3Q18 Outlook MIDF 060718

MALAYSIA EQUITY RESEARCH
6 JULY 2018
MALAYSIA EQUITY
INTO UNCHARTED TERRITORIES

3Q18 Outlook
JULY 2018 A
KINDLY REFER TO THE LAST PAGE OF THIS PUBLICATION FOR IMPORTANT DISCLOSURES
TABLE OF CONTENTS
Executive summary.......................................................................................................... 1
A. Market
i. Market performance................................................................................................................2
ii. Macro economic outlook..........................................................................................................4
iii. Valuation................................................................................................................................19
iv. Stock selection......................................................................................................................22
B. Sectors Outlook
i. Automotive.............................................................................................................................25
ii. Aviation..................................................................................................................................26
iii. Banking..................................................................................................................................27
iv. Construction..........................................................................................................................28
v. Consumer..............................................................................................................................29
vi. Gloves...................................................................................................................................30
vii. Healthcare.............................................................................................................................32
viii. Insurance...............................................................................................................................33
ix. Media.....................................................................................................................................35
x. Oil & Gas...............................................................................................................................36
xi. Plantation...............................................................................................................................37
xii. Power....................................................................................................................................40
xiii. Property.................................................................................................................................41
xiv. REITS....................................................................................................................................42
xv. Technology............................................................................................................................44
xvi. Telecommunication................................................................................................................45
xvii.Tobacco.................................................................................................................................46
xviii.Transportation......................................................................................................................47
Appendix
Table i: MIDF Research Stock Universe.................................................................................50-53
Table ii: Performance of various markets in local currency......................................................... 54
Table iii: Performance of various markets in US dollar................................................................54
Table iv: Performance by sector..................................................................................................55
Table v: Regional earnings and valuation....................................................................................55
Table vi: Performance of MIDFR’s stocks under coverage.......................................................... 56
KINDLY REFER TO THE LAST PAGE OF THIS PUBLICATION FOR IMPORTANT

DISCLOSURES
i JULY 2018
EXECUTIVE SUMMARY
1H18 IN BRIEF 6 July 2018

• Malaysia experienced its 1st change in the federal government KLCI (29 June 2018) : 1,691.50
after 6 decades during the 14th General Election. Meanwhile, END-2018 TARGET : 1,800.00
changes to monetary policy and fiscal policy, and geopolitics
continue to be major concerns.
SECTOR VIEW
• Malaysia’s economy expanded at 5.4% in 2017, marginally
below market expectations of 5.5%yoy with all components POSITIVE
increased at softer paces Automotive Insurance
• FBM KLCI declined -9.0% in the 2Q 2018 (1H18: -5.9%), in line Oil & Gas
Aviation
with peers in the emerging markets and Asia. Meanwhile, the (Downstream)
domestic equities market saw a cumulative 1H 2018 outflow Banks Property
of RM6.82b foreign fund. Power
Healthcare
POLICY REFORM WHILE SUSTAINING SOLID GROWTH
NEUTRAL
• We forecast that Malaysia’s economy to expand by 5.5%, with
inflation to moderate to 2.6% this year. Construction Plantations
• In addition exports growth is expected to grow 9.3%, with Consumer REITS
USD/MYR to end the year at 3.95, on the back of the
Gloves Technology
government’s focus on institutional reforms as well as being
investor-friendly. Media Tobacco
Oil & Gas Transportation &
• Business confidence is expected to come strong in 3Q18 once
(Upstream) Logistics
the National Budget 2019 tabled in Oct-18 and followed with
the Mid-Term Review of the 11th Malaysia Plan.
TOP BUYS
REITERATE FBM KLCI 2018 YEAR END TARGET AT
1,800 POINTS Price Target Total
STOCK 29 June Price Exp.
• The wide ranging effect from the external front is expected (RM) (RM) Return
to rein on the performance of the local bourse in the short
AirAsia 2.99 4.87 67.2
to medium term.
Mah Sing 1.07 1.60 55.6
• While markets are expected to be a bit quiet in the next few
CIMB 5.45 7.85 48.4
months, disconnects fundamental value of these stocks vis-a-
Malayan
vis the share price would present good buying opportunities. 9.00 11.40 33.4
Banking
• Nevertheless premised on the continuing earnings growth, Bermaz Auto 2.20 2.70 29.8
we reiterate our 2018 FBMKLCI target at 1,800 points which UOA
2.38 2.80 23.9
Development
equivalent to PER18 of 16.6x.
SP Setia 3.10 3.69 23.3
Muhibbah 3.00 3.60 21.7
Public Bank 23.36 27.30 19.7
Petronas Gas 17.30 20.00 19.5

Petronas
24.80 28.00 16.3
Dagangan
KL Kepong 24.16 28.00 15.9
IHH 6.10 6.95 15.2

Malaysia
8.80 9.88 13.8
Airports
SunREIT JULY1.77
2018 1
1.90 12.6
A. MARKET PERFORMANCE MALAYSIA EQUITY RESEARCH
I. PERFORMANCE
• FBMKLCI closes at 1,691.50 points on 29 June 2018. After seeing a small gain of 0.1% in the first
quarter of 2018, the benchmark FBMKLCI index has so far declined by 9.0% as of June 29 in the second
quarter of 2018. It is noteworthy that the local bourse peaked at 1,895.18 points on April 19 before
settling at 1,691.50 points on June 29. The top regional performer in Asia as of June 29 basis was Japan’s
Nikkei with a 4.2% gain while the Philippines’ PSEi was the biggest laggard, losing 10.5%.
Chart 1: FBM KLCI vis-à-vis MSCI Emerging Market (MSCI EM) and MSCI World Index
Source: MIDFR, Bloomberg (as at 29 June 2018)
• …elections in the Euro zone. The political gridlock in Italy following its elections on 4 March 2018
finally came to an end. In late May 2018, global markets faced a major selloff sparked by fears of a
possible round of new elections in Italy which could lead to a withdrawal from the Eurozone. Italy’s
bourse tumbled by 2.65% on 30 May 2018 while the 2-year Italian bond yields soared to 2.65% marking
its largest intra-day climb since 1992. Two days later, the mood turned upbeat following the revival of
discussions to form a coalition government between the anti-establishment Five Star Movement and
far-right League. Finally on 1 June 2018 the two Italian parties reached a deal to form a government
with law professor Giuseppe Conte as the prime minister who won the vote of confidence by the Senate.
• Corruption scandal brings down Rajoy. As the political angst receded in Italy, Spanish opposition
Socialists urged smaller parties to support the efforts in ousting Prime Minister Rajoy’s conservative
government during a parliamentary debate 31 May 2018. An election in the parliament took place on
the following day which saw Rajoy defeated in a no-confidence vote with Sanchez taking over as Spain’s
prime minister. This was the first time in Spain’s post 1977 democracy that a Spanish Prime Minister
had been brought down this way. Spain’s IBEX 35 reacted positively by gaining 1.7%.
2 JULY 2018
• China’s strong performance despite trade war. China’s exports remain strong with a 12.6%yoy growth
in May, signaling the resilience of global demand in the wake of trade tensions with Washington.
Meanwhile, imports grew more than expected in May at 26%yoy, the fastest pace in January bolstered
by acquisitions of computer chips together with commodities such as crude oil, copper ore and natural
gas. The latest round of the trade row saw China impose tariffs on U.S’s agricultural products in response
to President Trump slapping a hefty tariff of 25% on USD50b worth of Chinese goods on 15 June.
• Geopolitical situation in the Korean Chart 2: Cumulative Fund Flow into SEA Markets
Peninsula. A milestone was reached between
South and North Korea as leaders of both
nations met for the first time in 10 years. The
meeting resulted in the end the Korean war
and a pledge to reduce military arms, cease
hostile acts and seek multilateral discussions
with other nations. Meanwhile, North Korea’s
ties with the U.S was rather shaky as Kim
Jong Un on 15th May 2018 threatened to call
of the summit with the U.S. in June citing the Source: CEIC, MIDF Research
demand of denuclearization to be unjust. A

week later, President Trump announced the Chart 3: Cumulative Fund Flow into Asian Markets
withdrawal from the summit but eventually
gave a final decision to go ahead with it
after negotiations with a senior North Korean
envoy. The highly anticipated summit saw
Kim Jong Un pledge for a denuclearization
of the Korean Peninsula but however lacked
further details on the matter.
• President Trump withdraws from Iran’s

nuclear deal. President Trump has decided
to withdraw from a nuclear deal with Iran Source: CEIC, MIDF Research
on 8th May 2018. The withdrawal will see

Chart 4: Weekly Net Inflow of Foreign Funds into Malaysia
sanctions being re-imposed on Iranian oil
exports. French energy company, Total,
expressed their intention to exit from the
Iranian gas deal before the year ends unless
a waiver is granted by the U.S government
which later lifted oil prices to touch the
USD80pb level. Another highlight for the
energy sector is OPEC’s decision to relax
production cuts during the June 22 meeting
in the attempt to rebalance the oil market.
Source: CEIC, MIDF Research
JULY 2018 3
• Activities in the public sphere. The LEAP market which was introduced last year has seen another
two companies listed on it within the second quarter of 2018 which are SL Information Berhad and
Polymer Link Holdings Berhad. This in addition to the first three listings earlier this year. Meanwhile,
both the ACE market and Main market saw only one listing in the second quarter of 2018 there was
one company listed on the ACE market on only one on the main board. So far, fund raising activities in
the public equities market is more active in the first quarter of 2018 compared to the second quarter
which only had a total of four companies listed on Bursa.
• ….coupled with good economic numbers. The gross domestic product (“GDP”) for Malaysia expanded
5.4% yoy in the first quarter of 2018, the weakest growth in 5-quarters and less than previous year’s.
Among others, domestic demand contributes about 3.8% of the total growth during the quarter. From
supply side, services and manufacturing sectors contributed significantly by 3.5% and 1.2%. The latest
month, May saw exports expanding 3.4%yoy to RM82.1b. Despite slowing down to a single digit growth,
exports growth continued to outperform imports for the fifth consecutive month, resulting in a trade
surplus of RM8.1b.
• Foreign inflows take a breather. As of 29 June 2018, Malaysia recorded the second lowest foreign net
outflow after the Philippines amongst its ASEAN regional peers, amounting to –RM6.82b or –USD1.71b.
This amount offsets more than half of last year’s net inflow of RM10.3b. Moving foreign the trend
of foreign outflows to feature in the short to medium term considering external developments that
include the trade dispute between the U.S and China together with the progress of Korean Peninsula’s
denuclearization.
II. MACRO ECONOMIC OUTLOOK
GLOBAL: GLOBAL DEMAND REMAINS ON STRONG TIDE DESPITE OF TRADE WAR FEAR
• Global economic growth is expected to continue on a strengthening path amid notable pickups
observed in investment, trade, industrial production, and consumer spending. Business confidences
and consumer sentiments in most developed and emerging economies are still pointing towards upward
trajectory. Hence, we view global economic growth momentum will continue especially from the
supports of global trade activities, gradual rise in commodity prices and receding protectionism fear.
• Political risk will represent a substantial drag to global economic outlook. Monetary policy, fiscal
policy, regulation of new economy (sharing economy, crypto currencies, etc), protectionism, geopolitics
and domestic political shocks are some of the main areas of concern that could possibly derail the
global economy in the near to medium term. For instance, US-China trade tension, US-North Korea
tension and rising of Eurosceptic sentiment in EU are current and near-term downside risks for global
economy. In spite of this, we opine the strength of global demand remains intact given that Brexit
and Catalonian crisis as well as US-China trade tension so far have not created adverse impacts on
economic and business performances of the region.
• Globally, headline consumer price inflation on moderating trend. Inflationary pressures across
developed and emerging economies have been on descending trends since late last year amid of
unfavorable base effects. Gradual rise in commodity prices will give sufficient rooms for consumers
and businesses globally to adjust with the steady rise in inflation.
4 JULY 2018
• Commodity prices firmly on the upside, Chart 5: Commodity Prices ($per barrel day & RM per tonne)
we are seeing an uptick in global economic
growth especially from emerging markets
and commodity producers. Average
Brent oil price for the past 5 months
in 2018 is USD72pb, 28.5% higher than
previous year’s mean. Among others,
continued efforts of oil producers to
cap output, upbeat momentum in global
demand, geopolitical tensions in Middle
East region and receding trade war
Source: Bloomberg, MIDFR
effects are key supporting factors for
the rising commodity prices. The steady Chart 6: Commodity Prices (YoY %)
rise in commodity prices will benefit

commodity-exporting economies via
exports value, investment flows and
government revenue.
• Trade activities stay on strong tide. Despite

of unfavorable base effects, we noticed
exports growth momentum in China and
emerging economies recorded at solid
pace thus far in 2018. Exports of India and
China for instance, expanded by 7%yoy and
11.1%yoy respectively in Apr-18. As for Chart 7: Regional Exports Performance (YoY%)
ASEAN, exports rose at sturdy pace thanks
to robust global demand and increasing
commodity prices. Exports growth in
Indonesia and Singapore grew firmly
9%yoy and 10.1%yoy respectively in Apr-
18. Moving forward, we foresee global
and regional trade activities to stay on
uptick performance for 2H18.
• Upbeat manufacturing activity in the

US. The US manufacturing PMI rose to Source: CEIC, MIDFR
almost 3.5-year high at 56.4 points in Chart 8: ASEAN Exports Performance (YoY%)
May-18. Services PMI touched 55.7 points,
highest in 3-month. Among others, the
strong rise is driven by the tax cuts,
strong domestic demand and receding
global trade war effects. In addition,
manufacturing PMI for Euro Area and
Japan remained above 50 points in May-
18. Hence, we opine global demand
derived from advanced economies to
remain sanguine for 2H18 and indirectly
Source: CEIC, MIDFR
JULY 2018 5
will affect Malaysia’s external trade Chart 9: Manufacturing PMI Performance (Points)
performance this year. We maintain
our forecast for Malaysia’s exports
growth of 9.3% for 2018.
• Regional PMI indicates promising

outlook. Business confidences in
emerging economies as well as Asean
have been on uptick trends since mid-
2016. Latest May-18, manufacturing
PMI for emerging economies remains
above expansion line for 23-consecutive Source: Bloomberg, MIDFR
months while major Asean economies

except Malaysia registered above Chart 10: Regional Manufacturing PMI Performance (Points)
50 points. In fact, Singapore’s PMI
recorded the highest ever in May-
18 at 56.8 points. Therefore, we
foresee regional demand in 2H18 stays
intact and solid, thus will support
expanding regional as well as global
trade activities. The declining trend
in Malaysia’s PMI was mainly due to
pre-GE14 factor. We expect the PMI
figure to improve after GE14 amid of
zero-rated GST, stable retail fuel price Source: CEIC, MIDFR
and stable global demand.
CHINA: ECONOMIC GROWTH CONTINUES AT SUSTAINABLE PACE

• China growth momentum continues. China’s economy grew 6.8% in 1Q18—slightly lower than 2017’s
average growth of 6.9%. However, the expansion rate is still higher than China’s official target of
6.5%. Based on external trade performance, China’s exports grew by 11.1%yoy while imports surged
by 20.9%yoy in Apr-18. The solid momentum in exports growth is driven by demands from the US and
EU in which expanded by 9.6%yoy and 10.7%yoy respectively during the month. However, we view the
exports momentum to moderate partly due to unfavorable base effects and protectionist threat by
Trump’s administration. On top of that, sharp rise in imports growth mainly contributed by 27%yoy in
imports of machinery & transport equipment, indicating positive signal for the economy to continue
expanding in the near term.
• Domestic demand remains robust in China. Underpinned by robust economic performance in 2017,
domestic demand in China stays on upbeat momentum. Consumer confidence index continues on
upward trajectory and as for Apr-18 registered at 122.9 points. The consumer confidence index has
been hovering above 120 points since Oct-17, a level not seen since 1993. In addition, services and
non-manufacturing PMI for China stay above 50-points threshold level in 1H18. Even though retail sales
growth has been on declining trend, the momentum still persist, averaging at 9.8%yoy for the first four
months of 2018. We anticipate domestic demand in China to remain on steady path this year and thus
supporting the GDP growth to record above official target of 6.5%.
6 JULY 2018
UNITED STATES: ON THE LOOK FOR FISCAL AND FINANCIAL POLICIES PLAY
• The economy kicked into higher gear, expanding at above 2.2%yoy in 1Q18, lower than overall 2017
economic growth averaged at 2.5%. The US economy is expected to continue its near-term growth
trajectory to register 2.8% growth in 2018. Supportive financial conditions and strong business and
consumer confidence are the main thesis behind the expectation. Another impetus for near-term
boost is the implementation of fiscal policy stimulus. Built in fiscal stimulus such as tax cut can have
significant impact toward improving the economy via various transmission channels.
Chart 11: China’s Consumer Confidence vs Retail Sales (YoY%) Chart 12: China’s External Trade Performances (YoY%)
Source:CEIC, MIDFR Source: CEIC, MIDFR
• The labor markets remain steadfast. Steady labor market in May-18 saw non-farm payroll (NFP)
added 223K jobs, higher than market expectations of 180K. The recent figure in fact is higher than the
average monthly jobs added of 189K last year. Among others, the solid increase in job market is partly
due to upbeat business activities, consumer confidence and effects of expansionary fiscal policy. In
addition, unemployment rate in the US remains at 18-year low of 3.8% in May-18. Consequently, wage
growth as reflected by private average hourly earnings rose steadily by 2.7%yoy in May-18, fastest in
5-month. Moving forward, we foresee the steady labor market in the US will persist until the end of
the year and thus supporting the Fed’s moves to raise interest rate as guided in 2018.
• Gradual pick-up in inflationary pressure. The Fed’s preferred inflation indicator, core PCE index rose
by 0.2%mom, fastest since Apr-17 while on yearly-basis maintain at 1.8% for 2-consecutive months.
Headline inflation in Apr-18 registered at 2.5%yoy, fastest in 1-year and core inflation maintained at
13-month high of 2.1%yoy. Moving forward, we foresee inflation level in the US will gradually rise amid
demand-push factors like improve labor market and also cost-push factors of rising commodity prices.
• We expect three rate hikes in 2018. In tandem with the normalization plan by the Fed, we foresee
continuous upbeat momentum in the US economy amid of expansionary fiscal policy, optimistic business
environment, gradual rise in global commodity prices, build up inflationary pressure and tightening
labor market. We anticipate the Fed will raise its interest rate three times in 2018. The second and
third rate hikes would be in Jun-18 and Dec-18 FOMC meetings.
JULY 2018 7
Chart 13: Headline vs Core PCE Inflation (%) Chart 14: NFP (‘000) vs Unemployment Rate (%)
Table 1: Central Bank Policy Rate by Selected Economies (%)

Economies Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18
Malaysia 3.00 3.00 3.00 3.25 3.25 3.25 3.25 3.25
Indonesia 4.25 4.25 4.25 4.25 4.25 4.25 4.25 4.75
Singapore Neut. Neut. Neut. Neut. Neut. Neut. Neut. Neut.
Philippines 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.25
Thailand 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50
Vietnam 6.25 6.25 6.25 6.25 6.25 6.25 6.25 6.25
Korea 1.25 1.25 1.50 1.50 1.50 1.50 1.50 1.50
China 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35
Japan -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10
United Kingdom 0.25 0.50 0.50 0.50 0.50 0.50 0.50 0.50
EU 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
United States 1.25 1.25 1.25 1.25 1.25 1.75 1.75 1.75
Source:CEIC, MIDFR
8 JULY 2018
MALAYSIA: POST GE14 – POLICY REFORM WHILE SUSTAINING SOLID GROWTH

• GE14 is just concluded. GE14 was the most awaited election for Malaysian especially with numerous
issues as well as interesting figures involving in the scenes. The election was held in peaceful process
with smooth power transition. The election started off with the dissolution of parliament on 7th April,
followed by nomination day on 28th April and polling day on 9th May.
• Malaysia experienced its 1st change in the federal government after 6 decades. After 61 years under
the reign of Barisan Nasional (BN), the Malaysian government leadership changed to Tun Mahathir-led
coalition, Pakatan Harapan (PH). Despite of the election being held on a Wednesday, the turnout was
82.32% or equivalent to 12.3 million voters. PH had the highest numbers of seats, 122 surpassing the
minimum requirement of 112. BN and Islamic Party (PAS) won 79 and 18 seats respectively. By state,
PH managed to retain Selangor and Penang while Kelantan remained under PAS. On top of that, PH
had also received mandates to govern the states of Kedah, Perak, Negeri Sembilan, Melaka, Johor and
Sabah, seeing new chief ministers or menteri besar appointed to lead these state government. PAS
added Terengganu under its administration while Perlis, Pahang and Sarawak remain under BN.
• History in the making. At the national level, Malaysia created a few histories through the appointment
of the world’s oldest head of goverment and also the first to become the Prime Minister under two
different coalitions via the appointment of Tun Dr. Mahathir Mohamad as our 7th Prime Minister. Another
history was also created with the appointment Datin Seri Dr. Wan Azizah Wan Ismail as the Deputy
Prime Minister, the first Malaysian woman to hold that position.
• Post-GE14: Policy reforms and impacts. We opine business confidence for the 3-6 months to stay low
amid of policy changes and reforms made by the government. The review of mega infrastructure projects
and cancellations of HSR and MRT3 will have significant impacts on overall business confidence and
also investment flows. We predict business confidence will come back strong in 3Q18 once the National
Budget 2019 tabled in Oct-18 and followed with the Mid-Term Review of the 11th Malaysia Plan: New
Direction 2018-2020 by year-end. As mentioned by the Minister of Economic Affairs, the new economic
direction will be focus on free market and investor-friendly as well as ensuring a humanitarian economy.
• GDP growth remains above 5%. Malaysia’s GDP growth expanded by 5.4%yoy in 1Q18, weakest in five
quarters and marginally below market expectations of 5.5%yoy as all components increased at softer
paces. Among others, domestic demand contributes about 3.8% of the total growth during the quarter.
From supply side, services and manufacturing sectors contributed significantly by 3.5% and 1.2%
respectively. We opine the upbeat momentum in GDP growth was in tandem with steady performances
of industrial production, manufacturing sales, distributive trade and external trade during the quarter.
Moderating inflationary pressure, strengthening domestic demand and accommodative economic policies
as well as sturdy external demand are the major anchors driving up GDP performance in 1Q18.
• We reiterate our forecast of 5.5% GDP growth in 2018. Based on the current development and
indicators, we are optimistic that Malaysia’s economy to expand by 5.5% this year given the upbeat
performance of domestic and global economy. Confluence of factors such as stable labor market,
continued wage growth and moderating inflation will support and spur domestic economy. Additional
impetus from external sector will help boost the growth performance in 2018. Moving forward, we
foresee the economic performance in 2Q18 to expand at slower pace amid of unfavorable base effects.
JULY 2018 9
• Slowdown business confidence in 2Q18 expected. According to the latest Business Tendency Survey,
overall business performance is expected to continue at moderate pace given that overall business
confidence registered at 7.8%, slowest in 3-quarter. The slowdown is predicted mainly due to GE14
factor. The latest election was the most contentious especially with the return of Prime Minister Tun Dr.
Mahathir Mohamad. We opine business confidence for the 3-6 months to stay low amid of policy changes
and reforms made by the government. We predict business confidence will come back strong in 3Q18 once
the National Budget 2019 tabled in Oct-18 and followed with the Mid-Term Review of the 11th Malaysia
Plan: New Direction 2018-2020 by year-end.
• Economic outlook for 2H18 stays healthy. Referring to business expectations for the next 6 months, overall
business performance is expected to grow at tepid pace. Overall business performance for 2Q-3Q18 is expected
to experience slight slowdown especially dragged down by construction and mining sectors. Poor confidence
in mining sector is possibly due to volatility in commodity prices. On different note, we project services and
wholesale & retail trade sectors to be on upside, thanks to the zero-rated GST and tax holiday period till SST
implementation in Sep-18.
Chart 15: Business Tendency Index (%) Chart 16: Business Confidence by Sector (%)
• Solid private consumption while investments stay shy due to policy uncertainties. Economic growth
for 1Q18 was mainly contributed by private consumption which grew solidly by 6.9%yoy. Improvement in
private consumption is in line with the optimism in consumer sentiment index during 1Q18. MIER’s CSI
returned to 3.5-year high at 91 points underpinned by tightening labor market and stable wage growth.
We also observed a solid growth in distributive trade sales by 7.3%yoy during the quarter, indicating
continuous steady upbeat trend in Malaysia’s domestic spending. On a flip side, private investment
decelerated to 0.5%yoy, slowest ever recorded. Among others, less optimistic business condition as
reflected in MIER’s BCI and greater market uncertainties amid of GE14 are factors dragging down
investment activity. Moving forward, we predict private investment will improve in the last quarter amid
after the tabling of Budget 2019 and the Mid-Term Review of RMK-11. We expect private investment
to grow at tepid pace in 2Q18 and 3Q18 due to revision of mega projects and policy changes.
• Net exports highest in 6½ years. Real net exports registered at RM29.5 billion, largest since 3Q11. Steady
upward exports demands from developed and emerging economies as well as gradual recovery in commodities
prices continue to drive up Malaysia’s external trade activities. In addition, shrinking imports and 3.7%yoy growth
in outbound shipments during the quarter pushed the net exports higher. After 4-consecutive quarters, exports
outpaced imports growths in the first quarter of 2018. We forecast the external trade sector will maintain on
upbeat momentum in 3Q18 and thus supporting further economic expansion and development in the country.
10 JULY 2018
Table 2: GDP by Expenditure Performance (YoY %)

1Q17 2Q17 3Q17 4Q17 1Q18
Real GDP 5.6 5.8 6.2 5.9 5.4
Gross National Income 5.1 6.3 7.3 5.6 4.5
Final Consumption 6.8 6.4 6.6 6.9 5.7
Government Consumption 7.5 3.3 3.9 6.9 0.4
Private Consumption 6.6 7.1 7.2 7.0 6.9
Gross Fixed Capital Formation (GFCF) 10.0 4.1 6.7 4.3 0.1
GFCF: Structure 3.8 5.1 3.6 3.3 2.8
GFCF:Machinery & Equipment 21.8 4.4 11.6 8.3 (3.6)
GFCF: Other Asset 1.4 (3.7) 7.2 (6.7) (0.2)
GFCF: Public Investment 3.2 (5.0) 4.1 (1.4) (1.0)
GFCF: Private Investment 12.9 7.4 7.9 9.2 0.5
Net Exports (14.5) 1.4 1.7 5.4 62.4
Exports of Goods & Services 9.8 9.6 11.8 7.1 3.7
Imports of Goods & Services 12.9 10.7 13.4 7.4 (2.0)
Source:CEIC, MIDFR
• Services and domestic sectors continue to support economic growth. Services sector which accounts
for 55% of total GDP expanded steadily at 6.5%yoy, its fourth consecutive quarters at above 6%. Among
services sub-sectors, the top three contributors are wholesale trade, communication, government
services and retail trade. Apart from private consumption, the steady performance in services reflects
that domestic economic activity is currently on upbeat momentum. Stable and improved employment
conditions and higher private sector wage growth provide impetus for the domestic sector. Moving
forward, zero-rated GST and stable retail fuel price will taper inflationary pressure and thus supporting
domestic demand in 3Q18.
JULY 2018 11
Table 3: GDP by Expenditure Performance (YoY %)

1Q17 2Q17 3Q17 4Q17 1Q18
GDP 5.6 5.8 6.2 5.9 5.4
Agriculture, Forestry & Fishing (AF) 8.3 5.9 4.0 10.7 2.8
AF: Rubber 23.5 17.0 1.8 (2.8) (28.5)
AF: Oil Palm 17.7 12.1 10.0 24.3 12.5
AF: Livestock 3.0 4.8 4.5 8.6 5.8
AF: Other Agriculture 2.3 2.6 1.5 2.1 4.5
AF: Forestry & Logging (11.1) (14.5) (18.9) (17.9) (13.4)
AF: Marine Fishing (4.1) (3.9) (3.8) (9.4) (3.1)
AF: Aquaculture (3.5) 4.5 10.0 6.3 (2.3)
Mining & Quarrying 1.6 0.2 3.1 (0.5) 0.1
Manufacturing (Mfg) 5.6 6.0 7.0 5.4 5.4
Mfg: Vegetable & Animal Oil, Fats & Food
8.2 10.4 11.4 9.7 9.1
Processing
Mfg: Beverages & Tobacco 9.0 6.5 4.5 5.5 1.4
Mfg: Textiles, Wearing Apparel & Leather
6.9 7.3 9.1 8.3 6.6
Products
Mfg: Wood Prod, Furniture, Paper Prod,
8.6 5.6 2.4 1.9 4.1
Print & Publish
Mfg: Petroleum, Chemical, Rubber &
3.1 3.0 5.0 4.6 5.0
Plastic Products
Mfg: Non Metallic, Basic & Fabricated Metal
3.1 3.9 6.5 4.7 5.2
Products
Mfg: Electrical & Electronic 7.9 9.8 8.7 5.7 6.1
Mfg: Transport Equipment & Other
3.5 3.3 8.1 5.8 3.3
Manufactures
Construction 6.5 8.3 6.1 5.8 4.9
Services 5.8 6.3 6.6 6.2 6.5
Services: Electricity & Gas 1.3 1.1 2.0 3.7 3.9
Services: Water 6.0 5.9 6.2 6.1 5.9
Services: Wholesale Trade 5.5 6.0 6.9 7.4 7.9

Services: Retail Trade 7.8 11.4 10.3 8.2 7.4
Services: Motor Vehicles 3.5 0.9 0.4 0.2 (0.5)
Services: Restaurant 7.9 7.9 8.1 8.3 8.2
Services: Accommodation 4.8 4.9 5.5 5.5 5.7
Services: Transport & Storage 6.1 6.2 6.3 6.0 5.7
Services: Communication 8.2 8.5 8.8 8.1 8.3
Services: Finance 3.9 5.6 5.3 5.1 6.8
Services: Insurance 2.2 3.4 1.2 7.9 9.8
Services: Real Estate & Business Services 7.3 7.3 7.4 7.5 7.4
Services: Other Services 5.4 5.3 5.6 5.5 5.3
Services: Government Services 5.1 4.5 6.3 4.2 4.8
Import Duties 8.4 12.2 16.5 14.8 9.8
Source:CEIC, MIDFR
12 JULY 2018
• Thanks to upbeat momentum global economic activities. Manufacturing sector expanded by 5.4%yoy in
the first quarter, its fifth consecutive quarters achieving above 5%. Among others, robust global demand
and gradual recovery in commodity prices were key factors for the solid expansion in export-oriented
industries. We foresee commodity-related sectors to perform better in 3Q18 underpinned by lesser
market uncertainties and price volatilities. Nevertheless, concerns over global trade tensions remain as
Trump is still firm with his protectionist moves. Despite that, business indicators in major and emerging
economies are still showing optimistic signals on both global economic activities. Global and emerging
economies manufacturing PMI figures remain above expansionary line of 50 points as of Apr-18.
Chart 17: Private Sector driving-up GDP growth Chart 18: GDP vs External Trade (YoY%)
(YoY%)
Source: CEIC,MIDFR Source: CEIC, MIDFR
• Exports growth slowed to single digit again. Exports expanded by 3.4%yoy to RM82.1b in May-18,
following a double digit growth in the preceding month. Slowdown in exports was mainly due to
continuous and larger contractions in agriculture goods (-21.9%yoy). However, manufactured and
mining goods continued to expand by 3.2%yoy and 40%yoy respectively. Meanwhile, imports still
booked a growth albeit at a tepid pace of 0.1%yoy during the same month. Exports growth continued to
outperform imports for the fifth consecutive month, resulting in a trade surplus of RM8.1b. Underpinned
by optimistic signs of key global economic indicators, and gradual recovery in commodities prices, we
foresee Malaysia’s exports will expand by 9.3% this year. The moderating pace is mainly due to higher
base effect and in tandem with the expectation of slight slowdown in overall business performance.
Chart 19: Exports by Selected Products (YoY%) Chart 20: Exports by Selected Destination (YoY%)
Source: CEIC; MIDFR Source: CEIC; MIDFR
JULY 2018 13
• Industrial production to expand by 4.3% in 2018. Industrial production rose by 3.9% in 1Q18, lower
than 4.1% in 1Q17, in line with our expectation of a moderate performance in 2018. Based on May-18
external trade performance, we can expect IPI performance to remain solid for 2Q18 as well as 3Q18. In
addition, further recovery in commodity prices will boost productions in mining and commodity-related
sectors in 2018. With the zero-rated GST and stable fuel prices, industrial activities are expected to
benefit especially via lower operating costs. Moving forward, we foresee IPI performances to moderate
at 4.3% amid threat of trade war.
Chart 21: IPI vs GDP (YoY%) Chart 22: Manufacturing Sales vs IPI vs Eksports (YoY%)
Source: CEIC, MIDFR Source: CEIC, MIDFR
• Job vacancies returned to above 100K. Total job vacancies in Mar-18 recorded at 108.4K, lower
compared to 19-month low of 68.5K in the preceding month. Vacancies are highly observed in
manufacturing sector at 45.3K, followed by services and construction at 28.2K and 14.6K respectively.
The growth in job vacancies is in line with the performance of Malaysia’s outbound shipments in Mar-18
which increase by 2.2%yoy. Moving forward, we expect job vacancies to hover at 80K-100K on monthly
average in 2018 amid the moderating pace in economic momentum.
• Low value-added jobs continue to dominate. For every 100 job vacancies, 80 was for elementary
occupations, followed by 11 jobs for operators & assemblers, leaving 9 jobs for high-skilled and
medium-skilled occupations. Job vacancies of elementary occupations and plant & machinery operators
& assemblers were recorded at 86.8K and 11.9K respectively in Mar-18. This is in line with the rise of
job vacancies in manufacturing and services sectors. Moreover, we saw high value-added jobs such as
professionals grew moderately to 1.8K while technicians & associate professionals registered at 0.9K
during the month. The negative consequences of increasing low value-added jobs among others are rise
in graduate unemployment, influx of low-skilled foreign workers, tepid wage growth and weakening
domestic consumption.
14 JULY 2018
Chart 23: Labour Market Performance (YoY%) Chart 24: For every 100 Job Vacancies in Mar-18
• Bright outlook for domestic spending. Distributive trade rose by 7.7%yoy to RM99.9b in Apr-18 lifted
by retail trade which expanded by 8%yoy to RM39.2b. Furthermore, wholesale trade grew by 7.7%yoy to
RM48.6b, while motor vehicle businesses rebounded to positive growth of 6.6%yoy to RM12.1b. On a monthly
basis, all three sectors slumped from a positive growth recorded in the preceding month. Moving forward,
we foresee distributive trade sales to remain on steady momentum underpin by stable job market, zero-
rated GST, decelerating inflationary pressure, tourism activities and accommodative economic policies.
We forecast private consumption and services sector to grow at 6.5% and 6.2% respectively for 2018.
Chart 25: Distributive Trade Performance (YoY%) Chart 26: Domestic Spending Performance (YoY%)
• Inflation jumped to 4-month high. Headline inflation rate rose 1.8%yoy in May-18, higher than 1.4%yoy
registered in the preceding month and the highest since Feb-18 due to strong recovery in transport prices.
Transport inflation rose 3.8%yoy in May-18 compared to 0.4% registered in a month earlier. Meanwhile, inflation
moderated for a number of major groups such as food & non-alcoholic beverages, health and restaurants &
hotels. On a monthly basis, inflation increased by 0.2% in May-18. Meanwhile, core inflation is still low as it
maintained at 1.5%yoy. Amid higher base effects, we foresee headline inflation rate to average at 2.6% this year
compared to 3.8% in 2017. We expect inflationary pressure mainly from fuel-related items to calm, consistent
with gradual rise in global commodity prices on top of pass-through effect from a strengthening ringgit (USD/
MYR average: 4.32 in 2017; 4.00f in 2018), re-subsidization of domestic fuel price and withdrawal of GST. As
inflationary pressure remains steady, we anticipate Bank Negara to maintain its current monetary policy with
no more hikes in OPR for the rest of 2018 barring any pleasant upward surprises in domestic economic growth.
JULY 2018 15
• Recovery in fuel-related prices. The average price of Brent crude oil rose by 49.2%yoy to $76.7 per barrel in
May-18. This figure has been trending upward since Feb-18 due to strong global demand and supply concerns
due to OPEC production curbs on top of chaos in Venezuela and Trump’s decision to pull out of the Iran nuclear
deal. Similarly, retail fuel price jumped 5.8 %yoy during the month, recovered from a negative growth in
the preceding month. In tandem, inflation for transport soared by 3.8%yoy while price of fuels & lubricants
rebounded from -0.3%yoy in Apr-18 to 5.3%yoy in May-18. Moreover, average Brent oil price for the second
week of June-18 is registered at $75.6 while RON95 remained at RM2.20 following government’s decision to
eradicate retail fuel price fluctuation. At this juncture, we expect 2018’s fuel-related inflation to moderate
amid higher base effects, re-subsidization of domestic fuel price and high likelihood of a downward adjustment
of global commodity prices in 2H18 from the current temporary factors which pushed the prices up.
Chart 27: Headline vs Core Inflation (YoY%) Chart 28: CPI vs Food & Non-Food (YoY%)
Chart 29: CPI vs RON95 Price (YoY%) Chart 30: Headline vs Transport Inflation (YoY%)
• Current account surplus hit near 4-year high, reiterate USD/MYR forecast of 3.95 by year-end of 2018.
Current account balance soared to RM15bn in 1Q18, largest surplus since 2Q14. The surge was mainly due
to sharp increase in goods account at RM35.7bn compared to RM25.3bn registered in 1Q17. Simultaneously,
the services account deficit narrowed to RM5.9bn from RM6.2bn over the same period. Via the channel of
strong exports demand, improving market confidences and optimistic tourism activity, we opine a continuous
surplus in current account this year at RM39.6bn, slightly below 2017’s RM 40.3bn amid of unfavorable base
effects. Besides that, MYR has been hovering around 3.90-4.00 since end Apr-18 amid of policy uncertainties,
structural changes and external factors. Zero-rated GST and further revision of mega projects adds extra
market uncertainties which weigh on MYR performance in coming months.
16 JULY 2018
Chart 31: External Trade (YoY%) vs USDMYR Chart 32: Fund Flows (USD Million) vs USDMYR
• OPR stays at 3.25% in 2018. Amid positive signal of economic indicators, we maintain our baseline
view of one rate hike in 2018. We expect domestic economy will continue to expand at a moderating
pace this year. Hence, we maintain that Bank Negara will keep the OPR unchanged for the rest of
2018. Furthermore, it is less likely to hike or reduce interest especially with the environment of policy
uncertainties. However, future developments in both internal and external fronts will determine the
upcoming outlook of Malaysia monetary stance in the near term.
Chart 33: OPR at 3.25% in 2018
Source: CEIC, MIDFR
JULY 2018 17
Table 4: Macroeconomic Data Updates
(YoY%) Unless Stated Otherwise 2016 2017 2018f 1Q18 2Q18f 3Q18f 4Q18f
Real GDP 4.2 5.8 5.5 5.4 5.8 5.4 5.2

Private Consumption 6.1 7.0 6.5 6.9 5.8 6.5 6.8
Public Consumption 1.0 5.0 3.5 0.6 0.4 3.5 9.4
Gross Fixed Capital Formation 2.7 5.7 3.8 0.1 3.3 4.0 8.0
Exports of goods & services 0.1 9.2 5.0 3.7 7.9 3.5 5.0
Imports of goods & services 0.4 10.3 4.8 (1.9) 8.3 5.5 7.3
Net Exports - RMb 92.6 93.4 99.6 29.5 23.8 23.1 23.2
Exports of Goods (f.o.b) 1.1 14.5 9.3 6.0 12.1 8.9 10.1
Imports of Goods (c.i.f) 1.9 15.5 8.2 (0.3) 12.4 9.5 11.4
Trade Balance - RMb 87.2 97.5 119.9 33.4 27.0 29.0 30.5
Consumer Price Index 2.1 3.8 2.6 1.8 2.5 3.0 2.9
Current Account - RMb 29.0 36.6 39.6 - - - -
Current Account - % of GNI 2.7 3.2 3.2 - - - -
Fiscal Balance - % of GDP (3.1) (3.0) (2.9) - - - -
Federal Government Debt - % of GDP 53.8 53.0 52.5 - - - -
Nominal GDP 6.2 7.2 - - - -
Year-End of Unless States Otherwise 2016 2017 2018f 1Q18 2Q18f 3Q18f 4Q18f
Brent Crude Oil (Avg) 43.6 53.0 60.0 67.3

Crude Palm Oil (Avg) 2,652 2,825 2,600 2,480 - - -
USD/MYR (Avg) 4.15 4.32 4.00 3.92 4.00 4.05 4.00
USD/MYR 4.48 4.15 3.95 - - - -
Yield on generic 10-year MGS (%) 3.85 4.00 4.10 3.95 4.10 4.00 4.05
3-month KLIBOR (%) 3.54 3.43 3.60 3.60 3.50 3.50 3.70
Overnight Policy Rate (%) 3.00 3.00 3.25 3.25 3.25 3.25 3.25
Source: MIDFR
18 JULY 2018
III. VALUATION
• By peer comparison, FBM KLCI is not cheaper vis-à-vis most ASEAN markets. The PER of FBM KLCI
currently stands at 15.6x based on current year (CY) earnings. With a coefficient of variation (CV) of
0.08, by peer comparison, the valuation of FBM KLCI is relatively not cheap in comparison to other key
Southeast Asian markets excepting Bangkok’s SET (CV of 0.65).
Table 5: FBM KLCI Valuation against regional markets

FBM KLCI FSSTI JCI SET PCOMP
CV 0.08 -0.70 -0.08 0.65 0.05
CV PER 15.6 13.0 14.5 14.6 16.3
CY PER (+1SD) 17.0 15.5 17.0 15.5 19.2
CY PER (Mean) 15.5 14.0 14.7 12.9 16.2
CY PER (-1SD) 14.0 12.5 12.4 10.4 13.1
Source: Bloomberg, MIDF Research Note: Data for Mean and SD calculations are from Jan 2006 to present
• …but cheaper in comparison to Wall Street and main European markets. Against the key Wall Street
indices, namely Dow Jones (DJIA) and S&P500, as well as main European barometers, namely Euro
Stoxx 50 and UK’s FTSE, the local benchmark is currently trading at a nominally lower CV. The FBM KLCI
has now become relatively cheapest principally due to its price underperformance during the second
quarter of this year, i.e. the major Wall Street and European indices recorded gains in 2Q18 vis-à-vis
a -9.23% loss for the FBM KLCI.
Table 6: FBM KLCI Valuation against international markets

FBM KLCI DJIA S&P500 Euro Stoxx 50 FTSE
CV 0.08 0.39 0.76 0.58 0.42
CY PER 15.6 15.7 17.1 13.6 13.7
CY PER (+1SD) 17.0 17.0 17.5 14.4 15.0
CY PER (Mean) 15.5 14.9 15.5 12.4 12.8
CY PER (-1SD) 14.0 12.8 13.6 10.3 10.5
Source: Bloomberg, MIDF Research Note: Data for Mean and SD calculations are from Jan 2006 to present
• By historical comparison, pursuant to recent price downswing,… After outperforming all key Southeast
Asian, North American and European markets in the first quarter of this year, the local equity market
began to descend in late April. The price pullback became more precipitous in May 2018 until it gave
up all the year’s gain, and more.
• …FBM KLCI valuation has now reverted to below its multi-year mean. In tandem with the recent
price downswing, we also witnessed a rapid contraction in the trailing 12-month (T12-M) PER of FBM
KLCI back to below its multi-year mean levels. The T12-M PER of FBM KLCI is now at 16.5x against its
post-2008/9 crisis mean of 16.8x. In this regard, the recent valuation contraction was not entirely
unexpected. As stated in page 16 of our 2Q18 outlook report dated 21 March 2018, we had then foreseen
that the 1Q18 “valuation expansion may be scaled back going forward due to monetary policy factor.”
But nonetheless, we reckon the recent pullback was speedier than warranted hence expect a slightly
ascending PER trajectory for the remainder of this year to compensate for the excesses.
JULY 2018 19
Chart 34: FBM KLCI: T12-M PE Ratio
• Going forward, the odds of further US monetary tightening... Externally, in the money market, the
US Fed is expected to hike twice (or even thrice) more this year and possibly three more times next
year (in the opinion of Philadelphia Fed President Patrick Harker).
Chart 35: Rising Yields and Falling Spread
• …and the risk of impending yield inversion… Also, in the bond market, the US Treasury (UST) yields have been
on the rise and currently hovering near multi-year highs. But more importantly, the 10Y-3Y yield curve spread
has been shrinking and is now at a decade-low level of circa 24 basis points. In a recent US Fed minutes, it
was noted that some FOMC members view an inverted yield curve as an alarming warning. Historically, at least
during the past 50 years, an inverted UST yield curve was sure precursor to an impending US economic recession.
20 JULY 2018
Chart 36: DJIA; PER peaked in January 2018 and falling since
• …are likely to dampen any meaningful rebound in assets valuation… Likely attributable to the above,
the PER of DJIA has been on the downtrend after reaching a high of 21.5x in January this year. Going
forward, we reckon the PER may gravitate towards 16.1x, which is its long-term mean.
• …amid a less than stellar domestic earnings growth… As stated in our 1QCY18 Earnings Wrap report
dated 4 June 2018, the latest batch of quarterly corporate earnings failed to impress hence the
diminution in aggregate earnings estimates for FY2018. On this score, while corporate earnings could
still deliver positive on-year growth, however it is expected to be lower than what anticipated earlier.
Table 7: FBM KLCI: Historical and forward earnings growth

EPS Integer YoY (%change)
CY2018(F) 108.21 +3.50
CY2017 104.55 +5.35
CY2016 99.24 +5.40
CY2015 94.15 -12.97
• …and somewhat restrained macro performance thus far this year. Similarly, at the macro level,
Malaysia’s GDP for the first quarter this year of 5.4% also came in below market expectation. While
we still reckon the macro picture remains satisfactory with sustained domestic and external demands,
nonetheless it would be fiscally more challenging due to recent tax/subsidy measures.
• Reiterate FBM KLCI year-end 2018 target of 1,800 points. All above factors considered, we reiterate
our FBM KLCI year-end 2018 target of 1,800 points. However, valuation-wise, we tweaked our year-end
PER target to 16.6x or -0.2SD (as opposed to the earlier 16.3x or -0.5SD) due to the recent change in
FBM KLCI constituents, i.e. the inclusion of 3 new members with starkly above average PER valuation
(i.e. Dialog, Hartalega and MAHB) and the exclusions of a same number with average/lower than
average PER valuation (i.e. AMMB, Astro and YTL Corp). Also please note that the SD calculations are
based on 2010-17 historical data.
JULY 2018 21
IV. STOCKS SELECTION

• Challenging external factors. There are still lingering concerns over the wide ranging effect from the external
front that will rein on the performance of the local bourse. These factors will likely to feature prominently
in the immediate to medium term.
»» Trade wars , especially between US and China, has a direct impact since we export intermediary
goods especially the E&E products to China , which would very well find its ways to the US in finished
goods form
»» Monetary policy - increase in interest rates in the US (more in the future ) plus heightened probability
of other central banks (ECB, BOE) to follow suit has resulted in hot money flowing out, suppressing
share prices even further. In the region, Indonesia has raised interest rate by 100bps this year alone.
»» Strengthening of US dollar would also provide an adverse impact to returns of investments from
emerging markets, which would impact investment making decisions of foreigners. The Dollar index,
which measures the value of the US Dollar against some of the foreign currencies, has gone up 2%
so far this year.
»» Commodity prices has gone separate ways with Brent continued to be strong at USD77 /bbl range
amidst threat of supply cuts from Iran and Venezuela, while Crude Palm Oil has been trading around
RM2,400/MT.
• ….affecting us and our regional peers. The year 2018 saw emerging markets on the declining trend. MSCI
Emerging Markets (MXEF) along with MSCI Asia Ex-Japan (MXASJ) are both down -7.7% and -5.8% compared to
-5.9% recorded by our FBMKLCI benchmark.
Chart 37: 2018 YTD Performance of Selected Markets
22 JULY 2018
• …to be mitigated by strength of domestic front. We would like to reiterate again that Fundamentals are
still strong from the domestic macroeconomic side, among them;
1. GDP growth - based on the current development and indicators, we are optimistic that Malaysia’s
economy to expand by 5.5% this year
2. Stable Inflation - Despite unfavourable base effects, we foresee headline inflation rate to average
at 2.6% this year, much better than the likes of Philippines, which recorded 4.6% for May 2018.
3. USDMR Exchange Rate - with our Current account surplus hitting near 4-year high, reiterate USD/
MYR forecast of 3.95 by year-end of 2018.
4. Post GE14 changes – the review of mega projects and policy changes and reforms by the government
will have a temporary short to medium term impact on the market. We expect business confidence
will come back strong in 3Q18 once the National Budget 2019 tabled in Oct-18 and followed with
the Mid-Term Review of the 11th Malaysia Plan: New Direction 2018-2020 by year-end
• Trading activities will remain healthy. Markets are expected to be a bit quite in the next few months due to
Q3 seasonality factors, albeit still at active levels. We expect to see Average Daily Volume (ADV) of above 1.7
bn shares daily, but see Average Daily Traded Value(ADTV) will be lower due to the decline in share prices of
the listed companies over the past quarter. We reiterate our FBM KLCI year-end 2018 target of 1,800 points
at assumed PER target to 16.6.x
Chart 38: Average Daily Trading Volume (in mn shares) vs. Average Daily Traded Value (in RM mn)
JULY 2018 23
• Change in our Sector calls. We made 3 changes to our sector calls; Power (Upgrade to Positive), Plantations
(Downgrade to Neutral) and REITS (Downgrade to Neutral).
»» Positive : Automotive, Aviation, Banks, Healthcare, Insurance, Oil & Gas (Downstream), Power, Property
»» Neutral : Construction, Consumer, Gloves, Media, Oil & Gas (Upstream), Plantations, REITS, Technology,
Tobacco, Transportation & Logistics
• Portfolio & stocks selection criteria. While we remain an advocate to portfolio exposures with a combination
of stocks owing to impact of external and internal factors on both the prices and also on the fundamental
soundness of our top picks. Disconnects fundamental value of these stocks vis-a-vis the share price movements
affected by the market risk would present good buying opportunities, particularly for good dividend paying
counters and the companies with strong earnings that could withstand the impact from the external front.
• Our Top picks. Based on the four criteria above, we are pleased to share our list of top picks. In short, the
themes above are for the purpose of fulling the needs to generate returns amidst the period of high volatility
in the market; either through (1) Attractive Dividend Yield –(e.g. Mah Sing. Maybank, Bermaz Auto, UOA Dev,
SunREIT, CIMB, Air Asia, SP Setia), (2) Price upside with a defensive earnings – (e.g. Muhibbah, KL Kepong,
Public Bank, Petronas Gas, Petronas Dagangan, IHH, Malaysia Airports).
Table 8: Top Stock Picks
PRICE TARGET PRICE DIVIDEND TOTAL

STOCK BETA (RM) PRICE RETURN YLD RETURN
29-Jun (RM) (%) (%) (%)
AirAsia 0.91 2.99 4.87 62.9 4.3 67.2

Mah Sing 0.99 1.07 1.60 49.5 6.1 55.6
CIMB 1.54 5.45 7.85 44.0 4.4 48.4
Malayan Banking 1.02 9.00 11.40 26.7 6.8 33.4
Bermaz Auto 0.57 2.20 2.70 22.7 7.1 29.8
UOA Dev 0.81 2.38 2.80 17.6 6.3 23.9
SP Setia 1.16 3.10 3.69 19.0 4.3 23.3
Muhibbah 1.08 3.00 3.60 20.0 1.7 21.7
KL Kepong 0.61 24.16 28.50 18.0 2.6 20.6
Public Bank 0.78 23.36 27.30 16.9 2.8 19.7
Petronas Gas 0.76 17.30 20.00 15.6 3.9 19.5
Petronas Dagangan 0.74 24.80 28.00 12.9 3.4 16.3
IHH 0.66 6.10 6.95 13.9 1.3 15.2
Malaysia Airports 1.02 8.80 9.88 12.3 1.5 13.8
SunREIT 0.88 1.77 1.90 7.3 5.2 12.6
Source: Bloomberg, MIDFR (as at 29 June 2019)
24 JULY 2018
B. SECTORS OUTLOOK
I. AUTOMOTIVE
Boost from GST/SST-free window ................................................... Maintain POSITIVE
• Zero-rated GST. The Government has decided to reduce GST rates to zero (from 6%) effective 1st June
2018. Whilst SST is supposed to be re-introduced, this is expected to be within a 2-3 months period.
The implication is that consumers will likely take advantage of the GST/SST-free window which will
artificially drive up TIV. Beyond this, given that purchases would have been brought forward coupled
with a re-introduction of SST, we anticipate some weakness before demand normalises.
• Auto players already rolling back GST charges. In order to avoid a vacuum in demand between now till
implementation of zero-rated GST, key auto players have decided to provide some form of GST rebate
for the period leading up to 1st June. Others meanwhile, have already announced price reductions (of
between 5%-6%) as a result of the zero-rated GST decision. The decision to absorb GST for the period
of ~13 days to 1st June is likely to have some impact on the sector’s 2Q18 earnings, albeit temporary.
• SST re-introduction might impact pricing beyond “tax-free” period. If SST is reinstated at the previous
10% rate, car prices are likely to rise. On simple logic, car prices are expected to increase marginally
(versus prices under the current 6% GST rate), which is the opposite of what happened under GST in
2015 when car prices reduced by 1%-3%. Given the GST/SST-free period however, the magnitude of
increase from that base could be quite meaningful. Nonetheless, detail of the SST re-introduction is
still scant and it would be too preliminary to conclude at this stage.
• Countered by improving spending power? In 2017, GST collection was reported at RM44b which is a
considerably larger amount compared to SST collection of RM17b (back in 2014). The differential (which
works out to an estimated 2%-3% of GDP), is essentially being put back into consumers’ pockets. We
see this as a strong structural factor to lift consumer sentiment and drive TIV improvement beyond
the temporary demand volatility during the transition from GST to SST.
• We stick to our FY18F TIV forecast of 586K units, implying a modest 1.7%yoy growth. The 1H18 period
was realatively dry of major new launches as most of these have taken place in late FY17 e.g. the new
MyVi and the new CX5. Towards end FY18F, we expect key launches to include Proton’s new SUV based
on the Geely Boyue and possibly Perodua’s SUV model. UMW Toyota’s launches are also expected to
Chart 39: Annual TIV trend
Source: MAA, MIDFR
JULY 2018 25
be limited to CBU’s i.e. the CHR, Rush and Harrier. Tan Chong is expected to make a comeback with
several new model introductions over the next 1.5-2 years after a lull in the past 2 years. Honda is
expected to launch an Accord replacement this year.
• Maintain POSIITVE on autos. Our top picks are Bermaz Auto (BUY, TP: RM2.70), Tan Chong (BUY, TP:
RM2.05), UMW (BUY, TP: RM7.11) and MBM (BUY, TP: RM3.20).
II. AVIATION
Travel demand to remain strong .................................................... Maintain POSITIVE
• Good start with 1QFY18. Stocks under our coverage recorded healthy results in the last quarter, in
tandem with our upbeat outlook of the tourism sector. In terms of revenue, two stocks namely MAHB
and AirAsia recorded double-digit growth of +11.2%yoy and +14.2%yoy respectively. Meanwhile,
AirAsia X posted encouraging growth of +7.2%yoy in 1QFY18, beating our estimate of +3.9%yoy. These
were attributable to robust passengers’ demand for LCCs in both domestic and international sectors.
Also, the healthy travel demand directly benefited MAHB’s main revenue streams of aeronautical and
non-aeronautical given its status as the largest airport operator in Malaysia. All-in, we noted that the
sector’s core net profits came-in line with our expectations.
• Passenger growth remained resilient. Passengers’ traffic in Malaysia was still resilient, growing by
+3.4%yoy in 1QFY18. In comparison to last year, the growth may seem tepid but this was due to high
base effect. Recall that airports in Malaysia last year handled +8.7%yoy more passengers to a record
96.5m. While overall growth was relatively slower in 1QFY18, the trend has been encouraging in the
international segment. International sector advanced by +11.3% in 1QFY18, which was mostly in tandem
with last year of +13.6%yoy. This is positive to the overall traffic trend, given its higher economic
contribution in comparison to domestic passengers’. We believe traffic flow in 1HFY18 will remain
strong supported by key events namely Aidilfitri and upcoming summer periods. Both events will lead
to long holidays, which will stimulate demand for travel.
• Strong international passengers expected in 2H18. We expect the positive momentum of traffic flow
primarily international to remain, coming from the long holidays in countries such as China. It is worth
noting that Chinese tourists represent a significant portion of international traffic which we attribute to
the relaxation of visa permit to Malaysia and demographic factors. The occurrence of golden week in
October is also expected to encourage outbound travel among Chinese tourists. Consequently, revenue
from retail segments is expected to benefit given higher footfalls expected in the month of October
in airports operated by MAHB.
• LCCs to benefit the most. AirAsia and AirAsiaX are poised to register higher earnings in the next
quarter due to its notable presence in North Asia routes. China will lend strong base in passengers
carried. Accordingly, we opine that load factor will remain strong above 85%. While the entries of new
LCCs in the market are expected, given the growing demand, we believe both AirAsia and AirAsiaX
will maintain its pole position. This stems from the company’s’ comprehensive and forward-looking
strategy of retaining its dominant market share in the region via additional frequency utilization and
competitive fare prices.
26 JULY 2018
• Positive on the sector. While the current trend of rising fuel prices should pose downside risks, we
believe both low cost short and medium-long haul business to remain buoyant based on its ability to
weather higher fuel prices in the past years. Additionally, the bottom line earnings will be underpinned
by its continuous improvement in operational cost and its ability to grow operating revenue. Accordingly,
our optimistic views on the low-cost airlines business lead us to maintain our BUY call on AirAsia (TP:
RM4.87) and AirAsiaX (TP: RM0.47). Consequently, with a sanguine outlook on passenger traffic, MAHB
is poised to benefit as the main airport operator in Malaysia. We have a BUY call on MAHB (TP: RM9.88)
III. BANKS
Retail sector to lead loans growth................................................... Maintain POSITIVE
• Loans growth accelerated as expected. As we expected, loans growth came at a faster pace in
1QCY18, all the way towards May CY18, at +4.9%yoy to RM1.61t. Mortgages continued to be robust at
+8.8%yoy to RM536.4b and still the largest contributor to loans in the banking system at 33.2%. Also,
it seems that mortgages seem to settling around this level since December CY16, possibly indicating
that a steady state in loans growth for the segment and continuous stable demand for housing and the
associated financing..
• Loans growth will be better in 2HCY18. Going into 2HCY18, we believe that loans growth will maintain
its upward trajectory. Loans demand continue to be robust, as evident by the +20.1%yoy growth in
loans applied in April CY18. Similarly, loans approved grew strongly as well with a +21.6%yoy expansion.
This resulted in total 4 month loans demand to continue to grow better this year, comparatively with
CY17. As such, we opine that the healthy loans pipeline will translate to better loans growth in 2HCY18.
• Retail segment will continue to lead loans growth. We believe that the main driver for loans growth
in 2HCY18 will still be the retail segment especially mortgages where demand is expected to be solid.
We estimated that the retail loans segment grew +6.4%yoy to RM803.5b as at May CY18 vs. +3.0%yoy
growth from non-retail segment.
• Revised loans growth expectations downwards slightly due cautiousness. While we continue to expect
better loans growth this year, we have revised our loans growth expectations slightly to +5.5%yoy from
+6.0%yoy previously. This is due to the impact of the surprised result of GE14. We foresee the delay in
loans demand and disbursement coming from corporate and SME segment as businesses adopt a ‘wait-
and-see’ approach to the new Government’s economic policy direction.
• Margins compression likely to be subdued. We expect that pressure on banks’ net interest margin
(NIM) will persist in 2HCY18 as the impact from OPR hike normalise. In addition, the compression
pressure could also be coming from increased competition in loans and in particularly deposits. This due
to the expectations that banks will be scrambling for deposits to comply with the net stable funding
ratio requirement in CY19. However, we understand that majority of banks have already complied.
Therefore, we foresee a more subdued deposit competition for the rest of the year.
• Overall maintain POSITIVE. We maintain our POSITIVE view of the banking sector in anticipation of
continued solid performance throughout CY18. We believe that the stable employment environment
will drive loans growth. With higher demand and approval for loans, we believe the banking sector
will be able to maintain its earnings potential.
JULY 2018 27
• Maintaining BUY calls. At current juncture, we are still favouring the “top- tier” and the “smaller”
banks. We based our view on the scalability of the top tier banks and the nimbleness of the smaller
banks to navigate current conditions. In addition, we believe that the current market volatility presents
good time for investors to accumulate. Our BUY calls are Maybank (TP: RM11.40), CIMB (TP: RM7.85),
Public Bank (TP: RM27.30), Affin (TP: RM2.90), Alliance (TP: RM4.69) and BIMB (TP: RM5.15).
IV. CONSTRUCTION
Waiting for the dusts to settle....................................................... Maintain NEUTRAL
• Earnings Growth. We are approaching a juncture to review our earning assumptions for big-capitalization
construction companies under our coverage due to the headwinds for policy-changes in project
implementation. At this moment, we are certain that projects such as ECRL will face a cost revision hence
the amount of packages will also be revised. We have not yet imputed the impact of potential ECRL
packages to any companies under our coverage. Below is the are details on our earnings assumptions.
Table 9: Earnings Assumptions

Name FYE18 (RM'm) FYE19 (RM'm) (%) Growth
Gamuda 810.8 820.0 1.1%
IJM 348 354 2.1%
WCT 162.6 144 -11.4%
CMSB 286.3 290 1.3%
SunCon 158.5 174.3 10.0%
AQRS 69.7 75.1 7.7%
Muhibbah 136.6 100 -26.8%
Vivo 38 46.8 23.2%
MRCB 202.2 205 1.4%
HSL 63.3 65.6 3.6%
Total Growth 3.2%
Source: MIDFR
• The total growth that we’ve projected equates to only a dismal +3.2%. Despite that, we think earnings
for FYE19 would compress more as we move towards Q3/Q4 FYE18 award for projects would taper as
government would focus on negotiating for reducing the total cost of big ticket projects. Furthermore,
projects such as MRT3 and HSR have been cancelled and other project such as ECRL has been put under
review. Moving forward, earnings are expected to remain insipid and further trimming is expected -
pending further announcements. We maintain our NEUTRAL stance to reflect the changes of government’s
policy that would be reducing the potential orderbook replenishment rate for FYE19/FYE20 albeit the
appealing valuation – higher earnings yield and spread against the 10-y MGS. Nonetheless, continue
to favour; (i) AQRS (BUY, TP: RM2.30) and (ii) Muhibbah (BUY, TP: RM3.60) as our top picks due to
its defensive business model (Muhibbah) and potential earnings upside from progress billings (AQRS).
28 JULY 2018
Table 10: Earnings Assumptions
10-Y MGS
Name PER EY (%) PBR Spread (%)
(%)
Gamuda 12.95 7.72 1.13 4.2 3.52
IJM 16.63 6.01 0.54 4.2 1.81
WCT 7.61 13.14 0.39 4.2 8.94
CMSB 11.54 8.67 0.98 4.2 4.47
SunCon 17.3 5.78 4.12 4.2 1.58
AQRS 6.19 16.16 0.64 4.2 11.96
Muhibbah 10.55 9.48 1.01 4.2 5.28
Vivo 17.96 5.57 0.43 4.2 1.37
MRCB 13.5 7.41 0.49 4.2 3.21
HSL 16.28 6.14 1.06 4.2 1.94
Source: MIDFR
V. CONSUMER
Only short term boost.................................................................. Maintain NEUTRAL
• Consumer sentiment index is on an upward trajectory. MIER’s consumer sentiment index rose firmly
to 91.0points in 1QCY18 from 82.6points in the previous quarter. In light of the accommodative policies
by the newly minted government, we expect that consumer sentiment will be on an upward trajectory
to pass the 100 optimistic threshold levels in the coming quarters. The rolled back of key polices such
as zero rating of the GST and stabilization of the RON95 petrol and diesel prices at RM2.20 per litre
and RM2.18 per litre respectively are seen as sentiment booster for consumers. These measures will
help to increase consumers’ disposable income and indirectly spur domestic consumption.
• Pent-up-demand will drive 3QCY18 retail sales growth. Historically, retail sales growth was rather subdued
during third quarter of the year. In 3QCY17, retails sales as compiled by Retail Group Malaysia (RGM),
contracted marginally by -1.1%yoy while in 3QCY16 only a minimal growth of +1.9%yoy was observed. This
was mainly attributable to the absence of major festivities to drive up consumer spending. However, we
expect retail sales growth to pick up pace in 3QCY18 in view of pent-up demand. This was mainly driven
by the tax holiday as GST is being zero-rated from 1st June 2018 onwards. Since 2012, retail sales growth
had been consistently growing at a slower pace than GDP growth. On a more recent note, Malaysia’s 2017
retail sales growth was only at +2.0%yoy as compared to commendable GDP growth of +5.9%yoy in 2017.
Nonetheless, for 3CY18 we are projecting retail sales growth rate to move closer to the annual GDP growth
rate. Thereafter, the rate is expected to taper-off due to the reintroduction of Sales and Service Tax (SST).
• Uncertainty over the new framework for SST systems. On 17th May 2018, the Ministry of Finance issued a
media release confirming that SST will be reintroduced in September 2018. Nevertheless, not much detail has
been divulged as to the framework and implementation of the SST systems. Previously, SST was generally applied
to manufacturer at a rate of 10% (or 5% on prescribed goods such as food products). In view of this, we do not
discount the possibility that retailers might attach higher price to make up for the additional cost incurred from
reintroduction of SST. As a result, we expect 4QCY18 retail sales to slow-down on a sequential basis.
• Entrance of foreign brands will heighten competition. The fashion and fashion accessories retail sub-segment
recorded a strong growth of +3.9%yoy in 2017. This was mainly due to the influx of shopping malls opening which
lead to the opening of new retail outlets. In 1QCY18, we observed that 24 foreign brands from 13 countries,
primarily Singapore and Taiwan, have set up their outlets in Malaysia. Meanwhile, both AEON Co. (M) Bhd and
JULY 2018 29
Padini Holdings Bhd have been actively strengthening its presence in the country via the addition of two new
shopping malls and 12 outlets respectively. These have been one of the major contributors to their respective
retail sales figure for 1QCY18. To recall, both companies’ 1QCY18 retail sales grew by +3.4%yoy and +13.8yoy
respectively. However, we view that such growth may not be sustainable given the intensifying completion in
local retail market and lower overall performance year-on-year on same store basis.
• Savings from lower input costs will be channelled to advertising and promotional activities. As at
1QCY18, most manufacturers are still bounded by higher production cost as cost of input material as prices
of agricultural commodities costs remained elevated. Moving forward, we expect the production cost to
trend lower as we observed that the prices of agricultural commodities has been stabilizing at this current
level. We view that the cost savings generated will be use to increase the budget allocation for advertising
and promotional (A&P) activities. In addition, we also think that the higher A&P spending is justified and
timely due to: (i) improvement in consumer sentiment; and (ii) fend off competition in the market.
• Maintain Neutral. All in all, we expect that the outlook for local consumer sectors remain challenging.
Whilst, zero-rating of GST will encourage consumer spending, we view that the surge in spending to
be temporary as the framework of a new SST system is still unclear at this juncture. In the current
circumstances of heightening competition in the local retail market, retailers might resort on absorbing
the additional tax cost which is set to negatively impact profit margins. In additions, advertising and
promotional activities need to be ramped up to take advantage of consumer eagerness to spend.
VI. GLOVES
Healthy global demand to drive earnings in 2H18............................... Maintain NEUTRAL
• Resilient global demand to continue driving earnings. We believe that the gloves producers could
potentially record better earnings in the quarters to come due to the adjustments in pricing to
incorporate the +23% hike in natural gas tariff and new capacity expected to come on board in 2H18.
Additionally, we opine that the resilient global demand for gloves will continue to drive the earnings for
the gloves producers in 2H18. Malaysian Rubber Glove Manufacturers Association (MARGMA) projected
that the export for glove will increase by +10% to RM18b from RM16.2b in 2017 in line with the increase
in global demand of 8-10% per annum. In terms of number of pieces, MARGMA projected Malaysia will
export 232b pieces in 2018 (vs 228b pieces in 2017) and 287b pieces per annum by 2020.
Chart 40: Natural Rubber Price Trend Chart 41: Nitrile Butadiene Price Trend
Source: Bloomberg, MIDFR Source: Bloomberg, MIDFR
30 JULY 2018
• Current raw material price to persist at least for the 2H18. We opine that natural rubber price will
continue to trade between the ranges of RM4.50-RM5.00 per kg for the rest of 2018 mainly due to the
Tripartite Agreement between the three major natural rubber producers i.e: Thailand, Indonesia and
Malaysia that prevents the price of natural rubber from falling to below RM4.00/kg. Furthermore, we
reiterate our view that the natural rubber price will continue to remain at the current level as China’s
passenger car purchase tax has been restored to 10% (from 7.5% in 2017 and 5% in 2016). This will
reduce the double digit growth experienced by China’s automotive sector last two years to potentially
a low single digit growth of +3.0%yoy this year according to China’s automotive industry officials. As for
nitrile butadiene (NBR) price, we opine that the price would be trending upwards as the demand for
nitrile gloves increases worldwide. Due to this, we estimate that the price of NBR could increase by a
further 5-10% from its current price to an average of USD1,000 - 1,100/tonne for the rest of the year.
• Stable USD will be more beneficial to gloves manufacturers in the long term. Though a stronger USD
will boost revenue for gloves manufacturers as the export of gloves are USD-denominated, however,
we opine that the current stable USD condition is more beneficial to the gloves manufacturers in the
long term as it provides better visibility in terms of both revenue as well as costs. In addition, it will
also assist in currency hedging for the gloves manufacturers and reduce potential foreign exchange
losses. Our house view with regards to USD to MYR is that MYR will continue to fluctuate at current
level before settling at RM3.95 per USD by end-2018.
• Uncertainty over the new Government policies. Pakatan Harapan’s GE14 manifesto includes, among
others, the increase of minimum wage to RM1,500 from the current RM1,000 and the reduction in
foreign labours by 2.0m in stages. In general, these two policies are negative for the gloves sector as
the sector is highly dependent on foreign labours. On average, foreign labour makes up about 70-80%
of the total workforce employed by the gloves manufacturing companies in Malaysia and a shortage of
foreign labours could potentially hurt the gloves industry’s earnings. In terms of costs, labour makes
up about 11-12% of total costs of gloves production and according to our estimates, the RM500 increase
in minimum wage will reduce the earnings of gloves manufacturers by about RM1.5-RM3.5m (or about
2-4%) depending on the company. We opine that the increase in production will be fully-transferred to
the customers via the increase in average selling prices (ASPs) to mitigate impact on earnings.
• That said, the recent announcement from Minister of Human Resource stated that there will be an
increase of minimum wage however, the quantum of increase would be lower than the +RM500 that
was earlier announced. The actual amount to be increased will be made known sometime in August.
Despite the lower increase, the government is still determined to increase the minimum wage to
RM1,500 but it will be implemented at a later time. Meanwhile, the gloves producers will also invest
in automation to reduce their dependency on foreign labours.
• Maintain NEUTRAL. All factors considered, despite a positive outlook for the rubber gloves sector this
year, we are of the opinion that the near term prospects for some of the rubber glove producers will
remain subdued due to the constraint in terms of capacity. This is largely due to the delay in capacity
expansion for some of the producers caused by incomplete parts of the production lines. Moreover,
the upside earnings potential of these producers might be capped due to closure of some production
lines for upgrades and revamps. Hence, we are maintaining our NEUTRAL stance on the sector in view
of the capacity constraint as well as; the lack of strong catalysts for the sector at this juncture.
JULY 2018 31
VII. HEALTHCARE
Organic growth to continue driving earnings in 2H18........................... Maintain POSITIVE
• Organic growth to continue driving revenue and earnings. We reiterate our view that we expect
earnings of the private healthcare operators to display further improvements from 2H18 onwards. As
per 1H18, we are expecting revenue and earnings growth to be mainly driven by organic growth from
existing hospitals as well as hospitals that were newly opened back in 2015-17. In addition, we are
also expecting the opening of new specialization wards in recently opened hospitals will contribute
positively to the operators’ earnings as well. Furthermore, as the contribution from newly opened
hospitals grows, it will offset the high operating expenditures associated with the opening of the new
hospitals. In addition, we are also seeing improvements recorded in inpatient admissions for both IHH
Healthcare (BUY, TP: RM6.95) and KPJ Healthcare (BUY, TP: RM1.16) across the companies’ home
markets which signals healthy demand for private healthcare services worldwide.
• Zero-rated GST to encourage inpatient admissions and outpatient visits. Aside from the organic growth
from existing and new hospitals, we are also expecting better revenue in 2H18 as the zero-rated goods
and services tax (GST) will encourage inpatient admissions and outpatient visits to private hospitals.
Despite the GST being zero-rated for three months pending the re-introduction of sales and services
tax (SST), we believe this will nonetheless encourage the patients who have been delaying surgeries
or treatments to come in and take advantage of the zero-rated GST period due to the increase in
disposable income. Furthermore, with the current stable currency situation patients could also take
advantage of lower medical consumable costs compared to last year.
Chart 42: IHH’s Quarterly Inpatient Admissions Chart 43: IHH’s Revenue per Inpatient
Source: Company, MIDFR Source: Company, MIDFR
• Operating costs to stabilise with strengthening Ringgit. As the Ringgit began to strengthen since
October 2017, we are expecting the healthcare providers to benefit from a more stable operating
cost. For the past few quarters, the operating costs for the healthcare providers have shot up due to
the higher USD against Ringgit which has left the healthcare operators with higher cost for medical
consumables. Therefore, with the improving Ringgit, we opine that this will help to stabilize an
otherwise increasing cost of operations for the healthcare providers. Furthermore, we think that
higher contributions from newly opened hospitals from both healthcare players will help to cushion
the impact from the currency fluctuations.
32 JULY 2018
• Proposed increase in healthcare budget allocation to benefit HSS providers. The appointment of
a new Minister of Health came with an announcement that the ministry would look into increasing
the allocation for healthcare-related spending. Currently, Malaysia is spending about 4.4% of its total
gross domestic products (GDP) annually on healthcare and the new minister is looking into increasing
it to 6-7% of GDP going forward. This is in-line with the spending of developed countries worldwide.
Due to this, we opine that Edgenta (BUY; TP:3.26) in its role as the HSS provider for the MoH would
benefit from the increase in healthcare budget allocation as this would open new opportunities for
maintenance of various MoH facilities going forward. We also opine that the current HSS contract with
MoH is unlikely to be called off by the new government as there is a scarcity in terms of companies that
could provide HSS to MoH in Malaysia. Edgenta is currently maintaining 33 hospitals in the northern
region of Malaysia.
• Maintain POSITIVE. All in, we are reiterating our POSITIVE stance on the sector as we expect demand for
healthcare services to remain robust for the remainder of 2018 and that the announcement by MoH on
the potential increase in healthcare budget allocation would spur demand for healthcare and healthcare-
related services even further going forward. We opine that the sector’s earnings growth will remain resilient
which is evident by the increase in inpatient admissions despite the ongoing battle against high cost of
living. Our POSITIVE stance is premised on: (i) strong demand for quality healthcare and, (ii) lack of public
healthcare amenities to cater for patients both in the urban as well as suburban areas. We also opine that
private healthcare operators will continue to be the preferred choice for the urban dwellers with higher
disposable income and insurance coverage. IHH Healthcare is our Top Pick for the sector. We like IHH for
its: (i) geographically-diversified revenue base; (ii) robust balance sheet and; (iii) strategic expansion plans.
VIII. INSURANCE
Structural demand still strong........................................................ Maintain POSITIVE
• Demand still intact for insurance/takaful policy. Insurance and takaful stocks have performed well
in 1QFY18 where earnings were mostly in line. LPI and STMB were two stocks which saw notable
improvement in top line, with LPI recording the highest growth of +20.8%yoy in net earned premium. We
attribute this positive variance to the growing awareness for protection policy, as well as both Syarikat
Takaful and LPI’s underwriting strength in their respective segments. However, it is worth noting that
Tune Protect saw its net earned premium declining slightly by -4.4%yoy. While overall NEP was lower,
we are comforted to see that its travel segment was able to record higher NEP, which management
attributed to its dynamic pricing and product bundling initiatives. This was also supported by AirAsia’s
capacity expansion strategy, enabling the airlines to accelerate the growth of passengers carried in
1QFY18 by +16.0%yoy.
• Strategic initiatives in place, to accommodate changes. Insurers and takaful operators are on track
to achieve higher productivity via the adoption of leaner operation. This will be achieved via strategic
investment in technology across its operational fronts, directed towards customers’ acquisition channel,
to capture better take-up rate from the growing demand. Few ways to improve the take-up rate are
enhancing the digital marketing efforts, faster underwriting process and affordable policy offerings.
Besides digitalization, we are also optimistic to see improvement in the overall cost structure. This is
considering the use of technology to lower down the overall combined ratio, giving support to better
underwriting profit moving forward. In 3QFY18, we will potentially see some of the efforts done with
digital platform provider coming to fruition.
JULY 2018 33
• Takaful to lead the growth trend. We opine that takaful will continue to outperform the growth of
conventional insurance, factoring in the favorable demographic pattern for takaful products, given the
increasing measures to accelerate insurance penetration and to educate the Muslim-majority market.
With the lagging penetration rate of family takaful of 25%, prioritizatio on affordability and quality
of service will generate strong traction. Syarikat Takaful as the only listed takaful entity is poised to
benefit from this favorable trend, coupled with its introduction of online digital channel. Though banca
channel has been instrumental in growing new business, the potential for growth lies with its online
channel. This is considering the online capability of tapping wider market at low cost. According to
the management, its online platform is expected to rake in +240% of growth in new business.
• Favorable environment for long-term growth. The industry continues to benefit from the developing
market in the life insurance and family takaful segments. Penetration rate will continue to be the
highlight in CY18, in which it provides the biggest opportunity for further growth. The lagging penetration
rate which hovered between 54-56% over the past 5 years will see an improvement in CY18, with multiple
initiatives being carried out with target of reaching the 75% insured population. While we believe the
target is a bit stretched at this juncture, we are not ruling out the possibility of the industry growing
higher than the historical average. With initiatives namely Perlindungan Tenang and LIFE Framework
in place, this should provide some support to growth.
• Regulatory impact from new government. Following the change in government post general election,
we take note of the potential regulatory changes in the country. However, we see no clear outline in
PH’s manifesto that could materially impact the industry at this juncture. Partly, this is due to the
premium structure of life insurance itself, which is not GST chargeable. Notwithstanding this, we
noted that the cancellation could provide some relief on the premium paid on non-life policies, which
are subject to the aforementioned tax charges. Overall, we opine impact should be minimal bearing
in mind, that GST only constitutes a small percentage of the total premium paid by policy holders. At
this juncture, we are NEUTRAL on the upcoming changes of tax mechanism.
• Positive on the sector. We opine the industry’s forward trajectory will persist in the 3Q18 forward,
supported by the strategic initiatives being placed by the insurers and takaful players under our coverage.
The industry will continue to get attention by BNM, in order to enhance and strengthen the efficiency
of the industry which would bode well with the industry’s long-term growth. Given our optimism, we
maintain our BUY call on STMB (TP: RM4.44) and Tune Protect (RM1.10).
34 JULY 2018
IX. MEDIA
Slow but steady earnings recovery.................................................. Maintain NEUTRAL
• Consumer sentiment to be buoyed by tax holiday. 1Q18 consumer sentiment index (CSI) came in
higher at 91points from 82.6points as at 4Q17, which was attributable to better job prospects. Despite
this, spending plans remains on low gear. It is still below the demarcation level of 100points. Inclusive
of this, CSI has been below the 100points level for the past 18 quarters since 4Q13. Moving forward,
we expect the CSI to improve further, buoyed by the tax holiday following the zero-rating of Goods
and Services Tax (GST) which came into effect on 1st June 2018.
• Reducing reliance on advertising income. As shown in the latest 1Q18 results, the financial performance
of traditional media platforms continues to put pressure on the earnings of media companies. Apart
from focusing on digital media, media companies were also driving businesses with non-advertising
income. Recently, Media Prima Bhd also ventured into e-commerce space via the launching of its first
e-commerce site, SuperDeals. Nonetheless, such efforts required a gestation period before they can
make meaningful contribution to the bottomline.
• Changing landscape affect traditional cost structure. Due to the shift in business landscape, the
existing cost structure of traditional media companies can no longer match the revenue generated from
the various business segments. Thus, cost management initiative has been one of the main agenda.
To further drive this initiative, we understand that Star Media Group Bhd (Star) is engaging external
consultant to relook into the group’s existing business structure. Based on our latest channel check,
the exercise is still on-going.
• Expecting uptick on advertising spending. We view that the major sporting events such as the on-going
2018 World Cup would help to drive advertising spending. Traditionally advertising expenditure (adex)
would post a strong double digit growth on a quarter-over-quarter basis. This should also spillover to
3Q18 as the 2018 World Cup commence from 14th June 2018 to 15th July 2018.
• Shrinking cash reserve. The cash reserve of traditional media companies has been decline. As at 1Q18,
Media Prima Bhd’s cash level reduced by -29.1%yoy to RM265.2m. Meanwhile, Star’s cash level remain
resilient at RM429.5m. (-5.9%yoy). Thus, we view that Star would be in a better position to provide a
better dividend payout as compared to Media Prima.
• Maintain NEUTRAL. We view that the 2018 World Cup and tax holiday will provide from some support
to the ailing adex in the near term. Couple with rigorous cost management initiative, we expect the
earnings to improve slowly but steadily. On another note, the strategy to venture into non-adex based
revenue has yet to contribute to the bottomline. All factors considered we are reiterating our NEUTRAL
stance on the sector.
JULY 2018 35
X. OIL & GAS

Activity to sustain into 3QFY18.....................................Downstream: Maintain POSITIVE
Upstream: Maintain NEUTRAL
• Crude oil supply weighing in on prices. Global crude oil supply and demand fundamentals remain
largely intact – reflected by non-volatile price movements. Brent crude oil price is currently at USD75pb,
representing an increase of +14%ytd. The current year-to-date average Brent crude oil price is at
USD70pb. Brent crude oil price seems to have hit a hurdle of USD80pb in May 2018 largely attributable
to fresh sanctions on Iran. However, prices are currently hovering at lower levels as supply demand
fundamentals regain situational control. Back in March 2018 the US production reached a record level
of 10.47mbpd while Russia is ahead producing 11mbpd. Any potential spikes in crude oil price will be
deterred by potential increase in supply by OPEC.
• Malaysia hydrocarbon production. As at April 2018, Malaysia produced an average 661kbpd (+1.7%yoy)
of crude oil compared with an average of 650kbpd in 2018. Natural gas production on the other hand
averaged 6,727mmscfd (-2.6%yoy) compared with an average production of 6,906mmscfd in 2017.
Natural gas and crude oil production are seasonally higher in 1Q and 4Q as the offshore maintenance
activities are typically the lowest due to the monsoon season (less production stoppages).
• Although upstream E&P capex is set to increase ... Upstream oil majors consisting global integrated
oils and independent exploration and production (E&P) companies are expected to increase their
capital expenditure (capex) in 2018 due to multiple years of suppressed capex spend (ie. 2015 and
2016). Many E&P projects, particularly those involving deep water ventures and unconventional oils
have been either postponed or shelved due to unviable economics. On average, approximately 30-40%
of E&P capex is allocated for drilling and completion while around 15-20% for subsea production. In
its latest announcement, PETRONAS has indicated that it plans to increase its capex to RM55b in 2018
from RM44.5b (+23.5%yoy), venturing into new resource base and new business areas.
• … but drillers and support service providers are still scaling back spending. Conversely, drillers
and other upstream support service providers are scaling back spending in 2017 into 2018. This, in
our view is positive as: (i) there is still an oversupply situation in the offshore heavy assets realm; (ii)
service providers are still in a cash conservation mode trying to optimise existing resources; (iii) service
providers have rather successfully decreased operating expenses and overheads significantly and; (iv)
service providers are value adding by bundling more services into their existing offerings.
• Charter rates and utilisation rates. The lower capex plan by offshore services providers can be
substantiated by depressed charters rates for offshore support vessels (OSV) and drilling rigs, while the
increase in capex by oil producers can be evidenced by increasing offshore activities. Offshore support
vessels charter rates are still hovering near the trough as USD0.70/bhp per day, while Southeast Asia
jackup rig rates are still at around USD50-55k per day. Utilisation rates (UR) however have increased
significantly from a year earlier, with average OSV UR around 70% and jackup rigs in excess of 70%.
• Upstream sub-segment NEUTRAL and reiterate POSITIVE on downstream sub-segment. Moving

forward into 2HFY18 with year-over-year expected higher crude oil price environment, expected
increase in offshore E&P capex, expected increase in offshore activity levels and sustained demand
for petrochemical products globally, we are maintaining our stance on the upstream sub-segment of
the oil and gas industry at NEUTRAL. We continue to reiterate our POSITIVE stance on the downstream
sub-segment of the oil and gas industry.
36 JULY 2018
• Local oil and gas stocks to benefit. For the upstream services segment, we are bullish on Dayang
Enterprise Berhad (BUY; TP: RM1.06) as the company can expect to benefit from rising crude oil
and LNG selling prices, increased shallow water and deep water activities and more active offshore
maintenance works. For the downstream subsector of the O&G industry, we remain our bullish stance
on Petronas Dagangan Berhad (BUY; TP: RM28.00), Petronas Chemicals Group Berhad (NEUTRAL;
TP: RM8.90), Petronas Gas Berhad (BUY; TP: RM20.00) and Gas Malaysia Berhad (BUY; TP: RM3.50).
XI. PLANTATIONS
Average CPO price lowered to RM2400 per tonne........................ Downgrade to NEUTRAL
• An unexciting quarter in 1QCY18. Out of the 10 plantation companies under our coverage, there are 2
outperformers, 4 underperformers and 4 within expectations. SIMEPLT and IJMPLNT earnings are above
expectation due to better than expected cost controls. As for the 4 underperformers, it is mostly due
to non-plantation divisions except for TSH which was affected by higher than expected cost. The four
companies with earnings matching expectations are IOICORP, KLK, PPB and GENP.
• Weaker than expected soybean oil price. Production of soybean has been higher than expected in
Brazil at 118.05m tonnes and this is another record high for Brazil (against last year’s 114.08m tonnes).
Note that Brazil food statistics agency CONAB has raised their estimate for soybean production on 12-
June to 118.05m tonnes (against previous estimate of 117.0m tonnes). This factor coupled with high
inventory level of soybean have pretty much neutralised the impact of dryness in Argentina which
cause the country’s soybean production to plunge 19.1m tonnes yoy to 35.50m tonnes (against last
year’s 54.60m tonnes).
Chart 44: Relationship CPO & Soybean Oil Price Chart 45: Malaysia Palm Oil Inventory (‘000 MT)
Source: Company, MIDFR Source: Company, MIDFR
• Soybean inventory is declining but not soybean oil stocks. While the decline in soybean production
from Argentina has reduced soybean inventory by 4.0% yoy for 2017/2018 season ending September,
global soybean oil inventory is expected to rise 5.1% yoy to 5.82m tonnes. Reason for the difference
is because soybean can be stored for an extended period of up to twelve months before it is crushed,
hence the reduction in soybean production may only cause decline in soybean oil stocks after one year.
JULY 2018 37
• Malaysia palm oil inventory should rise from July onwards. Malaysia palm oil inventory has declined
for five consecutive months up to end-May 2018. For June, we do expect inventory to continue its
downtrend to 2.11m tonnes. However, the downtrend should reverse from July onwards as production
is expected to rise to the level which exceeds total demand. Hence, inventory should stays above 2.0m
tonnes throughout 2H2018 and keep the CPO price upside limited.
• But CPO price downside is limited due to strong Brent Crude Oil price. Despite the impact of weak
soybean oil price and high inventory of palm oil, we do not expect CPO price to fall significantly from
the current level. This is caused by strong Brent Crude Oil price which in turn will lead to higher demand
for palm oil from the biodiesel segment. As of end-June, CPO price is trading at USD576 per tonne
against Brent Crude Oil price of USD568 per tonne. Historically, Brent Crude Oil serves as the floor
price for CPO as CPO-Brent premium exists 100% of the time in the past 3 years. For the past 5 years,
CPO-Brent premium exists 87% of the time. Fundamentally, we expect Indonesia biodiesel industry to
boost their production as CPO-Brent premium declines as the same amount of money (collected from
export levy) can subsidize more volume of biodiesel production.
• Limited impact from change in accounting standards for MFRS 116 and MFRS 141. From 1-Jan-2018
onwards, plantation companies will start to implement the amendment on accounting standards with regards
to “Agriculture: Bearer Plants (Amendments to MFRS 116 “Property, Plant and Equipment” and MFRS 141
“Biological Assets”). Post implementation of the new accounting standards, the cost of new planting of
bearer plants and replanting will be capitalised at cost and depreciated over its useful life span. Previously,
the cost of new planting of bearer plants is kept at cost in the book without the need to depreciate it (as for
replanting, it was charged to income statement as it occurs). As expected, plantation companies which have
adopted these amendments have reported higher depreciation as seen in the recently concluded 1QCY18
result. However, the impact to earnings is minimal as it was neutralised slightly by lower replanting charge.
Chart 46: Correlation Between Palm Oil and Brent Crude Oil
• General Election result is Neutral to plantation sector. The recently concluded General Election on
9-May is overall Neutral to plantation sector. On the cost side, we do expect some cost pressure due to
implementation of higher minimum wage. However, this should be neutralised by better CPO price in the
long run due to better inventory management by the new Government. This could be achieved through
higher biodiesel usage and focused replanting effort.
38 JULY 2018
• 50% chance of El Niño but it is too early to conclude whether it will materialize. Australia Bureau
of Meteorology (ABM) has activated its El Niño WATCH (from INACTIVE) on 19-June with 50% chance
of El Niño forming in austral spring (September-November). However, ABM explained that “an El Niño
WATCH is not a guarantee that El Niño will occur; it is an indication that some of the typical precursors
of an event are in place.” Hence, we believe that it is still too early to conclude whether El Niño will
materialize.
• Average CPO price forecast for 2018 revised to RM2400 per tonne. We have lowered our CPO price
estimate for CPO price to RM2400 per tonne for 2018 after factoring in lower soybean oil price and higher
palm oil inventory in our model. For 2019, we expect CPO price to improve to RM2430 per tonne as we
believe that soybean oil stocks should decline due to lagged effect of lower soybean stocks kicks in.
• Downgrade our sector view to NEUTRAL. We have downgraded our sector call to NEUTRAL as we expect
CPO price to have limited upside at below RM2500 per tonne in the 2H2018 due to high stocks level
expected for palm oil and soybean oil. Earnings estimates for all plantation stocks under our coverage
have been reduced. Accordingly, the Target Prices for all planters have been reduced except PPB.
Note that PPB valuation is based on Price To Book which is not affected by lower earnings estimates.
• BUY calls on KLK (TP28.00) and GENP (TP: RM11.00). We like KLK for: i) improved outlook for its
manufacturing earnings due to low CPKO price, ii) earnings resiliency and iii) decent dividend yield
of 2.6%. For GENP, we like the Company as we expect its FFB growth of 13% yoy to be the strongest
among planters under our coverage. This is due to new contribution from recently acquired estate of
12,893 ha and 5000 ha coming to maturity in Indonesia.
• US-China trade war (if materialize) should have positive impact on CPO price. China has announced
that it would levy 25% tariffs on imports of U.S. soybeans and more than 100 other products from US.
Our base case scenario is that US-China trade war will not happen. However if it indeed materialize,
the impact is positive to CPO price as we expect higher China demand on palm oil in the long run. Note
that palm oil is a common substitute for soybean oil for use in the food processing industry.
Table 11: Key Industry Indicators

2015A 2016A 2017A 2018E 2019E
Average CPO price (RM/MT) 2154 2653 2783 2400 2430
JULY 2018 39
XIII. POWER
Removal of a regulatory overhang............................................... Upgrade to POSITIVE
• ICPT pass-through for non-residential. The EC (Energy Commission) announced an ICPT surcharge of
1.35sen/kwh for 2H18 which will be passed through for non-residential consumers. The 2H18 ICPT surcharge,
or cost under-recovery, amounts to a total of RM698m. We also understand that the previous 1.52sen/
kwh rebate has expired on 30th June. This means that 2H18 tariff effectively increases by 7.6% or a total
2.87sen/kwh for non-residential consumers. Both the rebate and ICPT surcharge in 1H18 was previously
subsidised by EIF (Electricity Industry Fund). For residential consumers however, the ICPT surcharge will
continue to be subsidised by the EIF for 2H18.
• Reduces burden on EIF. The decision to subsidise only residential consumers helps to reduce the burden
on EIF, which would have depleted to an estimated RM571m post 1H18 subsidy. The residential segment
accounts for just 22% of total power demand. Extrapolating from this we estimate only RM155m of the
total RM698m 2H18 ICPT surcharge, as well as RM175m of an estimated RM785m (1.52sen/kwh) in rebates
will be funded by the EIF. The remaining (i.e. sales to non-residential sectors) will be absorbed by an ICPT
pass through as well as the elimination of the previous 1.52sen/kwh rebate. In comparison, in 1H18, some
RM929m of EIF funds were used to subsidise consumers across the board.
• Removes a major overhang. The decision to allow a cost pass through sends a positive signal to the market
in that the new Government is willing to bite the bullet to pass through higher generation costs and uphold
the IBR framework; a perceived risk previously that drove down Tenaga’s share price 14%-15% post-election.
This is in fact the first time ICPT is allowed to be passed through since turning into a surcharge a year ago.
• Time to bottom fish? Tenaga (BUY, TP: RM16.30) share price has been bashed down quite substantially,
presumably given the perceived risk on its ability to attain a tariff hike, and secondly, given Tenaga’s
reasonably high foreign shareholding (of 24%) among index stocks. Given substantial price depreciation in the
past month, we see value emerging. Our TP remains unchanged at RM16.30, and our BUY call is reaffirmed.
Dividend yields are now attractive at 5.3% (+ve spread against 10yr MGS of 4.26%) while valuations are
cheap at 11x FY18F earnings, a substantial discount to the market’s 16x-17x.
• Our second sector pick is YTL Power (BUY, TP: RM1.20). After having seen share price retrace 14% in
the past month, risk reward is attractive at current price levels; the stock is trading at just 8x FY18F PER
while dividend yields are now attractive at 6%/7% (FY18F/19F) even at just 50% payout ratio assumption.
Furthermore, the market has yet to factor in the incremental value of 80%-owned Tg. Jati and YTLP’s 45%
stake in a Jordanian shale oil power plant (due for operations mid-2020) which carry attractive IRRs of low
and high teens respectively.
• Given the above, we upgrade our sector call to POSITIVE.
40 JULY 2018
XIII. PROPERTY
Leading indicator remains positive.................................................. Maintain POSITIVE
• Lower progress billing and adoption of MFRS15 dragged 1QCY18 earnings. For the recently concluded
2QCY2018 results season, six property companies out of nine companies under coverage reported
earnings which were below expectations. The main reason for the earnings miss was the slower-than-
expected progress billing in 1QFY18. Meanwhile, adoption of “MFRS15 – Revenue from contracts with
customers” effective January 2018 dragged earnings of UEM Sunrise. The adoption of MFRS15 which
changes revenue recognition has resulted in deferred revenue recognition of UEM Sunrise international
projects. In this context, revenue recognition of international projects has been changed to upon
settlement from progress completion.
• Applied loan to recover in the coming months. Meanwhile, total applied loan declined by 14.6%yoy
in May as homebuyers held back buying due to uncertainties on the outcome of General Election 14.
We expect buying interest to recover in the coming months as dust settles.
Chart 47: Monthly Total Applied Loan
Source: MAA, MIDFR
• Zero-rated GST is a boon to property sector. With the Goods and Services Tax (GST) adjusted to zero
per cent effective 1st June 2018, we view the zero-rated GST to be positive to the sector. Firstly, zero-
rated GST will lead to lower costs of developers as developers have been made to absorb GST on input
costs in the past. Secondly, zero-rated GST should boost the sale of commercial properties as buyers
no longer have to pay GST. Besides, buying interest on property may also be helped by zero-rated GST
as consumer sentiment should be boosted following higher disposable income.
• House Price Index grew 6.5% in 3Q2017. According to data released by National Property Information
Centre (NAPIC), Malaysia House Price Index (HPI) in 3Q2017 grew 6.5%yoy to 190.1, driven by increase
in house prices in all states. House prices in Kuala Lumpur recorded highest growth of 7.2%, followed
by Malacca (+6.9%) and Selangor (+6.7%). Nevertheless, HPI showed sign of weakening in 4Q2017 as
preliminary HPI figures of 190.0 represents a slight decrease from HPI of 190.1 in 3Q2017. Note that
this will be the first sequential decrease in HPI since 2009 if actual HPI for 4Q2017 turns out to be
lower quarter-on-quarter.
JULY 2018 41
XIV. REITS
Limited upside following increase in unit prices.......................... Downgrade to NEUTRAL
• Prices of REITs under our coverage have recovered. Since our report dated April 10th, 2018 titled
“Looking more attractive”, Bursa Malaysia REIT index has climbed +8.5%. Unit prices of REITs under
our coverage had climbed by +3% to +21%. Prior to that, they have fallen by about -12.6% on average
since the beginning of 2018. In view of the limited upside from the current unit prices, we downgrade
the sector to NEUTRAL.
Chart 48: Bursa Malaysia REIT Index has recovered from the previous low
Table 12: Price changes for REITS under our coverage since our sector report on April 10
Axis REIT 21%
Amanahraya REIT 3%
CMMT 10%
IGB REIT 9%
KLCCP 9%
Pavilion REIT 9%
Sunway REIT 12%
Source: MIDFR
• Yield spread narrowing. Previously, yield spread between MREITs and Malaysian Government Securities
(MGS) widened to about 2.3 percentage point (ppt). However, this has changed following the uptrend
of MGS yield, which now averages at 4.0% ytd compared with 3.95% in our previous sectoral update.
The current spread is just under 0.7 ppt. We maintain our MGS yield assumption of 4.0% for the year
but we notice that the spread between MGS yield and REITs under our coverage has narrowed to a less
attractive level.
• 1QCY18 earnings of REITs under coverage were mixed. Results for five out of the seven REITs that
we track were largely in-line with our full year forecasts. The two REITs with earnings below our
expectations were Amanahraya REIT and Axis REIT, mainly due to higher than expected expenses. We
have recently downgraded Axis REIT to NEUTRAL (TP:RM1.55) as its unit price has increased by about
20% since April.
42 JULY 2018
Chart 49: Spread between average yield of REITs under coverage and MGS-10 year yield narrowing
Source: Bloomberg, MIDFT
• 2HCY18 could be better for retail REITs given the upcoming Raya celebration, which is followed
by World Cup 2018, which may see higher footfall in major malls that usually organise crowd pulling
events and promotions. The reduction of GST from 6% to 0% starting June 1 should also spur consumer
spending, which could spill over to shopping malls. We expect malls at strategic locations to command
single-digit positive rental reversion while growth for rental reversion for neighbourbood malls may
be tepid or flat.
Table 13: Summary of REITs under coverage
Price Target Core EPU (sen) Core PE (sen) Net DPU Net Dvd Yield Price
Stock Rec. @4 Price to
Jun (RM) FY17 FY18 FY19 FY18 FY19 FY18 FY19 FY18 FY19 NAV
AXREIT NEUTRAL 1.54 1.55 8.3 9.1 10.0 16.9 15.4 8.0 8.8 5.2 5.7 1.2
CMMT NEUTRAL 1.25 1.11 7.8 7.9 8.0 15.8 15.6 7.5 7.7 6.0 6.2 0.9
IGBREIT BUY 1.64 1.73 8.6 8.7 9.2 18.9 17.8 9.4 8.8 5.7 5.4 1.5
PAVREIT NEUTRAL 1.54 1.41 7.7 8.3 8.4 18.6 18.3 7.7 7.8 5.0 5.1 1.2
KLCC NEUTRAL 7.75 7.59 40.0 40.7 41.9 19.0 18.5 35.4 36.4 4.6 4.7 1.0
SUNREIT BUY 1.70 1.90 9.2 9.7 10.3 17.5 16.5 8.7 9.3 5.1 5.5 1.2
ARREIT BUY 0.86 0.94 5.5 6.5 7.3 13.2 11.7 5.6 6.4 6.5 7.5 0.5
Average 5.5 5.7 1.1

Source: Companies, MIDFR
• Downgrade to NEUTRAL from OVERWEIGHT. We downgrade the sector to NEUTRAL from OVERWEIGHT
as unit prices for REITS have recovered by between 3% to 21% since our previous report “Looking more
attractive” in April. While earnings are expected to be resilient in the near-term, the recovery in unit
prices had narrowed the valuation gap. Our top pick for the sector is Sunway REIT (BUY; TP: RM1.90)
due to its positive earnings outlook that is backed by positive rental reversion from Sunway Pyramid
and growth from its hotel division. We also have a BUY call on AmanahRaya REIT (TP: RM0.96) for its
diversified assets base with exposure to education property. We also like IGB REIT (BUY; TP: RM1.73)
for its ability to command positive rental reversion for its crown jewel Mid Valley Megamall.
JULY 2018 43
XV. TECHNOLOGY
Component productions to enter peak cycle in 3QCY18....................... Maintain NEUTRAL
• Monthly semiconductor sales sustained above USD37b. Worldwide sales of semiconductor products advanced
by +20.0%yoy to USD37.0b. This represents the 20th consecutive months of year-over-year sales improvement
since August 2016. Higher sales were recorded across all major regional markets and all semiconductor product
categories, especially for the memory product segment. Meanwhile, on a monthly sequential basis, the global
semiconductor sales (GSS) only grew marginally by +0.7%yoy. This is in-line with the typical seasonal market trends.
• One of the preferred distribution channels. Malaysia has been one of the primary sites of global
offshore semiconductor test and assembly since 1987. Previously, Broadcom Ltd has announced its
plan to set up its global distribution warehouse in the Batu Kawan Industrial Park in Penang. It would
store Broadcom’s products that were manufactured in the US, Taiwan, South Korea, Thailand and
Malaysia for worldwide distribution. Prior to this, Broadcom shipped its products from Singapore. The
warehouse is projected to ship globally more than 16bn units a year which is valued at RM65b once its
principal hub in Penang was fully operational. This will make it the largest electronics and electrical
(E&E) exporter in Malaysia.
• Steady demand from automotive segment. Double digit annual sales growth has been recorded for
the automotive segment in 2016 and 2017. The trend is expected to continue in 2018. The growth in
the automotive chip market will be mainly driven by automation in the form of systems monitoring
and control, safety, driver assistance systems, convenience and automated driving.
• Flagship smartphone launches in 2H18. Traditionally, top-tier smartphone manufacturers would announce
their new flagship smartphones in the third quarter every year, prior to the year-end holiday gift season. For
2H18, apart from the iPhone lineup, companies such as Samsung, Nokia, Xiaomi and Huawei have line-up their
respective models. Premised on this, component manufacturers should see order to improve throughout 3Q18.
• Another round of semiconductor funding by China. Subsequent to the emergence of US-China trade
tension and US sanctions on ZTE Corp, China is hoping to catch up in the global semiconductor race via
the setting up of second National Integrated Circuitry Investment Fund. The second round of funding is
expected to help China become self-sufficient in chips that are used by the country’s vast manufacturing
supply chain. At present, China only manufactures approximately 16% of the semiconductor products
it uses domestically. With the aid of the fund, China is envisaged to increase the supply to 40% by the
middle of the next decade. We expect the move will support the growth in semiconductor equipment
spending and ultimately spur the sale of semiconductor products in the long run.
• Maintain NEUTRAL. The growth rate of monthly worldwide sales of semiconductor has trended lower mainly due
to the high base effect. Moving forward, the annual growth rate is expected to taper off to single digit in 2018
according to World Semiconductor Trade Statistic (WSTS). Nonetheless, we expect demand for semiconductor
products to remain robust, driven by; i) new smartphone line-up, ii) expected recovery in the tablet market, and
iii) stable demand from the automotive industry. Capital spending will continue to growth, albeit at a slower pace.
• Impact of “trade wars”. The trade tension between the US and China is causing uneasiness among
investors. Should the trade tension intensified, it could negatively impact the earnings prospect of
semiconductors companies under our coverage. Nonetheless, our channel checks indicate that there
is no change to volume order at this juncture. Nevertheless, we do not discount the possibility that
future earnings outlook of these companies could be affected. Pending further development on the
trade tension, we are maintaining our NEUTRAL recommendation on the sector.
44 JULY 2018
XVI. TELECOMMUNICATIONS
Lack of key growth catalyst.......................................................... Maintain NEUTRAL
• Expecting further delay for the assignment of 700Mhz spectrum. In the beginning of this year, Maxis,
Digi and Celcom Axiata have submitted their respective bids for the portion of the coveted 700Mhz
spectrum. To date, the outcome of the assignment has yet been announced. We are of the opinion that
the delay could be due to further review by the Malaysian Communications and Multimedia Commission
(MCMC). This could lead to postponement on the implementation of the spectrum which is initially
scheduled to be available on 1st January 2019. In addition, the mobile telecommunication operators
would also need to wait for the switch off of the analogue TV service.
• More spectrums due for allocation. Given that the successful bidders would need to pay a hefty sum
for the 700Mhz, we do not discount the possibility that the spectrum allocation for much awaited
2,300Mhz and 2,600Mhz could be postpone further. This would provide more time for the mobile
telecommunication service providers (telcos) to strengthen their respective financial position. On
another note, the concession for the 2,100Mhz spectrum band would also expire in 2018 which are
currently helmed by Maxis, Umobile, Celcom and Digi. Thus, this could create uncertainties among
the four mobile service providers should they be able to retain their respective portion beyond 2018.
• Challenging mobile realm. Postpaid revenue continues to gain positive traction as mobile operators
continued to improve on their postpaid plan proposition and held active marketing campaign to promote
their postpaid services. On the contrary, the prepaid segment remains under pressure. This was mainly
impacted by price-focused competition, SIM card consolidation and migration from prepaid to postpaid.
• More digital product offerings from the telcos. To be competitive, the big three telcos have introduced
new digital products. Maxis, Digi and Celcom Axiata have launched their respective prepaid services
on digital platform only. These are called Ookyo, Tapp and Yoodo respectively. Minimal upfront capex
would be required for the rollout as the entire service would be available only on the digital platform.
This would also enable the telcos to tap into the younger generation pool of customer. In addition to
this, the telcos have been focusing on provision of digital ancillary services which leverage on existing
telecommunication services. Digi’s digital offering is centred on FinTech (e.g. Vcash), IoT (iFleet) and
B2B (ijual). This is similar with Axiata’s digital business initiative in the areas of FinTech, adtech, the
enterprise IoT and application platform. Maxis has also launched its IoT suite of solutions targeting the
early adopter industries of logistics, fleet management and utilities.
• Maintain NEUTRAL. We expect competition to remain intense among the mobile service providers as
they are constantly solidifying its market position. Moreover, while more emphasis has been place on
digital offerings, we do not expect this segment to significantly contribute earnings in the near term.
The hefty cost of acquiring and maintaining new spectrum allocation serves as a challenge to local
mobile players. On another note, fixed line players such as Telekom Malaysia has also shown downward
pressure on earnings as the increase in internet revenue is unable to compensate for the drop in voice
and data revenues. Given the lack of catalyst in the telecommunication sector, we are maintaining
our NEUTRAL recommendation on the sector.
JULY 2018 45
XVII. TOBACCO
All time high illicits market share to limit earnings growth.................... Maintain NEUTRAL
(negative bias)
• Legal volume contracted as illicits hit all time high market share of 63%. Total industry legal volume
contracted by -4.2%yoy due to the increase in illicit cigarette market share by +3.0%yoy to 63% in 1Q18. The
all-time high illicit cigarette market share was contributed by: (i) smuggled cigarettes at 59% and; (ii) quasi
legal cigarettes with fake tax stamps at 4%. This new dynamic in illicit cigarettes market that came about
in 2H17 has continued to add pressure on the current legal cigarette sales in addition to the current illicit
cigarette market which remains at above 50% in terms of market share. Hence, we think that this condition
will persist through 2H18 as we are expecting the resilience in demand for illicit cigarettes to continue.
Chart 50: YTD Total Industry Volume (TIV) Chart 51: BAT Market Share by Products
Source: BAT, MIDFR Source: MIER, MIDFR
• Reintroduction of Rothmans cushioned earnings. The reintroduction of BAT’s old brand Rothmans into
the value-for-money (VFM) segment has proven to cushion BAT’s earnings against the impact coming from
the persistently high adoption of illicit cigarettes in the market. The reintroduction has so far gained
positive traction due to the lower pricing of Rothmans. The market share for Rothmans has grown by +3.0%
since its re-introduction in 4Q17. Therefore, we opine that this will continue to encourage some illicit
cigarette smokers to convert back to legal brands despite the high illicit cigarettes market share as it is
perceived to be more affordable than BAT’s other brand such as: Dunhill, Peter Stuyvesant and Pall Mall.
• Maintain NEUTRAL with negative bias. For 2H18, we remain cautious over the outlook on the tobacco
sector as we opine that the operating environment will remain challenging with a new illicit cigarette
dynamic adding to the illicit cigarette woes for BAT. Despite joining in the value-for-money (VFM)
segment, we opine that it will not translate to lower sales of illicit cigarettes. However, we do believe
that it will assist in sustaining the legal cigarettes market share from coming off even further. In
addition, as we do not think that the consumers will quit smoking due to the higher price of cigarettes
as seen in the western countries, the existence of alternatives such as illicit cigarettes and e-cigarettes
(vape) will continue to earnings recovery for the tobacco player. That said, BAT’s current valuation
remains attractive with a FY19F dividend yield of 5.0% and expected share price return of 15.7% due
to the recent massive sell-down of its share. We opine that despite the high illicits market, BAT will
be able to sustain its revenue with the re-introduction of Rothmans and its ongoing operating cost
rationalisation initiative which has managed to bring down its costs by -39.4%yoy. Therefore, we are
maintaining our BUY recommendation on BAT (TP of RM37.70).
46 JULY 2018
XVIII. TRANSPORTATION (PORTS, SHIPPING, LOGISTICS)

Lack of key growth catalyst.......................................................... Maintain NEUTRAL
• Logistics and warehousing companies to benefit from trade performance. Malaysia’s total exports for
the first five months of 2018 have grown by 6.9%yoy. As we are forecasting a year-on-year exports growth
to remain sturdy in FY18 at +9.3%, we retain our positive stance for logistic companies such as Tasco
(BUY;TP:RM2.50). Tasco has a global distribution hub for a global semiconductor company called Renesas
in the KLIA Freight Forwarder Complex which was launched in mid-2017. The distribution hub has helped
increased PBT margins of the contract logistics division from 10.9% in FY17 to 12.7% in FY18. Margins from
this division are expected to remain steady underpinned by Renesas’ growth in the chip market especially
microcontrollers for electrified cars and driver assistance systems is expected to be strong as power
efficiency becomes increasingly important as fuel efficiency amid tightening environmental regulations.
Moreover, the acquisition of MILS Cold Chain Logistics in April 2018 marks the full commencement of Tasco’s
cold supply chain logistics business and is expected to increase revenue contribution from RM61.4m to over
RM100.0m in FY19.
• Beneficiary of e-commerce activities. On the regional front, e-commerce in ASEAN is estimated to grow by
261% from 2016 to 2021 while Malaysia’s e-commerce penetration rate is expected to reach 4-5% in 2018,
underpinned by commendable internet penetration. The percentage of internet users aged 15 year and above
from Malaysia’s population has been steadily increasing from 57.1% in 2013 to 80.1% in 2017. In absolute
terms, the number of internet users in Malaysia has increased to 24.5m people last year compared to 2.5m
in 2006, translating into a 880% growth. As a consequence, Malaysia had the highest hourly average orders
of 6,000 during the Single’s Day Sales last year according to ShopBack Malaysia. The robust order numbers
beat Singapore, Philippines, Indonesia, Thailand and Taiwan. The accommodative e-commerce landscape in
Malaysia presents GDEX the opportunity to leverage from the need to fulfil a high volume of parcel deliveries.
All in, we reiterate our NEUTRAL recommendation for both Tiong Nam Logistics (NEUTRAL;TP:RM1.05) and
GDEX(NEUTRAL;TP:RM0.49) as we have yet to see realization of benefits in their ongoing expansion efforts.
Table 14: Estimated growth in market size between 2016 and 2021 (%)
Type of business Greater South East Asia U.S. China
E-commerce 261% 23% 196%
Digital Entertainment 145% n/a 54%
Online Travel 90% 15% 172%
Source: Google, Temasek Holdings 2016
Chart 52: Percentage of internet users from Malaysian population
Source: CEIC, MIDFR
JULY 2018 47
• Expected recovery in container volume. Westport’s (BUY;TP:RM3.85) overall container volume

declined by –7.4%yoy to 2.3m TEUs in 1QFY18 following the absence of the Ocean 3 Alliance volume
which were present in 1QFY17 prior to the reshuffling of alliances in April last year. We are slightly
optimistic, maintaining our forecast of a +5.2%yoy increase in throughput volume in FY18 Our more
upbeat view hinges on: (i) continued strength in Malaysian external trade which is expected to grow
at +9.3%yoy (internal forecasts) which will bodes well for the gateway segment and (ii) the ability
to accommodate Ultra-Large Container Vessels (ULCV) with a volume of slightly above 20,000 TEUs.
Overall, we favour Westports due to; (i) its strength in gateway container volume; (ii) the intra-Asia
containerised trade which is expected to grow at 5.1%yoy in 2018; and (iii) its attractive tariffs compared
to Port of Tanjung Pelepas and Ports of Singapore. Moreover, the expansion plans for CT10-CT19 that is
expected to increase Westport’s capacity to 30m TEUs per annum by 2030. This would allow Westports’
to compete more effectively against Ports of Singapore which has plans to raise capacity from circa
45m TEU to 65m TEU by 2027.
Chart 53: Westports Container Throughput Chart 54: Port of Tanjung Pelepas Container Throughput
Source: Westports, MIDFR Source: MMC Corp, MIDFR
• MMC Corp buoyed by PTP. Ports of MMC Corp (BUY;TP:RM2.29) registered a yearly PBT decline of
46.0% in 1QFY18. The blip in its port segment was mainly attributable to the -14.0%yoy drop in container
volume at Northport amidst the effects of reshuffling in shipping alliance, a similar issue faced by
Westports. We believe Northport’s fate is similar to that of Westports’ in terms of expected volume
recovery from 2HFY18 onwards. Nonetheless, the overall volume decline in MMC’s ports was cushioned
by Port of Tanjung Pelepas and Johor Ports which continues to register volume growth of +7%yoy and
+12%yoy respectively in 1QFY18. To recall, PTP is the key regional hub for the 2M Alliance with 12
weekly calls while the Ocean Alliance has four weekly calls at PTP. Moving forward, we opine that
overall container volume for the segment will be supported by: (i) resilient Malaysian external trade;
(ii) increased operational capacity of PTP following upgrade in infrastructure such the quay cranes and;
(iii) full contribution from Penang Port which was fully acquired on 1 May 2018. With a commendable
orderbook of around RM15b, we are cautiously optimistic on the engineering and construction segment
but a lack of big ticket infrastructure projects moving forward poses a risk to earnings. Overall, we
reiterate our BUY call for MMC Corp with a TP of RM2.29 which is mainly predicated on the potential
listings of its port assets by end of FY18 or early FY19.
48 JULY 2018
• Challenging environment for energy shipping. Spot rates for LNG vessels have declined by about
-5.6%qoq in 1QFY18 amid onset of warmer weather. The trend of weak spot rates is expected to
persist due to a huge pile-up of deliveries in 2018. Apart from that, time charter rates secured by MISC
Berhad (NEUTRAL; TP:RM6.52) for its petroleum fleet were much lower than expected amid tonnage
oversupply. Nonetheless, this could be partly mitigated by; (i) a pickup in scrapping activities in the
environment of slow crude tanker growth which bodes well for freight rates in the long term; (ii) its
latest higher term to spot ratio of 55:45 compared to 53:47 in 1QFY17 and; (iii) possible project wins
for its offshore business.
Chart 55: LNG Tanker Rates (US$’000/day) Chart 56: Spot Petrol. Tanker Rates (US’000/day)
Source: Company, Ship Brokers’ Reports MIDFR Source:Company, Ship Brokers’ Reports MIDFR
• Maintain NEUTRAL. We are cautiously optimistic on the outlook for the transportation sector especially
for last mile delivery service providers amid intense competition from the new start-up players entering
the industry which has prompted them to push for further expansion plans. Nonetheless we favour
logistic service providers which are venturing into niche areas by tapping into new service offerings
such as cold supply chain logistics. With the new government showing no signs of backing out of a
partnership with China’s Alibaba evident through the launch of its new office in Malaysia, paving way
for the progress of the Digital Free Trade Zone (DFTZ) which aims to boost exports especially for SMEs
in Malaysia.
JULY 2018 49
MIDF RESEARCH STOCK UNIVERSE as at 29 JUNE 2018 (cont’d)
Net Profit (RM m) EPS (sen) EPS (% chg) PER
Target
FYE Rec. Price (RM)
Price FY16 FY17 FY18F FY16 FY17 FY18F FY16 FY17 FY18F FY16 FY17 FY18F
CONSTRUCTION
Cahya Mata Sarawak Dec BUY 2.35 4.62 213.2 286.3 290.0 19.9 26.7 27.1 26.0 34.6 1.3 11.8 8.8 8.7
Gabungan AQRS Dec BUY 1.20 2.30 48.0 69.7 75.5 11.7 15.3 16.6 102.4 30.5 8.3 10.2 7.8 7.2
Gamuda Jul BUY 3.27 3.70 602.1 810.8 820.0 24.8 32.9 33.2 -4.7 32.6 1.1 13.2 10.0 9.8
Hock Seng Lee Dec BUY 1.40 1.67 46.5 63.3 65.6 8.5 11.5 11.9 -17.5 36.0 3.6 16.5 12.2 11.7
IJM Corp Mar BUY 1.79 2.45 653.8 349.8 348.0 18.2 9.7 9.6 -18.3 -46.9 -0.7 9.9 18.5 18.7
MRCB Dec BUY 0.60 1.36 167.6 202.2 205.0 6.6 4.6 4.7 -45.5 -29.8 1.4 9.1 13.0 12.9
Muhibbah Dec BUY 3.00 3.60 131.6 136.6 100.0 27.4 28.4 20.8 23.5 3.8 -26.8 10.9 10.5 14.4
Sunway Construction Dec BUY 1.81 2.67 137.8 158.5 174.3 10.7 12.3 13.5 11.6 15.1 10.0 17.0 14.8 13.4
Vivocom Dec BUY 0.06 0.23 14.6 38.0 46.8 0.4 1.1 1.4 -71.4 154.1 23.2 12.5 4.9 4.0
WCT Dec TRADING BUY 0.81 1.47 154.6 162.6 144.0 11.3 11.7 10.4 106.4 3.8 -11.4 7.2 6.9 7.8
CONGLOMERATE
MMC Corp Dec BUY 1.34 2.29 225.4 373.5 438.4 7.4 12.3 14.4 -59.1 65.8 17.4 18.1 10.9 9.3
YTL Corp Jun NEUTRAL 1.13 1.05 813.3 482.1 536.6 7.6 4.5 5.0 -12.1 -40.4 11.3 14.9 25.0 22.5
TELECOMMUNICATIONS
DiGi Dec NEUTRAL 4.15 4.70 1,476.7 1,403.3 1,480.7 19.0 18.0 19.0 -9.5 -5.0 5.5 21.8 23.0 21.8
Axiata Dec NEUTRAL 3.80 5.49 909.5 1,145.8 1,166.3 10.1 12.7 12.9 77.2 25.4 1.8 37.6 30.0 29.5
Maxis Dec NEUTRAL 5.46 6.16 2,191.6 2,015.0 2,095.0 28.6 25.8 26.8 6.7 -9.9 4.0 19.1 21.2 20.4
Telekom Malaysia Dec NEUTRAL 3.11 3.02 929.7 501.4 485.2 24.7 13.3 12.9 19.9 -46.0 -3.2 12.6 23.3 24.1
MEDIA
Astro Jan BUY 1.59 2.06 623.7 770.6 701.9 12.0 15.0 13.5 1.7 25.0 -10.3 13.3 10.6 11.8
Media Prima Dec TRADING BUY 0.48 0.41 -650.6 -63.6 -27.2 -58.7 -5.7 -2.5 998.5 -90.2 -57.2 n.a. n.a. n.a.
Star Dec NEUTRAL 1.09 1.04 90.3 42.1 45.7 12.2 5.7 6.2 -17.8 -53.4 8.6 8.9 19.1 17.6
TECHNOLOGY
Unisem Dec TRADING BUY 2.31 1.90 159.5 90.6 111.7 21.7 12.5 15.4 -1.8 -42.7 23.3 10.6 18.5 15.0
Globetronics Dec TRADING BUY 2.21 5.53 51.1 94.1 107.5 7.7 14.1 16.1 97.4 82.7 14.2 28.6 15.7 13.7
My E.G. Jun NEUTRAL 0.97 0.81 201.5 230.2 138.3 5.6 6.5 3.9 42.5 15.7 -39.9 17.2 14.9 24.8
D&O Green Tech Dec NEUTRAL 0.71 0.74 22.4 43.3 56.2 2.2 4.2 5.4 96.5 86.1 29.8 31.7 17.0 13.1
Inari Amertron Jun NEUTRAL 2.26 2.08 227.8 275.0 320.7 7.8 8.8 10.2 48.1 12.4 16.6 29.0 25.8 22.1
PLANTATION
Genting Plant Dec BUY 9.45 11.00 337.7 302.0 347.0 42.1 37.5 43.1 -1.7 -10.9 14.9 22.4 25.2 21.9
KL Kepong Sep BUY 24.16 28.00 1,005.1 1,113.0 1,088.0 94.4 104.5 102.2 -36.9 10.7 -2.2 25.6 23.1 23.6
FGV Dec NEUTRAL 1.51 1.69 143.7 80.4 97.8 3.9 2.2 2.7 333.3 -43.5 21.6 38.7 68.5 56.3
IJM Plant Mar NEUTRAL 2.14 2.20 115.1 46.6 95.0 13.1 5.3 10.8 375.3 -59.4 103.6 16.4 40.4 19.8
IOI Corp Jun NEUTRAL 4.54 4.48 743.2 1,224.0 1,226.0 11.8 20.0 20.1 18.3 69.6 0.2 38.4 22.6 22.6
PPB Group Dec NEUTRAL 19.68 19.40 1,205.4 912.0 1,031.0 101.7 76.9 87.0 15.3 -24.4 13.0 19.4 25.6 22.6
Sime Darby Plantation Jun NEUTRAL 5.33 5.15 967.2 1,080.0 979.0 n.a. 15.9 14.4 n.a. n.a. -9.4 n.a. 33.6 37.0
TSH Resources Dec NEUTRAL 1.15 1.20 115.0 74.3 79.5 8.4 5.4 5.8 96.0 -36.2 7.0 13.6 21.4 20.0
TOBACCO
BAT Dec BUY 34.78 37.70 492.6 437.3 524.9 172.5 153.2 183.8 -31.7 -11.2 20.0 20.2 22.7 18.9
GLOVE
Kossan Dec NEUTRAL 8.44 7.55 183.9 206.0 219.5 28.8 32.2 34.3 10.1 12.0 6.6 29.3 26.2 24.6
Hartalega Mar NEUTRAL 5.99 5.49 283.0 439.4 513.1 8.6 13.3 15.5 9.8 54.2 16.5 69.5 45.1 38.7
Supermax Jun NEUTRAL 4.17 3.31 67.2 130.1 160.9 10.0 19.8 24.5 -28.3 97.8 23.7 41.6 21.0 17.0
Top Glove Aug NEUTRAL 12.07 10.80 328.6 431.2 547.7 26.2 33.7 42.9 -9.1 28.7 27.0 46.0 35.8 28.2
HEALTHCARE
KPJ Dec BUY 1.02 1.16 161.9 200.0 226.3 3.7 4.7 5.4 330.2 28.3 13.2 27.6 21.5 19.0
IHH Healthcare Dec BUY 6.10 6.95 931.3 871.9 946.6 11.3 10.6 11.5 52.0 -6.5 8.6 53.9 57.7 53.1
UEM Edgenta Dec BUY 1.90 3.26 418.2 114.9 143.7 50.3 13.8 17.3 419.5 -72.5 25.1 3.8 13.8 11.0
Pharmaniaga Dec NEUTRAL 2.88 4.20 53.8 71.0 76.3 20.7 27.3 29.4 17.8 31.8 7.5 13.9 10.5 9.8
CONSUMER (F&B, Retail)
AEON Co. Dec NEUTRAL 2.27 2.11 105.0 106.3 109.5 7.5 7.6 7.8 15.6 1.2 3.0 30.3 30.0 29.1
MSM Dec NEUTRAL 3.63 3.86 -32.6 97.1 129.1 -4.6 13.8 18.4 -127.0 -398.3 33.0 n.a. 26.3 19.8
Nestle Dec NEUTRAL 147.50 132.32 645.8 694.2 734.6 275.4 296.0 313.3 1.2 7.5 5.8 53.6 49.8 47.1
Padini Jun NEUTRAL 5.97 4.77 157.4 178.3 201.7 23.9 27.1 30.7 14.6 13.3 13.1 25.0 22.0 19.5
Panasonic Mar NEUTRAL 37.34 38.15 127.1 131.0 167.9 209.0 216.0 276.4 -13.6 3.3 28.0 17.9 17.3 13.5
Spritzer Dec NEUTRAL 2.31 2.27 25.5 25.2 27.2 13.8 12.0 13.0 -29.1 -13.2 7.9 16.7 19.2 17.8
F&N Sep SELL 39.02 28.29 323.4 404.4 487.1 88.3 110.3 132.9 -16.1 24.9 20.5 44.2 35.4 29.4
QL Resources Mar SELL 6.00 4.71 195.9 206.2 246.2 12.3 12.7 15.2 6.7 3.2 19.4 48.7 47.2 39.5
INDUSTRIAL PRODUCT
Can One Dec BUY 2.36 2.71 63.6 65.1 75.4 33.1 33.9 39.2 -26.4 2.4 15.8 7.1 7.0 6.0
Daibochi Dec BUY 2.10 2.59 26.0 38.9 45.0 7.9 11.9 13.7 5.6 50.0 15.7 26.5 17.7 15.3
Favelle Favco Dec BUY 2.50 2.92 63.1 75.9 85.3 28.5 34.3 38.6 -15.8 20.4 12.4 8.8 7.3 6.5
KKB Engineering Dec BUY 0.80 1.15 1.6 2.7 3.0 0.6 1.0 1.2 -127.7 68.9 11.1 128.2 75.9 68.3
P.I.E. Industrial Dec BUY 1.30 1.95 48.0 49.8 55.5 12.5 13.0 14.4 33.1 3.8 11.3 10.4 10.0 9.0
Fima Corporation Mar NEUTRAL 1.97 1.95 37.7 36.1 36.7 15.6 15.0 15.3 -26.4 -4.2 1.9 12.6 13.2 12.9
Superlon Apr NEUTRAL 1.08 1.58 23.7 12.3 19.3 14.9 7.7 12.1 42.4 -48.5 57.7 7.2 14.0 8.9
United U-Li Dec NEUTRAL 0.86 1.72 19.1 20.8 23.2 8.8 9.6 10.6 -38.5 8.7 11.2 9.7 8.9 8.0
SERVICES
Scicom Jun BUY 1.99 2.29 45.4 36.6 44.5 12.8 10.3 12.5 8.2 -19.4 21.6 15.6 19.3 15.9
BANKING
Affin Bank Dec BUY 2.56 2.90 417.9 588.0 698.0 24.0 30.3 35.9 -12.7 26.1 18.7 10.7 8.5 7.1
Alliance Bank Mar BUY 4.04 4.69 512.1 493.2 596.0 33.5 31.9 38.5 -48.5 -4.8 20.7 12.1 12.7 10.5
BIMB Dec BUY 3.85 5.15 619.8 671.0 687.3 37.9 39.6 40.6 7.6 4.4 2.4 10.1 9.7 9.5
CIMB Dec BUY 5.45 7.85 4,475.2 4,984.0 5,785.0 49.6 53.2 61.8 21.0 7.2 16.1 11.0 10.2 8.8
Malayan Banking Dec BUY 9.00 11.40 7,520.5 8,070.0 8,713.0 72.0 73.8 79.7 6.2 2.5 8.0 12.5 12.2 11.3
Public Bank Dec BUY 23.36 27.30 5,470.0 5,787.0 6,101.0 141.7 148.3 156.3 5.1 4.6 5.4 16.5 15.8 14.9
AMMB Mar NEUTRAL 3.75 3.75 1,324.6 1,132.1 1,363.8 44.1 37.6 45.2 1.7 -14.6 20.2 8.5 10.0 8.3
Hong Leong Bank Jun NEUTRAL 18.20 18.85 2,145.0 2,601.0 2,776.0 104.9 127.2 135.7 5.1 21.2 6.7 17.3 14.3 13.4
Hong Leong
50 Financial Jun
JULY 2018 NEUTRAL 18.00 19.00 1,506.8 1,881.0 2,143.0 131.8 164.2 187.1 7.0 24.6 13.9 13.7 11.0 9.6
RHB Bank Dec TRADING BUY 5.46 6.00 1,950.1 2,174.0 2,322.0 48.6 54.2 57.9 11.5 11.6 6.8 11.2 10.1 9.4
Source: Company, MIDF Research
DPS Yield (%) PBV 52-week Price
BV / share Net margin No of shares Market cap
ROA (%) ROE (%)
FY16 FY17 FY18F FY16 FY17 FY18F FY16 (RM) % (m) (RM m) High (RM) Low (RM)
8.0 3.5 3.5 3.4 1.5 1.5 1.06 2.22 18.09 7.00 10.67 1,071.2 2,517.3 4.42 1.74
0.5 3.1 3.1 0.4 2.6 2.6 1.22 0.98 14.85 6.18 14.67 454.9 545.9 2.14 0.62
12.0 14.0 12.0 3.7 4.3 3.7 1.04 3.15 25.25 5.14 10.34 2,468.0 8,070.3 5.48 3.00
2.4 2.6 2.5 1.7 1.9 1.8 1.03 1.36 12.51 6.49 8.58 549.5 769.3 1.65 1.30
7.5 6.0 8.0 4.2 3.4 4.5 0.68 2.62 5.80 1.64 3.25 3,630.9 6,499.3 3.53 1.60
1.8 6.4 6.5 2.9 10.7 10.8 0.54 1.10 7.16 1.96 4.10 4,390.8 2,634.5 1.34 0.55
7.0 5.0 5.0 2.3 1.7 1.7 1.43 2.10 9.78 4.00 9.22 480.3 1,441.0 3.36 2.46
4.0 2.1 2.3 2.2 1.2 1.3 4.01 0.45 7.63 8.40 28.57 1,292.2 2,339.0 2.64 1.72
0.0 0.0 0.0 0.0 0.0 0.0 0.40 0.14 20.91 6.14 7.71 3,398.7 186.9 0.16 0.05
0.0 1.1 1.1 0.0 1.4 1.4 0.36 2.23 8.58 2.00 5.17 1,387.9 1,124.2 2.15 0.70
4.0 4.0 4.0 3.0 3.0 3.0 0.43 3.15 8.98 1.63 3.65 3,045.1 4,080.4 2.50 1.28
4.9 2.7 3.1 4.3 2.4 2.7 0.86 1.32 3.33 0.65 2.10 10,665.0 12,051.4 1.55 0.92
18.8 18.0 18.9 4.5 4.3 4.6 48.22 0.09 22.13 24.06 270.53 7,775.0 32,266.3 5.10 3.93
8.5 8.0 8.5 2.2 2.1 2.2 1.47 2.58 4.70 1.64 3.76 9,049.7 34,389.0 5.82 3.76
20.0 20.0 20.0 3.7 3.7 3.7 6.04 0.90 23.17 10.47 28.61 7,816.6 42,678.8 6.14 5.23
21.5 11.9 11.6 6.9 3.8 3.7 1.55 2.01 4.15 2.02 6.46 3,757.9 11,687.2 6.66 3.00
12.5 12.5 12.5 7.9 7.9 7.9 12.11 0.13 13.93 11.25 117.96 5,213.9 8,290.1 2.94 1.31
4.0 0.0 0.0 8.3 0.0 0.0 0.71 0.67 -5.32 -4.02 -8.24 1,109.2 532.4 0.94 0.25
12.0 6.0 6.0 11.0 5.5 5.5 0.96 1.14 8.13 3.65 4.81 737.9 804.3 2.22 1.00
11.0 7.0 8.0 4.8 3.0 3.5 1.17 1.98 6.18 4.91 6.19 727.1 1,679.6 4.25 1.60
1.7 22.0 23.0 0.8 10.0 10.4 5.27 0.42 31.06 23.69 33.45 667.0 1,474.1 2.97 1.49
1.7 1.9 1.2 1.8 2.0 1.2 5.06 0.19 62.01 26.65 41.71 3,552.3 3,428.0 3.03 0.66
50.0 1.3 1.8 70.4 1.8 2.5 32.46 0.02 9.35 8.97 13.65 1,038.9 737.6 0.80 0.53
4.2 6.3 7.3 1.9 2.8 3.2 6.92 0.33 23.37 22.85 31.49 3,141.0 7,098.8 2.55 1.42
15.0 20.7 23.8 1.6 2.2 2.5 1.79 5.29 16.74 3.57 6.61 804.8 7,605.8 10.98 9.17
50.0 61.7 60.4 2.1 2.6 2.5 2.32 10.42 5.30 5.71 n.a. 1,065.0 25,729.6 25.98 23.26
5.0 5.0 5.0 3.3 3.3 3.3 0.99 1.53 0.47 0.39 1.02 3,648.2 5,508.7 2.18 1.45
7.0 7.0 5.1 3.3 3.3 2.4 1.16 1.84 6.24 1.78 2.88 880.6 1,884.4 3.12 2.08
9.5 22.7 8.8 2.1 5.0 1.9 3.13 1.45 8.67 6.79 15.86 6,106.4 27,723.3 4.81 4.21
30.0 23.1 26.1 1.5 1.2 1.3 1.15 17.06 21.23 3.98 4.23 1,185.5 23,330.6 21.04 16.32
116.7 7.9 7.2 21.9 1.5 1.4 2.60 2.05 9.04 3.80 10.75 6,800.8 36,248.5 6.00 4.58
2.0 1.3 1.4 1.7 1.2 1.3 1.22 0.94 6.92 2.22 4.62 1,380.7 1,587.8 1.76 1.12
169.0 148.6 165.4 4.9 4.3 4.8 27.97 1.24 14.57 41.86 114.44 285.5 9,930.7 44.94 22.46
6.0 9.5 10.5 0.7 1.1 1.2 4.50 1.88 10.52 11.16 17.46 639.5 5,397.1 8.79 6.35
4.3 9.5 7.5 0.7 1.6 1.3 9.95 0.60 18.27 16.72 21.99 3,313.0 19,844.9 6.64 3.19
2.5 6.0 6.0 0.6 1.4 1.4 2.52 1.66 11.55 7.27 12.16 655.7 2,734.1 4.38 1.69
14.5 22.0 23.0 1.2 1.8 1.9 6.67 1.81 12.65 14.69 21.43 1,277.9 15,424.6 12.48 5.33
5.9 2.8 3.2 5.8 2.7 3.1 2.54 0.40 6.29 4.72 11.02 4,214.5 4,298.8 1.15 0.84
3.0 7.0 8.0 0.5 1.1 1.3 2.35 2.59 7.83 2.24 3.37 8,244.6 50,292.0 6.42 5.42
13.0 11.1 12.1 6.8 5.8 6.4 1.44 1.32 5.42 3.82 7.17 831.6 1,580.1 2.71 1.88
19.0 0.2 0.2 6.6 0.1 0.1 1.43 2.02 3.06 4.42 12.98 259.8 748.3 4.65 2.86
4.0 3.5 3.8 1.8 1.5 1.7 1.61 1.41 2.60 2.41 5.42 1,404.0 3,187.1 2.65 1.45
4.0 6.9 9.2 1.1 1.9 2.5 1.31 2.77 3.66 2.85 5.03 703.0 2,551.8 4.48 3.36
275.0 295.0 315.0 1.9 2.0 2.1 45.75 3.22 13.20 27.15 108.48 234.5 34,588.8 163.00 82.70
10.0 14.0 16.0 1.7 2.3 2.7 6.32 0.94 11.35 20.23 32.29 657.9 3,927.7 6.01 3.42
117.0 148.0 160.0 3.1 4.0 4.3 2.57 14.51 10.93 12.23 14.86 60.7 2,268.2 40.80 33.00
0.0 6.0 6.5 0.0 2.6 2.8 1.27 1.83 8.03 5.51 6.69 210.0 485.0 2.47 2.13
57.5 60.0 72.5 1.5 1.5 1.9 6.48 6.02 9.86 12.51 18.96 366.5 14,302.4 39.98 23.40
3.3 4.5 5.5 0.5 0.8 0.9 5.39 1.11 6.32 6.20 10.91 1,622.4 9,734.6 6.05 3.71
4.0 4.0 4.0 1.7 1.7 1.7 0.57 4.16 5.73 4.33 8.21 192.2 453.5 3.48 2.35
3.5 6.3 7.2 1.7 3.0 3.4 3.41 0.62 10.01 10.62 17.53 327.5 687.7 2.41 2.00
13.5 14.0 15.0 5.4 5.6 6.0 0.89 2.82 14.42 6.29 12.08 221.2 553.1 2.95 2.34
2.0 2.0 2.0 2.5 2.5 2.5 0.71 1.12 1.29 0.75 0.90 257.8 204.9 1.28 0.78
2.4 5.0 5.5 1.8 3.8 4.2 1.22 1.06 7.34 9.52 12.39 384.0 499.3 2.31 1.21
7.5 12.5 12.5 3.8 6.3 6.3 0.87 2.27 12.69 5.64 6.39 240.5 473.8 2.36 1.91
5.5 5.5 5.5 5.1 5.1 5.1 0.74 1.45 11.21 8.51 11.36 158.8 171.5 2.96 1.00
1.3 0.7 3.6 1.6 0.8 4.2 0.65 1.31 10.41 5.72 7.29 217.8 186.2 3.00 0.82
9.0 9.0 9.0 4.5 4.5 4.5 6.60 0.30 18.35 31.77 34.76 355.5 707.4 2.30 1.58
6.9 11.0 12.0 2.7 4.3 4.7 0.60 4.27 19.11 0.84 7.06 1,942.9 4,973.9 2.70 2.22
31.2 8.5 17.0 7.7 2.1 4.2 1.15 3.53 18.28 0.92 9.03 1,548.1 6,254.3 4.49 3.62
14.0 15.0 16.0 3.6 3.9 4.2 1.36 2.83 18.03 1.02 13.64 1,693.6 6,520.2 4.61 3.76
25.0 22.0 24.0 4.6 4.0 4.4 1.09 5.01 18.68 0.98 10.01 9,365.8 51,043.6 7.39 5.32
55.0 58.0 61.0 6.1 6.4 6.8 1.34 6.72 24.32 1.05 10.73 10,930.8 98,376.8 11.08 8.68
61.0 63.0 66.0 2.6 2.7 2.8 2.40 9.74 29.78 1.46 15.05 3,902.8 91,169.0 25.78 19.90
17.6 15.0 15.8 4.7 4.0 4.2 0.68 5.48 17.05 0.82 6.41 3,014.2 11,303.2 5.12 3.40
45.0 47.0 47.0 2.5 2.6 2.6 1.50 12.14 33.09 1.33 11.47 2,045.6 37,229.9 20.02 14.90
38.0 38.0 39.0 2.1 2.1 2.2 1.17 15.45 22.05 0.86 7.51 1,145.2 20,614.4 JULY 20.40
2018 15.40
51
15.0 15.0 17.0 2.7 2.7 3.1 0.98 5.57 20.59 0.94 9.38 4,010.0 21,894.9 5.88 4.71
MIDF RESEARCH STOCK UNIVERSE as at 29 JUNE 2018 (cont’d)

Target Net Profit (RM m) EPS (sen) EPS (% chg) PER
FYE Rec. Price (RM)
Price FY16 FY17 FY18F FY16 FY17 FY18F FY16 FY17 FY18F FY16 FY17 FY18F
FINANCE
AEON Credit Feb BUY 14.40 15.40 251.3 286.4 311.3 116.4 143.0 124.7 17.1 22.9 -12.8 12.4 10.1 11.5
MBSB Dec BUY 1.16 1.54 417.1 697.9 565.2 7.1 11.3 9.2 44.9 59.8 -19.0 16.3 10.2 12.6
Bursa Malaysia Dec NEUTRAL 7.35 7.57 223.0 237.5 240.0 27.7 29.5 29.8 14.7 6.5 1.1 26.6 25.0 24.7
INSURANCE
LPI Capital Dec NEUTRAL 17.08 18.91 313.8 330.2 358.0 78.8 82.9 89.9 -28.2 5.2 8.4 21.7 20.6 19.0
Syarikat Takaful Dec BUY 3.94 4.44 206.7 230.3 236.2 25.1 27.9 28.7 16.8 11.2 2.6 15.7 14.1 13.7
Tune Protect Dec BUY 0.90 1.10 46.3 68.1 69.9 6.2 9.1 9.3 -42.1 47.1 2.6 14.6 9.9 9.7
OIL & GAS
Dayang Ent Dec BUY 0.65 1.06 -143.9 73.4 104.4 -15.4 7.6 10.8 -346.9 -149.5 42.2 n.a. 8.5 6.0
Gas Malaysia Dec BUY 2.87 3.50 194.6 198.3 218.9 15.0 15.4 17.0 15.4 3.0 10.4 19.1 18.6 16.8
Petronas Dagangan Dec BUY 24.80 28.00 1,539.5 994.4 1,150.6 155.0 100.1 115.8 63.0 -35.4 15.7 16.0 24.8 21.4
Petronas Gas Dec BUY 17.30 20.00 1,792.7 1,868.2 1,907.5 90.6 94.4 96.4 3.1 4.2 2.1 19.1 18.3 17.9
Deleum Dec NEUTRAL 1.01 1.20 32.3 34.4 46.4 8.1 8.6 11.6 21.7 6.3 34.9 12.5 11.8 8.7
Dialog Group Jun NEUTRAL 3.09 3.24 370.6 448.8 483.2 6.9 8.0 8.6 20.7 15.7 7.7 44.9 38.8 36.1
MMHE Dec NEUTRAL 0.66 0.87 34.2 60.4 81.4 2.1 3.8 5.1 -125.5 76.4 34.8 30.8 17.5 13.0
Petronas Chemicals Dec NEUTRAL 8.41 8.90 4,177.0 4,356.0 4,450.0 52.2 54.5 55.6 42.2 4.3 2.2 16.1 15.4 15.1
Wah Seong Dec NEUTRAL 1.27 1.58 113.0 121.7 131.4 14.6 15.8 17.0 -149.5 7.7 8.0 8.7 8.1 7.5
Bumi Armada Dec TRADING BUY 0.72 0.89 352.2 306.4 345.0 6.0 5.2 5.9 -117.9 -13.0 12.6 12.0 13.8 12.3
KNM Group Dec TRADING BUY 0.18 0.22 -42.4 28.1 31.3 -2.0 1.2 1.3 -87.4 -160.8 11.4 n.a. 15.0 13.5
Sapura Energy Jan TRADING BUY 0.64 1.01 208.3 -2,503.5 105.1 3.5 -42.1 1.8 -126.4 -1,302.9 -104.2 18.3 n.a. 36.5
PROPERTY & REITS
AmanahRaya REIT Dec BUY 0.86 0.94 31.7 37.0 42.0 5.5 6.5 7.3 -21.9 16.9 13.5 15.6 13.3 11.7
E&O Mar BUY 1.57 2.37 86.6 100.8 116.0 6.9 7.7 8.9 129.7 11.9 16.0 22.8 20.4 17.6
Eco World Oct BUY 1.23 1.48 209.7 163.0 165.0 7.3 5.5 5.6 33.5 -23.6 1.2 17.0 22.2 21.9
IGB REIT Dec BUY 1.74 1.73 343.4 307.0 323.0 9.8 8.7 9.2 22.9 -10.9 5.2 17.8 20.0 19.0
Mah Sing Dec BUY 1.07 1.60 361.9 317.8 358.9 12.5 13.1 14.8 -6.9 4.4 12.9 8.5 8.2 7.2
SP Setia Dec BUY 3.10 3.69 932.9 651.0 607.0 26.8 16.7 15.6 -10.5 -37.5 -6.8 11.6 18.5 19.9
Sunreit Jun BUY 1.77 1.90 424.5 284.0 303.0 14.4 9.6 10.3 31.0 -33.1 6.7 12.3 18.4 17.2
UEM Sunrise Dec BUY 0.71 1.25 280.1 223.0 235.0 6.2 4.9 5.2 106.7 -20.7 5.4 11.5 14.4 13.7
UOA Development Dec BUY 2.38 2.80 491.2 362.9 379.0 29.0 20.9 21.9 -32.6 -27.8 4.4 8.2 11.4 10.9
Axis REIT Dec NEUTRAL 1.46 1.55 122.6 112.0 123.0 11.0 9.1 10.0 -1.1 -17.2 9.8 13.3 16.1 14.6
Capitaland Dec NEUTRAL 1.20 1.11 162.1 159.4 161.7 8.0 7.8 7.9 -3.6 -2.0 1.4 15.1 15.4 15.1
IOI Prop Jun NEUTRAL 1.60 1.69 920.9 703.0 697.0 18.4 12.8 12.7 -25.8 -30.7 -0.9 8.7 12.5 12.6
KLCCP Stapled Dec NEUTRAL 8.00 7.59 350.3 734.0 756.0 19.4 40.7 41.9 3.2 109.6 3.0 41.2 19.7 19.1
Magna Prima Dec NEUTRAL 1.10 1.18 10.7 6.7 7.7 3.2 2.0 2.3 -75.9 -37.4 14.9 34.2 54.6 47.5
Pavilion Dec NEUTRAL 1.78 1.41 249.4 252.0 255.0 8.2 8.3 8.4 -20.2 0.8 1.2 21.6 21.4 21.2
Sunway Dec NEUTRAL 1.55 1.60 639.5 605.8 650.0 13.3 12.5 13.4 4.5 -6.3 7.3 11.7 12.4 11.6
TRANSPORT
- Aviation
AirAsia Dec BUY 2.99 4.87 1,628.8 1,604.1 1,626.7 49.3 48.0 48.7 -15.4 -2.6 1.4 6.1 6.2 6.1
AirAsia X Dec BUY 0.34 0.47 98.9 223.5 230.1 2.4 5.4 5.5 118.2 124.5 3.0 14.2 6.3 6.1
Malaysia Airports Dec BUY 8.80 9.88 179.0 512.8 594.7 10.8 30.9 35.8 1,051.1 185.6 16.0 81.3 28.5 24.6
-Logistics
Tasco Mar BUY 1.70 2.50 30.7 29.4 41.6 15.3 14.7 20.8 0.2 -4.1 41.5 11.1 11.6 8.2
GD Express Jun NEUTRAL 0.41 0.49 36.8 31.7 37.1 0.7 0.6 0.7 -1.5 -14.3 17.0 61.4 71.6 61.2
Tiong Nam Mar NEUTRAL 0.98 1.05 81.5 30.5 59.5 19.2 7.3 13.1 5.7 -61.8 78.6 5.1 13.4 7.5
- Ports
Westports Dec BUY 3.39 3.85 651.5 584.6 613.7 19.1 17.1 18.0 2.3 -10.3 5.0 17.7 19.8 18.8
- Shipping
MISC Dec NEUTRAL 5.92 6.52 1,981.5 1,796.1 1,995.7 44.4 40.2 44.7 -23.2 -9.4 11.1 13.3 14.7 13.2
TOLL
LITRAK Mar BUY 4.23 5.90 221.0 228.6 283.4 42.1 43.3 53.7 25.9 2.9 23.9 10.0 9.8 7.9
UTILITIES
Tenaga Nasional Dec BUY 14.64 16.30 6,904.0 7,373.8 6,379.5 122.0 129.9 112.4 -6.5 6.4 -13.5 12.0 11.3 13.0
YTL Power Jun BUY 1.03 1.20 693.8 694.8 803.7 8.8 8.9 10.2 -36.3 0.9 15.7 11.7 11.6 10.1
AUTO
Bermaz Auto Apr BUY 2.20 2.70 117.6 140.1 226.0 10.3 12.1 19.5 -40.8 18.3 60.4 21.5 18.1 11.3
UMW Holdings Dec BUY 5.97 7.11 -651.2 370.3 578.7 -55.7 31.7 49.5 -60.7 -156.9 56.3 n.a. 18.8 12.1
Tan Chong Dec BUY 1.80 2.05 -88.6 20.5 60.5 -13.6 3.1 9.3 61.2 -123.1 195.1 n.a. 57.3 19.4
MBM Dec BUY 2.38 3.20 -148.8 109.3 126.5 -38.1 28.0 32.4 -325.3 -173.4 15.7 n.a. 8.5 7.4
BUILDING MATERIAL
- Cement
Lafarge Malaysia Dec SELL 3.10 3.24 -215.2 -240.0 -260.0 -25.3 -28.2 -30.6 -380.7 11.6 8.3 n.a. n.a. n.a.
- Timber
Ta Ann Dec SELL 2.63 2.30 119.3 83.7 90.8 26.8 18.8 20.4 -5.0 -29.8 8.5 9.8 14.0 12.9
Source: Company, MIDF Research
52 JULY 2018
DPS Yield (%) PBV BV / share Net margin (%) No of shares Market cap 52-week Price
(RM) ROA (%) ROE (%)
FY16 FY17 FY18F FY16 FY17 FY18F FY16 % (m) (RM m) High (RM) Low (RM)
42.0 53.6 42.3 2.9 3.7 2.9 2.26 6.37 21.04 3.72 15.42 249.7 3,595.4 15.20 11.98
5.0 4.0 4.0 4.3 3.4 3.4 0.99 1.17 42.61 1.56 9.80 6,149.9 7,133.9 1.35 1.01
13.3 28.0 28.3 1.8 3.8 3.9 7.17 1.03 45.49 10.67 27.54 806.3 5,925.9 8.20 6.31
60.0 75.0 70.0 3.5 4.4 4.1 3.43 4.98 30.87 8.66 17.19 398.4 6,804.4 17.50 14.53
15.0 13.0 13.0 3.8 3.3 3.3 3.68 1.07 11.95 2.81 27.63 824.2 3,247.4 4.23 3.17
5.2 5.0 6.0 5.8 5.6 6.7 1.31 0.69 17.29 5.17 12.40 751.8 676.6 1.26 0.71
0.0 0.0 0.0 0.0 0.0 0.0 0.68 0.96 10.55 2.72 6.38 964.8 627.1 0.92 0.54
13.0 13.0 15.3 4.5 4.5 5.3 3.66 0.78 3.71 8.60 18.88 1,284.0 3,685.1 3.03 2.66
75.0 80.0 85.0 3.0 3.2 3.4 4.30 5.76 3.72 10.20 16.46 993.5 24,637.7 28.18 20.81
66.0 66.0 67.0 3.8 3.8 3.9 2.71 6.39 38.84 10.60 14.64 1,978.7 34,232.1 19.50 15.82
4.3 4.3 5.8 4.2 4.3 5.7 1.30 0.77 6.44 5.64 9.80 401.1 405.1 1.33 0.76
2.7 3.6 3.9 0.9 1.2 1.3 5.00 0.62 13.23 7.72 14.06 5,638.3 17,422.4 3.57 1.84
3.0 1.0 1.0 4.5 1.5 1.5 0.42 1.57 6.32 1.78 2.34 1,600.0 1,056.0 0.98 0.63
27.0 27.0 27.0 3.2 3.2 3.2 2.46 3.42 25.02 13.10 15.09 8,000.0 67,280.0 8.88 6.80
0.0 2.2 2.8 0.0 1.7 2.2 1.07 1.19 4.88 3.84 12.29 772.6 981.1 1.71 0.90
0.0 0.8 0.8 0.0 1.1 1.1 0.78 0.92 12.76 1.63 5.55 5,870.9 4,227.1 0.95 0.68
0.0 0.0 0.0 0.0 0.0 0.0 0.18 0.98 2.02 0.64 1.16 2,346.1 422.3 0.30 0.18
1.0 1.0 1.0 1.6 1.6 1.6 0.40 1.59 -42.47 -8.35 -26.49 5,992.2 3,835.0 1.75 0.40
5.4 5.6 6.4 6.3 6.5 7.4 0.62 1.39 60.04 2.42 5.08 573.2 493.0 0.97 0.83
3.0 3.0 3.0 1.9 1.9 1.9 1.10 1.42 10.27 2.46 5.37 1,297.3 2,036.8 1.70 1.35
0.0 0.0 0.6 0.0 0.0 0.5 0.85 1.45 5.57 1.65 3.82 2,944.4 3,621.6 1.68 0.98
9.3 8.4 8.8 5.3 4.8 5.1 1.64 1.06 58.49 5.85 8.25 3,524.6 6,132.8 1.80 1.46
6.5 6.5 6.5 6.1 6.1 6.1 0.63 1.71 10.90 4.45 6.84 2,427.7 2,597.6 1.62 0.98
15.5 12.4 13.2 5.0 4.0 4.3 1.01 3.07 14.40 2.35 4.72 3,890.3 12,060.1 4.00 2.77
9.2 8.7 9.3 5.2 4.9 5.2 1.24 1.43 53.47 4.15 6.74 2,945.1 5,212.8 1.90 1.48
1.0 1.4 1.5 1.4 1.9 2.0 0.47 1.52 7.68 1.55 3.00 4,537.4 3,221.6 1.26 0.69
15.0 15.0 15.0 6.3 6.3 6.3 0.94 2.52 33.55 6.56 7.99 1,733.1 4,124.8 2.71 2.30
7.3 8.0 8.8 5.0 5.5 6.0 1.12 1.31 64.48 4.39 7.04 1,232.3 1,799.2 1.67 1.19
16.4 7.5 7.6 13.7 6.3 6.4 0.93 1.30 43.21 3.82 5.93 2,040.6 2,448.8 1.83 0.98
6.0 4.8 5.3 3.8 3.0 3.3 0.49 3.27 16.80 2.09 3.80 5,506.1 8,809.8 2.22 1.47
36.2 35.4 36.4 4.5 4.4 4.5 1.11 7.21 53.70 4.13 4.88 1,805.3 14,442.7 8.64 6.77
3.0 0.4 0.5 2.7 0.4 0.4 0.62 1.78 6.77 0.69 1.12 332.6 365.9 1.59 1.00
8.2 7.7 7.8 4.6 4.3 4.4 1.39 1.28 51.43 4.46 6.40 3,034.5 5,401.4 1.78 1.32
6.0 6.1 6.2 3.9 3.9 4.0 0.94 1.65 11.27 3.00 7.14 4,864.5 7,539.9 1.96 1.44
12.0 13.0 13.0 4.0 4.3 4.3 1.07 2.79 16.52 7.40 23.91 3,342.0 9,992.5 4.75 2.93
0.0 0.0 0.0 0.0 0.0 0.0 1.37 0.25 4.90 4.69 22.61 4,148.1 1,410.4 0.45 0.33
13.0 13.0 13.0 1.5 1.5 1.5 1.80 4.88 11.02 2.28 5.69 1,659.2 14,600.9 9.45 7.86
4.5 4.5 5.0 2.6 2.6 2.9 0.94 1.81 4.14 3.93 8.08 200.0 340.0 2.58 1.55
0.3 0.3 0.3 0.6 0.7 0.7 5.10 0.08 12.65 6.63 7.44 5,602.6 2,269.1 0.74 0.39
2.0 0.0 3.5 2.0 0.0 3.6 0.62 1.57 4.63 1.69 4.24 455.8 446.6 1.79 0.93
14.3 14.0 14.0 4.2 4.1 4.1 5.43 0.62 27.99 11.50 25.70 3,410.0 11,559.9 3.90 3.10
30.0 30.0 30.0 5.1 5.1 5.1 0.80 7.41 17.84 3.56 5.00 4,463.8 26,425.7 7.90 5.03
25.0 25.0 30.0 5.9 5.9 7.1 2.71 1.56 43.63 10.11 27.77 527.9 2,233.1 6.00 3.63
61.0 71.9 62.2 4.2 4.9 4.2 1.44 10.20 15.55 5.19 12.81 5,678.2 83,128.6 16.34 13.54
4.9 4.5 5.3 4.8 4.4 5.1 0.64 1.60 7.21 1.43 5.15 7,843.5 8,078.8 1.43 0.73
11.0 10.4 15.6 5.0 4.7 7.1 5.35 0.41 7.03 16.61 26.70 1,161.8 2,555.9 2.47 1.84
0.0 15.8 24.8 0.0 2.6 4.2 2.23 2.68 3.35 3.72 8.87 1,168.3 6,974.7 6.98 4.70
1.0 3.0 3.0 0.6 1.7 1.7 0.42 4.30 0.47 0.38 0.74 652.7 1,174.8 1.91 1.29
1.5 7.0 8.1 0.6 2.9 3.4 0.64 3.73 6.31 5.27 6.60 390.9 930.3 2.68 2.01
0.0 2.4 2.4 0.0 0.8 0.8 0.95 3.27 -10.67 -5.51 -8.40 849.7 2,634.1 7.08 2.92
10.0 7.2 7.8 3.8 2.7 3.0 0.85 3.09 7.14 3.61 5.94 444.6 1,169.4 3.75 2.57
JULY 2018 53
APPENDIX
Table ii: Performance of various markets in Local Currency (% change)

Index
In Local Currency 2016 1Q17 2Q17 3Q17 4Q17 2017 1Q18
point
Mumbai Sensex 30 35,423.48 11.2% 4.4% 1.2% 8.9% 27.9% -3.2% 7.4%
Nikkei 225 22,304.51 -1.1% 5.9% 1.6% 11.8% 19.1% -5.8% 4.0%
Dow Jones 24,271.41 4.6% 3.3% 4.9% 10.3% 25.1% -2.5% 0.7%
Taiwan Weighted 10,836.91 6.0% 5.9% -0.1% 2.5% 15.0% 2.6% -0.8%
Hang Seng 28,955.11 9.6% 6.9% 6.9% 8.6% 36.0% 0.6% -3.8%
Straits Times 3,268.70 10.2% 1.6% -0.2% 5.7% 18.1% 0.7% -4.6%
KOSPI 2,326.13 6.6% 10.7% 0.1% 3.0% 21.8% -0.9% -4.9%
Jakarta Composite 5,799.24 5.1% 4.7% 1.2% 7.7% 20.0% -2.6% -6.3%
FBM KLCI 1,691.50 6.0% 1.4% -0.5% 2.3% 9.4% 3.7% -9.2%
Philippines Composite 7,193.68 6.9% 7.3% 4.2% 4.7% 25.1% -6.8% -9.9%
Shanghai Composite 2,847.42 3.8% -0.9% 4.9% -1.2% 6.6% -4.2% -10.1%
SET Index 1,595.58 2.1% 0.0% 6.2% 4.8% 13.7% 1.3% -10.2%
Source: Bloomberg *as at 29 June 2018
Table iii: Performance of various markets in US dollar (% change)

Index
In US Dollar 2016 1Q17 2Q17 3Q17 4Q17 2017 1Q18
point

SET Index 6.6% 1.2% 8.2% 7.2% 25.1% 5.8% -15.2%
1,595.58

Shanghai Composite 4.8% 0.7% 7.0% 0.7% 13.6% -0.8% -14.7%
2,847.42
FBM KLCI 7.5% 4.3% 1.3% 6.4% 20.9% 9.1% -13.1%
1,691.50

Philippines Composite 5.5% 6.8% 3.2% 6.6% 24.0% -10.8% -11.7%
7,193.68

Jakarta Composite 6.8% 4.7% 0.1% 6.7% 19.6% -3.6% -9.9%
5,799.24

KOSPI 15.1% 8.2% 0.1% 10.1% 37.2% 0.1% -9.4%
2,326.13

Straits Times 14.2% 3.1% 1.3% 7.3% 27.9% 2.7% -8.3%
3,268.70

Taiwan Weighted 13.1% 5.9% -0.1% 4.9% 25.6% 4.6% -5.1%
10,836.91

Hang Seng 9.3% 6.4% 6.9% 8.6% 35.0% 0.1% -3.8%
28,955.11

Nikkei 225 3.7% 5.0% 1.4% 11.9% 23.4% -0.1% -0.3%
22,304.51

Dow Jones 4.6% 3.3% 4.9% 10.3% 25.1% -2.5% 0.7%
24,271.41

Mumbai Sensex 30 16.6% 4.8% 0.0% 11.4% 36.2% -5.1% 2.2%
35,423.48
54 JULY 2018
Table iv: Performance by sectors (% change)
Index point 2016 1Q17 2Q17 3Q17 4Q17 2017 1Q18
Technology 35.32 37.9% 15.2% 5.6% 13.1% 89.7% -22.4% 8.7%
Consumer 734.73 6.0% 3.4% -1.1% 3.4% 12.1% 9.0% 4.2%
Industrial 3,127.53 4.2% 0.5% -2.1% 2.5% 5.1% -1.3% -3.4%
Plantation 7,534.16 5.9% -3.5% -0.5% 0.4% 2.0% 1.2% -5.8%
Property 1,019.93 15.6% -0.4% -3.8% -1.8% 8.8% -11.6% -6.0%
Finance 16,649.91 8.9% 7.1% -1.9% 2.6% 17.2% 8.1% -8.7%
Services & Trading 208.39 6.1% -1.1% 0.0% 1.4% 6.5% -1.4% -9.5%
Construction 202.74 13.6% 5.2% -4.3% -3.9% 9.8% -9.1% -28.7%
FBM Small Cap 14,012.50 16.1% 2.1% -2.8% 0.6% 15.9% -12.9% -5.7%
FBM Emas 11,960.93 7.8% 1.9% -0.5% 3.3% 12.9% 0.8% -8.3%
FBM 100 11,757.93 7.3% 1.9% -0.4% 3.5% 12.7% 1.9% -8.5%
FBM KLCI 1,691.50 6.0% 1.4% -0.5% 2.3% 9.4% 3.7% -9.2%
Table v: Regional earnings and valuations
EPS Growth (% change) PER
2018 (est as of) 2018 (f'cast as of) 2018 (est as of) 2018 (f'cast as of)
2017 2017
Mar-18 Jun-18 Mar-18 Jun-18 Mar-18 Jun-18 Mar-18 Jun-18
Nikkei 225 49.5% 14.0% 17.7% 5.7% 14.6% 19.1 16.1 16.2 15.2 14.1
Taiwan Weighted 11.9% 14.1% 14.1% 6.2% 5.8% 15.8 14.0 13.9 13.2 13.1
Hang Seng 18.7% 18.6% 15.2% 11.2% 10.6% 13.3 11.6 11.5 10.5 10.4
FBM KLCI 10.7% 4.2% -3.1% 7.2% 6.9% 15.7 16.6 16.2 15.5 15.2
Jakarta Comp. 26.0% 47.7% 49.7% 12.2% 11.9% 22.1 15.9 14.7 14.2 13.2
SET Index -0.1% 19.3% 18.1% 10.1% 9.7% 17.2 16.1 14.6 14.6 13.3
Philippines Comp. 6.5% 21.0% 17.2% 12.4% 12.3% 19.3 17.7 16.5 15.8 14.7
Shanghai Comp. 9.1% 31.9% 28.7% 13.9% 13.5% 14.5 12.3 11.3 10.8 9.9
Straits Times 29.2% -18.7% -17.7% 8.3% 8.8% 10.7 13.8 13.0 12.7 11.9
Mumbai Sensex 30 9.7% 4.0% 31.3% 23.4% 21.3% 24.1 21.6 18.4 17.5 15.2
DJIA 13.5% 23.4% 28.7% 9.4% 8.8% 20.3 16.3 15.8 14.9 14.5
JULY 2018 55
Table vi: Performance of MIDFR’s stocks under coverage

OUT-PERFORMERS Share price (RM) UNDER-PERFORMERS Share price (RM)
% change TP % change TP
30/6/18 31/3/18 30/6/18 31/3/18
Supermax 4.17 2.51 66.3% 3.31 My E.G. Services Berhad 0.97 2.90 -66.7% 0.81
Padini 5.97 4.44 34.5% 4.77 Malaysian Resources Corporation Berhad 0.60 1.01 -40.6% 1.36
British American Tobacco 34.78 26.15 33.0% 37.70 Telekom Malaysia Berhad 3.11 5.22 -40.4% 3.02
AEON Co. 2.27 1.73 31.1% 2.11 Cahya Mata Sarawak Berhad 2.35 3.87 -39.3% 4.62
Pavilion REIT 1.78 1.37 29.9% 1.41 Gamuda Berhad 3.27 5.18 -36.9% 3.70
Globetronics 2.21 1.72 28.8% 5.53 WCT Holdings Berhad 0.81 1.27 -36.0% 1.47
Media Prima 0.48 0.38 26.3% 0.41 IJM Corporation Berhad 1.79 2.64 -32.1% 2.45
Top Glove 12.07 9.58 25.9% 10.80 Pharmaniaga Berhad 2.88 4.23 -31.9% 4.20
Inari Amertron 2.26 1.82 24.1% 2.08 Axiata Group Berhad 3.80 5.41 -29.7% 5.49
Eco World Development 1.23 1.00 23.0% 1.48 Lafarge Malaysia 3.10 4.36 -28.9% 3.24
Syarikat Takaful Malaysia 3.94 3.32 18.7% 4.44 UEM Sunrise 0.71 1.00 -28.7% 1.25
AEON Credit 14.40 12.18 18.2% 15.40 Vivocom International 0.06 0.08 -26.7% 0.23
QL Resources 6.00 5.09 17.9% 4.71 United U-Li 0.86 1.16 -26.5% 1.72
Fraser & Neave 39.02 33.13 17.8% 28.29 Lingkaran Trans Kota 4.23 5.69 -25.7% 5.90
Sapura Energy 0.64 0.55 17.4% 1.01 CIMB Group 5.45 7.19 -24.2% 7.85
D&O GreenTechnologies 0.71 0.61 17.2% 0.74 GD Express 0.41 0.53 -22.9% 0.49
Tune Protect 0.90 0.77 16.9% 1.10 Gabungan AQRS 1.20 1.55 -22.5% 2.30
KPJ Healthcare 1.02 0.89 15.1% 1.16 AirAsia Group Berhad 2.99 3.79 -21.0% 4.87
AXIS REIT 1.46 1.27 14.8% 1.55 Dayang Enterprise 0.65 0.81 -19.8% 1.06
IGB REIT 1.74 1.53 14.0% 1.73 TSH Resources 1.15 1.43 -19.4% 1.20
KLCCP Stapled 8.00 7.09 12.8% 7.59 UEM Edgenta 1.90 2.33 -18.5% 3.26
Sunway REIT 1.77 1.58 12.2% 1.90 MMC Corporation 1.34 1.64 -18.4% 2.29
Capitaland Malaysia Mall 1.20 1.08 11.1% 1.11 Astro 1.59 1.93 -17.7% 2.06
Eastern & Oriental 1.57 1.42 10.6% 2.37 YTL Corporation 1.13 1.35 -16.3% 1.05
Kossan 8.44 7.64 10.5% 7.55 KNM 0.18 0.22 -16.3% 0.22
Panasonic 37.34 34.60 7.9% 38.15 MISC 5.92 6.97 -15.1% 6.52
Tan Chong Motor 1.80 1.67 7.8% 2.05 Ta Ann 2.63 3.06 -13.9% 2.30
Mah Sing 1.07 1.00 7.0% 1.60 Bumi Armada 0.72 0.84 -13.8% 0.89
Affin Bank 2.56 2.40 6.7% 2.90 Wah Seong 1.27 1.45 -12.4% 1.58
RHB Bank 5.46 5.13 6.4% 6.00 Malayan Banking 9.00 10.26 -12.3% 11.40
UOA Development 2.38 2.28 4.6% 2.80 Sunway Construction Group Berhad 1.81 2.06 -12.1% 2.67
AmanahRaya REIT 0.86 0.83 4.0% 0.94 KKB Engineering 0.80 0.90 -11.8% 1.15
PPB Group 19.68 18.93 4.0% 19.40 AirAsia X 0.34 0.39 -11.7% 0.47
S P Setia 3.10 2.99 3.7% 3.69 MMHE 0.66 0.75 -11.4% 0.87
Gas Malaysia 2.87 2.77 3.6% 3.50 FGV 1.51 1.70 -11.2% 1.69
Malaysia Building Society 1.11 1.07 3.5% 1.54 Superlon 1.07 1.20 -10.7% 1.58
LPI Capital 17.08 16.52 3.4% 18.91 DiGi.Com 4.15 4.59 -9.5% 4.70
Tasco Berhad 1.70 1.65 3.2% 2.50
Bermaz Auto 2.20 2.14 2.9% 2.70
Magna Prima 1.10 1.07 2.8% 1.18
MSM Malaysia 3.63 3.55 2.3% 3.86
Sunway 1.55 1.52 2.0% 1.60
Petronas Chemicals 8.41 8.26 1.8% 8.90
Muhibbah Engineering 3.00 2.95 1.7% 3.60
IHH Healthcare 6.10 6.02 1.3% 6.95
Bursa Malaysia 7.35 7.27 1.1% 7.57
Dialog 3.09 3.06 1.1% 3.24
YTL Power International 1.03 1.02 1.0% 1.20
Malaysia Airports 8.80 8.77 0.3% 9.88
Petronas Dagangan 24.80 24.75 0.2% 28.00
IJM Plantations 2.14 2.15 -0.5% 2.20
Scicom (MSC) 1.99 2.00 -0.5% 2.29
Fima Corporation 1.97 1.98 -0.5% 1.90
Hartalega 5.99 6.03 -0.7% 5.49
IOI Properties Group 1.60 1.62 -1.2% 1.69
Hock Seng Lee 1.40 1.43 -1.8% 1.67
UMW 5.97 6.08 -1.9% 7.11
BIMB 3.85 3.93 -2.0% 5.15
Petronas Gas 17.30 17.67 -2.1% 20.00
Spritzer 2.31 2.36 -2.2% 2.27
Favelle Favco 2.50 2.56 -2.3% 2.92
Public Bank 23.36 24.00 -2.7% 27.30
Sime Darby Plantation 5.33 5.49 -2.8% 5.15
MBM Resources 2.38 2.45 -2.9% 3.20
Unisem 2.31 2.39 -3.1% 1.90
Hong Leong Bank 18.20 18.80 -3.2% 18.85
Nestlé 147.50 152.98 -3.6% 132.32
AMMB 3.75 3.89 -3.6% 3.75
Maxis 5.46 5.69 -4.0% 6.16
Tiong Nam Logistics 0.98 1.03 -4.9% 1.05
Hong Leong Financial 18.00 18.99 -5.2% 19.00
Star Media 1.09 1.15 -5.2% 1.04
IOI Corporation 4.54 4.79 -5.2% 4.48
Kuala Lumpur Kepong 24.16 25.58 -5.6% 28.00
Westports 3.39 3.59 -5.6% 3.85
Alliance Bank 4.04 4.30 -6.0% 4.69
Can-One 2.36 2.52 -6.3% 2.71
Genting Plantations 9.45 10.16 -7.0% 11.00
Daibochi 2.10 2.29 -8.3% 2.59
Tenaga Nasional 14.64 16.02 -8.6% 16.30
P.I.E. Industrial 1.30 1.43 -8.8% 1.95
Deleum 1.01 1.11 -9.0% 1.39
FBM KLCI 1,691.50 1,863.46 -9.2% 1,800.00
Source: MIDFR, Bloomberg *as at 29 June 2018
56 JULY 2018
YOUR EQUITY CAPITAL MARKET TEAM

Research
Mohd Redza bin Abdul Rahman............................................................................................. mohd.redza@midf.com.my.............................03-27721692
Head of Research
Syed Muhammed Kifni Syed Kamaruddin......................................................................................smkifni@midf.com.my.............................03-21738383
Head of Strategy & Quantitative Analytics
Dr. Kamaruddin bin Mohd Nor................................................................................................ kamaruddin@midf.com.my.............................03-27721693
Chief Economist
Muhammad Zafri Zulkeffeli............................................................................................. muhammad.zafri@midf.com.my.............................03-27721686
Economist (Economics)
Mazlina Abdul Rahman.................................................................................................................mazlina@midf.com.my.............................03-27721669
Economist (Economics)
Adam Mohammed Rahim.................................................................................................... adam.marhim@midf.com.my.............................03-27721686
Ports, Logistics, Shipping & Strategy
Aaron Tan Wei Min.....................................................................................................................aaron.tan@midf.com.my.............................03-27721650
Oil & gas, Utility (Water)
Alan Lim Seong Chun, CFA...........................................................................................................alan.lim@midf.com.my.............................03-21738464
Plantation, Timber
Hafriz Hezry bin Harihodin..................................................................................................... hafriz.hezry@midf.com.my.............................03-21738392
Automotive, Utility (Power)
Imran Yassin bin Md Yusof....................................................................................................imran.yassin@midf.com.my.............................03-21738395
Banks
Noor Athila binti Mohd Razali................................................................................................... noor.athila@midf.com.my.............................03-27721679
Healthcare, Gloves, Tobacco
Martin Foo Chuan Loong........................................................................................................... martin.foo@midf.com.my.............................03-21738354

Telecommunications, Media, Technology
Muhammad Danial bin Abd Razak.............................................................................. muhammad.danial@midf.com.my.............................03-21738396
Insurance, Non-bank Financials, Aviation
Jessica Low Jze Tieng.............................................................................................................jessica.low@midf.com.my.............................03-21738391
Property
Abdul Fadhli Zil Ikram Dzulkifly...............................................................................................abdul.fadhli@midf.com.my.............................03-21738463
Construction, Cement
Nabil Fikri bin Zainoodin.................................................................................................... nabil.zainoodin@midf.com.my.............................03-27727663
Consumer
Ng Bei Shan..................................................................................................................................... ng.bs@midf.com.my.............................03-21738461
REITs, Small Cap
Sales and Distribution
Wan Ahmad Satria (Head).........................................................................................................wan.satria@midf.com.my.............................03-21738728

Henry Gan Yong Beng................................................................................................................ henry.tan@midf.com.my.............................03-21738230
Muhriz Nor Iskandar Mohamed Murad........................................................................................... muhriz@midf.com.my.............................03-27721665
Macy Hee Mei Yee........................................................................................................................hee.MY@midf.com.my.............................03-27721664
Dealing
Norlia Binti Mohd Ali............................................................................................................norlia.mohdali@midf.com.my.............................03-21738467

Zainal Ariffin Yahya.................................................................................................................zainal.ariffin@midf.com.my.............................03-21738468
Khairul Anwar Abdullah........................................................................................................khairul.anwar@midf.com.my.............................03-27721643
Shaiful Baharin bin Mohd Zain......................................................................................s_baharin.m_zain@midf.com.my.............................03-21738458
Zarina binti Yusoff.......................................................................................................................... zarinay@midf.com.my.............................03-21738365
Norlela Mokty................................................................................................................................. norlela@midf.com.my.............................03-21738456
Mohammad Taufiq bin Abdul Jalal.................................................................................................... taufiq@midf.com.my.............................03-21738459
Suzana Sultani................................................................................................................... suzana.sultani@midf.com.my.............................03-21738445
Ahmad Faizul bin Mohd Sharif..............................................................................................ahmad.faizul@midf.com.my.............................03-21738385
Zuraimi Sanayan........................................................................................................................... zuraimi@midf.com.my.............................03-21738363
Dawne Chin Ji Ling.................................................................................................................dawne.chin@midf.com.my.............................03-21738460
Nur Shamim Hashim.............................................................................................................. nur.shamim@midf.com.my.............................03-27721644
Hanafi Bin Husin.....................................................................................................................hanafi.husin@midf.com.my.............................03-27721689
Ahmad Hafiz bin Rusli........................................................................................................... ahmad.hafiz@midf.com.my.............................03-21738364
Elmy bin Sharudin...............................................................................................................elmy.sharudin@midf.com.my.............................03-21738440
Mat Razi bin Daud........................................................................................................................ mat.razi@midf.com.my.............................03-21738359
Khairun Adila Khazali............................................................................................................khairun.adila@midf.com.my.............................03-21731655
JULY 2018 57
DISCLAIMER
This report has been prepared by MIDF AMANAH INVESTMENT BANK BERHAD (23878-
X). It is for distribution only under such circumstances as may be permitted by applicable law.
Readers should be fully aware that this report is for information purposes only. The
opinions contained in this report are based on information obtained or derived from sources
that we believe are reliable. MIDF AMANAH INVESTMENT BANK BERHAD makes no
representation or warranty, expressed or implied, as to the accuracy, completeness or
reliability of the information contained therein and it should not be relied upon as such.
This report is not, and should not be construed as, an offer to buy or sell any securities
or other financial instruments. The analysis contained herein is based on numerous
assumptions. Different assumptions could result in materially different results. All opinions
and estimates are subject to change without notice. The research analysts will initiate,
update and cease coverage solely at the discretion of MIDF AMANAH INVESTMENT
BANK BERHAD.
The directors, employees and representatives of MIDF AMANAH INVESTMENT BANK

BERHAD may have interest in any of the securities mentioned and may benefit from the
information herein. Members of the MIDF Group and their affiliates may provide services
to any company and affiliates of such companies whose securities are mentioned herein
This document may not be reproduced, distributed or published in any form or for any
purpose.
MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS
STOCK RECOMMENDATIONS
BUY Total return is expected to be >10% over the next 12 months.
Stock price is expected to rise by >10% within 3-months after a Trading Buy
TRADING BUY
rating has been assigned due to positive newsflow.
Total return is expected to be between -10% and +10% over the next 12
NEUTRAL
months.
SELL Negative total return is expected to be -10% over the next 12 months.
Stock price is expected to fall by >10% within 3-months after a Trading Sell
TRADING SELL
rating has been assigned due to negative newsflow.
SECTOR RECOMMENDATIONS
The sector is expected to outperform the overall market over the next 12
POSITIVE
months.
NEUTRAL The sector is to perform in line with the overall market over the next 12 months.
The sector is expected to underperform the overall market over the next 12
NEGATIVE
months.
58 JULY 2018
MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad (23878 - X)

(Bank Pelaburan)
(A Participating Organisation of Bursa Malaysia Securities Berhad)
Business Address:
11 & 12th Floor, Menara MIDF,
82, Jalan Raja Chulan, 50200
Kuala Lumpur.
Tel: 2173 8888
Fax: 2173 8380
JULY 2018 59

3Q18 Outlook MIDF 060718

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MALAYSIA EQUITY RESEARCH

INTO UNCHARTED TERRITORIES

KINDLY REFER TO THE LAST PAGE OF THIS PUBLICATION FOR IMPORTANT

1H18 IN BRIEF 6 July 2018

Muhibbah 3.00 3.60 21.7

Public Bank 23.36 27.30 19.7

Petronas Gas 17.30 20.00 19.5

IHH 6.10 6.95 15.2

Source: MIDFR, Bloomberg (as at 29 June 2018)

demand of denuclearization to be unjust. A

• President Trump withdraws from Iran’s

on 8th May 2018. The withdrawal will see

II. MACRO ECONOMIC OUTLOOK

rise in commodity prices will benefit

• Trade activities stay on strong tide. Despite

• Upbeat manufacturing activity in the

• Regional PMI indicates promising

months while major Asean economies

and stable global demand.

CHINA: ECONOMIC GROWTH CONTINUES AT SUSTAINABLE PACE

Source:CEIC, MIDFR Source: CEIC, MIDFR

Source:CEIC, MIDFR Source: CEIC, MIDFR

Table 1: Central Bank Policy Rate by Selected Economies (%)

MALAYSIA: POST GE14 – POLICY REFORM WHILE SUSTAINING SOLID GROWTH

Source:CEIC, MIDFR Source: CEIC, MIDFR

Table 2: GDP by Expenditure Performance (YoY %)

Table 3: GDP by Expenditure Performance (YoY %)

Services: Water 6.0 5.9 6.2 6.1 5.9

Services: Wholesale Trade 5.5 6.0 6.9 7.4 7.9

Source: CEIC,MIDFR Source: CEIC, MIDFR

Source: CEIC; MIDFR Source: CEIC; MIDFR

Source: CEIC, MIDFR Source: CEIC, MIDFR

Source: CEIC, MIDFR Source: CEIC, MIDFR

Source: CEIC, MIDFR Source: CEIC, MIDFR

Source: CEIC, MIDFR Source: CEIC, MIDFR

Source: CEIC, MIDFR Source: CEIC, MIDFR

Source: CEIC, MIDFR Source: CEIC, MIDFR

Chart 33: OPR at 3.25% in 2018

Source: CEIC, MIDFR

Table 4: Macroeconomic Data Updates

Real GDP 4.2 5.8 5.5 5.4 5.8 5.4 5.2

Brent Crude Oil (Avg) 43.6 53.0 60.0 67.3

Table 5: FBM KLCI Valuation against regional markets

Table 6: FBM KLCI Valuation against international markets

Chart 34: FBM KLCI: T12-M PE Ratio

Source: Bloomberg, MIDFR

Chart 35: Rising Yields and Falling Spread

Source: Bloomberg, MIDFR

Source: Bloomberg, MIDFR

Table 7: FBM KLCI: Historical and forward earnings growth

IV. STOCKS SELECTION

Chart 37: 2018 YTD Performance of Selected Markets

Source: Bloomberg, MIDFR

Source: Bloomberg, MIDFR

Table 8: Top Stock Picks

PRICE TARGET PRICE DIVIDEND TOTAL

AirAsia 0.91 2.99 4.87 62.9 4.3 67.2

Chart 39: Annual TIV trend

Source: MAA, MIDFR

Table 9: Earnings Assumptions

Table 10: Earnings Assumptions

Source: Bloomberg, MIDFR Source: Bloomberg, MIDFR

Source: Company, MIDFR Source: Company, MIDFR