividend policy of distributing at least Total current liabilities 84 89 96
Total non-current liabilities 2 1 1
50% of its net profit to shareholders but its payout ratio has been higher
Total liabilities 86 90 97
at 70-75% over the last two years. Moving forward, we are projecting Shareholders' equity 238 251 268
11.5 sen and 12.5 sen of dividends to be declared in FY17F-18F, Minority interests 3 1 1
translating into yields of 5.3-5.8%. Total equity 240 252 269
Total liabilities & equity 326 343 366
Management. Power Root is managed by three of its major Total debt 11 12 15
shareholders who founded the company, namely Dato Low Chee Yen, Net debt (60) (62) (50)
Dato How Say Hwee, and Dato Wong Fuei Boon. All of them possess Source: Company data, RHB
vast and relevant experience in FMCG and marketing, and in total they
hold a 58.4% stake in Power Root. Cash flow (MYRm) Mar-16 Mar-17F Mar-18F
Cash flow from operations 48 47 54
Cash flow from investing activities (5) (7) (25)

Recommendation Cash flow from financing activities

Cash at beginning of period

We like Power Root for its robust export sales, while its commitment to Net change in cash 5 3 (12)
Ending balance cash 73 74 62
set up a new manufacturing plant in the Middle East should pave the
way for positive long term prospects. Source: Company data, RHB

We value Power Root at MYR2.82 (31% upside), after pegging a 16x

P/E to our FY18F EPS of 17.6 sen. The target P/E valuation is on par
with what we have ascribed for OldTown (OTB MK, BUY, TP:
MYR2.40). Although Oldtowns key focus export market in China offers
a bigger potential and the FMCG commands better profit margin as
compared to Power Root, we believe that an equivalent valuation is
justified considering that Power Root is a pure FMCG play with no
exposure in the higher risk retail F&B business while its dividend pay-
out is more generous.

Fair Value: MYR0.26
Priceworth International Price: MYR0.11

A Landbank Of Opportunity
Priceworth International (PWP MK)
Price Close Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits
0.21 187

0.19 170 Acquisition of FMU5 a game-changer

0.17 153 Superior-yielding forest with extensive logging equipment
0.15 136 Listing of subsidiary on SGX to capture foreign interests
0.13 118

0.11 101 Company Profile

0.09 84
Priceworth International is primarily involved in sustainable timber
0.07 67
500 harvesting and manufacturing and sale of plywood. Priceworth has
been in the timber industry since 1992, before it was listed on Bursa
200 Malaysia in 2001.
Vol m





Source: Bloomberg A transformative acquisition. PWI acquired 101,161ha of forest
management unit (FMU5) in Trusmadi, Sabah, via its wholly-owned
Stock Profile Singapore subsidiary, GSR Pte Ltd. The MYR260m acquisition, which
Bloomberg Ticker PWP MK was completed in Oct 2016, enabled PWI to transform into a fully-
Avg Turnover (MYR/USD) 2.07m/0.47m integrated player and to fully optimise its existing operational capacity.
Net Gearing (%) -13.3 Prior to the acquisition, PWI had a 50-year concession of over
Market Cap (MYRm) 141m
28,000ha, also located in Sabah. Current utilisation rate of its plywood
manufacturing plant is estimated at only 40% due to a shortage of
Beta (x) 1.00
sustainably sourced logs. We forecast this rate to increase to 70% in
BVPS (MYR) 0.13 FY18 (Jun) before ramping up higher, due to its ample source of logs
52-wk Price low/high (MYR) 0.09 - 0.20 available with its new acquisition.
Free float (%) 74
A virgin forest. On FMU5 logging activities have been rare due to the
steeper terrains in the area, which posed difficulties in logging
operations by the previous owner. However, PWI has an extensive set
Major Shareholders (%) of logging equipment which enables it to employ the reduced impact
Lim Nyuk Foh 11.3 logging (RIL) method of extraction. This allows for a maximum volume
Chong Vun Kon 1.8 of logs to be extracted, with minimum damage to the logs. Based on a
Forest Resource Appraisal Report on FMU5, the forest has a potential
productivity of up to 111.3cu m per ha for trees which are above the
40cm diameter at breast height (dbh) the limit at which cutting is fixed
at. Our forecasts have been much more conservative as we have only
Share Performance (%) inputted a yield of 70 cu m per ha for an allowable annual area (AAA) of
1m 3m 6m 12m 8,000 ha per year over a 10 year cutting cycle.
Absolute 81.8 66.7 122.2 81.8 Listing of GSR on the SGX. Management has plans to list its wholly-
Relative 81.1 62.0 119.5 80.3 owned GSR unit in Singapore, with an estimated completion by
1HFY18 and a target market capitalisation of MYR800m. The newly-
acquired FMU5 as well as Sinora, the groups plywood manufacturing
Stephanie Cheah +603 9280 8859 unit, is to be injected into the Singapore entity. PWI intends to retain
75% stake in GSR post IPO.

Top Malaysia Small Cap Companies 2017
Profit & Loss Jun-16 Jun-17F Jun-18F
Total turnover (MYRm) 167 135 592
Reported net profit (MYRm) 1 4 112
Company Report Card Recurring net profit (MYRm) 1 4 112
Recurring net profit growth (%) (51.0) 278.5 2,423.3
Latest results. PWI reported 1HFY17 net profit of MYR1.3m vs its
Recurring EPS (MYR) 0.00 0.00 0.03
FY16 earnings of MYR0.7m. We assumed no contribution from FMU5 Recurring P/E (x) 97.17 153.11 6.07
for the fiscal year ending in June. There is therefore upside potential to Return on average equity (%) 0.4 1.2 22.2
our earnings projection for F17F should PWI be able to commence P/B (x) 0.41 1.52 1.21
logging activities starting in March as expected. P/CF (x) 20.67 9.88 51.48

Source: Company data, RHB

Balance sheet/cash flow. The group announced various proposals to
fund the FMU5 acquisition, namely a:
Balance Sheet (MYRm) Jun-16 Jun-17F Jun-18F
i. Private placement of c.64.2m shares that raised MYR6.4m Total current assets 126 323 607
(completed) Total assets 518 924 1,166
ii. Special issue of ~141.2m shares which could raise MYR14.1m. Total current liabilities 197 182 281
Total non-current liabilities 47 47 47
The funds collected from these transactions would be used to fund the
Total liabilities 244 229 328
MYR20m deposit payment for the acquisition. The remaining MYR240m Shareholders' equity 275 447 558
is to be funded via the issuance of PWI shares (MYR60m) and via the Minority interests (0) 248 279
listing of GSR in Singapore (MYR180m). Other equity - (0) -
Total equity 275 695 838
Subsequently, the group plans to undertake a 2-for-1 two-call rights Total liabilities & equity 518 924 1,166
issue of around 1.69bn shares, with one bonus share for every two Total debt 163 163 163
rights share to raise MYR84.7m. This would be used to pare down its Net debt 150 (93) (159)
borrowings. We assume all of these corporate exercises to be Source: Company data, RHB
completed by FY17. Post completion of these exercises, we expect the
groups net gearing to fall to 0.18x (from 0.68x at the end-FY15). Cash flow (MYRm) Jun-16 Jun-17F Jun-18F
Cash flow from operations 6 69 13
Dividend. The group has not paid any dividends historically. However,
Cash flow from investing activities (8) (200) (9)
management has guided that they are looking to introduce a dividend Cash flow from financing activities (119) 356 -
policy in order to reward shareholders going forward. Our forecasts Cash at beginning of period 4 13 255
have assumed no dividend payments. Net change in cash (121) 224 4
Forex effects 5 - -
Management. Mr Lim Nyuk Foh is the founder and managing director Ending balance cash (113) 237 259
of PWI. He has extensive experience in the timber industry spanning
Source: Company data, RHB
over 28 years. He is assisted by Mr Koo Jenn Man who has served as
an executive director at PWI since 2011. Mr Koo is tasked to oversee
the financial and administrative operations of the group.

We like PWI for its growth story arising from the acquisition of FMU5,
which represents a turning point for PWI. This is as earnings are
expected to grow from the current MYR1-2m pa to approximately
MYR112m by FY18. We value PWI at MYR0.26 based on 8x F18F P/E.
Our target multiple is at 38% discount to its peers average of 13x, a
discount that we think is justified given:
i. Its smaller plantation acreage;
ii. Execution risks;
iii. The lack of track record (in terms of forest management).
A key risk to highlight is that, at the time of writing, the sales and
purchase agreement (SPA) has not been signed. While management
guided that this would be completed before end-FY17, failure to obtain
the agreement could result in the group not being able to commence its
logging operations.

Fair Value: MYR1.14
Reach Energy Price: MYR0.62

Kazakhstan Asset The Cash Cow

Price Close
Reach Energy (REB MK)
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits
0.75 117

Stake in Kazakhstan oilfield

0.70 111
Beneficiary of higher crude oil price
0.65 105
Future upside from central processing facility
0.60 99

0.55 93
Company Profile
0.50 87
25 Reach Energy is a special purpose acquisition company (SPAC) with a
60% stake in a Kazakhstan oilfield.
Vol m





The asset. Reach Energy owns a 60% stake in Paleontol BV, the
Source: Bloomberg owner and operator of the Emir Oil concession block in Kazakhstan.
The Emir Oil concession block is an onshore field located in the
Stock Profile Mangystau Oblast, in the South West region of Kazakhstan.
Bloomberg Ticker REB MK
The block has a total contract area of approximately 850.3 square km.
Avg Turnover (MYR/USD) 1.59m/0.36m
The asset comes with four producing fields Aksaz (gas), Dolinnoe,
Net Gearing (%) -60.7 Emir and Kariman (oil) with an exploration area of approximately
Market Cap (MYRm) 792m 804.8 square km, comprising two development fields and six future
Beta (x) 1.00 prospects.
BVPS (MYR) 0.80 The oilfield is based on a concession fiscal regime with a period of
52-wk Price low/high (MYR) 0.60 - 0.74 production until 2036.
Free float (%) 45
Reserves and location. Based on RPS Energy, an independent oilfield
consultant, the block is estimated to hold 2P gross reserves of 70mbbls
of oil with a 2P associated gas gross reserve of 116.3bn of standard
Major Shareholders (%) cubic feet (Bscf).
Reach Energy Holdings 20.0
3P reserves are estimated at 116.1mbbls and 184.1Bscf of gross oil
PAG Holdings 9.5 and gas reserves respectively.
Lembaga Tabung Haji 8.0
Future upside. Apart from on-going efforts to upgrade its 3P reserves
to 2P reserves, the group is expected to start operations at a new
central processing facility, scheduled to come on-line in early 2017.
Share Performance (%)
1m 3m 6m 12m There are also plans to construct a 25km oil and 35km gas pipeline to
state-owned trunk lines, which would reduce transportation costs.
Absolute (3.9) (1.6) (10.2) (6.1)
Relative (6.3) (7.5) (12.5) (7.9)

Wan Mohd Zahidi +603 9280 8879

Top Malaysia Small Cap Companies 2017
Company Report Card Profit & Loss
Total turnover (MYRm)

Latest results. Reach Energys FY16 net profit came in at MYR131m. Reported net profit (MYRm) 131 128 136
Recurring net profit (MYRm) 131 128 136
The Emir Oil concession only contributed one month of revenue to the
Recurring net profit growth (%) - (2.4) 6.6
company as the deal was finalised in Nov 2016. Recurring EPS (MYR) 0.11 0.12 0.12
DPS (MYR) - 0.01 0.00
Balance sheet/cash flow. The company has zero borrowings while its
Dividend Yield (%) - 1.6 0.2
cash balance stood at MYR106m. Cash flow for FY16 was negative as Recurring P/E (x) 5.63 5.32 4.99
Reach Energy paid USD155m for the 60% stake in the concession. Return on average equity (%) 33.0 15.5 14.4
P/B (x) 0.89 0.77 0.67
ROE. ROE for FY16 came in at 33%, which included a negative
P/CF (x) 0.82 1.34 1.48
goodwill of MYR143m from the acquisition of a stake in the concession.
Source: Company data, Source: Company data, RHB
Dividend. Reach Energy is expected to pay 30% of its free cash flows
as dividends. We expect the company to start paying dividends in FY17. Balance Sheet (MYRm) Dec-16 Dec-17F Dec-18F
Total current assets 153 663 968
Management. Reach Energy is led by its executive director, Ir Shahul Total assets 1,953 2,414 2,867
Hamid, bringing with him more than 36 years of experience in the oil & Total current liabilities 735 1,081 1,314
gas industry. Total non-current liabilities 427 427 427
Total liabilities 1,162 1,508 1,741
Shareholders' equity 764 879 1,014
Minority interests 27 27 113
Recommendation Other equity - 0 -
Total equity 791 906 1,126
We believe Reach Energy is a beneficiary of higher crude oil prices Total liabilities & equity 1,953 2,414 2,867
given its stake in the Emir Oil concession. We expect crude oil price to Total debt 15 15 15
average USD60 per bbl over the long term. Net debt (91) (550) (855)

Source: Company data, Source: Company data, RHB

We value Reach Energy using DCF methodology for its concession,
with a WACC of 10% - on par with other oilfield valuations arriving at a
Cash flow (MYRm) Dec-16 Dec-17F Dec-18F
fair value of MYR1.14.
Cash flow from operations 898 507 460
Based on our estimates, every 5% positive movement in crude oil price Cash flow from financing activities 604 - -
Cash at beginning of period 778 106 565
would increase our fair value by 17%.
Net change in cash 1,503 507 460
We do not have a rating on Reach Energy at the moment. Ending balance cash 2,281 613 1,026

Source: Company data, RHB

Fair Value: MYR3.10
Samchem Holdings Price: MYR1.90

Riding On The Chemical Boom

Samchem Holdings (SAHB MK)
Price Close Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits
2.1 265

1.9 240 Trading presence in emerging markets

1.7 215
Long term relationship with downstream majors

1.5 190

1.3 165
Infrastructure already in place to enable growth
1.1 140

0.9 115

0.7 90
Company Profile
0.5 65
3 Samchem Holdings (Samchem) is a third party distributor of chemical
products, with presence in Malaysia, Singapore, Indonesia, and
Vol m





Source: Bloomberg Regional distributor of chemicals. Samchem is a distributor of
industrial chemicals, ranging from polyurethanes chemicals to
Stock Profile intermediate and specialty chemicals. The company has been operating
Bloomberg Ticker SAHB MK for more than 20 years and distributes 400 types of petrochemical
Avg Turnover (MYR/USD) 0.29m/0.06m products across Malaysia, Indonesia, Vietnam and Singapore, with a
Net Gearing (%) -18.2 customer base of more than 2,500.
Market Cap (MYRm) 258m Aside from distribution, Samchem also has a solvent blending segment
Beta (x) 1.00 capable of blending customised solvents from 5,000 to 20,000 litres.
BVPS (MYR) 0.64 Seal of approval from MNCs. Samchem holds formal distributorship
52-wk Price low/high (MYR) 0.65 - 1.90 rights for more than 200 products from major chemical manufacturers
Free float (%) 13 such as ExxonMobil, Shell, Petronas Chemicals, BASF, and many other
players. Samchem is able to obtain formal distributorship rights from
major chemical companies as its logistics infrastructure is of global
Major Shareholders (%)
Ng Thin Poh 43.8 Time to milk the cow. Management indicated that it has spent
Ng Soh Kian 6.6 MYR10m in capex over the past five years to upgrade its logistics
Dato Ng Lian Poh 6.3 infrastructure across the region. The improved infrastructure allows
Samchem to comply with strict health, safety and environmental
requirements of chemical manufacturers, in addition to enhancing its
distribution capabilities.
Share Performance (%)
1m 3m 6m 12m
Absolute 11.8 42.9 101.1 143.6 Company Report Card
Relative 9.4 37.0 98.8 141.8
Latest results. In FY16, Samchem recorded PATAMI of MYR15m, an
improvement of 275% from its FY15 performance. This is attributed to
higher sales from its improved logistics and infrastructure facilities.
Wan Mohd Zahidi +603 9280 8879 Balance sheet/cash flow. Samchem was in a net debt position of
MYR80m as at end-2016, due mainly to capex for its expansion drive.

Top Malaysia Small Cap Companies 2017
ROE. Samchem registered ROE of 13% in FY16. We expect major Profit & Loss Dec-16 Dec-17F Dec-18F

improvements in ROE as net profit is expected to reach MYR60m in Total turnover (MYRm) 696 807 836
Reported net profit (MYRm) 15 60 65
Recurring net profit (MYRm) 15 60 65
Dividend. Dividend has been increasing on an annual basis. Samchem Recurring net profit growth (%) 270.3 302.6 8.6
Recurring EPS (MYR) 0.11 0.29 0.24
paid out MYR6m in FY16, translating to a DPS of 4.5sen. The company
DPS (MYR) 0.05 0.02 0.02
has not set a dividend policy but we expect Samchem to pay out a
Dividend Yield (%) 2.4 1.2 1.2
similar amount in FY17. Recurring P/E (x) 17.30 6.44 7.91
Return on average equity (%) 12.9 41.0 32.1
Management. Samchem was founded in 1989 by Mr Ng Thin Poh, with
P/B (x) 2.16 2.98 2.22
35 years of chemical distribution experience under his belt. Currently, P/CF (x) 204.67 2.97 6.10
Dato Ng Lian Poh is the CEO of Samchem, having started his career as
Source: Company data, RHB
a sales executive in another chemical distribution company before
joining Samchem in 1996.
Balance Sheet (MYRm) Dec-16 Dec-17F Dec-18F
Total current assets 316 377 436
Total assets 356 416 476
Recommendation Total current liabilities 221 122 125
Total non-current liabilities 4 94 74
We like Samchem for its regional exposure in a resilient yet growing Total liabilities 225 216 199
industry. We believe it is in an enviable position of being in a market Shareholders' equity 120 174 233
Minority interests 11 27 44
with exponential population growth, which would in turn increase
Other equity - - (0)
demand for chemical products.
Total equity 131 200 276

Samchem also has the backing of major chemical producers, given that Total liabilities & equity 356 416 476
Total debt 134 114 94
its infrastructure, logistics and distribution channels are of global
Net debt 80 (36) (107)
Source: Company data, RHB
We value Samchem at FY17F P/E of 14x, which is at a 30% discount to
its competitor, Brenntag AG, arriving at our fair value of MYR3.10. We Cash flow (MYRm) Dec-16 Dec-17F Dec-18F
believe the 30% discount is justified due to Samchems relatively lower Cash flow from operations 1 131 85
global market share. Cash flow from investing activities 10 (1) (0)
Cash flow from financing activities 2 (29) (30)
We do not have a rating on Samchem at the moment. Cash at beginning of period 28 54 150
Net change in cash 13 101 55
Forex effects 2 - -
Ending balance cash 42 154 205

Source: Company data, RHB

Fair Value: MYR2.00
Sasbadi Holdings Price: MYR1.57

Supporting The Education Blueprint

Price Close
Sasbadi Holdings (SASB MK)
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits
1.7 136

1.6 129 New national curriculum for schools to drive revenue growth
1.5 121
Acquisitions and new direct marketing license would broaden
1.4 114
income streams

1.3 106

1.2 99
Investments in digital educational products to sustain future growth
1.1 91

1.0 84 Company Profile

0.9 76
Sasbadi Holdings (Sasbadi) is principally a publisher of educational
materials. These materials are focused on the primary and secondary
school education system based on the Malaysian National School
Curriculum (MNSC). The group expanded into the Chinese language
Vol m

segment via the acquisitions of a 70%-stake in Sanjung Unggul SB in




Aug 2015 and a 100% stake in United Publishing House (M) SB (UPH)
in Aug 2016. Sanjung Unggul caters to students in national-type
Source: Bloomberg Chinese schools (SJKC), while UPH has a large number of syllabus
and non-syllabus based titles, and an established distribution network in
Stock Profile the Chinese schools segment. In FY16 (Aug), publication of materials
Bloomberg Ticker SASB MK for MNSC accounted for 64% of operating profit, while another 10%
Avg Turnover (MYR/USD) 0.87m/0.20m came from the newly-added Chinese language segment.
Net Gearing (%) 2.3
Market Cap (MYRm) 439m
Beta (x) 0.91 Highlights
BVPS (MYR) 0.59 Revenue uplift from revamped MNSC curriculum... The publishing of
52-wk Price low/high (MYR) 1.03 - 1.61 printed educational materials based on the MNSC is expected to see
Free float (%) 45 strong growth in FY17-18. This was after a softening of the domestic
economy in FY16, which caused sales to stagnate. In mid-2016, the
Education Ministry (MOE) revamped the national curriculums for
primary and secondary schools, ie the Standard Based Curriculum for
Major Shareholders (%)
Primary Schools (KSSR) and Standard Based Curriculum for
Law King Hui 18.3 Secondary Schools (KSSM) respectively. There would be tenders for
Lee Swee Hang 8.5 new KSSR and KSSM textbooks for schools nationwide post this
Employees Provident Fund 6.9 progressive revision of the school syllabus. We also expect Sasbadi to
introduce new titles to cater to the change in curriculums. The last
reviews for KSSR and KSSM were in 2011 and 1989 respectively.
Share Performance (%) expansion in Chinese language segment, and... Sasbadi is
1m 3m 6m 12m augmenting its position in the Chinese language market with the UPH
Absolute 1.3 7.5 51.0 22.2 acquisition. UPH widens its offerings for the Chinese language segment
Relative 0.9 3.5 50.4 20.4
with its education-related and non-education products. Concurrently,
Sanjung Unggul has an estimated 50% market share in the Chinese
textbook market.

Fiona Leong +603 9280 8886 a new marketing strategy for digital offerings. In Apr 2016,
Sasbadi was granted a direct marketing license to sell its interactive
digital/online learning portal, ie i-LEARN Ace. This puts it at the forefront
of supporting the MOEs Malaysia Education Blueprint 2013-2025. The
blueprint intends to leverage on information and communications
technologies (ICT) to scale up quality learning nationwide. Management

Top Malaysia Small Cap Companies 2017
is confident demand for technology-enabled solutions in teaching and Profit & Loss Aug-16 Aug-17F Aug-18F

learning would grow at an accelerated pace in the coming years. Total turnover (MYRm) 93 117 137
Reported net profit (MYRm) 17 24 30
Ready to support growing emphasis on science, technology, Recurring net profit (MYRm) 17 24 30
engineering and mathematics (STEM). As a distributor of Lego Recurring net profit growth (%) 7.8 35.4 27.5
Recurring EPS (MYR) 0.06 0.08 0.11
robotics, Sasbadi can benefit from the Governments growing emphasis
DPS (MYR) 0.02 0.03 0.03
on STEM. In Dec 2016, it entered into a memorandum of understanding
Dividend Yield (%) 1.4 1.6 1.8
(MOU) with University Malaysia to collaborate on research and product Recurring P/E (x) 24.20 18.52 14.53
development related to robotics and STEM education. Return on average equity (%) 13.8 15.2 17.2
P/B (x) 2.97 2.67 2.35
Will continue to pursue inorganic growth. Having successfully P/CF (x) na 46.87 28.10
completed two acquisitions, Sasbadi intends to use this inorganic
Source: Company data, RHB
strategy to accelerate growth. That said, management has among
several acquisition prerequisites a criteria that the takeover would be
Balance Sheet (MYRm) Aug-16 Aug-17F Aug-18F
done with a single-digit P/E multiple. The firm is keen to widen its
Total current assets 128 148 176
publication portfolio to include general titles that cater to school leavers, Total assets 205 227 254
particularly in the Malay and Chinese language mediums. Funding of Total current liabilities 35 39 41
the acquisitions would be via a combination of internally-generated Total non-current liabilities 17 17 18
funds and funds raised via the capital markets. Total liabilities 52 56 59
Shareholders' equity 148 164 187
Minority interests 5 7 8
Other equity - 0 0
Company Report Card Total equity 153 171 195
Total liabilities & equity 205 227 254
Latest results. Net profit jumped 113% YoY to MYR4.34m in 1QFY17. Total debt 18 22 22
This was supported by robust revenue growth of 48% YoY, which came Net debt (8) 4 (14)
from the delivery/supply of textbooks and robotics to schools under Source: Company data, RHB
contract with the MOE, increased revenue from the printing of Chinese
school textbooks (with maiden contributions from UPH acquired in Cash flow (MYRm) Aug-16 Aug-17F Aug-18F
Aug 2016), and commencement of direct sales and network marketing Cash flow from operations (0) 9 16
of the groups online and digital products. Cash flow from investing activities (15) (3) (2)
Cash flow from financing activities 31 (10) (7)
Balance sheet/cash flow. At end-1QFY17, Sasbadi had net debt of Cash at beginning of period 8 26 18
MYR11.9m, with net gearing at a very comfortable 8%. This was Net change in cash 15 (4) 6
compared with a net cash position of RM5.8m in FY16. Ending balance cash 24 22 24

Source: Company data, RHB

ROE. Annualised ROE was 11.6% in 1QFY17, down from the 13.8%
achieved in FY16. The lower ROE was mainly due to the seasonality in
Sasbadis businesses, where sales in 2Q of its financial year are usually
the strongest (accounting for 36-37% of full-year revenue). We expect
ROE to improve to 15% in FY17.
Dividend. No dividend was declared for 1QFY17. Sasbadi has a policy
of paying out up to 50% of annual earnings. For FY16, its dividend
payout ratio was 36%. We forecast DPS of 2.5 sen for FY17 vs 2.3 sen
in FY16.
Management. Sasbadi is helmed by its two co-founders, ie Mr Law
King Hui (group MD) and Mr Lee Swee Hang (the groups publishing
director). Mr Law has more than 36 years of publishing experience,
while Mr Lee is responsible for the editorial and production teams. Mr
Law has an effective 18.3% stake in Sasbadi.

We like Sasbadi for its growth strategies that places it in a good position
to benefit from resilient demand for educational resources, as well as
the Governments education transformation programme. We value the
stock at MYR2.00, which is based on 18.5x FY18F P/E. This is a 10%
discount to the average 21x P/E multiple for comparable stocks.

Fair Value: MYR1.40
Yoong Onn Corp Price: MYR1.11

Deep Value Embedded By Solid Foundation

Price Close
Yoong Onn Corp (YOCB MK)
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
Investment Merits
1.40 159

1.30 147
Solid fundamentals, proven track record and dominant market

1.20 136
Growth strategy for its in-house retail stores

1.10 124
Undemanding valuations. At its last close, the stock was trading at
1.00 112
7.2x FY18F P/E
0.90 101

89 Company Profile
2 Yoong Onn Corp (Yoong Onn) is a leading integrated designer,
2 manufacturer, distributor and retailer of home linen and bedding
accessories in the region. Backed by over five decades of experience,
Vol m

Yoong Onn has more than 10 main brands of home linen for premium




to mid-range consumers to date including Novelle, Jean Perry, Louis

Casa, Genova, Niki Cains, Diana and Cotonsoft. With its integrated
Source: Bloomberg operations, strong expertise, and multiple distribution channels
including its Homes Harmony retail outlets, the brands have become
Stock Profile household names not only in Malaysia but also the region.
Bloomberg Ticker YOCB MK
Avg Turnover (MYR/USD) 0.05m/0.01m
Net Gearing (%) -1.8 Highlights
Market Cap (MYRm) 178m
Deep value embedded by solid foundation. Yoong Onn began
Beta (x) 0.44
manufacturing bed linen in 1976. Since then, the company has
BVPS (MYR) 1.22 established itself as the major player in the local bed linen industry. Its
52-wk Price low/high (MYR) 0.90 - 1.37 market share in Malaysia is estimated to be over one-third, while its
Free float (%) 25 track record is a solid one with consistent earnings growth (8-year
CAGR of 8.7%). The companys hands-on and dedicated management
team has played a major role behind the success. We believe that
investors should look at the elusive intrinsic value in the company, as its
Major Shareholders (%)
reputation and market share accumulated over the years would be a
Casatex Cosmo SB 52.5 feat that is difficult to replicate.
Wang Shouhu 4.9
Homes Harmony to propel growth. The company has been actively
OCBC Securities Pte Ltd 4.4
expanding its in-house retail stores under the Homes Harmony brand.
We believe the strategy would benefit Yoong Onn in view of the
additional sales boost driven by extra stores, enhancement in brand
Share Performance (%) recognition and reduction in dependency on consignment stores.
1m 3m 6m 12m These, in turn, would translate to better profit margins. We are
Absolute 2.8 (4.3) (4.3) 19.4 projecting its PBT margin to expand to 15.3%, 15.7% and 16.2% in
Relative 2.4 (8.3) (4.9) 17.6
FY17-19F (Jun) respectively, from 14.3% in FY16.
Unheralded, but valuation is undemanding. The stock has been
trading at modest valuations (7-8x forward P/Es), probably due to the
Alexander Chia +603 9280 8889 limited exposure to the investment community as it is under-researched.
We think its valuation is unjustified, due to its solid fundamentals,
proven track record and sturdy balance sheet. Looking ahead, its
outlook is positive with the establishment of more in-house retail stores,
robust sales to the institutional sales channel and sustainable demand
on the back of lifestyle modernisation and rising affluence.

Top Malaysia Small Cap Companies 2017
Company Report Card Profit & Loss
Total turnover (MYRm)

Latest results. Yoong Onns1HFY17 core net profit of MYR11.4m Reported net profit (MYRm) 21 23 25
Recurring net profit (MYRm) 21 23 25
represents a growth of 9.6% YoY, while revenue grew 2.7% to
Recurring net profit growth (%) 12.8 10.9 7.8
MYR96.1m in the same period. The higher sales can be attributable to Recurring EPS (MYR) 0.13 0.15 0.16
the four new Homes Harmony outlets opened during the year. Recurring P/E (x) 8.49 7.65 7.10
Return on average equity (%) 12.1 12.4 12.2
Balance sheet/cash flow. As of 1HFY17, Yoong Onn has net cash of P/B (x) 0.99 0.91 0.84
MYR1.6m. It also booked healthy operating cash flow of MYR10.6m P/CF (x) 85.46 5.41 7.24
during the same period.
Source: Company data, RHB
ROE. The companys ROE has averaged 12.5% over the last three
years. We expect it to record a similar level of ROEs for the next three Balance Sheet (MYRm) Jun-16 Jun-17F Jun-18F

years. Total current assets 170 168 175

Total assets 222 227 242
Dividend. Yoong Onn has been paying out an average of 32.3% of its Total current liabilities 35 28 28
earnings as dividends to reward shareholders. Moving forward, we are Total non-current liabilities 7 4 1

projecting DPS of 4.5 sen, 5 sen and 5.5 sen for FY17-19, which Total liabilities 42 32 29
Shareholders' equity 180 196 213
translates to yields of 4-5%.
Total equity 180 196 213
Management. The company is in the able hands of the Chew family. It Total liabilities & equity 222 227 242
Total debt 25 13 10
is helmed by Mr Roland Chew, its managing director and CEO, who has
Net debt 10 (4) (8)
37 years of industry experience. He is flanked and assisted by
executive director and COO Mr Raymond Chew (37 years of Source: Company data, RHB

experience), its head of business development Mr Nelson Chew (33

years of experience), head of production Mr Eric Chew and its CFO Mr Cash flow (MYRm) Jun-16 Jun-17F Jun-18F
Cash flow from operations 2 33 25
Jon Tan.
Cash flow from investing activities (11) (12) (12)
Cash flow from financing activities 16 (19) (11)
Cash at beginning of period 27 15 17

Recommendation Net change in cash 6 1 2

Ending balance cash 34 17 18
We like Yoong Onn for its solid fundamentals and proven track record. Source: Company data, RHB
We believe the company is in good hands, thanks to its highly
experienced management team. We believe its management would
sustain the growing momentum of the company, while the expansion of
the Homes Harmony store network would provide a further avenue for
We value the stock at MYR1.40, pegging a 9x P/E to its FY18F EPS of
15.6 sen. The valuation implies a 10% discount to the FBM Small Cap
Index average forward P/E which is justified by its smaller market

RHB Guide to Investment Ratings

Buy: Share price may exceed 10% over the next 12 months
Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
Neutral: Share price may fall within the range of +/- 10% over the next 12 months
Take Profit: Target price has been attained. Look to accumulate at lower levels
Sell: Share price may fall by more than 10% over the next 12 months
Not Rated: Stock is not within regular research coverage

Investment Research Disclaimers

RHB has issued this report for information purposes only. This report is intended for circulation amongst RHB and its affiliates clients
generally or such persons as may be deemed eligible by RHB to receive this report and does not have regard to the specific investment
objectives, financial situation and the particular needs of any specific person who may receive this report. This report is not intended,
and should not under any circumstances be construed as, an offer or a solicitation of an offer to buy or sell the securities referred to
herein or any related financial instruments.

This report may further consist of, whether in whole or in part, summaries, research, compilations, extracts or analysis that has been
prepared by RHBs strategic, joint venture and/or business partners. No representation or warranty (express or implied) is given as to
the accuracy or completeness of such information and accordingly investors should make their own informed decisions before relying
on the same.

This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in
any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to the
applicable laws or regulations. By accepting this report, the recipient hereof (i) represents and warrants that it is lawfully able to receive
this document under the laws and regulations of the jurisdiction in which it is located or other applicable laws and (ii) acknowledges
and agrees to be bound by the limitations contained herein. Any failure to comply with these limitations may constitute a violation of
applicable laws.

All the information contained herein is based upon publicly available information and has been obtained from sources that RHB
believes to be reliable and correct at the time of issue of this report. However, such sources have not been independently verified by
RHB and/or its affiliates and this report does not purport to contain all information that a prospective investor may require. The opinions
expressed herein are RHBs present opinions only and are subject to change without prior notice. RHB is not under any obligation to
update or keep current the information and opinions expressed herein or to provide the recipient with access to any additional
information. Consequently, RHB does not guarantee, represent or warrant, expressly or impliedly, as to the adequacy, accuracy,
reliability, fairness or completeness of the information and opinion contained in this report. Neither RHB (including its officers, directors,
associates, connected parties, and/or employees) nor does any of its agents accept any liability for any direct, indirect or consequential
losses, loss of profits and/or damages that may arise from the use or reliance of this research report and/or further communications
given in relation to this report. Any such responsibility or liability is hereby expressly disclaimed.

Whilst every effort is made to ensure that statement of facts made in this report are accurate, all estimates, projections, forecasts,
expressions of opinion and other subjective judgments contained in this report are based on assumptions considered to be reasonable
and must not be construed as a representation that the matters referred to therein will occur. Different assumptions by RHB or any
other source may yield substantially different results and recommendations contained on one type of research product may differ from
recommendations contained in other types of research. The performance of currencies may affect the value of, or income from, the
securities or any other financial instruments referenced in this report. Holders of depositary receipts backed by the securities discussed
in this report assume currency risk. Past performance is not a guide to future performance. Income from investments may fluctuate.
The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of

This report does not purport to be comprehensive or to contain all the information that a prospective investor may need in order to
make an investment decision. The recipient of this report is making its own independent assessment and decisions regarding any
securities or financial instruments referenced herein. Any investment discussed or recommended in this report may be unsuitable for
an investor depending on the investors specific investment objectives and financial position. The material in this report is general
information intended for recipients who understand the risks of investing in financial instruments. This report does not take into account
whether an investment or course of action and any associated risks are suitable for the recipient. Any recommendations contained in
this report must therefore not be relied upon as investment advice based on the recipient's personal circumstances. Investors should
make their own independent evaluation of the information contained herein, consider their own investment objective, financial situation
and particular needs and seek their own financial, business, legal, tax and other advice regarding the appropriateness of investing in
any securities or the investment strategies discussed or recommended in this report.

This report may contain forward-looking statements which are often but not always identified by the use of words such as believe,
estimate, intend and expect and statements that an event or result may, will or might occur or be achieved and other similar
expressions. Such forward-looking statements are based on assumptions made and information currently available to RHB and are
subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievement
to be materially different from any future results, performance or achievement, expressed or implied by such forward-looking
statements. Caution should be taken with respect to such statements and recipients of this report should not place undue reliance on
any such forward-looking statements. RHB expressly disclaims any obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or circumstances after the date of this publication or to reflect the occurrence of
unanticipated events.

The use of any website to access this report electronically is done at the recipients own risk, and it is the recipients sole responsibility
to take precautions to ensure that it is free from viruses or other items of a destructive nature. This report may also provide the
addresses of, or contain hyperlinks to, websites. RHB takes no responsibility for the content contained therein. Such addresses or
hyperlinks (including addresses or hyperlinks to RHB own website material) are provided solely for the recipients convenience. The
information and the content of the linked site do not in any way form part of this report. Accessing such website or following such link
through the report or RHB website shall be at the recipients own risk.

This report may contain information obtained from third parties. Third party content providers do not guarantee the accuracy,
completeness, timeliness or availability of any information and are not responsible for any errors or omissions (negligent or otherwise),
regardless of the cause, or for the results obtained from the use of such content. Third party content providers give no express or
implied warranties, including, but not limited to, any warranties of merchantability or fitness for a particular purpose or use. Third party
content providers shall not be liable for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential
damages, costs, expenses, legal fees, or losses (including lost income or profits and opportunity costs) in connection with any use of
their content.

The research analysts responsible for the production of this report hereby certifies that the views expressed herein accurately and
exclusively reflect his or her personal views and opinions about any and all of the issuers or securities analysed in this report and
were prepared independently and autonomously. The research analysts that authored this report are precluded by RHB in all
circumstances from trading in the securities or other financial instruments referenced in the report, or from having an interest in the
company(ies) that they cover.

RHB and/or its affiliates and/or their directors, officers, associates, connected parties and/or employees, may have, or have had,
interests in the securities or qualified holdings, in subject company(ies) mentioned in this 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, RHB and/or its affiliates
may have, or have had, business relationships with the subject company(ies) mentioned in this report and may from time to time seek
to provide investment banking or other services to the subject company(ies) referred to in this research report. As a result, investors
should be aware that a conflict of interest may exist.

The contents of this report is strictly confidential and may not be copied, reproduced, published, distributed, transmitted or passed, in
whole or in part, to any other person without the prior express written consent of RHB and/or its affiliates. This report has been
delivered to RHB and its affiliates clients for information purposes only and upon the express understanding that such parties will use
it only for the purposes set forth above. By electing to view or accepting a copy of this report, the recipients have agreed that they will
not print, copy, videotape, record, hyperlink, download, or otherwise attempt to reproduce or re-transmit (in any form including hard
copy or electronic distribution format) the contents of this report. RHB and/or its affiliates accepts no liability whatsoever for the actions
of third parties in this respect.
The contents of this report are subject to copyright. Please refer to Restrictions on Distribution below for information regarding the
distributors of this report. Recipients must not reproduce or disseminate any content or findings of this report without the express
permission of RHB and the distributors.

The securities mentioned in this publication may not be eligible for sale in some states or countries or certain categories of investors.
The recipient of this report should have regard to the laws of the recipients place of domicile when contemplating transactions in the
securities or other financial instruments referred to herein. The securities discussed in this report may not have been registered in
such jurisdiction. Without prejudice to the foregoing, the recipient is to note that additional disclaimers, warnings or qualifications may
apply based on geographical location of the person or entity receiving this report.


This report is issued and distributed in Malaysia by RHB Research Institute Sdn Bhd. The views and opinions in this report are our
own as of the date hereof and is subject to change. 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 therein are unaffected. RHB Research
Institute Sdn Bhd has no obligation to update its opinion or the information in this report.

This report is issued and distributed in the Kingdom of Thailand by RHB Securities (Thailand) PCL, a licensed securities company
that is authorised by the Ministry of Finance, regulated by the Securities and Exchange Commission of Thailand and is a member of
the Stock Exchange of Thailand. The Thai Institute of Directors Association has disclosed the Corporate Governance Report of Thai
Listed Companies made pursuant to the policy of the Securities and Exchange Commission of Thailand. RHB Securities (Thailand)
PCL does not endorse, confirm nor certify the result of the Corporate Governance Report of Thai Listed Companies.
This report is issued and distributed in Indonesia by PT RHB Securities Indonesia. This research does not constitute an offering
document and it should not be construed as an offer of securities in Indonesia. Any securities offered or sold, directly or indirectly, in
Indonesia or to any Indonesian citizen or corporation (wherever located) or to any Indonesian resident in a manner which constitutes
a public offering under Indonesian laws and regulations must comply with the prevailing Indonesian laws and regulations.

This report is issued and distributed in Singapore by RHB Research Institute Singapore Pte Ltd and it may only be distributed in
Singapore to accredited investors, expert investors and institutional investors as defined in the Financial Advisers Regulations and
the Securities and Futures Act (Chapter 289), as amended from time to time. By virtue of distribution to these categories of investors,
RHB Research Institute Singapore Pte Ltd and its representatives are not required to comply with Section 36 of the Financial Advisers
Act (Chapter 110) (Section 36 relates to disclosure of RHB Research Institute Singapore Pte Ltd s interest and/or its representative's
interest in securities). Recipients of this report in Singapore may contact RHB Research Institute Singapore Pte Ltd in respect of any
matter arising from or in connection with the report.

Hong Kong
This report is issued and distributed in Hong Kong by RHB Securities Hong Kong Limited () (CE No.: ADU220)
(RHBSHK) which is licensed in Hong Kong by the Securities and Futures Commission for Type 1 (dealing in securities) and Type 4
(advising on securities) regulated activities. Any investors wishing to purchase or otherwise deal in the securities covered in this report
should contact RHB Securities Hong Kong Limited.

United States
This report was prepared by RHB and is being distributed solely and directly to major U.S. institutional investors as defined under,
and pursuant to, the requirements of Rule 15a-6 under the U.S. Securities and Exchange Act of 1934, as amended (the Exchange
Act). RHB is not registered as a broker-dealer in the United States and does not offer brokerage services to U.S. persons. Any order
for the purchase or sale of the securities discussed herein that are listed on Bursa Malaysia Securities Berhad must be placed with
and through Auerbach Grayson (AG). Any order for the purchase or sale of all other securities discussed herein must be placed with
and through such other registered U.S. broker-dealer as appointed by RHB from time to time as required by the Exchange Act Rule
This report is confidential and not intended for distribution to, or use by, persons other than the recipient and its employees, agents
and advisors, as applicable.

Additionally, where research is distributed via Electronic Service Provider, the analysts whose names appear in this report are not
registered or qualified as research analysts in the United States and are not associated persons of Auerbach Grayson AG or such
other registered U.S. broker-dealer as appointed by RHB from time to time and therefore may not be subject to any applicable
restrictions under Financial Industry Regulatory Authority (FINRA) rules on communications with a subject company, public
appearances and personal trading.

Investing in any non-U.S. securities or related financial instruments discussed in this research report may present certain risks. The
securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the U.S. Securities and Exchange
Commission. Information on non-U.S. securities or related financial instruments may be limited. Foreign companies may not be subject
to audit and reporting standards and regulatory requirements comparable to those in the United States.
The financial instruments discussed in this report may not be suitable for all investors.

Transactions in foreign markets may be subject to regulations that differ from or offer less protection than those in the United States.


RHB does not have qualified shareholding (1% or more) in the subject company (ies) covered in this report except for:
a) -

RHB and/or its subsidiaries are not liquidity providers or market makers for the subject company (ies) covered in this report except
a) -

RHB and/or its subsidiaries have not participated as a syndicate member in share offerings and/or bond issues in securities covered
in this report in the last 12 months except for:
a) -

RHB has not provided investment banking services to the company/companies covered in this report in the last 12 months except for:
a) -

RHB Securities (Thailand) PCL and/or its directors, officers, associates, connected parties and/or employees, may have, or have had,
interests and/or commitments in the securities in subject company(ies) mentioned in this report or any securities related thereto.
Further, RHB Securities (Thailand) PCL may have, or have had, business relationships with the subject company(ies) mentioned in
this report. As a result, investors should exercise their own judgment carefully before making any investment decisions.

PT RHB Securities Indonesia is not affiliated with the subject company(ies) covered in this report both directly or indirectly as per the
definitions of affiliation above.

Pursuant to the Capital Market Law (Law Number 8 Year 1995) and the supporting regulations thereof, what constitutes as affiliated
parties are as follows:

1. Familial relationship due to marriage or blood up to the second degree, both horizontally or vertically;

2. Affiliation between parties to the employees, Directors or Commissioners of the parties concerned;

3. Affiliation between 2 companies whereby one or more member of the Board of Directors or the Commissioners are the same;
4. Affiliation between the Company and the parties, both directly or indirectly, controlling or being controlled by the Company;

5. Affiliation between 2 companies which are controlled, directly or indirectly, by the same party; or

6. Affiliation between the Company and the main Shareholders.

PT RHB Securities Indonesia is not an insider as defined in the Capital Market Law and the information contained in this report is not
considered as insider information prohibited by law.

Insider means:
a. a commissioner, director or employee of an Issuer or Public Company;

b. a substantial shareholder of an Issuer or Public Company;

c. an individual, who because of his position or profession, or because of a business relationship with an Issuer or Public Company,
has access to inside information; and

d. an individual who within the last six months was a Person defined in letters a, b or c, above.

RHB Research Institute Singapore Pte Ltd and/or its subsidiaries and/or associated companies do not make a market in any securities
covered in this report, except for:
(a) -

The staff of RHB Research Institute Singapore Pte Ltd and its subsidiaries and/or its associated companies do not serve on any board
or trustee positions of any issuer whose securities are covered in this report, except for:
(a) -

RHB Research Institute Singapore Pte Ltd and/or its subsidiaries and/or its associated companies do not have and have not within
the last 12 months had any corporate finance advisory relationship with the issuer of the securities covered in this report or any other
relationship (including a shareholding of 1% or more in the securities covered in this report) that may create a potential conflict of
interest, except for:
(a) -

Hong Kong
RHBSHK or any of its group companies may have financial interests in in relation to an issuer or a new listing applicant (as the case
may be) the securities in respect of which are reviewed in the report, and such interests aggregate to an amount equal to or more
than (a) 1% of the subject companys market capitalization (in the case of an issuer as defined under paragraph 16 of the Code of
Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (the Code of Conduct); and/or (b) an
amount equal to or more than 1% of the subject companys issued share capital, or issued units, as applicable (in the case of a new
listing applicant as defined in the Code of Conduct). Further, the analysts named in this report or their associates may have financial
interests in relation to an issuer or a new listing applicant (as the case may be) in the securities which are reviewed in the report.

RHBSHK or any of its group companies may make a market in the securities covered by this report.
RHBSHK or any of its group companies may have analysts or their associates, individual(s) employed by or associated with RHBSHK
or any of its group companies serving as an officer of the company or any of the companies covered by this report.
RHBSHK or any of its group companies may have received compensation or a mandate for investment banking services to the
company or any of the companies covered by this report within the past 12 months.

Note: The reference to group companies above refers to a group company of RHBSHK that carries on a business in Hong Kong in
(a) investment banking; (b) proprietary trading or market making; or (c) agency broking, in relation to securities listed or traded on The
Stock Exchange of Hong Kong Limited.
Kuala Lumpur Hong Kong Singapore

RHB Research Institute Sdn Bhd RHB Securities Hong Kong Ltd. RHB Research Institute Singapore
Level 3A, Tower One, RHB Centre 12th Floor Pte Ltd.
Jalan Tun Razak World-Wide House 10 Collyer Quay
Kuala Lumpur 19 Des Voeux Road #09-08 Ocean Financial Centre
Malaysia Central, Hong Kong Singapore 049315
Tel : +(60) 3 9280 8888 Tel : +(852) 2525 1118 Tel : +(65) 6533 1818
Fax : +(60) 3 9200 2216 Fax : +(852) 2810 0908 Fax : +(65) 6532 6211

Jakarta Shanghai Bangkok

PT RHB Securities Indonesia RHB (China) Investment Advisory Co. Ltd. RHB Securities (Thailand) PCL
Wisma Mulia, 20th Floor Suite 4005, CITIC Square 10th Floor, Sathorn Square Office Tower
Jl. Jenderal Gatot Subroto No. 42 1168 Nanjing West Road 98, North Sathorn Road, Silom
Jakarta 12710, Indonesia Shanghai 20041 Bangrak, Bangkok 10500
Tel : +(6221) 2783 0888 China Thailand
Fax : +(6221) 2783 0777 Tel : +(8621) 6288 9611 Tel: +(66) 2 862 9999
Fax : +(8621) 6288 9633 Fax : +(66) 2 862 9799

Printed by Kumpulan Media Karangkraf Ultimate Print Sdn Bhd, Lot 2, Jalan Sepana 15/3, Off Persiaran Selangor, Seksyen 15,
40200 Shah Alam, Selangor Darul Ehsan.
Tel: (603) 03-5101 3378