RHB Report My - 2q22 Market Outlook - Strategy - 20220408 - RHB 8110241450264741624e907121a97

Malaysia Strategy
7 April 2022 Market Outlook | Market Strategy
Market Strategy
Stocks Covered 141
To Endemicity And Beyond!
Rating (Buy/Neutral/Sell): 79 / 55 / 7
Last 12m Earnings Revision Trend: Positive
 Speed bumps on the path to recovery. The economic recovery continues Analyst
apace, culminating in the relaxation of border restrictions on 1 Apr. We
remain in the nascent stage of a new growth cycle, but geopolitical risks are Alexander Chia
clouding the outlook, adding to global inflationary pressures. A more +603 9280 8889
aggressive-than-expected US Fed and the escalation of the Ukraine conflict alexander.chia@rhbgroup.com
are key risks, on top of fragile domestic public finances, policy and
regulatory worries, and an evolving political backdrop. The investment
strategy will centre on trading angles – a core defensive posture with
opportunities in the small-mid cap space.
 Living with COVID-19. Despite the spike in new COVID-19 cases, the
percentage of patients requiring hospital intervention remains low and,
accordingly, the healthcare system has been able to comfortably manage
the load, on the back of high vaccination rates achieved. The base effect,
absence of new movement restrictions, high levels of pent-up demand,
steady pick-up in global growth and near-term political status quo will help
to support the 5.5% YoY GDP growth projection this year.
 Risks aplenty. The Russia-Ukraine crisis has helped to trigger the FBM KLCI – 7-year forward consensus P/E
unexpected return of foreign portfolio funds into the region for its safe-haven (x)
appeal, but adds to the lengthening list of risk factors that could threaten 20.0
global growth. A protracted crisis looks likely, although the core assumption
is for the conflict to remain contained within Ukrainian borders. 19.0
Nonetheless, the resulting spike in commodity prices will exacerbate

inflation and the risks to growth compounded, after the recent Federal Open 18.0
Market Committee meeting revealed a more hawkish US Fed than RHB 2sd: 17.4x
1.5sd: 16.9x
economists were expecting. Investors are now watching for signals on how 17.0
1sd: 16.5x
the US Fed intends to deleverage its balance sheet. A decision by China to
strategically align itself with Russia would further destabilise the geopolitical 16.0 Average: 15.7x
balance. In our opinion, a lack of political will to achieve fiscal consolidation -1sd: 14.9x
15.0
will keep domestic regulatory and policy risks elevated. The spectre of -1.5sd: 14.4x
higher taxes refuses to go away, given the propensity for more populist 14.0
-2sd: 14x
measures in the run-up to the 15th general election (GE15).

 Strategy. We expect the economic recovery to ensue, but acknowledge 13.0
2015 2016 2017 2018 2019 2020 2021 2022
gathering headwinds. Market valuations are not compelling, given the
paucity of earnings growth in 2022. Accordingly, the potential for volatility
Source: Company data, RHB
suggests that domestic investors will not look too far ahead, while
maintaining a nimble stance. 2022 will be a traders’ market that will require
astute bottom-up stock-picking. Investors should remain focused on value
and cyclical names that can leverage on the recovery, and look for more
attractive entry points to build positions for the longer term, while
maintaining core holdings in defensive, high-yield stocks and companies
with a strong ESG profile. We are OVERWEIGHT on banks, non-bank
financial institutions (NBFI), oil & gas, utilities, healthcare, basic materials,
gaming and technology. We lift our end-2022 FBM KLCI target to 1,670pts
(from 1,630pts) after ascribing a 16x (unchanged) P/E to FY23 EPS.
Target % Upside P/E (x) P/B (x) ROAE (%) Yield (%)
Company Name Rating
(MYR) (Downside) Dec-22F Dec-22F Dec-22F Dec-22F
AMMB Buy 4.00 7.8 7.6 0.6 9.4 3.8
Berjaya Food Buy 4.20 10.7 15.9 3.3 21.6 3.1
Bumi Armada Buy 0.65 57.6 4.1 0.5 13.9 -
CTOS Digital Buy 2.40 51.6 44.8 6.1 17.5 1.3
Genting Buy 6.39 36.6 16.6 0.6 3.4 4.3
Guan Chong Buy 4.00 50.9 10.8 1.7 17.2 2.1
Heineken Malaysia Buy 25.80 14.8 23.7 17.0 72.1 4.2
Hong Leong Bank Buy 23.50 16.3 12.5 1.3 10.6 2.8
Inari Amertron Buy 3.59 16.9 27.0 4.4 18.6 3.1
Kuala Lumpur Kepong Buy 31.45 24.8 13.6 2.7 16.0 4.4
Malayan Banking Buy 10.40 16.3 13.0 1.2 9.4 6.4
Matrix Concepts Buy 2.66 12.1 8.2 1.0 12.4 5.5
MGB Buy 0.99 37.2 6.5 0.7 10.8 3.1
Mr DIY Group Buy 4.59 32.6 36.1 15.0 46.2 1.4
Petronas Chemicals Buy 10.86 13.1 14.4 2.0 14.7 3.5
Press Metal Buy 8.25 33.1 21.8 9.7 50.5 2.1
TASCO Buy 2.14 93.0 11.6 1.6 14.4 2.6
See important disclosures at the end of this report

1
Market Dateline / PP 19489/05/2019 (035080)
Market Strategy Malaysia Strategy
Contents
MARKET OUTLOOK 3
KEY RISKS 25
MARKET STRATEGY 27
FBM KLCI FROM A TECHNICAL PERSPECTIVE 37
SECTOR OUTLOOK
Auto 40
Banking 42
Basic Materials 44
Construction 46
Consumer 49
Gaming 51
Healthcare 53
Integrated Oil & Gas 55
Media 57
NBFIs 59
Plantation 60
Property 62
Property MREITs 64
Rubber Products 66
Technology 68
Telecommunications 70
Transport 73
Utilities 75
APPENDIX
Valuations And Ratings Of Individual Stocks Under Coverage 77-82

2
Market Outlook
Geopolitics a party pooper

When it rains, it pours. Even as investors were looking toward the normalisation of economic
activities – as most of the world shifts toward a state of endemicity – and preparing for
tightening monetary conditions, geopolitics has reared its ugly head in spectacular fashion.
The invasion of Ukraine was always considered to be an improbable event, even when the
build-up of Russian troops on the border began appearing in media reports last December.
The Ukraine crisis is now turning into a major risk event, with far-reaching effects for global
markets.
Implications of the Ukraine crisis for equity markets

The geographical location of Ukraine in the heart of Europe, the importance of Russia in the
global commodity supply chain, Europe’s dependence on Russian energy, and the up-
ending of the post-Cold War security balance are just some of the reasons for this crisis to
be the biggest source of volatility for global markets and risk assets since the COVID-19
pandemic in 2020. The resulting Western sanctions on Russia’s economy and individuals
connected to its political leadership will exact a massive financial toll on the country.
It has also been reported that Russia has asked China for military and economic assistance.
In an emergency special session of the United Nations General Assembly on 2 Mar that
overwhelmingly voted to condemn Russia’s invasion of Ukraine, China abstained. China’s
potential assistance could help Russia weather the extensive economic sanctions, but this
may also escalate the Ukraine crisis into a global dispute, as Western countries will be
compelled to decide if China should also be subject to sanctions. Such a scenario would
pose significant downside risks to global financial markets.
While we expect the crisis to be contained within Ukrainian borders, it could easily escalate
– since Western governments are actively re-supplying the Ukrainian Army with modern
anti-tank and anti-aircraft weapons systems. The West has, however, so far drawn a line at
repeated Ukrainian requests to enforce a no-fly zone over the country, as that could mean
a direct confrontation with Russian forces. An offer by Poland to supply its fleet of Soviet-
era MiG-29 jets to Ukraine was also rejected by NATO for fear of escalating the situation.
The Ukraine crisis has already proven to be a significant inflationary event, causing extreme
spikes in the price of commodities, with CPO breaching new highs, and crude oil at well
above USD100.00/bbl. Prices of other metals like nickel and aluminium have also
skyrocketed. With Russia and Ukraine also being large producers of wheat, sunflower oil,
corn and fertiliser, the implications for the agri-food supply chain is enormous, and will help
to further exacerbate global inflationary pressures that were already acute before the
invasion. Should Russia decide to weaponise its oil and natural gas assets by withholding
supplies to retaliate against Western sanctions, crude oil prices will rise exponentially –
given that oil markets are already tight, with limited short-term excess capacity.
Figure 1: 2021 top crude oil producers
United States 10.2M
Russia 9.7M barrels per day
Saudi Arabia 9.3M
Canada 4.3M
Iraq 4.2M
China 3.9M
Brazil 2.9M
UAE 2.7M
Iran 2.5M
Kuwait 2.3M
Source: Rystad Energy

3
Prolonged and elevated commodity prices will raise downside risks to growth, even as
global economies struggle to emerge from the effects of the COVID-19 pandemic. Western
Europe, in particular, is already struggling with the scale of the unfolding humanitarian crisis,
with more than 4m Ukrainians already having fled westwards, with more to come. Also the
refugee crisis also has the potential to worsen the pandemic, given the relatively low
vaccination rates in Ukraine and Eastern Europe.
High energy prices will dampen the pace of global economic growth, and inflationary
pressures can only worsen in the near term. This will give global central banks pause for
thought on how to conduct their monetary tightening narratives. Near-term equity markets
will remain volatile, even as investors parse news flow for signs on how the crisis is evolving
We have seen this picture before

Taking into consideration the region’s long and complicated history, coupled with President
Vladimir Putin’s penchant for the unexpected, it will be nigh impossible to predict how the
Ukraine crisis will evolve. We have seen evidence of Russia’s adventurism in the past.
Between 1991 and 2000, Russia was involved in two wars in Chechnya, after which the
conflict evolved into a long-term insurgency between 2000 and 2017. Russia also invaded
Georgia in 2008 and annexed the Crimean peninsula in 2014. While the Russia-Georgia
war was over in five days and the annexation of Crimea was relatively bloodless, the long
drawn-out conflict in Chechnya and the conduct of the Ukrainian people and armed forces
in this conflict, so far, suggests a high potential for a protracted crisis. The relatively large
44m Ukraine population, the escalating refugee situation, scale of destruction to public and
private infrastructure and the significant civilian casualties suggest that there is little scope
for Russia to reverse course and pull out its forces.
However, if public opposition to the war grows in Russia and the weight of the economic
sanction begins to bite – its foreign assets have been frozen, the RUB has cratered, the
Moscow Stock Exchange has tanked, major corporations have exited the country thereby
triggering a freefall of the Russian economy – it may still be possible for a situation to come
about to convince President Putin to end the war. Even in such a scenario, we would expect
economic sanctions and isolation from global markets to continue for some time. This
suggests that the risks to global energy and agri-food markets may not be quickly resolved.
In the event Russia continues to fail to achieve its military objectives in Ukraine, or face
material setbacks and losses, many observers fear President Putin could decide to double
down and raise the stakes by escalating tensions through the use of chemical weapons or
even tactical nuclear weapons.
Nonetheless, the evolution of the Ukraine crisis bears careful monitoring, as it could easily
spiral into a broader conflict beyond Ukrainian borders. Conversely, the Moscow-Kviv peace
talks could offer an opportunity for a negotiated settlement. A de-escalation of the Ukraine
crisis will alter the complexion of the global geopolitical risk profile, and affect commodity
prices and change the direction of foreign equity portfolio flows to the ASEAN region.
COVID-19: The arrival of the new normal

Moving towards endemicity. On 8 Mar, Prime Minister Datuk Seri Ismail Sabri Yaakob
announced that the country will transition into the endemic phase from 1 Apr. The relaxation
of COVID-19 policies that took immediate effect includes the removal of limitations on
business hours, removal of the 50% capacity limit for event venues, and also the reopening
of borders. After two years of stringent border controls, international travellers will be able
to come into Malaysia without having to apply for a clearance via MyTravelPass.
Furthermore, those who are fully vaccinated will not have to undergo quarantine. The only
requirement is having to do a polymerase chain reaction (PCR) test two days prior to
departure and an antigen rapid test upon arrival. The PM has shared that the decision was
made after careful consideration, taking into account the country’s high vaccination rate and
also other risk factors.
Disconnect between rising cases and hospitalisations. The advent of Omicron has led
to a surge in new infections, which surpassed the previous Delta wave, reaching 33,406
cases on 5 Mar. However, on a positive note, the high number of cases did not translate
into higher hospitalisations nor admissions to intensive care units (ICU). COVID-19 hospital
admissions rate stood at 49.1% while the number of COVID-19 patients requiring ICU
treatment is at 44%. The disconnect is undoubtedly driven by the high vaccination rate,
where 97.5% of the adult population had completed two doses, and 65.7% had gotten their
booster shots. Based on the experience in countries with similar levels of vaccination, we
expect the current wave to recede within a month, barring unforeseen circumstances.

4
Declining daily booster doses administered is a cause for concern. The daily average of
booster shots administered for the past 14 days stood at 32k doses, compared to 162k
doses in the month prior. While we expected the pace to drop – since the adult population
is the only eligible group for booster doses – this leaves 7.5m individuals yet to be boosted
(32% of the adult population). As of 20 Mar, 2.2m Sinovac recipients (9% of the adult
population) have yet to receive their booster jab. Additionally, only 77% of the elderly
population that completed the primary series (above the age of 60 years) have received the
booster shot, leaving c.1m senior citizens at risk. Given the low probability of both groups
to complete the booster regimen by 31 Mar, we believe the Ministry of Health (MOH) may
yet extend the deadline. Recall that senior citizens and Sinovac primer adult recipients that
did not receive their booster shot by 31 Mar are at risk of having their “Fully Vaccinated”
status reverted to “Incomplete”.
Endemicity does not mean zero cases. There is a huge wall of immunity in most places
in the world right now, either from vaccination or past infections. However, breakthrough
infections and reinfections have become more common as immunity wanes, even after a
booster shot. Against this backdrop is the rise of the BA.2 sub-variant that has been gaining
traction across the EU and Asia. In response, vaccine manufacturers have requested
regulatory approval to authorise the extension of the booster regimen. However, vaccine
experts remain skeptical of the effectiveness of a second booster for the majority of people.
Ideally, the next booster should be “updated” against the predominant variant, and an
annual schedule makes more sense than boosting every 3-6 months. More importantly,
focus and funding for treatments, vaccines, and surveillance should remain even after the
declaration of endemicity. The lack of preparedness could invite yet another devastating
wave.
Figure 2: Test and quarantine requirements for travellers (Malaysia)

Test and quarantine after
Vaccination status Pre-departure test On-arrival test
arrival
Fully vaccinated + booster dose
(aged 18 and above) PCR test - 2 days before journey
Fully vaccinated
RTK-Ag professional test at  No test
Fully vaccinated and recently infected with facility/hotel in 24 hours  No quarantine
RTK-Ag professional - 2 days before
COVID-19
journey
(within 60 days before departure)
 No test
Not vaccinated due to medical reasons
PCR test - 2 days before journey
RTK-Ag professional test at  No quarantine (results
(based on case to case basis) facility/hotel in 24 hours based on case to case
basis)
 PCR test on day 4/RTK-

Partially vaccinated/ RTK-Ag professional test at
PCR test - 2 days before journey Ag on day 5
not vaccinated facility/hotel in 24 hours
 Quarantine for 5 days
Children and adolescents 17 and below RTK-Ag professional test at  No test

PCR test - 2 days before journey
(vaccinated or unvaccinated) facility/hotel in 24 hours  No quarantine
Source: MOH, RHB

5
Figure 3: Regional comparison on arrival/departure requirements

Philippines  Fully vaccinated, except for minors below 12 years old
 Proof of vaccination
 Negative RT-PCR test result taken within 48 hours prior to departure from the country of origin, or
 Negative laboratory-based antigen test result taken within 24 hours prior to departure from the country of origin
 Valid return tickets to the original port of origin or next port of destination for not more than 30 days from the date of arrival in the
Philippines
 Valid passport for at least six months from the time of arrival in the Philippines
 Travel insurance for COVID-19 treatment, with a minimum coverage of USD35,000
Singapore  Pre-departure COVID-19 PCR, professionally administered ART, or self-administered and remotely supervised by an ART provider
in Singapore providing such services, taken within two days before departure for Singapore
 Unsupervised self-administered ART using self-procured authorised ART kits within 24 hours of arrival in Singapore. Travelers
are required to report their test results via https://www.sync.gov.sg before proceeding with their activities in Singapore
Indonesia  Provide a health certificate confirming a negative COVID-19 PCR test result, which can be checked by a QR code or bar code.
From 1 Jan, the certificate must be issued for a maximum of 48 hours prior to departure for Indonesia. The certificate must be in
English
 Download and install the Peduli Lindungi app to perform the e-Hac registration
 Show proof of a paid stay of a minimum of four nights
 Take a PCR test on arrival. If the result is positive, visitors are required to undergo isolation at their hotels. Elderly visitors with co-
morbidities will be admitted to hospital. A further PCR test is required on day 3. If the result is negative, visitors are allowed to
continue their holiday.
 Show proof of health insurance (minimum USD25,000)/travel insurance including specific COVID-19 health coverage and a letter
stating their willingness to pay for their own treatment, should the person be or become infected with COVID-19
Thailand  Apply for the Thailand Pass. Visitors will need to state the details of their arrival, and
 Upload proof of vaccination, and
 Provide your hotel details, and
 Submit their COVID-19 insurance
 RT-PCR test upon arrival (day 0-1) and an antigen self-test (ATK) on day 5.
Source: Philippine Inter-Agency Task Force, (IATF), Immigration & Checkpoint Authority Singapore (ICA), Department of Consular Affairs Thailand (DCA), Indonesia’s
COVID-19 Task Force, RHB
Figure 4: Decoupling between cases and hospitalisation/ICU Figure 5: Daily doses administered
Source: MOH, RHB Source: MOH, RHB

6
Figure 6: Booster coverage by age, 90 days after completing primary series (as of 20 Mar)
Negeri Pulau Terengg W.P. Klang
Johor Kedah Kelantan Melaka Pahang Perak Perlis Sabah Sarawak Malaysia
Sembilan Pinang anu Labuan Valley
18 to
69.0% 44.2% 22.8% 78.1% 70.0% 50.3% 61.8% 37.9% 64.3% 35.3% 81.1% 38.6% 62.5% 70.4% 63.3%
29
30 to
71.9% 49.6% 29.2% 81.8% 73.0% 55.2% 63.0% 37.8% 70.1% 40.2% 83.6% 43.4% 65.7% 74.9% 68.3%
39
40 to
77.0% 54.2% 34.0% 85.7% 78.9% 59.8% 67.7% 39.8% 76.1% 44.0% 85.8% 48.8% 71.1% 81.0% 73.4%
49
50 to
78.9% 56.4% 36.6% 85.0% 79.4% 64.0% 70.5% 44.6% 80.5% 45.1% 86.9% 50.5% 68.8% 85.0% 75.3%
59
60 to
80.2% 60.7% 42.4% 87.9% 80.7% 66.4% 73.8% 53.3% 83.9% 49.8% 87.1% 51.9% 74.4% 86.8% 77.5%
69
70 to
80.7% 55.3% 39.4% 85.5% 79.9% 65.2% 74.8% 52.1% 84.0% 52.1% 82.3% 46.1% 71.2% 87.7% 77.2%
79
80+ 73.3% 45.8% 31.8% 80.3% 70.7% 58.2% 69.4% 42.1% 80.6% 42.8% 70.9% 35.7% 62.3% 83.6% 71.4%
Overall 74.1% 51.3% 30.9% 82.6% 75.1% 57.3% 66.9% 41.7% 73.2% 41.0% 83.9% 44.5% 66.6% 77.2% 69.8%
Note: Table excludes latest data undergoing verification

Source: MOH, RHB
Politics – Is GE15 a market-moving event?

Barisan Nasional’s (BN) strong showing in the recent Johor state election – where it secured
40 out of the 56 seats contested – comes closely on the heels of another landslide win at
the Melaka state election in Nov 2021 (BN won 21 of 28 seats). The Gabungan Parti
Sarawak (GPS) coalition that is aligned to the ruling federal Perikatan Nasional (PN)
coalition won the Sarawak state election in Dec 2021, with an increased majority (GPS won
76 of 82 seats). While BN won handsomely in Johor, the voter turnout rate was only 54.9%,
with the swing also due as much to the disunity of the opposition parties and voter apathy.
We expect that pressure will likely grow on incumbent Prime Minister Dato’ Sri Ismail Sabri
to dissolve Parliament sooner rather than later, for GE15 – even as BN strategists feel
increasingly emboldened that the electoral wind is firmly in their sails. The probability is
rising for GE15 to be called well before the end of the current Parliament’s 5-year term in
mid-2023. However, we note that it may not be in the prime minister’s personal interest to
dissolve Parliament early. This is given the fact that, within the United Malays National
Organisation (UMNO), he is but one of three vice-presidents and, in the event of a BN victory
in GE15, he may not necessarily be nominated to be prime minister.
The Government has a Memorandum of Understanding (MoU) with the Pakatan Harapan
(PH) opposition in force, that includes an agreement for Parliament to not be dissolved
before 31 Jul 2022. While UNDI18 has been implemented, other salient points of the MOU
that include an anti-hopping law and limiting the Prime Minister’s term to 10 years have not.
It was earlier reported that the policy on the proposed anti-party-hopping provisions and
limiting the prime minister’s term was presented to Members of Parliament for their feedback
and views. Minister in the Prime Minister’s Department (Parliament and Law) Datuk Seri Dr
Wan Junaidi Tuanku Jaafar said the policy was discussed by the Political Transformation
and Stability Steering Committee on 25 Jan. More recent media reports indicate that the
first reading of the anti-party-hopping bill was due to have been tabled in Parliament in
March, but has now been postponed due to the conduct of the recently concluded Johor
state election and that the draft of the proposed bill is already ready.

7
Figure 7: KLCI during GE11 Figure 8: KLCI during GE12

Index GE on 8 Mar '08
GE on 21 Mar '04 Index
-12 mth -6 mth -3 mth +3 mth +6 mth
+12 mth +12 mth
1,000 -3 mth - +6 mth 1,600 -1% -9% -18% +5% -9%
-12 mth -6mth -3 mth -3% -27%
+23% +17% 10% -6%
+44%
950 1,500
900 1,400
1,300
850
1,200
800
1,100
750
1,000
700
900
650 800
600 700
Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09
Source: Bloomberg, RHB Source: Bloomberg, RHB
Figure 9: KLCI during GE13 Figure 10: KLCI during GE14

Index +12 mth Index GE on 9 May '18
GE on 5 May '13 +6% -12 mth -6 mth -3 mth +3 mth +6 mth +12 mth
1,900 -12 mth -6 mth -3 mth +3 mth +6 mth
+4% +6% 0% -2% -7% -12%
+11% +6% +9% +2% +3% 1,950
1,850
1,900
1,800
1,850
1,750
1,800
1,700 1,750
1,650 1,700
1,600 1,650
1,550 1,600
1,500 1,550
May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 May-17 Aug-17 Nov-17 Feb-18 May-18 Aug-18 Nov-18 Feb-19 May-19
Nonetheless, the inability (so far) of both sides of the political divide to put in place clear
lines for leadership succession has been a disappointment for the electorate at large.
Entrenched incumbency in most major political parties has stymied the process of renewal,
cementing the reason why they fail to resonate and connect with the younger voters
especially. The resulting voter apathy has been a contributing factor to the low voter turnout
in recent state polls. The Democratic Action Party (DAP) has been the exception, with a
change of guard following the retirement of Lim Kit Siang from politics and Lim Guan Eng
vacating the Secretary-General post.

8
Key dates
Figure 11: Notable dates in FY22
Month Date Description
3-4 May US Federal Open Market Committee (FOMC) meeting
May 10-11 May 3rd Monetary Policy Committee meeting
13 May Release of 1Q22 Malaysia GDP report
June 14-15 Jun FOMC meeting
5 - 6 Jul 4th Monetary Policy Committee meeting

18 Jul-4 Aug 2nd Malaysia Parliament Sitting
July
26-27 Jul FOMC meeting
31 Jul MOU agreement to not dissolve parliament ends
August 12 Aug Release of 2Q22 Malaysia GDP report
7-8 Sep 5th Monetary Policy Committee meeting

September
20-21 Sep FOMC meeting
26 Oct-15 Dec 3rd Malaysia Parliament Sitting

October
TBA Tabling of Malaysia Budget 2023
1-2 Nov FOMC meeting

November 2-3 Nov 6th Monetary Policy Committee meeting
11 Nov Release of 3Q22 Malaysia GDP report
December 13-14 Dec FOMC meeting

Source: RHB
Macroeconomic picture: Ukraine crisis poses risks to global growth and inflation
Figure 12: Key economic forecasts (prior to the Russia-Ukraine war)

2022F 2023F
Euro Japan US China Euro
US China Japan
Area Area
Real GDP Growth (% YoY)
IMF 4.0 4.8 3.9 3.3 2.6 5.2 2.5 1.8
OECD 3.7 5.1 4.3 3.4 2.4 5.1 2.5 1.1
World Bank 3.7 5.1 4.2 2.9 2.6 5.3 2.1 1.2
CPI
IMF 3.46 1.82 1.89 0.54 2.67 1.92 1.62 0.66
OECD 4.78 1.73 2.68 0.77 2.54 2.43 1.79 0.77
Source: Bloomberg, Organisation for Economic Co-operation and Development (OECD), International Monetary Fund (IMF), World Bank
Figure 13: Impact of the Russia-Ukraine war on global growth and inflation
Source: OECD

9
“Amid the uncertainty, the OECD estimates global economic growth could be more
than 1ppt lower this year than was projected before the conflict, while inflation,
already high at the start of the year, could be higher than it would have been if war
had not broken out by at least a further 2.5ppts on aggregate across countries.” -
OECD
Financial stress could be aggravated by central banks’ response to higher inflation.
In many developing economies, inflation is already at the highest level in a decade.
A further boost from surging energy prices could lead to an inflationary spiral as
expectations of higher long-term inflation become entrenched. That, in turn, could
prompt central banks to tighten monetary policy more rapidly than has been expected
so far.” – Indermit Gill, Vice President for Equitable Growth, Finance and Institutions,
World Bank
The World Bank, in its recently issued East Asia and Pacific Economic Update, estimates
that overall economic growth in developing East Asia and Pacific countries will slow to 5%
in 2022, 0.4ppts lower than what was forecasted in October, and that growth in the region
might decline to 4% if global conditions worsen and national policy responses are poor.
RHB economists recently raised their end-2022 Federal Funds Rate (FFR) forecast to 1.75-
2.0% (from 1%) and, that for end-2023, to 2.25-2.50% (from 1.5%). The US Fed’s revised
dot plot suggests an end-2022 FFR median forecast of 1.75-2%, and an end-2023 median
forecast of 2.75-3%.
RHB economics also revised their view for a detailed guidance on balance sheet adjustment
to materialise at the 5 May FOMC meeting, compared with our earlier assessment of this
event materialising at the 16 Jun FOMC meeting. The actual lift-off for balance sheet
adjustment could happen in 2Q22 vs our earlier assessment by 4Q22.
The revisions to RHB economics’ US Fed forecasts were driven by an unexpectedly hawkish
US Fed, risks to commodity prices remaining higher for longer, and the central bank’s
willingness to do whatever it takes to moderate inflation expectations without worrying too
much about the impact on future GDP growth and labour market conditions. It remains to
be seen if the US Fed can achieve the projected soft landing.
Domestic macroeconomics: Neutral outlook for growth
Figure 14: Key economic forecasts

2021 2022F 2023F 1H22F 2H22F
Real GDP Growth (% YoY) 3.1 5.5 4.9 5.5 5.5
CPI 2.5 2.6 2.0 1.4 2.7
Policy Interest Rate (eop) 1.75 2.00 2.50 1.75 2.00
Current Account Balance (% of GDP) 3.6 3.0 2.8 3.2 2.8
Fiscal Balance (% of GDP) -6.5 -6.0 -5.0 -6.2 -5.8
Source: RHB Economics
RHB economists maintain their 2022 GDP growth forecast at 5.5% YoY vs the Bloomberg
consensus forecast of 6% and the Ministry of Finance (MOF) estimate of 6.5-7.5%. In
addition, we continue to believe that 1Q22 will be a soft patch in economic activity, with
February and March Industrial Production (IP) data points likely to weaken further. As a
result, the pace of labour market improvements is expected to decelerate in 1Q22 relative
to 2H21. Accordingly, it is possible that 1Q22 consumption GDP will point to a slower pace
of growth on a sequential basis. In February and March, with IP slowing, labour markets will
show that the rate of improvement is slowing. In addition, consumer sentiment could be
impacted by Omicron-related issues and the conflict in Ukraine.
Looking past 1Q22, the seasonal effects from the festive season in May could provide some
boost to consumer spending in 2Q22. Meanwhile, the positive terms of trade effects from
robust commodity prices having positive effects on labour market conditions need to be
weighed, with some negative factors such as rising inflationary pressures during the quarter
and the uncertainty on how the conflict in Ukraine will impact global trade and impact net
export conditions.
There is no change to RHB’s 2022 headline CPI inflation forecast of 2.6% YoY vs the
Bloomberg consensus estimate of 2.4% and 2021 print of 2.5%. The baseline view is that
core CPI inflation will double to around 2% YoY by April on back of some of the caps on fuel
and food being raised, since the MOF is worried about elevated subsidies on these products.

10
The Government recently announced that the fuel pricing mechanism could be reviewed
and be more targeted, on the back of oil prices rising past USD100.00 per bbl against the
backdrop, where Budget 2022 assumes an average of USD67.00 per bbl.
RHB economists believe that a fiscal policy from a food and fuel subsidies perspective will
remain pro-active to contain core inflationary pressures. There are limited risks for fuel and
food subsidies, along with the formula to price RON 95 and diesel prices at petrol pumps,
to be changed significantly in 2022.
The Government, although indicating recently in Parliament that fuel subsidies could hit
MYR28bn in 2022 vs MYR11bn in 2021, is unlikely to implement any substantive changes
to its subsidy formula (last announced in 2017) in 2022. RHB economists are of the view
that the Government has enough fiscal space to continue with fuel and other subsidies in
2022, despite the spike in global food and oil prices.
Figure 15: In 2022, oil-related revenues could supersede total subsidies (even if we assume a margin of error of 50% on our
estimates for total subsidies)
RON 95 Diesel
Subsidy Cost For Subsidy Cost Total Fuel Subsidy Total Subsidy Total Oil Related
Brent Crude Oil government government
Ron 95 For Diesel Cost Expenditure Revenue
Price (USD/Barrel) subsidy subsidy
(RM Billion) (RM Billion) (RM Billion) (RM Billion) (RM Billion)
(MYR/ltr) (MYR/ltr)
67 5.68 - 7.17 2.87 - 4.01 9.55 - 11.17 21.90 44.27 - 44.56 0.41 0.34
80 10.70 - 13.51 7.68 - 8.13 18.38 - 21.64 27.40 52.77 - 53.13 0.78 0.67
100 18.42 - 23.25 13.54 - 14.33 31.96 - 37.58 35.85 65.85 - 66.30 1.34 1.18
120 26.14 - 32.99 19.40 - 20.54 45.54 - 53.53 44.30 78.92 - 79.48 1.90 1.70
140 33.85 - 42.73 25.26 - 26.74 59.11 - 69.47 52.74 92.00 - 92.65 2.46 2.21
160 41.57 - 52.48 31.12 - 32.94 72.69 - 85.42 61.19 105.08 - 105.83 3.03 2.72
180 49.29 - 62.22 36.98 - 39.15 86.27 - 101.37 69.64 118.16 - 119.00 3.59 3.23
200 57.01 - 71.96 42.84 - 45.35 99.85 - 117.31 78.09 131.24 - 132.18 4.15 3.75
Source: RHB Economics & Market Strategy.
RHB economists expect that Bank Negara Malaysia will hike the Overnight Policy Rate
(OPR) by 25bps in 2H22, with the guidance being given at the May 11 Monetary Policy
Committee meeting.
Supply chain bottlenecks in shipments to Asia ex-Japan are worsening as economies re-
open in the region. As such, the transport of capital goods to Malaysia and destined for large
infrastructure projects and replacement capital spending is likely to be restrained in 1H22.
The port container low activity index, which tabulates the percentage of locations from the
total that are experiencing low levels of activity at each point in time, is rising. Hence, the
conclusion is that major supply chain disruptions are underway at ports in Malaysia, and is
likely to restrain overall investment spending in 1H22. Sectors such as auto and electrical
and electronics goods (which rely on imports of parts and components) could face significant
limitations to raising output.
With supply chain congestions likely to be a feature of Malaysia’s economy in 1H22, besides
the impact on gross fixed capital formation from the demand side of the economy, trade is
also likely to be impacted adversely in 1H22. There is already evidence of this trend in the
January exports and imports data, where momentum is slowing.
On the supply side of the economy, manufacturing IP activity and palm oil sector production
is slowing. The slowing of the palm oil sector’s output is partially due to foreign labour supply
limitations, on back of sluggish progress by the Government on policy changes to import
more labour from abroad. RHB Economics’ base case remains unchanged – that foreign
labour supply will remain restrained in 1H22, with a pick-up only materialising in 2H22.

11
FX: Softer USD in 2H22

Figure 16: RHB global FX forecasts
G10FX 2Q22 3Q22 4Q22 2023

EUR/USD 1.135 1.140 1.145 1.150
USD/JPY 114.50 114.00 113.50 113.00
AUD/USD 0.700 0.705 0.710 0.715
USD/CNH 6.530 6.500 6.495 6.465
USD/IDR 14,500 14,400 14,300 14,200
USD/MYR 4.250 4.200 4.150 4.100
USD/PHP 49.50 49.00 48.50 47.50
USD/SGD 1.375 1.370 1.365 1.360
USD/THB 34.00 33.50 32.50 31.00
USD/VND 23,100 22,850 22,800 22,500
Source: RHB Economics & Market Strategy
The RHB FX team expects US yields and the USD to remain under upward pressure in
1H22. In 2H22, we expect the USD to gradually soften, as the market would have fully priced
in the path of the future US Fed policy by then.
Oil: Higher for longer

We increase our Brent crude oil price forecasts for 2022-2024 to USD104.00,
USD85.00 and USD75.00 per bbl, from USD90.00, USD75.00, and USD70.00 per bbl.
1Q22 QTD crude prices have averaged at USD99.00 per bbl – outpacing our estimate of
USD92.00 per bbl for the quarter. This was mainly due to the continuous uncertainly arising
from the Russia-Ukraine war. Brent prices have been on a rollercoaster ride over the past
month, skyrocketing to USD130.00 per bbl before retracing to below USD100.00 per bbl.
We expect such volatility to continue, responding to the developments of the Russia-Ukraine
war.
We now expect the price of oil to stay at USD115.00 per bbl in 2Q22, then moderate to
100.00 per bbl in 2H22. Our base case assumes a protracted crisis with the conflict
contained within the Ukrainian borders, and that Russia does not weaponise its oil and gas
resources and supply to Europe.
Our main assumptions are:
i. Global oil demand is adjusted lower to factor in demand disruptions arising from the
Russia-Ukraine war and lockdown in China. It is still projected to grow by 3.3mbpd to
100mbpd in 2022;
ii. Supply disruption from Russia amounting to 2-2.5mbpd in 2Q22-4Q22. With that, non-
OPEC production is expected to improve by 1.5mbpd YoY to 70.2mbpd in 2022;
iii. Based on the current production deal, the remaining 3.65mbpd production cut will be
fully resumed by Sep 2022. However, we assume a shortfall of 600kbpd on average
until the end of 2022 (vs 668kbpd in February). OPEC production could increase from
28.3mbpd in 1Q22F to 31.0mbpd in 4Q22F, and average 30mbpd in 2022F. Such
production levels are still higher than the pre-pandemic level of 29.4mbpd in 2019.
With the assumptions highlighted above, the theoretical surplus estimate may be
compressed to a further 0.2mbpd in 2022. The struggle of OPEC+ ramping up production
also casts doubt over the readiness of its spare capacity. Downside risks are a full-scale
lockdown in China, and the lifting of Iran sanctions. On the flip side, a full-blown ban on
Russian oil by European countries would send prices to an unprecedentedly high level of
USD150.00/bbl – but an unstoppable price trend eventually heightens global recession
risks.

12
Figure 17: Demand and supply, and crude oil prices and forecasts
2018 2019 2020 2021 1Q22F 2Q22F 3Q22F 4Q22F 2022F
Crude oil price (USD/bbl)
Brent, RHB (new) 71 64 43 71 99 115 100 100 104
Brent, RHB (old) 71 64 43 71 92 100 88 80 90
Change 7 15 12 20 14
World oil demand and supply balance (mbpd)

Total demand 99.1 100.3 91.0 96.7 99.1 98.6 100.3 102.0 100.0
YoY change 1.5 0.9 -9.1 5.7 5.3 3.1 2.8 1.9 3.3
Total non-OPEC 63.4 65.6 63.0 63.6 65.8 63.6 64.7 65.7 65.0
OPEC NGLs 5.3 5.2 5.1 5.1 5.2 5.3 5.3 5.3 5.3
Total non-OPEC +OPEC NGLs 68.7 70.8 68.0 68.7 71.0 68.9 70.0 71.0 70.2
YoY change 3.1 2.1 -2.7 0.7 3.4 0.5 1.3 0.9 1.5
OPEC 31.3 29.4 25.7 26.3 28.3 29.8 30.9 31.0 30.0
Total production 100.1 100.1 93.7 95.1 99.3 98.7 100.9 102.0 100.2
Balance 0.9 0.1 2.7 1.6 -0.1 -0.1 -0.7 0.0 -0.2
Note: Data as of Mar 2022
Source: OPEC, RHB
Global oil demand – OPEC demand numbers under assessment, but International
Energy Agency (IEA) slashed estimates. In OPEC’s monthly report for Mar 2022, oil
demand this year remains unchanged from last month. Global oil demand growth is still
estimated at 4.2mbpd YoY, to a total of 100.8mbpd for 2022, premised on a global GDP
growth of 4.2%. However, this forecast is under evaluation when there is more clarity on the
far-reaching impact of the geopolitical turmoil. It is difficult to assess the actual impact of
supply disruptions, given the complexity of the situation and the pace of development that
is changing almost daily. Rystad Energy estimated that the war in Ukraine could result in as
much as 1mbpd of oil demand being removed from the global market, of which Ukraine is
likely to suffer more – with the possibility of a 50% drop in oil demand if the war persists. On
the other hand, IEA’s March Oil Market Report showed a downward revision on global oil
demand by 1.3mbpd for 2Q22-4Q22F, resulting in 950kbpd slower growth for 2022F on
average. Total demand is now projected at 99.7mbpd in 2022, pointing to an increase of
2.1mbpd from 2021. This is about 1.2mbpd lower than OPEC’s latest estimates.
China lockdown could weaken demand in the near term. China started to implement a
city-wide lockdown in Shanghai in two stages. As it was reported that some factories are
still operating as usual and workers on site are given priority for testing, the disruption to the
supply chain is likely to be manageable. Having said that, near-term oil demand can be
weakened if China decides to roll out further lockdowns in other cities and provinces.
Not seeing the worst case. Although Russian oil being completely blocked off from the
market is not our base case scenario, we cannot deny that the potential disruption can be
rather significant and disruptive to the supply market. According to Energy Information
Administration (EIA), Russia was the largest natural gas-exporting country in the world, the
second-largest crude oil and condensates-exporting country after Saudi Arabia and the
third-largest coal-exporting country after Indonesia and Australia. Europe already accounted
the most of Russia’s crude oil and natural gas exports last year, at 49% and 74% and it has
been reluctant to sanction Russian oil and gas sectors. If there is a complete ban on Russian
oil by European countries, oil prices could stay above the unprecedentedly high level of
USD150.00 per bbl. We believe China and India would increase their oil imports from Russia
to leverage on the huge discounts.

13
Figure 18: Selected energy exports from Russia (2021) Figure 19: Crude oil and condensate exports from Russia
(2021)
Source: EIA Source: EIA
Risk premium to stay due to compressed OPEC’s spare capacity. We do not expect
any major adjustment to the current production ramp-up schedule. Overall, we believe
OPEC is likely to stay intact. The current production ramp-up schedule, in our view, allows
OPEC+ members to increase their output and capitalise on the higher oil prices. The gap
between OPEC+ output and its target levels swelled to 1mbpd in February from 900kbpd in
January. OPEC 10’s total production stood at 24.1mbpd in February, which is 668kbpd
lower than the production quota. Such a shortfall is mainly attributable to Saudi Arabia,
Angola and Nigeria – and could deepen further, as production constraints remain.
According to Bloomberg, OPEC’s spare capacity stood at 4.8mbpd. This means that even
OPEC’s spare capacity is still left with 3.1mbpd, after gradually reversing the remaining
production quantum of 3.7mbpd until Sep 2022. As such, we believe that the higher risk
premium will continue in 2H22. Note that Saudi Arabia and the United Arab Emirates have
the highest spare capacity among OPEC 10, at 1.3mbpd and 1.2mbpd.
Figure 20: OPEC’s spare capacity Figure 21: OPEC – crude oil production
Source: Bloomberg Source: Bloomberg
OECD inventory levels are even below 2010-2014 levels. The IEA’s March Oil Market
Report also suggested that OECD industry oil stocks dropped by 22m bbl to 2.62bn bbl in
January, or 335.6m bbl below its 5-year average. Preliminary data for the US, Europe and
Japan indicates that industry stocks decreased by a further 29m bbl in February. Do note
that the current levels are also below the average inventory levels in 2010-2014, when oil
prices averaged USD102.00 per bbl. If we do not see OECD inventory levels recovering
meaningfully in 2023, we may see further upside in our oil price projection. It is also then
very much dependent on how strong US oil production can grow next year.

14
Meanwhile, the largest ever Strategic Petroleum Reserve (SPR) release of 1mbpd by the
US in the next 6 months and IEA’s second emergency release of oil reserves would provide
some short-term relief to the tight supply market and help to calm the market, as Russia oil
exports are expected to fall in the coming months. The total release of up to 180m bbls by
the US accounted for about one-third of the current SPR, which is already at its lowest level
since 2002. Such a huge drawdown can be rather risky, as the country would be more
vulnerable to external shocks moving forward, unless US oil production can be boosted up
strongly.
Figure 22: OECD inventories are below 2010-2014 averages Figure 23: OECD inventories have a strong correlation to oil
prices
US production to reach record high in 2023, but near-term numbers would be capped
by bottlenecks. The Energy Information Administration (EIA) expects US crude production
to improve to 12mbpd in 2022, from 11.3mbpd currently. Subsequently, it will continue to
grow by c.1mbpd in 2023, surpassing the previous average annual high of 12.3mbpd in
2019. This would make the US the producer that delivers the greatest output outside OPEC+
in 2022. The US rig count is still growing – it stood at 670 in mid-March, about 60% up from
a year ago but still a gap from the 900-1000 levels recorded in 2018-2019. That said, shale
oil producers are also facing workforce and equipment bottlenecks in the near term, even
though oil prices have surged beyond the USD100.00 per bbl level. The major public US
shale producers are still prioritising capital discipline to reward shareholders, rather than
aggressively ramping up production. Most of them are still looking at single-digit production
growth, as opposed to private independent firms that can boost their output by 15-20%.

15
Portfolio equity flows: Defensive ASEAN attracts foreign funds
Figure 24: Regional foreign equity flows
USDm 2022 YTD (USDm) 2021 YTD (USDm)
4,000 Thailand : 3,369.4 Indonesia : 2,688.4
Indonesia : 2,229.0 Philippines : (4.5)

3,500 TH
Malaysia : 1,541.0 Malaysia : (767.3)
MYR 6.46bn MYR (3.15bn)
3,000
Philippines : (119.2) Thailand : (1,632.4)
2,500
ID
2,000
MY
1,500
1,000
500
0 PH
3-Jan-22 18-Jan-22 2-Feb-22 17-Feb-22 4-Mar-22 19-Mar-22
-500
Indonesia Philippines Thailand Malaysia
Source: Bloomberg, RHB
Figure 25: Malaysia foreign portfolio flows from 2017 to Mar 2022
MYRbn
6.0
Mar-17, 4.3bn
4.0 Mar-22, 3.2bn
2.0
0.0
-2.0
-4.0
-6.0
-8.0
Source: Bursa Malaysia

16
Figure 26: Malaysia – 2021 trading participation Figure 27: Malaysia – YTD 2022 trading participation
Foreign Foreign
Investors, Local Retail, Investors,
19.3% 27.3% 25.0%
Local Retail,
37.2%
Local Institutional,
43.5%
Local Institutional,
47.7%
Figure 28: Malaysia equities – foreign ownership

% Index
26.0 2,000
24.4 24.3
24.0 1,800
24.0 23.5
23.1 23.2
22.3 22.3 22.3 22.3
1,600
22.0 1,400
20.7 20.7 20.5
20.4 20.3 20.3 20.4 20.3 20.2 20.2 20.2 20.3 20.4 20.2 20.1
1,200
20.0
1,000
17.9 17.7
18.0 17.6 17.6
17.1 800
16.6 16.5
16.0 16.0
16.0 600
14.9
400
14.0 13.5 13.3 13.3
13.2 13.0 12.9 13.0
12.8 12.8 12.9 12.9 12.8 12.7 200
12.6 12.6
12.0 0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2022 2022
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb
in units (LHS) % mkt cap (LHS) FBMKLCI index (RHS)
Source: Bursa Malaysia
Figure 29: Domestic institutional equity flows Figure 30: Domestic retail equity flows
MYRm MYRM MYRm MYRm
600.0 local retail (LHS) cumulative local retail (RHS) 14,000
local insti (LHS) cumulative local insti (RHS)
500 2,000
500.0 12,000
400 0
300 400.0
-2,000 10,000
200
-4,000 300.0
100 8,000
-6,000
0 200.0
-8,000 6,000
-100
100.0
-10,000
-200
4,000
-12,000 0.0
-300
-400 -14,000 2,000
-100.0
-500 -16,000
-200.0 0
-600 -18,000

17
ASEAN’s relatively limited trade and business ties with Russia and Ukraine, coupled with
old-economy, commodity-centric industries, offers regional markets some defensive
attributes. Coupled with the steady pace of economic normalisation, gradual easing of
border restrictions, the rise in global macroeconomic risks and continued challenges in
North Asian markets, foreign portfolio flows have surged into ASEAN equity markets from
February.
In ASEAN, Thailand and Indonesia have enjoyed the biggest foreign inflows YTD, with net
inflows of MYR6.5bn into Malaysia, marking a reversal from a net sell of MYR3.2bn in 2021.
Predictably, the reversal in foreign portfolio flows have been on the larger-cap names
centred in the financial, industrials, consumer and plantation sectors but were net sellers of
technology and healthcare stocks. We believe the challenges in North Asia markets,
coupled with the Ukraine crisis, have drawn foreign investors back to Malaysia equities as
a shelter from global volatility, given their underweight stance – having sold MYR50.5bn
over 2018-2021. Nonetheless, we note YTD foreign flows continue to lag behind net inflows
to Thailand and Indonesia equities. Going forward, we continue to expect foreign investors
to remain opportunistic and stay underweight, owing to a host of structural impediments that
will cap the upside for the market. Malaysia’s safe-haven status could continue to draw
foreign inflows if geopolitical tensions in Europe remain protracted. Conversely, a quick
resolution of the Ukraine crisis could see a reversal of foreign portfolio fund flows.
Domestic institutions remained resolute net sellers, with a YTD 2022 cumulative net sell of
MYR6.7bn that comes on the back of the MYR8.9bn net sell in 2021. With the unexpected
and relatively aggressive buying by foreign funds, domestic institutional investors have
predictably been counter-trend investors
Retail participation has eased noticeably in 2022 as retail investors become more
circumspect, adopting a more trading approach, even as the large-cap stocks are driven
higher by foreign demand. Nonetheless, for much of 1Q22, retailers recorded net inflows
into local equities focusing on utilities, technology and healthcare. While Tenaga Nasional’s
share price has retreated, retailers like the stock for its dividend yield and defensive
attributes. Retailers continue to accumulate growth stocks like Inari Amertron and maintain
a strong appetite for rubber glove stocks. In recent weeks, some retail investors have rotated
into the financial and consumer sectors.

18
Figure 31 : Foreign shareholding levels of the largest stocks under coverage

Rec Shariah Price Target Foreign Foreign
Compliant (MYR/s) (MYR/s) Shareholdings Shareholdings Changes
31 Mar 2022 (%) (%) (ppt)
(MYR/s) (MYR/s) 2Q22 Strategy 2022 Strategy 2Q22 vs 2022
Maybank Buy NO 8.94 10.40 17.2 16.4 0.79
Public Bank Neutral NO 4.67 4.70 25.8 25.7 0.07
Petronas Chemicals Buy YES 9.60 10.86 9.8 9.3 0.47
IHH Healthcare Buy YES 6.20 7.50 51.1 50.4 0.70
CIMB Buy NO 5.33 6.40 25.1 23.9 1.20
Tenaga Buy YES 9.00 11.50 12.1 12.1 -0.01
Press Metal Buy YES 6.20 8.25 14.0 10.0 4.00
Hong Leong Bank Buy NO 20.20 23.50 9.8 10.2 -0.39
Sime Darby Plantations Neutral YES 4.97 5.30 9.2 9.2 0.04
Axiata Buy YES 3.79 5.03 11.0 10.7 0.30
Petronas Gas Neutral YES 16.66 17.72 9.2 9.1 0.10
Maxis Neutral YES 3.93 4.45 7.5 7.4 0.10
MISC Buy YES 7.35 7.79 8.3 8.5 -0.25
Nestle Neutral YES 133.60 138.00 81.5 81.3 0.20
DiGi.Com Neutral YES 3.90 4.18 10.7 10.6 0.10
KLK Buy YES 25.20 31.45 13.4 12.2 1.23
IOI Corp Neutral YES 4.12 4.70 10.8 10.5 0.30
Mr DIY Group Buy YES 3.46 4.59 5.7 5.9 -0.20
Petronas Dagangan Neutral YES 20.42 19.90 7.6 7.8 -0.17
Telekom Buy YES 4.89 7.65 9.8 10.9 -1.10
Genting Bhd Buy NO 4.68 6.39 19.5 20.8 -1.30
Hartalega^ Neutral YES 4.85 5.10 18.2 34.0 -15.80
Sunway Bhd Buy YES 1.75 2.06 5.5 5.3 0.16
Genting Malaysia Buy NO 2.98 3.58 15.5 15.8 -0.30
Sime Darby Neutral YES 2.40 2.40 17.6 18.2 -0.60
Dialog Buy YES 2.74 3.40 21.0 Low-20s NA
Westports Neutral YES 4.00 4.32 32.5 10.5 22.00
KLCCP Stapled Neutral YES 6.56 6.90 0.9 0.9 0.00
QL Resources^ Neutral YES 5.02 4.67 9.7 9.8 -0.10
AMMB^ Buy NO 3.71 4.00 16.0 17.0 -1.00
Inari Amertron Buy YES 3.07 3.59 25.0 16.7 8.30
MAHB Neutral NO 6.95 7.20 25.3 25.3 0.00
Gamuda Neutral YES 3.46 3.55 12.0 12.0 0.00
Genting Plantations Neutral YES 8.55 8.90 5.4 6.0 -0.60
Time dotCom Buy YES 4.30 5.00 8.6 8.8 -0.20
FGV Holdings Neutral YES 1.98 2.05 4.2 4.1 0.09
Heineken Buy NO 22.48 25.80 74.5 75.0 -0.50
Scientex Buy YES 4.06 4.68 10.0 10.0 0.00
Carlsberg Neutral NO 21.72 23.80 66.1 67.0 -0.87
BIMB Neutral YES 2.95 3.30 1.9 1.6 0.33
IJM Corp^ Neutral YES 1.67 1.66 12.1 12.1 0.03
Bursa Malaysia Neutral YES 7.07 6.10 14.4 15.1 -0.70
Alliance Bank^ Buy NO 3.76 4.00 21.1 19.6 1.46
IOI Properties Buy YES 0.98 1.38 4.3 4.5 -0.20
Astro^ Buy NO 1.10 1.37 6.8 5.4 1.40
Yinson^ Buy NO 4.80 6.49 7.0 9.0 -2.00
YTL Power Buy NO 0.66 0.68 5.4 5.5 -0.10
IGB REIT Buy NO 1.53 1.92 6.0 5.9 0.10
SP Setia Neutral YES 1.26 1.28 5.5 5.5 -0.03
Kossan Buy YES 1.96 2.05 18-20 18-20 NA
Source : RHB

19
Dec 2021 quarter results round-up: Headed in the right direction
Figure 32: Results tracker – actual vs RHB Figure 33: Misses-to-beats ratio trend
(x)
70% 5.0
60% 4.5 4.3 4.6
50% 4.0
3.4
40% 3.5 3.3 3.6
3.3 3.2 3.5
3.4 2.9 3.4
30% 3.0
3.4 3.3
2.9
2.5 2.6 2.6
20% 2.5 2.4 2.5 2.8
2.5
2.0 1.9 2.4 2.3
2.5 2.4
10% 2.0 2.2 1.8 2.0
1.8 1.8
0% 1.5 1.9 1.5
1.3 1.5 1.5 1.4
1.2 1.2 1.3
Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 1.0 1.1 1.0
1.1
1.2 0.6
0.7 0.6
Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 0.5 0.6
Above 9.1% 14.6% 8.4% 18.7% 13.6% 11.5% 15.9% 18.7% 10.0% 10.2% 11.1% 18.0% 15.6% 13.8% 15.9% 15.0% 14.4% 19.8% 33.3% 34.5% 26.8% 22.6% 29.8% 35.6%
0.0
In Line 60.8% 55.6% 55.9% 56.7% 52.3% 51.6% 53.8% 47.5% 57.1% 55.5% 49.2% 48.9% 46.7% 45.5% 42.4% 45.9% 37.1% 40.5% 34.1% 45.4% 39.8% 46.1% 37.7% 42.4%
Below 30.1% 29.9% 35.7% 24.6% 34.1% 36.9% 30.3% 33.8% 32.9% 34.3% 39.7% 33.1% 37.8% 40.7% 41.7% 39.1% 48.5% 39.7% 32.5% 20.2% 33.3% 31.3% 32.5% 22.0%
results vs RHB results vs consensus
Source: RHB Source: RHB
Figure 34: Sector performance tracker – actual vs RHB

Sector Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec
2018 2018 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 2021 2021
Auto Above Above Above In line Below Below Below Below Mixed Above In line Below Below Above
Banks In line In line In line In line In line In line Mixed Mixed Above In line Above In line Above Above
Basic Materials Below In line Below Below Below In line In line Above In line Mixed In line Below Below In line
Construction Below Below In line In line Below In line Below Below Below In line Below Below Below In line
Consumer In line In line In line In line In line In line Below Below Below In line Mixed Below Below Below
Gaming Below Above In line In line Above In line Below Below Mixed In line Below In line In line In line
Healthcare In line In line Below In line In line In line In line Below In line In line Above Above In line In line
Media In line Below In line In line In line Above In line Below Above Above In line In line In line In line
NBFI In line In line In line In line In line In line Mixed Mixed In line Above In line In line Below Above
Oil & Gas In line In line In line n.a Above Below Below In line Above In line Below Below In line In line
Plantations Below Below Below Below Above Below Below In line Above Above In line Above Above Above
Property Below Below In line Below In line In line Below Below Below In line Below Below Below Above
REITs In line In line In line In line In line In line Below Below Mixed Mixed Below Below In line In line
Rubber In line In line In line Below Below In line In line Above Above Above In line In line Above Below
Technology Below In line Below In line Below Below Below In line Above Above Mixed In line In line In line
Telecoms In line In line In line In line In line In line In line In line In line In line In line In line In line In line
Transport In line Below Below In line In line Below Below In line Mixed In line In line Below In line In line
Utilities In line Below In line n.a In line Below In line Above In line In line In line In line In Line In line
Source: RHB, Company data
The December quarter results were relatively encouraging, building on the green shoots of
recovery seen during the preceding September quarter on the back of the normalisation of
economic activity that will continue to gain momentum through 2022.
Five sectors beat expectations – including the bellwether banking sector, plantation, auto,
NBFI and property – which trumped the two sectors that disappointed (gloves and
consumer). The banking sector reported robust operating metrics, coupled with well-
contained credit costs, while plantation earnings beat on the back of higher CPO prices
realised. The misses-to-beats ratio improved to 0.6, from 1.1 in the preceding September
quarter. 35.6% of earnings beat expectations compared to just 22% that disappointed. The
key changes in earnings forecasts involved the plantation (positive revisions) and glove
(negative) sectors. For the RHB coverage universe, we nominally raised FY22 and FY23
estimates by 3.1% and 3.4%. Excluding the drag from gloves, estimates are up 5.3% and
4.5%. Excluding gloves and plantation, earnings are 1% and 1.7% higher. Nine stock
recommendation upgrades were offset by six downgrades. KLCI component stocks reported
nine beats and six misses.

20
Earnings outlook: Foreign inflows into large caps drive up KLCI valuations
Figure 35: Earnings outlook and valuations

FBM KLCI RHB BASKET RHB BASKET (EX-FBM KLCI)
COMPOSITE INDEX @ 1,587.36 2020 2021 2022F 2023F 2020 2021 2022F 2023F 2020 2021 2022F 2023F
31 Mar 22
Revenue Growth (%) (10.4) 23.7 5.3 3.5 (8.8) 19.9 5.3 4.2 (5.9) 13.5 5.3 5.6
EBITDA Growth (%) (5.2) 30.0 2.5 1.8 (5.8) 30.2 1.5 3.1 (7.7) 31.1 (1.2) 7.2
Normalised Earnings Growth (%) (24.8) 69.7 (2.2) 8.3 (24.4) 68.4 (3.2) 9.4 (23.1) 65.6 (5.4) 12.3
Normalised EPS (sen) 21.6 36.4 35.5 38.4 14.8 24.7 23.8 25.9 8.2 13.4 12.5 14.0
Normalised EPS Growth (%) (25.0) 68.8 (2.4) 7.9 (24.9) 67.1 (3.7) 8.9 (24.0) 64.0 (6.1) 11.8
Prospective PER (x) 26.9 15.9 16.3 15.2 25.6 15.3 15.8 14.6 22.9 13.9 14.8 13.2
Normalised EPS (sen) ex-Rubber glove 21.6 32.3 35.8 40.4 14.3 20.7 23.6 26.7 7.5 9.9 12.3 14.2
Normalised EPS Growth (%) ex-Rubber glove (28.7) 49.3 10.9 12.9 (29.6) 44.3 14.0 13.5 (31.2) 32.5 24.4 15.2
Prospective PER (x) ex-Rubber glove 27.8 18.7 16.8 14.9 26.9 18.6 16.3 14.4 25.1 18.9 15.2 13.2
Price/BV (x) 1.9 1.8 1.7 1.6 1.6 1.6 1.5 1.4 1.1 1.1 1.0 1.0
Dividend Yield (%) 3.2 4.3 3.7 3.9 3.0 4.0 3.6 3.9 2.5 3.2 3.2 3.6
ROE (%) 6.9 11.3 10.5 10.8 6.3 10.2 9.4 9.8 4.9 7.7 6.9 7.6
Note: Excludes FBM KLCI stocks not under RHB Research’s coverage, i.e.,HLFG, RHB Bank, and PPB
Figure 36: FBM KLCI stocks under our coverage – weightings & valuations
Market Cap Weight EPS Growth (%) P/E (x)
MYRbn (%) FY21 FY22F FY23F FY21 FY22F FY23F
Sime Darby 16.3 1.67 20.0 (3.4) 7.4 13.1 13.5 12.6
Auto 16.3 1.67 20.0 (3.4) 7.4 13.1 13.5 12.6
CIMB 54.5 5.57 286.7 2.2 25.7 11.5 11.2 8.9

HL Bank 43.8 4.47 14.7 7.0 15.8 14.5 13.5 11.7
Maybank 106.2 10.85 18.3 0.5 19.5 13.1 13.0 10.9
Public bank 90.6 9.26 16.7 1.5 16.7 16.4 16.1 13.8
Banking 295.1 30.15 38.9 2.2 20.1 13.8 13.5 11.3
Press Metal 50.1 5.12 121.1 123.1 9.9 48.6 21.8 19.8
Basic Material 50.1 5.12 121.1 123.1 9.9 48.6 21.8 19.8
Nestle 31.3 3.20 2.3 6.3 16.6 54.9 51.6 44.3

Mr DIY 21.7 2.22 23.4 39.2 16.0 50.3 36.1 31.1
Consumer 53.1 5.42 10.4 20.4 16.3 52.9 43.9 37.8
Genting Bhd 18.0 1.84 (225.2) 234.0 62.9 n.m 16.6 10.2
Genting Malaysia 16.9 1.72 28.7 201.4 44.9 n.m 17.5 12.0
Gaming 34.9 3.57 (9.8) 216.0 54.2 (19.7) 17.0 11.0
IHH Healthcare 54.6 5.58 117.1 1.9 14.8 35.0 34.4 29.9
Healthcare 54.6 5.58 117.1 1.9 14.8 35.0 34.4 29.9
Inari Amertron 11.4 1.16 113.6 21.1 12.6 34.8 28.8 25.5
Technology 11.4 1.16 113.6 21.1 12.6 34.8 28.8 25.5
Dialog 15.5 1.58 (16.2) 10.0 13.0 33.6 30.6 27.1

MISC 32.8 3.35 (28.8) 21.7 28.6 25.8 21.2 16.5
Petronas Chemicals 76.8 7.85 280.1 (27.0) 1.0 10.5 14.4 14.3

21
Petronas Dagangan 20.3 2.07 71.7 27.0 13.0 37.0 29.1 25.8
Oil & Gas 145.4 14.85 107.9 (15.6) 8.1 15.3 18.1 16.7
IOI Corp 25.6 2.62 39.1 73.2 (15.2) 23.5 13.5 16.0
Kuala Lumpur Kepong 27.2 2.78 168.3 10.9 (13.6) 14.6 13.1 15.2
Sime Darby Plantations 34.4 3.51 117.2 24.5 (16.6) 17.3 13.9 16.7
Plantation 87.1 8.90 106.4 30.2 (15.2) 17.7 13.6 16.0
Hartalega 16.6 1.69 524.5 7.2 (80.3) 5.6 5.2 26.6

Rubber Products 31.9 3.26 347.0 (65.5) (67.8) 3.0 8.7 27.1
Axiata 34.8 3.55 53.2 (4.5) 17.6 25.9 27.1 23.0

DiGi.Com 30.3 3.10 (8.0) (21.4) 10.0 24.6 31.3 28.5
Maxis 30.8 3.14 (5.5) (7.4) 11.8 22.6 24.4 21.8
Telekom Malaysia 18.5 1.89 25.2 (4.8) 15.0 14.8 15.5 13.5
Telecommunication 114.3 11.68 11.5 (9.4) 13.8 22.0 24.3 21.4
Petronas Gas 33.0 3.37 4.3 (5.1) (3.1) 15.9 16.8 17.3
Tenaga 51.5 5.27 22.0 3.3 12.7 11.8 11.4 10.1
Utilities 84.5 8.63 15.6 0.6 7.9 13.1 13.0 12.1
FBM KLCI 978.7 100.00 68.8 (2.4) 7.9 15.9 16.3 15.2
Corporate earnings should continue to improve and reflect a broad-based rebound in 2022,
helped by the base effect from stop-start lockdowns imposed during 2021, as well as the
recovery in the global growth outlook.
Our forecasts are predicated on the assumption that government policies on COVID-19
going forward will treat the virus as endemic – combined with a strong emphasis on
vaccinations, booster doses, and a strict adherence to established standard operating
procedures (SOPs). We also note that the easing of border restrictions from 1 Apr will help
to speed up the process of normalisation.
We recognise that the Ukraine crisis is a significant risk event that is already up-ending
commodity markets and exacerbating global inflation. A protracted crisis or an escalation of
the security situation in Europe would have material implications for global economic growth.
Our base case assumptions on the Ukraine crisis are:
i. A somewhat protracted crisis, with the conflict contained within Ukrainian borders.
Russia could over-run and capture Kviv and install a puppet government there, while
the legitimate government decamps to Lviv in Western Ukraine, or even to outside of
Ukraine. A less pernicious scenario involves the pullback of Russian forces to
consolidate territory already captured in eastern Ukraine, which includes the separatist
self-proclaimed Luhansk People’s Republic and Donetsk People’s Republic. Sanctions
against Russia remain in place;
ii. Russia does not weaponise its oil and gas resources and maintains supply to
Europe. This has the potential to cause oil prices to spike even higher and the
Eurozone economy to fall into a recession. However, the prices of oil and other
commodities will remain “at elevated levels” for a prolonged period of time – given the
unpredictability of events playing out in Eastern Europe;
iii. Global inflationary pressures will be exacerbated for an extended period. There will
be some risks to global growth;
iv. China remains neutral and does not become embroiled in Western sanctions. US-
China relations remain stable.
We note that nominal FBM KLCI earnings have been impacted by the imposition of the
Cukai Makmur (one-time prosperity tax levied) on 2022 earnings, which has contrived to
shave about 6% off pre-Budget 2022 earnings estimates. This has resulted in benchmark
index earnings estimates for FY22 contracting 2.4% YoY.

22
In addition, 2022F earnings have also been dragged lower by negative growth in the glove,
telecoms and oil & gas sectors, with the small- and mid-caps (RHB basket excluding KLCI
stocks) staging a 6.1% earnings contraction.
Ex-gloves, however, the adjusted earnings growth for the KLCI is back up to 10.9%. For the
RHB basket ex-KLCI and ex-gloves, the normalised earnings growth is a solid 24.4%.
FBM KLCI end-2022 target

Our end-2022 FBM KLCI target is predicated on the assumption that the broader economy
will continue to re-open, helped by a relatively stable environment for global growth. We lift
our end-2022 FBM KLCI target to 1,670pts (from 1,630pts) after ascribing an unchanged
16x P/E to 2023F earnings, a slight premium to the market’s long-term mean P/E of 15.7x.
The higher year-end target reflects a net 2.9% increase in FY23 EPS compared to the
estimate at the date of the preceding quarterly report.
Jun 2022 FBM KLCI semi-annual review

The forthcoming FBM KLCI semi-annual review will be announced by FTSE Russell on 2
Jun and effective from 17 Jun, based on rankings of eligible securities at the close of
business on 23 May.
According to the ground rules of the FTSE Bursa Malaysia Index Series, a security would
be inserted into the FBM KLCI at the periodic review if its ranking by full market value rises
to ≥25th. A security would be deleted if its market cap ranking among eligible securities
drops to ≤36th placing.
Based on the latest market capitalisation rankings, the lowest ranked component stock is
Inari Amertron at no. 36, while no non-component has risen to no. 25 or higher. Inari is at
risk of dropping out from the index, with the highest ranked and eligible non-component
stock being Malaysia Airports.
Hap Seng stands at no. 23, but recall the stock was removed from the list of component
stocks at the preceding Dec 2021 review for liquidity reasons. A non-constituent stock that
does not turn over at least 0.05% of its shares after the application of any investability
weightings based on its median daily trading volume per month for at least ten of the twelve
months prior to the semi-annual review will not be eligible for inclusion in the index. On this
basis, Hap Seng does not meet the requirements for re-inclusion at the forthcoming June
review.

23
Figure 37: Top 50 stocks by market cap

Price
Full mkt cap (MYRbn)
Name (MYR/s)
31-Mar-2022
1 MALAYAN BANKING 8.94 106.19
2 PUBLIC BANK 4.67 90.65
3 PETRONAS CHEMICALS 9.60 76.8
4 IHH HEALTHCARE 6.20 54.58
5 CIMB 5.33 54.48
6 TENAGA NASIONAL 9.00 51.53
7 PRESS METAL 6.20 50.07
8 HONG LEONG BANK 20.20 43.79
9 AXIATA GROUP 3.79 34.78
10 SIME DARBY PLANTATION 4.97 34.37
11 PETRONAS GAS 16.66 32.97
12 MISC 7.35 32.81
13 NESTLE (MALAYSIA) 133.60 31.33
14 MAXIS 3.93 30.76
15 DIGI.COM 3.90 30.32
16 KUALA LUMPUR--KEPONG 25.20 27.17
17 IOI 4.12 25.6
18 RHB BANK 5.96 24.69
19 PPB GROUP 17.10 24.33
20 HONG LEONG FINANCIAL GROUP 19.60 22.45
21 MR DIY GROUP 3.46 21.74
22 PETRONAS DAGANGAN 20.42 20.29
23 HAP SENG 7.48 18.62
24 TELEKOM MALAYSIA 4.89 18.45
25 GENTING 4.68 18.02
26 GENTING MALAYSIA 2.98 16.88
27 HARTALEGA 4.85 16.57
28 SIME DARBY 2.40 16.34
29 DIALOG GROUP 2.74 15.46
30 TOP GLOVE 1.92 15.37
31 WESTPORTS 4.00 13.64
32 AMBANK HLDG 3.71 12.28
33 QL RESOURCES 5.02 12.22
34 KLCCP STAPLED GROUP 6.56 11.84
35 MALAYSIA AIRPORTS 6.95 11.53
36 INARI AMERTRON 3.07 11.38
37 BATU KAWAN 26.30 10.36
38 GAMUDA 3.46 8.84
39 SUNWAY 1.75 8.56
40 TIME DOTCOM 4.30 7.85
41 VITROX CORP 8.20 7.75
42 FRASER & NEAVE 21.00 7.7
43 GENTING PLANTATIONS 8.55 7.67
44 MY EG SERVICES 1.02 7.53
45 MALAYSIAN PACIFIC INDUSTRIES 36.40 7.24
46 FGV HOLDINGS 1.98 7.22
47 HEINEKEN MALAYSIA 22.48 6.79
48 HONG SENG 2.61 6.67
49 CARLSBERG BREWERY 21.72 6.64
50 YTL CORP 0.59 6.47
Note: Shaded stocks are current FBM KLCI component stocks
Source: Bloomberg

24
Key Risks
Ukraine crisis
The Ukraine crisis has the potential to significantly escalate and this could engulf the wider
European theatre in a conflict and even drag NATO in. A protracted crisis will result in
continued extreme volatility for risk assets. Ukraine is a significant inflationary event
triggering large price spikes in commodities such as crude oil, edible oils and metals and
also dampening business and investor sentiment while destabilising the outlook for global
growth.
Any decision by China to offer either economic or military assistance to Russia could
escalate the Ukraine crisis into a global dispute, as Western countries will become
compelled to decide if China should also be subject to sanctions. A strategic alignment
between China and Russia against the West would pose significant downside risks to global
financial markets, and exponentially worsen geopolitical risks and the global security
balance.
Oil price volatility

Higher oil prices will ultimately lead to increased domestic fuel prices, which could impact
consumption growth and inflation. A hike in retail fuel prices would have political implications
for the incumbent government in an election year. With the current retail price of fuel now
benchmarked to an oil price of USD55.00/bbl, the fuel subsidy bill is reaching unsustainable
levels – which may affect the Government’s ability attain its fiscal deficit targets. There would
be negative implications for global growth at prolonged high oil price levels.
Lower crude oil prices would be a net negative for Malaysia, as it is the only net oil & gas
exporter in ASEAN – given the fiscal contributions from petroleum income taxes, royalties,
and Petronas dividends. Reduced oil revenues would be negative for the country’s current
account position and the MYR. A low oil price environment would result in Petronas
undertaking a more cautious stance on the development of domestic oil & gas resources,
with a reduced capex budget that would dampen the prospects of the local oil & gas sector.
Global inflation and monetary tightening

A worsening inflation outlook will spur the US Fed to re-assess its monetary policy stance.
Inflationary pressures could be exacerbated by long-term disruptions to supply chains,
availability of workers, and transportation and inventory bottlenecks. With the US Fed
already behind the curve on inflation, an over-zealous move on monetary policy guidance
and expectations on normalising the US Fed balance sheet (quantitative tightening), could
lead to tighter liquidity conditions, causing bond yields to spike higher and destabilise equity
markets.
Management of COVID-19
The likely continued prevalence of COVID-19 in human population centres could mean a
spike in infections from time to time – which would be disruptive to business operations,
depending on whether countries adopt an eradication or endemic approach. This could raise
the cost of operations. The pace of normalisation, re-opening, and removal of border
closures, movement restrictions, and quarantine guidelines under the new normal will
significantly influence sentiment, economic growth prospects and corporate earnings, in our
view.
COVID-19 mutations could cause new waves of infections, giving rise to uncertainty on the
effectiveness of existing vaccines. This could cause further major economic disruptions if
the mutations are contagious enough and/or induce severe illness that require medical
intervention resulting in healthcare systems being overwhelmed.

25
Worsening US-China ties

A further worsening of the US-China relationship beyond trade and technology issues could
have profound consequences for global trade relationships and geo-political stability. There
are ample sources of friction between the two sides that include Taiwan, Hong Kong,
Xinjiang, Tibet, the South China Sea, trade, and technology. The US-China relationship is
an evolving one and investor sentiment could turn more cautious. Businesses may decide
to delay their investment plans, should ties worsen.
Domestic political and policy risks

Unresolved domestic political issues will remain an underlying medium-term risk, given the
PN government’s continued thin parliamentary majority, making the coalition susceptible to
shifts in support from its partners. However, the MoU signed between PN and the PH
opposition has alleviated these risks for now, with a key pillar of the agreement to not
dissolve Parliament before 31 Jul 2022 – this should offer some political stability over the
near term. However, the political landscape will remain extremely fluid and unpredictable
beyond that date, even as we approach the mid-2023 deadline for GE15.
Sovereign rating risks

We cannot rule out the possibility of Moody’s and S&P Global Ratings following Fitch
Ratings’ lead to downgrade Malaysia’s sovereign rating, should government finances
worsen further. A sovereign ratings downgrade could raise bond yields, lift funding costs,
and accelerate the outflow of capital, which could pressure the MYR lower.
Outflow of foreign capital

Malaysia could be vulnerable to outflows of foreign capital on rising domestic risks and
changes in the external environment – given the high foreign ownership levels in the
domestic debt market. Reduced foreign demand could lead to higher yields and funding
costs for the Government.

26
Market Strategy
On the path to recovery

Government policy and the ongoing gradual process of normalisation has given investors
greater confidence that we are firmly on the road to endemicity. Despite the spike in positive
COVID-19 cases, the percentage of patients requiring hospital intervention remains low and,
accordingly, the healthcare system has been able to comfortably manage. This has been
possible, due to the high vaccination rate.
The base effect, absence of new lockdown restrictions, high levels of pent-up demand,
steady pick-up in global growth and the near-term political status quo will help to support
the expected rebound in economic growth in 2022. This will culminate in the full re-opening
of international borders from 1 Apr that will help to lift market sentiment, and is a significant
milestone in the normalisation process. The ability of the lower-income segment to cope
with the transition will also be aided by the fourth Employees Provident Fund (EPF)
withdrawal scheme that could benefit up to 6.3m contributors, in addition to the proposed
hike in the minimum wage to MYR1,500 (from MYR1,200).
Malaysia a safe haven…for now

The sudden spike in geopolitical risks in Europe has helped to trigger the unexpected return
of foreign portfolio funds into the region – net foreign inflows into Malaysia equities are at
MYR6.5bn YTD – sheltering in the predominantly domestic-centric listed space with strong
representation by commodity-based names, and limited trade and business ties to Russia
and Ukraine. The safe-haven appeal of ASEAN markets for foreign portfolio funds has
resulted in the outperformance of large-cap names over the mid-cap ones.
Figure 38: FBM KLCI has outperformed the FBM 70 YTD
(%)
FBMKLCI Index FBM70 Index
6.0
4.0
2.0
0.0
-2.0
-4.0
-6.0
-8.0
-10.0
-12.0
-14.0
External and internal risks aplenty

Investors should not be lulled into a false sense of security, and we continue to reiterate the
asymmetrically lengthening list of risk factors that could threaten global growth and the
recovery scenario.
Ukraine crisis. While a protracted crisis looks likely, the core assumption is for the conflict
to remain contained within Ukraine. In any armed conflict, however, there are many ways
for the situation to deteriorate beyond our relatively benign scenario. The resulting spike in
commodity prices will only exacerbate the inflation picture and drag on the global recovery
that was just emerging from the pandemic. The OECD has already estimated that global
economic growth will be 1.1ppts lower and inflation nearly 2.5ppts higher. Talk of
stagflationary conditions are already emerging – although this is not the RHB house view.

27
What will China do? China’s insistence on continuing a zero-COVID approach is already
having repercussions for its economy and the global supply chain. What is more worrying,
however, is the risk that China could choose to strategically ally itself with Russia by offering
economic and military support. Such a Russia-China axis raises the spectre of economic
sanctions being extended to China, which would significantly raise geopolitical risks.
A hawkish US Fed... The recent FOMC meeting revealed a more hawkish US Fed than
RHB economists were expecting. It is clear that the Fed is looking to prioritise the
containment of inflationary pressures, after announcing a maiden 25bps increase in the Fed
Funds Rate and signalling a further six 25bps rate increases in 2022, and four in 2023.
…and balance sheet deleveraging. Investors are now closely watching for signals on how
the US Fed intends to deleverage its balance sheet. The RHB house view is for detailed
guidance on balance sheet adjustment to be announced at the May FOMC meeting, and for
the process to begin in 2Q22 vs the earlier assessment by 4Q22. With the US Fed well
behind the curve on inflation, a more aggressive pace of quantitative tightening and a
disorderly transition into a tighter liquidity environment could have negative implications for
Emerging Market equities. While inflation is expected to peak in 1H22, it also very much
depends on how the Ukraine crisis evolves, and the risk is for inflation to stay higher for
longer – given the persistent labour shortages and supply chain constraints.
Nonetheless, we note that tightening global liquidity conditions will be offset by a more
dovish European Central Bank (ECB) whose president has already acknowledged that the
ECB and US Fed’s monetary policy moves will remain out of sync for the foreseeable future,
given their concern over the impact of the Ukraine crisis on Europe and its higher reliance
on commodity (energy) imports.
Rising recession risks. Despite US Fed Chairman Jerome Powell’s optimistic view for the
US Fed to be able to contain inflation without causing a recession, we cannot ignore the
risks. Already, we are seeing the yield curve flattening, coupled with commodity price
shocks. Historically, an inverted yield curve has been a reliable indicator of a potential
recession. While not all rate hike cycles have resulted in recessions, rate hikes that result
in an inversion of the yield curve have led to recessions.
Figure 39: US yield curve is flattening Figure 40: Volatility is rising

(%) 10-year Treasury Constant Maturity Minus 2-year Treasury Constant Maturity Index
1.6
70.0
1.4
60.0
1.2
50.0
1.0
40.0
0.8
0.6 30.0
0.4
20.0
0.2
10.0
0.0
Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22
0.0
-0.2 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Source: Federal Reserve Bank of St. Louis Source: Bloomberg, RHB
Global supply chain disentanglement challenges. Shortages of materials, components

and labour will likely persist, with congestion at key global ports exacerbated by the Ukraine
crisis and continued COVID-19 restrictions in China. This will mean that freight rates will
stay high, and shipping times extended for the foreseeable future. Food and energy costs
have surged as Russia and Ukraine are major wheat producers (20-30% of global
production), in addition to corn, sunflower oil, barley and fertiliser. A global food crisis seems
to be on the horizon.
Rising fuel subsidies point to an inefficient allocation of resources. With RON 95 petrol
and diesel prices heavily subsidised and Brent crude trading in excess of USD100.00/bbl,
Finance Minister Dato’ Seri Tengku Zafrul Aziz said recently that the subsidy would reach
MYR28bn in 2022 (2021: MYR11bn), given the USD67.00/bbl price assumption in Budget
2022. RHB economists believe that there is still enough cover from robust oil-related
revenues via petroleum tax revenues, Petronas dividends and Petroleum royalties. While
the Government will have to depend on higher dividends from Petronas should oil prices
remain high, this would be an inefficient allocation of scarce resources on top of ignoring
Petronas’ own capex and operational needs.

28
With fuel prices being a political hot potato that also carries severe implications for domestic
inflation, it remains to be seen how the Government will adjust the fuel price mechanism to
ensure that subsidies are more targeted towards the lower-income segment, in view of the
impending general election.
Stress on public finances. With direct debt as at end-2021 standing at MYR979.8bn and
equivalent to 63% of GDP, this balloons to MYR1.29trn (83.5% of GDP) after adding debt
guarantees. Debt services charges are running at MYR43.1bn for 2022, equivalent to 18.4%
of projected revenue. A rising interest rate environment and growing subsidy bill will only
make the Government’s 6% fiscal deficit target more difficult to achieve.
Regulatory and policy risks. The heightened risks are underpinned by the apparent lack
of political will to achieve fiscal consolidation, raising the spectre of higher taxes going
forward – given the propensity for continued populist measures in the run-up to GE15. In
our opinion, regulatory and policy risks will remain high and will return to the mainstream of
investor discourse the closer we get to the tabling of Budget 2023 in 4Q22.
GE15: Boon or bane for the stock market? With the current sitting of Parliament ending
in mid-2023, and the recent landslide victories for BN in Melaka and Johor giving rise to
calls from BN strategists for the prime minister to dissolve Parliament and kick off GE15, it
seems a general election would be upon us sooner rather than later. While the
Government’s MOU with the opposition specifies that the Parliament should not be
dissolved before 31 Jul, pressure is already being brought to bear on the prime minister.
Ultimately, regardless of which coalition succeeds in securing the seat of power in Putrajaya,
the impact on the market will likely be neutral. Challenges remain, and neither side has yet
to prove that its leadership offerings and ideas are superior to the other. Neither side has
yet put through meaningful reforms to bring through the next generation of leaders that can
resonate with the younger voters, let alone show the electorate ample reasons why they
should shed the yoke of political fatigue and get more engaged with the political process.
The continuity of key policies and ensuring that the rule of law applies, is the market’s basic
expectation, regardless of the victor in GE15 – assuming there even is a clear victor. A
negative outcome would be a result that does not allow the winning coalition to emerge with
a reasonably comfortable parliamentary majority. A “hung parliament” scenario would lead
to more unsavoury horse-trading, party-hopping and side deals that are not be in the
country’s democratic interests.
Ukraine crisis: What if there is a quick and peaceful resolution?

In the event of a quick and peaceful resolution to the crisis in Ukraine, investors need to be
weary of a knee-jerk sell-off in ASEAN equities. Given that ASEAN has enjoyed safe-haven
status post-invasion, with a near-term shield from higher commodity prices and foreign fund
inflows (bad news is good news), the reverse would lead to market volatility as commodity
prices pull back and foreign portfolio funds reconsider the need for a defensive cloak. A
near-term sell-off in ASEAN markets is a plausible scenario (good news is bad news).
Valuations are not especially compelling

The influx of foreign portfolio funds into the large caps have resulted in the FBM KLCI’s
nominal FY22 P/E moving to 16.5x – a premium to the long-term mean of about 16x –
despite the de-rating of the glove sector. Stripping out the glove stocks elevates the FY22F
P/E to 17.1x. The implementation of the incremental corporate tax from Cukai Makmur has
been a key factor dragging on market earnings growth in 2022, and dilutes the ex-gloves
EPS growth to just 10.9%. Cukai Makmur also incentivises the larger corporations to
kitchen-sink costs into 2022 and defer new revenue streams to 2023 and beyond, which
could further suppress current year growth metrics.
Arguments made for investors to look past the one-off Cukai Makmur to focus on FY23
seem a stretch, given that clarity on the prospects for that year will not be evident until at
least 2H22. The elevated domestic policy and regulatory risks remain a drag on sentiment
as the market cannot now assume that there will be no further versions of Cukai Makmur,
loan moratoriums, and other such onerous regulatory hurdles in the future.
The risk that we could be under-estimating earnings growth for FY23 will depend on the
strength of the recovery and the pace of normalisation. This could mean added upside for
the equity market. An upward re-rating of valuation premiums look difficult to justify.
Nonetheless, the risk-reward profile going forward remains tilted towards the downside.

29
We believe the main reason for the uptick in valuations recently was a function of safe haven
demand by foreigners, who we believe retain an intrinsic underweight on Malaysia equities.
Change to sector weightings

The only change in weighting was in relation to the plantation sector, which we upgraded
to NEUTRAL (from Underweight) following the invasion of Ukraine. The spike in geopolitical
risks caused all commodity prices to rise sharply, as crude oil prices shot past
USD100.00/bbl and the CPO futures price moved beyond MYR6,500/tonne. As oilseed
crops from the Ukraine and Russia may not be able to be planted or exported out of the
country, a loss of 6-7% of global oilseed crops is expected. Fertiliser from Russia and
Belarus is also at risk, as exports may be banned, resulting in a loss of 13% of total global
fertiliser output.
Figure 41: RHB basket – sector weightings & valuations

Sectors Mkt Cap Weight EPS Growth (%) P/E (x) Recommendation
MYRbn % FY21 FY22F FY23F FY21 FY22F FY23F
Banking 323.8 24.8 39.9 3.2 19.3 13.2 12.8 10.8 Overweight
Gaming 40.1 3.1 (14.3) 251.1 52.3 (25.2) 16.7 11.0 Overweight
Basic Materials 54.4 4.2 291.7 105.9 6.7 42.8 20.3 18.6 Overweight
Non-Bank Financials 19.9 1.5 (11.6) (2.3) 5.9 13.6 13.7 12.9 Overweight
Oil & Gas 153.5 11.8 86.1 (9.9) 9.3 15.5 17.2 15.7 Overweight
Utilities 95.8 7.3 14.5 (0.4) 9.0 13.4 13.4 12.3 Overweight
Technology 28.5 2.2 54.9 24.0 13.8 31.9 25.7 22.6 Overweight
Healthcare 56.0 4.3 108.6 2.5 14.6 34.5 33.6 29.3 Overweight
Rubber Products 40.1 3.1 335.1 (72.5) (64.8) 2.3 8.4 23.8 Neutral
Construction 24.7 1.9 3.3 20.4 18.4 19.2 15.9 13.4 Neutral
Auto 23.5 1.8 11.0 2.3 12.9 13.0 12.7 11.2 Neutral
Property-REITs 31.5 2.4 (2.6) 18.8 9.9 22.0 18.4 16.8 Neutral
Telecommunications 122.6 9.4 11.2 (7.7) 14.5 21.9 23.8 20.8 Neutral
Plantation 110.4 8.5 118.9 30.2 (16.8) 16.0 12.3 14.8 Neutral
Consumer 108.4 8.3 11.7 23.6 19.2 33.3 26.9 22.6 Neutral
Transport 31.2 2.4 81.7 497.7 241.1 (255.8) 64.3 18.9 Neutral
Property 34.4 2.6 153.5 24.8 7.9 17.8 14.3 13.3 Neutral
Media 6.4 0.5 3.6 17.5 11.0 11.7 10.0 9.0 Neutral
RHB BASKET 1305.3 100.0 67.1 (3.7) 8.9 15.3 15.8 14.6
Source: RHB
Investment themes
We continue to expect a gradual economic recovery, as the normalisation process gathers
pace. The macroeconomic house view is for the domestic economy to expand 5.5% YoY in
2022. However, we acknowledge that external macroeconomic headwinds continue to
gather, combined with internal domestic risks that include policy and regulatory concerns.
The paucity of earnings growth in 2022 means that valuations are not especially compelling
either.
As we get closer to mid-2022, we expect markets to gradually start pricing in expectations
for 2023. The myriad of prevailing issues that could have volatile repercussions means that
investors are not yet looking too far forward, while maintaining a relatively nimble stance.
A trading market still

2022 will be a traders’ market that will require astute bottom-up stock picking and a nimble
touch to outperform. Investors will need to maintain a nimble investment posture, and
remain somewhat liquid to be able to capitalise on trading opportunities.

30
Figure 42: Top BUYs

Market EPS EPS Growth 3-Yr P/E P/BV P/CF DY
FYE Price TP Shariah
Cap (sen) (%) EPS (x) (x) (x) (%)
(MYR/s) (MYR) compliant (MYRm) FY22F FY23F FY22F FY23F CAGR (%) FY22F FY23F FY23F FY23F FY23F
31 Mar 22
Maybank Dec 8.94 10.40 NO 106,194 68.5 81.9 0.5 19.5 12.4 13.0 10.9 1.2 n.a. 7.3
Petronas Chem Dec 9.60 10.86 YES 76,800 66.6 67.2 (27.0) 1.0 41.0 14.4 14.3 1.9 11.0 3.5
Press Metal Dec 6.20 8.25 YES 50,073 28.4 31.3 123.1 9.9 75.7 21.8 19.8 7.6 17.1 2.3
HL Bank Jun 20.20 23.50 NO 43,788 149.6 173.2 7.0 15.8 12.4 13.5 11.7 1.2 n.a. 3.0
KLK Sep 25.20 31.45 YES 27,170 191.7 165.7 10.9 (13.6) 37.0 13.1 15.2 2.0 12.2 4.0
Mr DIY Group Dec 3.46 4.59 YES 21,740 9.6 11.1 39.2 16.0 25.8 36.1 31.1 12.1 24.0 1.6
Genting Dec 4.68 6.39 NO 18,021 28.2 45.9 234.0 62.9 (292.2) 16.6 10.2 0.5 2.1 4.3
AMMB^ Mar 3.71 4.00 NO 12,283 50.4 54.8 18.4 8.8 19.7 7.4 6.8 0.6 n.a. 5.5
Inari Amertron Jun 3.07 3.59 YES 11,376 10.7 12.0 21.1 12.6 42.8 28.8 25.5 4.3 23.1 3.3
Heineken Dec 22.48 25.80 NO 6,791 94.8 115.1 16.5 21.4 25.6 23.7 19.5 16.9 16.2 5.1
CTOS Digital Dec 1.58 2.40 YES 3,650 3.5 4.4 75.8 24.4 32.2 44.8 36.0 5.7 37.0 1.7
Bumi Armada Dec 0.41 0.65 NO 2,422 10.1 10.6 63.9 4.8 9.3 4.1 3.9 0.5 2.3 0.0
Matrix^ Mar 2.37 2.66 YES 1,977 29.2 30.8 5.0 5.3 (0.7) 8.1 7.7 0.9 6.9 5.7
Berjaya Food Jun 3.79 4.20 YES 1,366 24.0 23.7 150.2 (1.3) (261.1) 15.8 16.0 3.1 8.1 3.1
Tasco^ Mar 1.11 2.14 YES 888 8.8 9.4 11.3 7.0 22.2 12.6 11.8 1.4 7.1 2.5
MGB Dec 0.73 0.99 YES 429 11.2 17.7 108.7 58.5 102.1 6.5 4.1 0.6 2.8 4.9
Note: ^FY22-23 valuations refer to those of FY23-24
Source: RHB
Figure 43: Top SELLs

FYE Price TP Market EPS EPS growth 3-Yr P/E P/BV P/CF DY
Shariah
Cap (sen) (%) EPS (x) (x) (x) (%)
(MYR/s) (MYR/s) compliant (MYRm) FY22F FY23F FY22F FY23F CAGR (%) FY22F FY23F FY23F FY23F FY23F
31 Mar 22
Eastern & Oriental^ Mar 0.53 0.48 YES 762 0.6 1.8 160.4 193.8 (182.0) 85.5 29.1 0.5 4.1 0.0
CLMT Dec 0.58 0.50 NO 1,238 2.1 2.5 42.1 17.7 (8.7) 27.3 23.2 0.5 8.5 4.3
Supermax Jun 1.18 0.92 YES 3,145 30.0 6.6 (79.6) (78.1) (31.1) 3.9 18.0 0.6 15.5 1.1
Sapura Energy^ Jan 0.04 0.02 YES 559 (3.5) (1.9) 79.4 45.2 14.7 n.m. n.m. (0.9) (49.5) 0.0
Source: RHB

31
Stay focused on the recovery

In our base case recovery scenario, equities will still remain the preferred asset class.
Investors should focus on value and cyclical names that can leverage on the economic
recovery and re-opening theme.
Figure 44: Recovery plays
3 yrs EPS
EPS EPS Growth P/E P/BV P/CF DY
Price TP Shariah Mkt Cap CAGR Rec
(sen) (%) (x) (x) (x) (%)
(%)
FY20-
(MYR/s) (MYR/s) Compliant (MYRm) FY22F FY23F FY22F FY23F FY22F FY23F FY23F FY23F FY23F
FY23F
31 Mar 22
Maybank 8.94 10.40 NO 106,194 68.5 81.9 0.5 19.5 12.4 13.0 10.9 1.2 n.a. 7.3 Buy
Press Metal 6.20 8.25 YES 50,073 28.4 31.3 123.1 9.9 75.7 21.8 19.8 7.6 17.1 2.3 Buy
Hong Leong Bank 20.20 23.50 NO 43,788 149.6 173.2 7.0 15.8 12.4 13.5 11.7 1.2 n.a. 3.0 Buy
Axiata Group 3.79 5.03 YES 34,780 14.0 16.5 (4.5) 17.6 19.8 27.1 23.0 1.9 3.1 3.7 Buy
MISC 7.35 7.79 YES 32,809 34.7 44.6 21.7 28.6 3.7 21.2 16.5 0.9 6.3 4.5 Buy
Genting Bhd 4.68 6.39 NO 18,021 28.2 45.9 234.0 62.9 (292.2) 16.6 10.2 0.5 2.1 4.3 Buy
Dialog 2.74 3.40 YES 15,461 9.0 10.1 10.0 13.0 1.3 30.6 27.1 3.2 27.2 1.7 Buy
AMMB^ 3.71 4.00 NO 12,283 50.4 54.8 18.4 8.8 19.7 7.4 6.8 0.6 n.a. 5.5 Buy
Astro M'sia^ 1.10 1.37 NO 5,736 10.7 11.8 17.4 10.1 4.8 10.3 9.3 4.1 4.7 8.2 Buy
IGB REIT 1.53 1.92 NO 5,470 8.2 9.3 46.3 13.3 11.8 18.7 16.5 1.4 14.1 5.1 Buy
Sime Darby Prop 0.59 0.75 YES 4,012 2.6 2.9 30.4 9.2 (178.3) 22.5 20.6 0.4 12.5 2.2 Buy
CTOS Digital 1.58 2.40 YES 3,650 3.5 4.4 75.8 24.4 32.2 44.8 36.0 5.7 37.0 1.7 Buy
Guan Chong 2.65 4.00 YES 2,800 24.6 27.0 59.2 9.5 11.7 10.8 9.8 1.5 8.5 2.3 Buy
Berjaya Food 3.79 4.20 YES 1,366 24.0 23.7 150.2 (1.3) (261.1) 15.8 16.0 3.1 8.1 3.1 Buy
Tasco^ 1.11 2.14 YES 888 8.8 9.4 11.3 7.0 22.2 12.6 11.8 1.4 7.1 2.5 Buy
Media Prima 0.64 0.90 NO 704 7.8 9.1 18.4 16.8 (378.4) 8.1 6.9 0.9 3.6 3.1 Buy
Source: RHB
Buy on weakness
With domestic liquidity remaining ample and interest rates still at low levels, captive
investment funds will still need to be deployed. A key investment theme will be to seek more
attractive entry points to build positions for the longer term.
Figure 45: Best bombed-out stocks
EPS EPS Growth 3 yrs EPS P/E P/BV P/CF DY
Price TP Shariah Mkt Cap Rec
(sen) (%) CAGR (%) (x) (x) (x) (%)
FY20-
(MYR/s)(MYR/s) Compliant (MYRm) FY22F FY23F FY22F FY23F FY22F FY23F FY23F FY23F FY23F
FY23F
31 Mar 22
Tenaga Nasional 9.00 11.50 YES 51,535 79.1 89.2 3.3 12.7 12.4 11.4 10.1 0.8 3.0 5.7 Buy
Syarikat Takaful 3.63 4.90 YES 3,033 36.6 41.9 (11.0) 14.5 (1.3) 9.9 8.7 1.5 n.a. 5.2 Buy
Unisem 3.14 3.75 YES 5,065 14.7 17.0 17.5 15.1 22.2 21.3 18.5 2.1 10.8 2.5 Buy
Malayan Cement 2.41 3.65 YES 3,158 10.7 11.9 1220.2 11.1 (173.0) 22.5 20.2 1.0 20.2 0.0 Buy
Sports Toto 1.92 2.39 NO 2,576 10.0 18.1 (23.4) 81.2 24.5 19.2 10.6 3.0 7.2 8.3 Buy
Magnum 1.82 2.51 NO 2,616 15.0 17.4 1556.9 15.8 33.5 12.1 10.5 1.1 8.7 8.8 Buy
GHL Systems 1.52 1.65 YES 1,735 3.1 3.6 19.9 16.7 10.2 48.9 41.9 3.0 23.8 0.0 Buy
Duopharma 1.49 1.92 YES 1,403 8.2 9.1 17.1 10.6 12.3 18.1 16.3 2.0 13.5 3.3 Buy
SKP Resources^ 1.41 2.40 YES 2,203 13.1 14.0 26.2 7.0 19.0 10.8 10.1 2.3 9.6 5.9 Buy
Kerjaya Prospek 1.13 1.56 YES 1,398 13.5 16.6 73.3 22.7 31.4 8.4 6.8 1.0 6.8 5.1 Buy
VS Industry 1.03 1.26 YES 3,932 5.4 9.3 (16.4) 73.6 42.6 19.2 11.0 1.8 13.3 5.9 Buy
IOI Properties 0.98 1.38 YES 5,396 12.7 13.0 2.1 1.9 8.2 7.7 7.6 0.3 4.2 3.6 Buy
Datasonic^ 0.48 0.57 YES 1,361 0.5 2.3 103.6 317.9 100.3 20.7 21.9 3.5 19.4 3.2 Buy
Gabungan AQRS 0.40 0.60 YES 214 10.1 9.5 150.0 (6.0) (198.0) 3.9 4.2 0.4 3.2 5.1 Buy
Source: RHB

32
Core defensive posture

Domestic investors that have to remain invested locally, need to maintain a core defensive
portfolio for tactical reasons, given the prevailing risks. These defensive names will
demonstrate greater price stability and resilience in the face of volatility, while high-dividend
yield stocks will remain on the radars of risk-averse investors.
Figure 46: Defensive stocks

EPS EPS growth 3-yr EPS P/E P/BV P/CF DY
Price TP Mkt cap
(sen) (%) CAGR (%) (x) (x) (x) (%)
(MYR/s) (MYR/s) (MYRm) 22F 23F 22F 23F FY20-FY23F 22F 23F 23F 23F 23F
Rec 31 Mar 22
IHH Healthcare Buy 6.20 7.50 54,577 18.0 20.7 1.9 14.8 36.5 34.4 29.9 2.2 14.7 1.0
Tenaga Nasional Buy 9.00 11.50 51,535 79.1 89.2 3.3 12.7 12.4 11.4 10.1 0.8 3.0 5.7
Nestle Neutral 133.60 138.00 31,329 258.8 301.7 6.3 16.6 8.2 51.6 44.3 52.6 32.3 2.2
QL Resources^ Neutral 5.02 4.67 12,217 10.4 11.9 26.0 13.7 7.5 48.1 42.3 4.4 22.8 0.8
Time DotCom Buy 4.30 5.00 7,850 23.3 28.4 12.3 21.9 13.9 18.5 15.1 2.2 11.7 3.3
Scientex Buy 4.06 4.68 6,297 27.3 34.5 (6.2) 26.2 10.8 14.9 11.8 1.8 9.4 3.0
Magnum Buy 1.82 2.51 2,616 15.0 17.4 1556.9 15.8 33.5 12.1 10.5 1.1 8.7 8.8
Source: RHB
ESG screening
How a business manages financial and non-financial risks has become increasingly
important in the decisions made by investors. An organisation’s ESG practices provide a
vital metric for where they should park their funds. The COVID-19 pandemic has taught
investors that, no matter how foreseeable a risk may be, the impact an event has on society
and businesses hinges on the ability to plan for significant disruptions and changes in the
operating environment. ESG issues have, therefore, come even more to the forefront, as a
signpost of a resilient business. Many institutional investors are now building ESG portfolios,
and forming their own in-house ESG methodologies.
Accordingly, investors need to perform stringent screening to avoid companies that may
present ESG risks. RHB’s proprietary ESG scoring methodology, where we assess the ESG
profiles of companies under coverage, will be relevant in this regard. We believe that an
improving ESG score, corroborated with high ROEs and superior earnings, will result in
robust long-term returns. In addition, we believe that a low ESG score that remains stagnant,
may reflect negatively on a company’s prospects and also its ROE and earnings resiliency.
Figure 47: High ESG scorers

EPS growth 3-yr EPS P/E P/BV P/CF DY ESG
Price TP Mkt cap EPS (sen)
(%) CAGR (%) (x) (x) (x) (%) Score
(MYR/s) (MYR/s) (MYRm) FY22F FY23F FY22F FY23F FY20-FY23F FY22F FY23F 23F 23F 23F
Rec 31 Mar 22
Maybank Buy 8.94 10.40 106,194 68.5 81.9 0.5 19.5 12.4 13.0 10.9 1.2 n.a 7.3 3.2
Press Metal Buy 6.20 8.25 50,073 28.4 31.3 123.1 9.9 75.7 21.8 19.8 7.6 17.1 2.3 3.3
Mr DIY Buy 3.46 4.59 21,740 9.6 11.1 39.2 16.0 25.8 36.1 31.1 12.1 24.0 1.6 3.2
Heineken Buy 22.48 25.80 6,791 94.8 115.1 16.5 21.4 25.6 23.7 19.5 16.9 16.2 5.1 3.3
Astro M'sia^ Buy 1.10 1.37 5,736 10.7 11.8 17.4 10.1 4.8 10.3 9.3 4.1 4.7 8.2 3.2
Yinson^ Buy 4.80 6.49 5,108 28.7 41.5 0.7 44.7 7.9 16.7 11.6 1.7 4.3 1.3 3.2
Axis Reit Buy 1.86 2.28 3,040 9.6 9.8 7.3 2.3 3.9 19.4 19.0 1.2 7.2 5.3 3.2
Allianz M’sia Buy 12.72 17.90 2,264 143.5 164.0 (2.9) 14.3 3.3 8.9 7.8 0.9 n.a 3.0 3.2
GHL Buy 1.52 1.65 1,735 3.1 3.6 19.9 16.7 10.2 48.9 41.9 3.0 23.8 0.0 3.3
FM Global Buy 0.67 1.20 374 7.1 7.4 34.6 3.5 48.0 9.4 9.1 1.0 6.8 5.2 3.3
^FY22-23 valuations refer to those of FY23-24
Source: RHB

33
Small-Mid Cap Outlook

Still range-bound. The outperformance of FBM SC (+3.4% YTD) continues in 2022 despite
Analyst
the overall range-bound market, in the absence of a major positive catalyst, while
Lee Meng Horng
uncertainties from external events linger. The stronger performance of the FBM SC is helped
+603 9280 8866
by commodity-related stocks that benefited from the surge in various commodity prices. On lee.meng.horng@rhbgroup.com
the other hand, the FBM 70 (-2.5% YTD) has underperformed the FBM KLCI so far this
year, as the sector heavyweight that consists mainly technology sector-related stocks took
a beating amid high inflation and rising interest rates. The return of foreign fund inflows has
supported the FBM KLCI so far, helped by a strong performance from banks, thanks to the
Malaysian market’s defensive attributes, while the spike in commodity prices has been a
boon. Notably, we have seen a drop in market liquidity, with a cautious tone from local
institutions and the lack of participation from retailers. This has been exacerbated by the
risk-averse sentiment casting a further pall on the market.
Figure 48: YTD performance of FBM SC and FBM 70 vs FBM KLCI
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
3-Jan-22 18-Jan-22 2-Feb-22 17-Feb-22 4-Mar-22 19-Mar-22
-1.0%
-2.0%
-3.0%
-4.0%
-5.0%
-6.0%
-7.0%
-8.0%
-9.0%
-10.0%
-11.0%
-12.0%
FBM SC Index FBM 70 Index FBM KLCI Index
Figure 49: Yearly returns of major indices

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 YTD
FBM KLCI 19.3% -0.2% 10.3% 10.5% -5.7% -3.9% -3.0% 9.4% -5.9% -6.0% 2.4% -3.7% +1.3%
FBM70 31.8% 4.6% 6.6% 15.0% -7.9% 0.5% -0.8% 23.4% -18.7% 8.7% 6.6% -6.2% -2.5%
FBMSC 24.2% -9.0% -1.6% 36.7% -4.2% 6.0% -7.7% 15.9% -33.7% 25.4% 9.9% 1.3% +3.4%
Figure 50: Bursa Malaysia trading statistics

100%
90%
26% 26% 22% 22% 25% 23% 20% 22% 22% 24% 27%
80% 37% 37%
70%
60%
50% 47% 48% 52% 52% 51% 50% 53% 56% 51% 46% 47%
40% 46% 44%
30%
20%
27% 26% 26% 27% 24% 27% 27% 22% 27% 30% 25%
10% 17% 19%
0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
YTD
Foreign Investors Local Institutional Local Retail
Source: Bloomberg, RHB.

34
Risk-averse sentiment and stamp duty hike dampened market activity. As highlighted
in our previous strategy note, the drain in market liquidity will be a key talking point in 2022.
This is given the stamp duty rate and new cap, as well as various detrimental external events
such as high inflation, geopolitical risks and surging commodity prices. Trading activity has
been muted since mid-2021, and continues to be lacklustre in the absence of robust retail
participation – YTD traded value for FBM 70 and FBM SC has declined by 32% and 61%.
Compounded by the resumption of intra-day short selling (IDSS), we have witnessed a
rather volatile market in the 1Q22, especially for the small-mid cap space.
Valuations have fallen again below the 5-year mean. The short-term outlook continues
to be clouded by the persistent high inflation rate, higher-than-expected rate hikes, the
Russia-Ukraine crisis, supply chain disruptions and domestic political instability. On the
other hand, the pace of economic recovery seems to be the major catalyst supporting the
equity market, in tandem with the net inflow of foreign funds that are searching for a safer
market in South-East Asia. This, in turn, is in view of the surging commodity prices – such
as that of palm oil and crude oil. Notably, the foreign fund inflow so far has not benefited the
small-mid cap stocks much. However, the trend could swiftly be reversed, as the local
institutional investors could again redirect their attention towards counters offering alpha
returns in this space again, should global geopolitical risks subside and the inflation rate
comes under better control. If this happens, from a valuation standpoint, it is time to be
nimble – given the better risk-reward ratio on current forward P/Es. Both the FBM 70 and
FBM SC are trading below their 5-year means, at about 2x P/E discounts to that of the FBM
KLCI – based on RHB’s stock universe.
Trim the winners, be nimble with the laggards. Against the backdrop of a full-blown
economic recovery in 2022, supported by our in-house GDP growth forecast of 5.5% YoY,
certainly there are companies expected to perform well and record growth. Still, we expect
market volatility to remain elevated for a large part of 2022, no thanks to the fluid situation
and prevailing uncertainties. We believe the upside is capped, as the expectation of a broad-
based economic recovery seems priced in while the downside continues to be supported by
bottom-fishing activities. The strategy to be nimble on laggards and trim the winners should
remain relevant, given the range-bound market against a volatile backdrop. The mainstay
of an investor’s strategy should be two-pronged: i) Rotational play on sectors; and ii) bottom-
up stock-picking. Among the sectors to look out for in the small-mid cap space are consumer
discretionary, technology, logistics, oil & gas, plantation and politically linked thematic plays.
Accommodative fiscal and monetary policies should continue to lend support to private
consumption, supporting the consumer discretionary sector. The oil & gas sector upcycle
could just be at an early stage – given the positive crude oil price trend, higher capex
allocations, and oil demand recovery. This is likely to translate to a positive earnings cycle
in the future. Following the YTD steep correction, there are value buys within the technology
space. This sector is now trading at a reasonable valuation, while fundamentals remain
solid, supported by the structural growth and advancements in various fields.
The logistics sector continues to benefit from the economic reopening and resumption or
ramp-up of business activities. These come on top of the secular e-commerce play, elevated
freight rates, growing demand for third-party logistics, and favourable measures and tax
incentives from policymakers. Also, the interest on the plantation sector should come in
tandem with the spike in CPO prices – which should point to sturdy, positive earnings growth
in the quarters ahead.
Figure 51: FBM 70’s P/E band Figure 52: FBM SC’s P/E band

35
Key risks
i. Persistently high inflation;
ii. Earnings disappointments that undermine the economic growth outlook;
iii. Worsening economic conditions, which will drive investors to seek refuge in the safer
high-yield, big-cap space;
iv. Liquidity issues, which may compound fund outflow;
v. Higher ESG-related risks for smaller-cap companies.
Figure 53: Small-mid cap Top Picks

Mkt EPS EPS Growth P/E P/BV P/CF DY
Price TP Shariah Rec
Cap (sen) (%) (x) (x) (x) (%)
(MYR/s) (MYR/s) Compliant (MYRm) FY22F FY23F FY22F FY23F FY22F FY23F FY23F FY23F FY23F
31 Mar 2022
MPI 36.40 43.30 YES 7,240 149.3 177.5 21.1 18.9 24.4 20.5 3.4 12.6 0.9 Buy
Heineken Malaysia 22.48 25.80 NO 6,791 94.8 115.1 16.5 21.4 23.7 19.5 16.9 16.2 5.1 Buy
Ta Ann 5.15 6.40 YES 2,268 89.1 62.9 37.3 (29.4) 5.8 8.2 1.1 4.9 4.9 Buy
Guan Chong 2.65 4.00 YES 2,800 24.6 27.0 59.2 9.5 10.8 9.8 1.5 8.5 2.3 Buy
SKP Resources^ 1.41 2.40 YES 2,203 13.1 14.0 26.2 7.0 10.8 10.1 2.3 9.6 5.9 Buy
Tasco^ 1.11 2.14 YES 888 8.8 9.4 11.3 7.0 12.6 11.8 1.4 7.1 2.5 Buy
Astro Malaysia^ 1.10 1.37 NO 5,736 10.7 11.8 17.4 10.1 10.3 9.3 4.1 4.7 8.2 Buy
FM Global Logistics 0.67 1.20 YES 374 7.1 7.4 34.6 3.5 9.4 9.1 1.0 6.8 5.2 Buy
Datasonic^ 0.48 0.57 YES 1,361 0.5 2.3 103.6 317.9 20.7 21.9 3.5 19.4 3.2 Buy
Bumi Armada 0.41 0.65 NO 2,422 10.1 10.6 63.9 4.8 4.1 3.9 0.5 2.3 0.0 Buy
Source: RHB

36
FBM KLCI: From a Technical Perspective
Figure 54 : FBM KLCI’s monthly chart
Jul 2014 High

1,896
Head &
Dec 2020 High
Shoulder
1,696
1,613
1,558
1,483
Aug 2015 Low
1,504 Neckline
1,452
Apr 2020 Low

Sep 2011 Low 1,317
1,310
“Hammer” Low 1,208
Source: RHB, Bloomberg
Consolidating sideways
Edging higher towards the resistance. Momentum on the FBM KLCI has picked up in recent
months, with the index moving higher and testing the 1,613-pt resistance. In Dec 2021, the
index fell to a low of 1,475 pts. Strong buying momentum then emerged, which lifted it towards
Mar 2022’s high of 1,620 pts. This price action is in line with our expectation – as detailed in a
previous report – for the FBM KLCI to trend between 1,483 pts and 1,558 pts. With the renewed
momentum, the index may attempt to break above 1,613 pts.
Strong support has formed. The latest price action saw strong support forming at 1,483 pts.
As long as the support stays intact in the coming months, the uptrend that started since 1,208
pts is deemed as valid now. In the event the FBM KLCI resorts to a consolidation, it may retrace
and re-test the 1,558-pt level, followed by 1,483 pts. Meanwhile, the 1,452-pt level will act as
the last defence of the bullish structure. Breaching this major support will unveil a major
correction towards 1,317 pts.
Consolidating beneath the resistance. While the index has established its support, it is
moving higher to test the strong resistance of 1,613 pts. Breaching the threshold will see the
FBM KLCI move towards 2021’s high of 1,646 pts, followed by 2020’s high of 1,696 pts. Before
that happens, the index may undergo a consolidation phase.
Sideways movements in the near future. The FBM KLCI will continue to move between 1,613
pts and 1,483 pts. A breakout above the 1,613-pt resistance will see a fresh leg-up. On the other
hand, breaching below the 1,452-pt major support would lead to a sharp correction.

37
FBM 70: From a Technical Perspective

Figure 55 : FBM 70’s monthly chart
Jan 2018 High: 16,894
Apr 2021’s High:

15,895
Oct 2021’s High:

15,558
Resistance:
14,179
Major
Support:
13,205
Mar 2022’s Low

12,429
Aug 2015 Low:

11,024
Sep 2011 Low :

9,286 Mar 2020 Low:
8,952
Bouncing off the interim base

Staging a strong rebound. The FBM 70 staged a strong rebound in March, bouncing off
12,429 pts and closing at 13,853 pts – printing a bullish candlestick with a long lower shadow.
The price action affirmed 13,205 pts as a major support.
Downside risk persists. Despite the index rebounding from a low, it has yet to print a fresh
“higher high”. In Jan 2022, we observed the bearish candlestick breaching the 14,179-pt
support. For now, this Jan 2022 bearish candlestick still remains valid. As such, we believe the
bears remain in control of the correction phase. In the event the bullish momentum eases, the
FBM 70 may resume its downward path to re-test 13,205 pts and 12,429 pts.
Pending a fresh “higher high”. To climb higher, the index has to break past the threshold of
14,179 pts. Breaking past the support-turned-resistance will deem the recent bearish
breakdown as a false breakout and send the FBM 70 back to an upward trajectory. We expect
strong resistance to exist near 14,179 pts.
Counter-trend rebound in progress. The index is currently undergoing a counter-trend
rebound. This may lift the FBM 70 higher to test the 14,179-pt level. On the other hand,
breaching below the 13,205-pt support may signal that the rebound is weakening and we may
potentially see a resumption of the downwards correction.

38
FBM SC: From a Technical Perspective

Figure 56 : FBM SC’s monthly chart
Aug 2014’s High:

19,388
Apr 2021’s High:

17,446
Resistance:
16,402
Neckline/ Support:
15,119
Major Support:
12,486
Sep 2011 Low:

9,930
Mar 2020 Low:

7,520
Consolidating in a tight range

Momentum remains neutral. The FBM SC is consolidating within a tight range of 15,119 pts
and 16,402 pts. In January, the index touched the low of 15,078 pts and bounced to February’s
high of 16,539 pts. In March, the index then fell to the low of 15,066 pts before closing the month
at 16,292 pts. The price action showed both bulls and bears shared equal strength and
momentum remains neutral.
Upside risk intact. In the event the index breaches 16,402 pts, we think the positive momentum
will pick up pace and lift it towards 17,446 pts. Breaching the 17,446-pt level will negate the
formation of a Double Top. Before that happens, we expect selling pressure to exist near the
16,402-pt resistance.
Joseph Chai
Strong support or neckline has formed. Based on the latest price action, strong support has
formed at 15,119 pts. In the event the momentum eases, the index may retrace and re-test the +603 9280 8870
joseph.chai@rhbgroup.com
15,119-pt support. Breaching below the strong support or neckline will confirm the formation of
a Double Top. A strong correction will then drag the FBM SC towards the 12,486-pt level.

39
Auto & Autoparts: Bumpy 2H22 NEUTRAL

NEUTRAL on sector – lacking catalysts, potential 2H22 headwinds. We maintain our
NEUTRAL stance on the sector despite the expectation of a stellar 1H22, as it may be
weighed down by some headwinds in 2H22 when carmakers and distributors may face a
trade-off between sales volumes and margins. The worsening chip and parts shortage may
pose risks of further supply constraints for European marques. As our current estimates
have yet to account for the potential reform of the excise duty in 2023, the implementation
of said reform poses downside risks to our 2023 earnings forecasts. We keep our 540,000
TIV assumption for 2022, but note that an extension of the Sales and Services Tax (SST)
and/or implementation of the excise duty reform in 2023 may require us to relook at our
assumptions, to account for sales brought forward. While we currently do not have any BUY
calls in the sector, we favour MBM Resources (MBMR MK, NEUTRAL, TP: MYR3.38) for
its sector-leading FY22-23F dividend yields of 7-8%. Also, its associate Perodua may
benefit from potential downtrading among consumers, should there be a broad-based
increase in car prices.
Expecting a strong 1H22. Across both national and non-national marques, there continue
to be strong backlogged orders – driven by tight supply and strong demand. Most marques
continue to have tight inventory, caused by the persistent chip shortage. Domestic demand
for passenger vehicles remains robust, as customers rush to take advantage of the SST
exemption, which is slated to end after June. The strong demand is also a result of the
spillover from previous unfulfilled orders, caused by the insufficient supply of vehicles. In
2Q22, we expect the marques to continue fulfilling any orders that they can, to help buyers
use the tax relief. Proton's sales and production should also recover in the coming months,
after its sales took a hit in Dec 2021 and Jan 2022, as its vendors in Shah Alam were
impacted by floods.
Potential margin impact in 2H22? While Malaysian Automotive Association (MAA) has
requested the Ministry of Finance to extend the SST exemption period, we continue to
assume that there will not be an extension. We believe certain marques will be providing
customers with discounts and promotions to support their sales volumes, which may erode
margins. Moreover, prices of car components have risen along with that of commodities and
raw materials. We believe different distributors have varying ability to pass on higher costs.
For example, Sime Darby (SIME MK, NEUTRAL, TP: MYR2.40) which sells higher-end
cars, is less likely to face any margin erosion – as demand for higher-end cars tend to be
more price-inelastic, especially so with a supply shortage. Conversely, national marques
with more affordable brands may be less able to pass on higher costs. As such, they may
need to trade off margins for sales volume. Separately, we note that the JPY/MYR
weakened by about 5% throughout March, which may cushion the margins of Bermaz Auto
(BAUTO MK, NEUTRAL, TP: MYR1.74), whose 30%-owned associate (Mazda Malaysia)
incurs the majority of its costs in JPY terms.
Persistent chip and parts shortage. Our checks with the management teams of different
marques show that there has not been any improvement in customer waiting time. In fact,
the Russia-Ukraine war poses a risk of lengthening said waiting time – as the war has
exacerbated the chip shortage and disrupted the production of wire harnesses in Ukraine.
Wire harnesses, a crucial car component, are model-specific. As such, its production cannot
easily and quickly be replaced. This supply disruption is especially pronounced for European
marques, including SIME's BMW and Porsche, and MBMR's Volvo and Volkswagen. While
the carmakers and distributors have not felt the additional impact of the war, we believe that
the further supply strain may take some time to be felt.
Excise duty reform in 2023? To recap, the excise duty reform was introduced by the
Pakatan Harapan administration in Jan 2020, but its implementation was postponed to end-
2020 and again to end-2022. The reform would change the definition of a vehicle's open
market value (OMV) to include the profits and expenses incurred, during not only the
manufacturing process, but also the sale. The higher OMV would result in a higher excise
duty, and could raise car prices by 8-20% in 2023, according to MAA. In our view, such a
price increase is enough to adversely impact car sales. Moreover, the reform may also make
Malaysia less competitive – potentially deterring new foreign direct investments, such as by
discouraging foreign marques from setting up local production of electric vehicles (EV).
Analyst
Jim Lim Khai Xhiang
+603 9280 8683
jim.lim@rhbgroup.com

40
More needs to be done to encourage local EV production. While it is encouraging that

Volvo’s recently launched XC40 Pure Electric P8 will be assembled in Malaysia for local
sales and for exports, we believe existing incentives need to have a longer-term horizon to
attract more foreign marques to domestically produce EVs. At the moment, the payback
period of a local EV production plant may be long (3-5 years), due to the expected slow
adoption of EVs. With the incentives for CKD EVs only lasting until FY25, auto
manufacturers may be lacking policy visibility beyond FY25 to base their investment
decisions on and, as such, may not be enticed to locally manufacture EVs. To recap, in our
view, the expected slow adoption is mainly attributable to: i) High vehicle costs, with the
cheapest option in Malaysia being the Hyundai KONA electric at c.MYR150k; and ii) the
lack of charging infrastructure currently. Moreover, the national marques have no plans for
any affordable battery EV in 2022. While Proton will be importing, distributing and dealing
Smart Automotive EVs, early estimates suggest selling prices of around c.MYR140k to
c.MYR200k, which do not cater for the majority of Proton buyers.
Downside risks: Worse-than-expected shortages of key components and delays in new
model launches, mutating COVID-19 variants that could disrupt operations going forward,
tightening of bank approvals for car loans, and a sharp weakening of the MYR.
Figure 57: Auto stocks' valuations

Price Target Mkt cap P/E (x) EPS growth (%) P/BV(x) P/CF(x) ROE (%) DY (%) Rec
(MYR/s) (MYR/s) (MYRm) FY22F FY23F FY22F FY23F FY22F FY22F FY22F FY22F
Sime Darby 2.40 2.40 16,344 13.5 12.6 (3.4) 7.4 1.0 5.0 7.5 4.2 Neutral
MBM Resources 3.09 3.38 1,208 6.1 5.7 16.9 8.5 0.6 30.1 10.0 7.6 Neutral
Bermaz Auto^ 1.79 1.74 2,080 13.2 10.5 21.6 25.3 3.2 13.6 25.5 5.0 Neutral
UMW 3.29 3.29 3,844 13.4 10.1 10.5 32.6 0.9 8.7 6.7 1.8 Neutral
Sector Avg 12.7 11.2 2.3 12.9
Source: RHB

41
Banks: Navigating Near-Term Volatility OVERWEIGHT

We reiterate our OVERWEIGHT sector weighting. Our investment thesis remains
unchanged – we believe the reopening of the economy and improving asset quality themes
will remain in play. The combination of risks and fragilities – brought about by the geopolitical
upheaval in Ukraine – will keep markets volatile and risk-off sentiment elevated. Still,
Malaysia, with its relatively defensive attributes, should see some short-term
outperformance. That said, we advocate defensive names to weather market volatility,
following the pecking order for our preferred Top Picks: Hong Leong Bank (HLBK, BUY, TP:
MYR23.50)>Malayan Banking (MAY MK, BUY, TP: MYR10.40)>AMMB (AMM MK, BUY,
TP: MYR4.00).
Sector earnings to pick up on lower credit cost. We expect sector earnings (ex-RHB) to
grow 6% YoY in FY22, capped by Cukai Makmur. Sector PPOP growth of 3.8% reflects a
moderation in topline growth by volatile markets against the expectation of a pick-up in opex
and IT expenses. Credit cost is expected to ease to 40bps (FY21: 49bps), which remains
elevated against the pre-pandemic average of 30-35bps.
Pick-up in loan demand, NIM stable. Broadly, banks expect loans to expand by 5-6% in
2022, led by demand from businesses and consumers. We expect the NIM slippage to be
manageable, with deposit growth to keep pace and sustain LDR at high 80% levels, thereby
reducing the need for aggressive deposit competition. While CASA growth has moderated
on the pick-up in economic activities, banks believe that CASA secured in the past two years
was stickier when compared to that of 2015-2016. This reinforces our view that banks with
stronger CASA franchises will be better positioned to sustain NIMs. The banks under our
coverage (MY Banks) guided for stable to single-digit declines in NIMs for FY22, with the
modest compression coming from funding cost pressures and the widely expected 25bps
OPR hike in 4Q22 having no material uplift on NIMs.
Loans under relief assistance (LURA) are expected to meaningfully decline as we
approach the tail-end of the PEMULIH programme. Overall, banks received very few sign-
ups for the Financial Management & Resilience Programme (URUS). Having said that, we
may see some upticks in GIL and credit cost in the early part of the year as borrowers exit
the relief schemes – overall, we project sector credit cost to fall to 40bps in FY22. We are
unlikely to see near-term writebacks on the heavy pre-emptive provisions made in 2020-
2021, as banks expressed the need to remain prudent on asset quality, given the ongoing
health crisis. We believe the geopolitical tensions and resulting supply chain disruptions are
other concerns for the banks.
Potential impact from new digital banks. We do not anticipate an immediate impact upon
the award of the digital banking licenses – set to be announced at end-1Q22 – but the
expectation is that some of them will start to roll out their businesses by the later part of
2022. Given Bank Negara Malaysia’s stated purpose for digital banks – to address the
underserved market segments – we think new entrants in the immediate term will likely
focus on unsecured lending and selected offerings of wealth management products. While
this would not be immediately disruptive for incumbent banks, digital banks with partners
that have good ecosystems can grow to become a threat. We believe incumbent banks that
have taken steps to digitalise their operations will be better positioned to fend off potential
competition from these new digital banks. These include taking a very holistic approach Analysts
through: i) Addressing a consumer segment that is tech-savvy; and ii) additional steps taken Fiona Leong
to go beyond just the consumer market by extending digital offerings to corporations in the +603 9280 8886
commercial segment, which in turn draws in new businesses. fiona.leong@rhbgroup.com
Key sector risks to our investment view are escalations in geopolitical tensions and the Eddy Do Wey Qing
knock-on effects on global growth. Surprise provisions could bring downside risks to sector +603 9280 8856
earnings, but we think lumpy provisions ahead should be fairly limited, as banks have taken wey.qing.do@rhbgroup.com
quite a fair bit of provisions over the past two years.

42
Figure 58: Banking stocks' valuations

Price Target Mkt cap P/E(x) EPS growth (%) P/BV(x) DY (%) ROE (%) Rec
(MYR/s) (MYR/s) (MYRm) FY22F FY23F FY22F FY23F FY22F FY23F FY22F FY23F FY22F FY23F
Maybank 8.94 10.40 106,194 13.0 10.9 0.5 19.5 1.2 1.2 6.4 7.3 9.4 11.1 Buy
HL Bank 20.20 23.50 43,788 13.5 11.7 7.0 15.8 1.3 1.2 2.7 3.0 10.2 11.1 Buy
AMMB^ 3.71 4.00 12,283 7.4 6.8 18.4 8.8 0.7 0.6 5.0 5.5 9.5 9.4 Buy
CIMB 5.33 6.40 54,480 11.2 8.9 2.2 25.7 0.9 0.8 3.7 4.1 8.0 9.4 Buy
Alliance Bank^ 3.76 4.00 5,821 9.8 8.9 6.2 10.2 0.8 0.8 4.0 4.9 8.6 8.9 Buy
Public Bank 4.67 4.70 90,648 16.1 13.8 1.5 16.7 1.8 1.7 3.3 3.5 11.4 12.5 Neutral
BIMB 2.95 3.30 6,358 10.9 9.2 5.0 18.1 0.9 0.8 3.7 4.3 8.5 9.3 Neutral
Affin 2.00 2.00 4,248 7.9 6.1 0.5 28.6 0.4 0.4 6.3 8.2 5.4 6.7 Neutral
Sector Avg 12.8 10.8 3.2 19.3 1.2 1.1
Source: RHB

43
Basic Materials: A Geopolitical Risk Hedge OVERWEIGHT

Current dynamics remain supportive for aluminium. London Metal Exchange (LME)
aluminium prices have risen to USD3,646 per tonne currently from USD2,806 per tonne at
the start of the year. The ongoing Russia-Ukraine conflict has persisted longer and
escalated further than what most initially expected. While Russian aluminium is currently
not subject to any “official” sanctions, existing embargoes on Russia’s financial institutions
and “self-sanctioning” by other market participants are having a significant impact on supply
chains – this is reflected in the changes in regional aluminium premiums. While the situation
remains fluid, we envision a few scenarios that could play out:
i. Immediate de-escalation. Aluminium and broader commodity prices will fall back, on
a rush in profit-taking from long positioning and improved supply outlooks. However,
aluminium prices are likely to be above pre-pandemic levels due to a tight inventory
balance, the lack of new supply growth, and stronger demand stemming from brighter
economic growth prospects;
ii. Prolonged affair with gradual de-escalation. Prices will remain elevated in the near
term. We expect temporary distortions in trade flows, notably the supply of raw
materials to Russia, reducing its potential aluminium output. Chinese traders may take
advantage of the price arbitrage – becoming net exporters of aluminium from their
bonded warehouses. Nonetheless, prices will gradually moderate in this scenario as
tensions ease while global economic growth will be weaker. We believe this scenario
is looking increasingly likely;
iii. Escalating tensions. Assuming 4m tonnes of aluminium and 8m tonnes of alumina
supply are wiped out, prices will move higher and remain elevated in the short term.
However, demand destruction will act as a balancing check on prices, as the economic
growth outlook worsens considerably.
Potential distorting of trade flows ahead. China became a net exporter in February, which
we believe was attributed to the allure of higher premiums. However, the exported primary
aluminium was likely pre-imported ingots stored in Chinese bonded warehouses. To
incentivise exports of domestic smelted metal – given the 15% export tax – LME prices will
have to further outperform that on the Shanghai Futures Exchange (SHFE) and/or regional
premiums to rise further, in our view. Meanwhile, imports will be subdued as domestic
operating rates recover.
Curtailed capacity in Yunnan has started to be restored, as power shortages ease on higher
water supply. We continue to expect SHFE prices to remain supported despite the gradual
resumption of curtailed capacity due to sustained high ex-China prices, low inventory levels,
and stronger downstream drawdowns as a seasonally stronger demand season approaches
post Lunar New Year. The current dynamic should encourage China’s exports of Analyst
downstream aluminium products. That said, the current COVID-19 spread remains a wild Malaysia Research
card. Nonetheless, we expect the likes of Press Metal (PMAH MK, BUY, TP: MYR8.25) to +603 9280 8888
benefit from the potential trade flow diversion to regions that command higher premiums. research.my.equity@rhbgroup.com
Figure 59: China’s primary aluminium net exports Figure 60: Regional aluminium premiums
50
0
Net trade flow ('000 MT)
(50)
(100)
(150)
(200)
(250)
(300)

44
Continued demand recovery for cement. Industry production volumes continue on their
recovery trajectory towards normalcy, with the latest January monthly figure at 2.3m tonnes
vs the pre-pandemic average of 1.6m per month. Meanwhile, we believe market bulk
cement prices rose to MYR275.00 per tonne as of February. We believe the demand for
cement will remain robust, due to the rollout of major infrastructure projects, notably the
MRT3 Circle Line, which was recently approved. While coal has seen a spike in price
movements, we believe profitability margins remain intact for Cahya Mata Sarawak (CMS
MK, BUY, TP: MYR1.60) as it sources the majority of its coal requirements locally, ie within
Sarawak. Meanwhile, Malayan Cement (LMC MK, BUY, TP: MYR3.65) has hedged coal
prices for the next three months given its enlarged inventory levels. We only expect
recognition of higher-cost inventory to only happen in FY23 (Jun) should coal prices remain
elevated. For every USD10.00 per tonne decrease in coal prices, LMC’s EBITDA should
increase by USD6.00 per tonne of cement.
Potential introduction of phosphorous exposure on the horizon. After a series of
delays, CMS is expected to commission its integrated phosphate complex by 4Q22. The
complex – based at the Samalaju Industrial Park – will be entirely powered by hydroelectric
energy to produce yellow phosphorus and phosphoric acid (technical and food grade) that
will cater to the agriculture fertiliser and food industries.
Maintain OVERWEIGHT. While we are cognisant of the uncertainty posed by ongoing
conflicts and the expectation of steeper rate hikes leading to muted growth, we believe the
basic materials sector in Malaysia will remain underappreciated as a geopolitical hedge and
a beneficiary of elevated commodity prices.
Our preferred picks for the sector is PMAH. We continue to favour the company – which
stands out in the large-cap space – its robust FY22-24F earnings growth should be led by
its +42% nameplate smelting capacity expansion this year. This is in tandem with the
sustained strength in aluminium selling prices. For value play, we see bargain-hunting
opportunities in the small- to mid-cap space – LMC and CMS – whose share prices are still
hovering at 10-year lows.
Key risks: Deterioration in global macroeconomic conditions leading to a demand shock,
emergence of new COVID-19 variants derailing the economic reopening, as well as
unfavourable FX and raw material fluctuations.
Figure 61: Basic materials stocks' valuations

Price Target Mkt Cap P/E (x) EPS Growth (%) P/BV(x) P/CF(x) ROE (%) DY (%) Rec
Press Metal Dec 6.20 8.25 50,073 21.8 19.8 123.1 9.9 9.7 25.3 50.5 2.1
Malayan Cement Jun 2.41 3.65 3,158 22.5 20.2 1220.2 11.1 0.8 22.5 4.3 0.0
CMS Dec 1.09 1.60 1,171 4.8 4.7 16.8 2.6 0.4 (95.4) 7.8 3.2
Sector Avg 20.3 18.6 105.9 6.7
Source: RHB

45
Construction: Prospects Tempered By Headwinds NEUTRAL
Maintain NEUTRAL. Construction activity levels have normalised since 4Q21 amid the
relaxation of movement restrictions. As such, progress billings of construction projects
picked up QoQ in that quarter. Notwithstanding this, the sector’s medium-term earnings
trajectory may be somewhat held back by margin pressures arising from an inflationary
building material cost environment. The Government has projected that sector output will
rebound by 11.5% YoY in 2022, but this comes off a low base since the sector’s output
contracted by 5.2% YoY in 2021. Looking ahead, the high-speed rail (HSR) is a sector
upside risk, and will likely boost market confidence if it materialises.
Not all hunky dory for Mass Rapid Transit Line 3 (MRT3). The disclosure of the MRT3
project details by the Government seems to have sparked some positivity in the market, as
the project should keep contractors busy in the coming years. Nevertheless, the challenge
lies in how the project will be funded. The MOF mentioned that it will raise MYR50bn for
MRT3, via the issuance of government-guaranteed Islamic bonds. MRT Corp CEO Datuk
Mohd Zarif Hashim also said that a hybrid financing model will be adopted in addition to the
debt issuance by the MOF, whereby contractors will have to fund upfront construction costs
and receive deferred payments as the project progresses. Henceforth, a strong take-up rate
and sizeable private sector participation is required to kick off the initial stage of civil works.
With that in mind, execution risks linger if the take-up rate by contractors is low. Taking into
account the country’s limited fiscal headroom, the possibility of future mega infrastructure
projects to be downsized in terms of value – or be financed via private funding initiatives –
cannot be ruled out.
Manpower hurdles continue to loom. Although Malaysia eased border restrictions from 1
Apr, impediments in recruiting foreign workers remain. Special quotas will no longer be
given for the recruitment of foreign workers, as announced in January. For now, all
applications from employers will have to go through the Home Ministry’s evaluation
committee to determine the number of foreign workers eligible to be employed, in
accordance with the terms and conditions set. While the move could prevent the misuse of
foreign workers, it may impede hiring processes – especially so when contractors urgently
require an immediate supply of labour. A shortage in manpower in the construction industry
could lead to a slowdown in work progress, increasing the risk of late completion of projects
that may affect the reputation of contractors.
To mitigate the possible lack of mega infrastructure projects besides MRT3 moving
forward, contractors are seen to either strengthen their footprint in other geographical
markets or focus on other niches. For instance, Gamuda (GAM MK, NEUTRAL, TP:
MYR3.55) plans to grow its construction orderbook beyond MYR10bn by the end of FY23
(Jul), by bidding for jobs in Taiwan, Singapore and Australia. This should buffer against the
potential impact of the contract value of MRT3 works turning out to be lower than expected.
On the other hand, contractors such as Gabungan AQRS (AQRS MK, BUY, TP: MYR0.60)
highlighted that it will reduce dependency on public infrastructure jobs. This is done by
emphasising on private construction jobs, and finalising several property development JVs
that may be announced in 1H22 – which could boost its GDV pipeline by MYR400m.
Top Picks: Kerjaya Prospek and MGB. We recommend that investors accumulate shares
of companies with robust earnings visibility (higher than the peer average) and strong
fundamentals – as their near-term outlook should remain intact, given their capacity to buffer
against downside impact. Counters that fit these criteria include Kerjaya Prospek (KPG MK,
BUY, TP: MYR1.56) and MGB (MLG MK, BUY, TP: MYR0.99).
Key upside/downside risks to our sector call would revolve around the
acceleration/deceleration in orderbook replenishment, potential surprises surrounding the
timeline of public infrastructure project rollouts, as well as raw material cost trends. From an
ESG perspective, the sector – without question – has high exposure to environmental risks,
as construction works are responsible for substantial greenhouse gas emissions, alongside Analyst
waste and pollution. Aside from that, we flag the Social pillar to be pertinent to construction Adam bin Mohamed Rahim
companies, given their exposure to the employment of migrant workers. All in all, the ESG +603 9280 8682
focus remains a work in progress for most contractors, and should be prioritised in the long adam.mohamed.rahim@rhbgroup.com
run.

46
Figure 62: Construction projects already/expected in the pipeline (not exhaustive)
Estimated job
Projects Latest updates
value (MYRbn)
Works are in progress, with expected completion in Jul 2022. This project was financed
KVMRT2 30.5*
by government funding vehicle, DanaInfra through the ICP/IMTN programme.
Works are in progress. Expected completion in Feb 2024. Progress billings have
LRT3 16.6*
significantly improved, and are expected to increase in 2022.
The project is on track for completion in 2022. The project will increase train speeds from
Gemas-Johor Bahru double-tracking 9.5
Johor Bahru to Gemas, and boost ridership between Johor Bahru and Central Johor.
Construction works commenced in 2021. The project is expected to be begin operating by

end-2026. Of the 4km length, 2.7km is in Malaysia and 1.3km is in Singapore. The RTS
Johor Bahru-Singapore RTS Link 3.7
link will transit from the underground Woodlands North Station to the above-ground Bukit
Chagar station via a 25m high bridge across the Straits of Johor.
Phase 1 of Sarawak Pan Borneo Highway project from Telok Melano to Miri will be fully
opened by the end of this year. The completion rate was around 85% by the end of Feb
16.2
Pan Borneo Sarawak Highway 2022, for the 11 packages awarded previously. Full completion expected by 2022-2023.
Meanwhile, the construction of Phase 2 of the Sarawak Pan Borneo Highway from
Limbang to Lawas will resume this year and is expected to be completed in 2028.
Until Nov 2021, only 69% of 12 packages of the first phase’s 35 packages had been
completed, or just about 21.2% of the first phase has been concluded. In April, HSS
Pan Borneo Sabah Highway 15.2 Engineers’ associate company HSS Integrated has been awarded a project management
consultant project by the Government for Phase 1 of Sabah’s Pan Borneo Highway worth
MYR145m.
Expected completion is in 2024 amid delays in Selangor due to land acquisition issues.
West Coast Expressway 5.0 Four sections (5, 8, 9, and 10) were opened from May to Dec 2019. Tolling began in Jan
2020 for sections 8, 9 and 10.
Expected to be completed in 2026. The 306.8km project with a total cost of MYR7.3bn,
Central Spine Road 7.3 involves six packages with four, namely, an over 200km stretch, located in Pahang starting
from Kampung Relong in Kuala Lipis.
Project delivery partner role secured by Gamuda. The initial phase of the Penang South
Reclamation project is targeted to kick off soon. Discussions with the state government
Penang Transport Master Plan 27.0 are in high gear to resolve outstanding issues, with the aim of starting reclamation works
for Island A by 3Q22. Financing for Island A is provided by Gamuda, using its cash and
new borrowings.
Target completion is Dec 2026. Local contractors have so far benefited from advance
works that were mainly awarded in May and Jun 2020. Close to 11 packages were
awarded to Gadang, Gabungan AQRS, Ho Hup Construction, and Advancecon with a total
East Coast Rail Link 50.3 sum of MYR505m. We understand that the ECRL alignment has been extended to 665km
from 640km previously. The additional alignment will encompass the original 30km, which
was 24km from Jalan Kastam (Port Klang) to West Port and 6km from Jalan Kastam to
North Port.
MRT3 will be implemented via the turnkey project method, similar to the revised version
of Sungai Buloh-Serdang-Putrajaya (SSP) line (MRT2) project. Tenders will be opened in
May this year and awarded by 4Q22 via five packages over a 6-8 year period. The first
KVMRT3 31.0> phase of MRT3 is expected to open in Dec 2028, while the entire project is slated for
completion by 2030. MRT3’s proposed length of 51km with 39km in Kuala Lumpur, and
the remaining 12km in Selangor. Under this alignment, 80% is elevated and 20%
underground.
Talks about reviving the Kuala Lumpur-Singapore HSR are expected to start in 2Q22. To
recap, Malaysia and Singapore said in a joint statement that the HSR project had been
KL-SG High Speed Railway 40.0>
cancelled after both countries failed to reach an agreement on several changes proposed
by Malaysia on 1 Jan 2021.
Kuala Lumpur-Bangkok High Speed Malaysia and Thailand have agreed to conduct a feasibility study on the Kuala Lumpur-
n.a.
Railway Bangkok HSR.
Note: *Project value reduced after revision

>
Civil works
Source: Various media, Company data, RHB

47
Figure 63: Construction stocks' valuations

Sunway Construction 1.72 1.74 2,218 15.8 14.7 27.6 7.8 2.9 42.5 19.2 3.2 Buy
Kerjaya Prospek 1.13 1.56 1,398 8.2 6.7 77.7 21.1 1.1 3.8 14.0 4.3 Buy
Kelington Group 1.37 2.40 881 26.3 25.5 40.0 3.2 5.2 37.6 21.3 1.0 Buy
Pintaras 2.60 3.24 431 7.3 6.9 0.6 5.6 1.1 6.0 15.1 5.8 Buy
MGB 0.73 0.99 429 6.5 4.1 108.7 58.5 0.7 1.7 10.8 3.1 Buy
Gabungan AQRS 0.40 0.60 214 3.9 4.2 150.0 (6.0) 0.4 4.8 10.3 5.1 Buy
Advancecon 0.31 0.38 150 7.8 6.8 1274.5 15.3 0.6 1.6 7.6 2.6 Buy
Gamuda 3.46 3.55 8,837 14.6 12.8 1.0 14.5 0.9 35.3 6.4 3.5 Neutral
IJM Corp^ 1.67 1.66 5,899 23.5 20.8 23.0 13.2 0.6 8.6 2.6 2.6 Neutral
MRCB 0.37 0.38 1,631 55.4 25.6 83.5 116.4 0.4 7.4 0.6 0.5 Neutral
UEM Edgenta 1.63 1.70 1,356 14.7 13.4 21.8 9.2 0.8 7.3 5.8 4.4 Neutral
Econpile^ 0.29 0.28 411 91.5 13.6 (61.8) 573.2 0.9 4.9 1.0 0.2 Neutral
Sector Avg 15.9 13.4 20.8 18.2

48
Consumer: A More Stable Recovery Picture Ahead NEUTRAL

Maintain NEUTRAL. Top Picks: Mr DIY (MRDIY MK, BUY, TP: MYR4.59), Berjaya Food
(BFD MK, BUY, TP: MYR4.20), Heineken Malaysia (HEIM MK, BUY, TP: MYR25.80), and
Guan Chong (GUAN MK, BUY, TP: MYR4.00). Our base case assumes a broad-based
recovery in consumer spending in FY22, underpinned by the sustainable, effective
containment of COVID-19. That said, large-cap stocks are still trading at rich valuations, so
investors may not have too many options or levers to capitalise on. Meanwhile, we see more
opportunities in the small- to mid-cap space – particularly those with promising expansion
plans to drive earnings growth beyond recovery and back to the pre-pandemic base.
Outlook. We expect the exciting headline numbers to taper off from the high base, taking
into account the resurgence of COVID-19 infections amidst the spread of the more
contagious new variant. That said, we believe both consumers and businesses should be
better prepared to manage the new wave, in view of the high vaccination rates and
experience accumulated over the past two years – this is on top of the Government’s
approach to achieve endemicity. Meanwhile, we expect more cost pass-throughs to be
implemented, since commodity prices and operating expenses have remained elevated.
Rising costs and labour constraints should be major sector headwinds while prudent cost
controls and efficient allocation of resources will be essential in mitigating these challenges.
All companies recorded positive revenue growth in 4Q21. This was widely expected,
considering the pent-up demand and revenge spending after consumers emerged from a
long-drawn-out lockdown in 3Q21. The broad easing of movement restrictions has also
facilitated the pick-up in consumption and a more conducive business environment for the
companies. That said, we highlight that the rising cost environment continues to impact
businesses – primarily from elevated raw material costs, higher transportation/freight costs,
Analysts
and labour constraints (the inflow of foreign labour is still largely restricted).
Soong Wei Siang
Sector picks. We still like Mr DIY for its gravity-defying growth, underpinned by sound +603 9280 8865
fundamentals and, as such, the potential for a further valuation re-rating. We also like soong.wei.siang@rhbgroup.com
Heineken Malaysia, which is our preferred choice in the brewery space due to its market
leadership and robust sales growth momentum. Berjaya Food is our cyclical pick, and we Raja Nur Aqilah Raja Ali
expect the company to benefit from the reopening of international borders and unrestricted
+603 9280 8885
operating hours. It also has a solid expansion plan, targeting c.30 store openings.
Meanwhile, we view Guan Chong as a proxy for the economic recovery in play – it is trading raja.nur.aqilah@rhbgroup.com
below the sector’s average valuation. We have also highlighted a few recovery plays,
including Focus Point (FPHB MK, NR), Kawan Food (KFB MK, NR), and Innature
(INNATURE MK, NR).
Figure 64: Sector quarterly revenue trend
MYRm
(%)
12,000
22%
10,000 18%
14%
8,000
10%
6,000 6%
2%
4,000
-2%
-6%
2,000
-10%
00 -14%
Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21
BJFOOD GCB LHI
MRDIY NESTLE NTPM
PWROOT QL BAT
CARLSBG HEIM AEON
MYNEWS PADINI Total quarterly sales
YoY (RHS) QoQ (RHS)
Source: RHB

49
Figure 65: Consumer stocks' valuations

Price Target Mkt cap P/E (x) EPS growth (%) P/BV (x) P/CF (x) ROE (%) DY (%) Rec
Heineken Malaysia 22.48 25.80 6,791 23.7 19.5 16.5 21.4 17.0 19.6 71.8 4.2 Buy
VS Industry 1.03 1.26 3,932 19.2 11.0 (16.4) 73.6 1.9 13.6 9.9 3.4 Buy
Guan Chong 2.65 4.00 2,800 10.8 9.8 59.2 9.5 1.7 7.3 17.2 2.1 Buy
SKP Resources^ 1.41 2.40 2,203 10.8 10.1 26.2 7.0 2.6 12.5 25.0 5.6 Buy
Berjaya Food 3.79 4.20 1,366 15.8 16.0 150.2 (1.3) 3.4 7.4 23.0 3.2 Buy
Scientex 4.06 4.68 6,297 14.9 11.8 (6.2) 26.2 2.0 14.1 16.8 2.5 Buy
Leong Hup 0.52 0.83 1,898 9.3 8.6 140.3 7.3 1.0 3.1 10.9 3.2 Buy
Mr DIY Group 3.46 4.59 21,740 36.1 31.1 39.2 16.0 15.0 29.8 46.2 1.4 Buy
Padini 3.45 3.15 2,270 20.5 16.0 104.2 28.4 2.7 24.2 13.5 3.5 Neutral
Power Root^ 1.36 1.33 568 18.3 15.3 73.9 19.5 2.4 20.0 13.1 4.8 Neutral
NTPM^ 0.44 0.48 494 11.7 9.8 44.3 18.9 1.0 6.5 8.4 0.0 Neutral
Mynews 0.71 0.70 484 76.6 27.1 115.2 182.5 2.1 71.0 2.7 0.3 Neutral
BAT 12.44 13.50 3,552 12.8 11.6 (5.3) 9.6 9.2 9.6 72.3 7.7 Neutral
Nestle 133.60 138.00 31,329 51.6 44.3 6.3 16.6 53.2 39.3 103.6 1.9 Neutral
QL Resources^ 5.02 4.67 12,217 48.1 42.3 26.0 13.7 4.7 25.5 10.0 0.7 Neutral
Carlsberg 21.72 23.80 6,641 25.3 20.6 26.9 22.7 27.9 20.2 116.7 3.6 Neutral
AEON 1.58 1.41 2,218 21.0 18.3 23.7 15.1 1.2 2.8 6.0 2.5 Neutral
Sector Avg 26.9 22.6 23.6 19.2
Note: ^FY22-23 valuations refer to those of FY23-24\
Source: RHB

50
Gaming: Recovery In Full Swing OVERWEIGHT

Casino operators’ outlook
Omicron merely a hiccup to Resorts World Genting’s (RWG) recovery. We take cues
from the stronger-than-expected recovery of RWG in 4Q21, and are expecting a strong
recovery in FY22. While the spike in COVID-19 cases in Malaysia during February and
March may have dampened footfall at the resort, we believe that – given the Omicron
variant's lower mortality rate – the impact on footfall and gross gaming revenues (GGR) is
not likely to be as severe as with previous COVID-19 variants. Besides, we believe the
seasonally stronger Lunar New Year gaming volumes should help support 1Q22 earnings.
Genting SkyWorlds finally opened its doors on 8 Feb. Currently, 15 out of its 20 rides
are open – the rest are slated to be gradually opened throughout the year. After speaking
with management, we estimate the outdoor theme park is operating at c.20-30% of its
maximum capacity of 20,000 visitors at a time. Management said Genting Malaysia (GENM
MK, BUY, TP: MYR3.58) will raise Genting SkyWorlds' capacity based on customer
demand. As Malaysia and other countries in the region transition into the endemic phase,
we believe footfall at Genting SkyWorlds should pick up – after Malaysia opened its borders
to international visitors – and during the holiday seasons. We continue to believe that
Genting SkyWorlds will be a crowd-puller and should help lift footfall for GENM's other
facilities.
Empire Resorts' (ER) turnaround continues to gain pace, having turned EBITDA-positive
in FY21. We expect ER to further improve in FY22, with the recent (early March) launch of
its mobile sports betting platform – Resorts World Bet (RWB) – and new video gaming
facilities in 3Q22. The launch of RWB was timely for popular upcoming sports events, such
as March Madness and the 2022 NBA Playoffs, which start in April. While management did
not comment on the popularity of RWB – taking cues from other operators’ earlier launches
of other mobile sports betting apps – we believe this platform will likely be popular among
punters. We estimate RWB to lift GENM’s FY22 earnings by around 3%.
On Resorts World New York City (RWNYC), we continue to look forward to the potential
downstate commercial casino license, which may lead to further earnings upside for
RWNYC. While we note that gaming crowd footfall may have dampened in 1Q22 due to the
cold winter season and spread of the Omicron variant, we are anticipating seasonally
stronger spring and summer months. Over at Resorts World Las Vegas (RWLV), Genting
(GENT MK, BUY, TP: MYR6.39) is hopeful that the recent lifting of mask mandates should
drive a recovery in footfall. The group also completed the construction of the 5,000-seat
capacity theatre and other amenities in 4Q21, which should help GENT ramp up its RWLV
business.
Number forecast operators (NFOs) – attractive yields

Continued ticket sales recovery. Taking cues from the 4Q21 performance, while ticket
sales have been slow due to NFO outlets’ strict SOP measures, ticket sales have continued
to show steady improvement and are currently estimated at c.85% of pre-pandemic levels.
Given the defensive nature of the NFO business and continued popularity of the games, we
still expect ticket sales to gradually recover and normalise by 1H22 as the country transitions
towards living with COVID-19.
Maintain OVERWEIGHT; Top Pick: GENT

We continue to favour GENT as the Top Pick for the casino operators and for the gaming
sector as a whole. We like the group for being a liquid proxy to the recovery from the
pandemic. It is a direct beneficiary of the resumption in tourist activity and revenge spending
phenomenon. Moreover, continued growth from RWLV should continue to bode well for
GENT. The stock is trading at an attractive c.6x FY23F EV/EBITDA vs the regional peer
average of c.9x – which we believe will appeal to foreign investors looking for exposure in Analysts
under-valued emerging market equities. Jim Lim Khai Xhiang
+603 9280 8683
Magnum (MAG MK, BUY, TP: MYR2.51) remains our NFO Top Pick. As a pure-play jim.lim@rhbgroup.com
NFO, Magnum should continue to see improving ticket sales in the quarters ahead, as
punters get accustomed to the SOPs required to enter NFO outlets. Its FY22-23F yield of Lee Meng Horng
c.7-9% is attractive for yield-seeking investors. Catalysts include the recovery in NFO outlet +603 9280 8866
footfall, continued clampdowns on illegal gambling activity, and the potential monetisation lee.meng.horng@rhbgroup.com
of Magnum's stake in U Mobile.

51
Key risks to the sector include a fluctuation in luck factor, changes in government policies,
and a prolonged pandemic.
Figure 66: Gaming stocks' valuations

Price Target Mkt cap P/E (x) EPS growth (%) P/BV (x) P/CF(x) ROE (%) DY (%) Rec
Genting 4.68 6.39 18,021 16.6 10.2 234.0 62.9 0.6 2.6 3.4 4.3 Buy
Genting Malaysia 2.98 3.58 16,882 17.5 12.0 201.4 44.9 1.3 5.7 7.3 5.0 Buy
Magnum 1.82 2.51 2,616 12.1 10.5 1556.9 15.8 1.1 9.5 9.1 7.1 Buy
Sports Toto 1.92 2.39 2,576 19.2 10.6 (23.4) 81.2 3.1 10.5 16.4 4.7 Buy
Sector Avg 16.7 11.0 251.1 52.3
Source: RHB

52
Healthcare: Defensive Amidst Volatility OVERWEIGHT

Defensive amidst an inflationary environment. We believe concerns over inflationary
pressures and lofty valuations will take the centrestage in 2022. Healthcare provides a
defensive flavour, owing to the inelastic demand and strong pricing power, which investors
may come to appreciate, moving forward. IHH Healthcare (IHH MK, BUY, TP: MYR7.50)
expects cost pressures to kick in in FY22, from higher wages and inflation, notably in Turkey.
That said, Acibadem has already made appropriate price adjustments (+33% since the start
of FY22), and this is not expected to hamper demand, given the inelastic nature of
healthcare and the targeted group of patients belonging to the middle- to upper-income
segment. Similarly, price adjustments will be made for its other markets as it has done
historically, as reflected in the trend of its revenue intensities.
Revitalisation of medical tourism. The easing of international border restrictions should
spur the recovery of medical tourism. Singapore reopened its borders to all fully vaccinated
travellers, and transited to a new Vaccinated Travel Framework on 1 Apr. Under the new
framework, all fully vaccinated travellers will not require any entry approvals, and entry will
be quarantine-free – although pre-departure tests are still necessary. We believe this bodes
well for the recovery trajectory for medical tourism. Foreign patients historically accounted
for 25% of IHH’s Singapore unit, prior to the pandemic.
Minor stall, but growth trajectory intact thereafter. COVID-19-related revenue will taper
down by 1H22F due to the global move towards endemicity, and Singapore’s replacement
of PCR testing with Antigen Rapid Test Kit (RTK) for on-arrival testing. However, we do not
expect margins to collapse, given the return of foreign patient arrivals, and continued ramp-
up in domestic operations.
Figure 67: COVID-19-related revenue for IHH (2021) Figure 68: IHH’s % of contribution from foreign patient
revenue in 2019
Source: Company data, RHB Source: Company data, RHB
Rising appetite for M&As and expansion. After a stellar year, IHH is back on the lookout
for strategic assets that complement its existing clusters or penetration of adjacent markets.
Recently, IHH verified that it has submitted a non-binding, indicative proposal to Ramsay
and Sime Darby (SIME MK, NEUTRAL, TP: MYR2.40) to acquire 100% of their healthcare
JV, Ramsay Sime Darby Health Care (RSDH). Overall, we are rather neutral on the
proposal, as the potential increase in financing costs is expected to impact earnings in the
short term. However, we are more upbeat on the prospects over the long term, as RSDH’s
assets are a strategic fit with IHH’s cluster strategy, and presents an entry into the
Indonesian market.
Meanwhile, several expansions are expected to come online. These include, but are not Analyst
limited to, a new hospital in Istanbul (180 beds in 3Q22), Parkway Shanghai (soft opening Malaysia Research
in 3Q22), and a new ambulatory care centre in Singapore (FY23F). Nonetheless, its portfolio +603 9280 8888
restructuring efforts are still ongoing, where underperforming assets will be monitored and research.my.equity@rhbgroup.com
reviewed for possible divestment.

53
Anticipating further contract renewals. Duopharma Biotech’s (DBB MK, BUY, TP:
MYR1.92) new supply agreement for its human insulin contract with the Ministry of Health
is expected to be signed in the near future, as the company is still in the midst of clarifying
certain terms with the MOF. Recall that the contract is now worth MYR125m pa in sales
(from MYR90m pa previously). Additionally, with the pandemic largely under control, we
believe DBB stands to benefit from the potential re-tender of the Approved Product
Purchase List (APPL) in FY22F, to reflect increases in raw material costs since the supply
agreement was entered in 2017.
Maintain OVERWEIGHT. Equity markets have seen bouts of volatility from increasing risk
of stagflation and steeper rate hikes. Amidst all this, we believe investors would find comfort
in the healthcare sector, given its inherent defensiveness and secular growth trends at
reasonable valuations.
Key risks: Implementation of unfavourable regulatory policies, emergence of new COVID-
19 variants derailing the economic reopening, and longer-than-expected gestation periods.
Figure 69: Healthcare stocks' valuations

IHH Healthcare 6.20 7.50 54,577 34.4 29.9 1.9 14.8 2.3 18.5 6.9 1.0 Buy
Duopharma Biotech 1.49 1.92 1,403 18.1 16.3 17.1 10.6 2.1 8.1 12.0 2.7 Buy
Sector Avg 33.6 29.3 2.5 14.6
Source: RHB

54
Integrated Oil & Gas: Work Orders To Pick Up In 2022 OVERWEIGHT
Maintain OVERWEIGHT; Top Picks: Petronas Chemicals (PHCEM MK, BUY, TP:
MYR10.86), Yinson (YNS MK, CALL, TP: MYR6.49), and Bumi Armada (BAB MK, CALL,
TP: MYR0.65). We believe elevated oil prices will bode well for a sector recovery, with the
anticipation of higher capex and opex spending by clients. Maintenance-related players are
likely to recover faster than fabricators, given that Petronas is not aggressively expanding
greenfield projects but is – instead – focusing on low-hanging fruit to boost production. We
remain bullish over FPSO players on robust demand and resilient earnings – Yinson is now
our sector Top Pick. The potential award of the Safina project could benefit shipbuilders and
OSV players. For the downstream segment, Petronas Chemicals continues to benefit from
strong ASPs, given its unique feedstock arrangement with Petronas that offers competitive
feedstock costs.
Special dividends from Petronas in 2022-2023? The national oil & gas company paid
MYR9bn to the Government in 4Q21, bringing full-year dividends paid to MYR25bn.
Subsequent to its improved operating cash flow (+11% QoQ), its net cash rose 5% QoQ to
MYR67bn in 4Q21. At this juncture, there has been no special dividend requested from the
Government, but it is highly likely for Petronas to contribute – especially when the fuel
subsidy is ballooning amidst high oil prices.
Based on our evaluation of Petronas’ free cash flow over the past 10 years, we noticed that,
from 2011 to 2014, the company was able to fund its dividend for the following year via free
cash flow – this was prior to the industry downturn in 2H14. However, since 2015, free cash
flow generated has not been able to cover the dividend payment for the following year,
except in 2017 and 2019. Last year, Petronas’ free cash flow was estimated to be the
highest in the past 10 years, at MYR48bn. As such, we think the company is capable of
increasing its 2022 dividend payment to the Government.
For dividend payments in 2023, based on our back-of-envelope calculations, Petronas’
operating cash flow could reach MYR85-105bn – assuming oil prices average at USD100.00
per bbl. With that, its 2022 free cash flow is estimated at MYR35-70bn if capex spending
lands within the guided range of MYR40-50bn. As commodity prices are projected to stay
elevated during the next two years, Petronas – in our view – is capable of paying another
MYR10-20bn in special dividends in 2022-2023. This is in order to help reduce the
Government’s financial burden without a significant deterioration to its net cash position.
Figure 70: Petronas’ free cash flow and dividend trends
Source: Petronas, RHB
Still expecting higher upstream activities in 2022. Petronas has been underspending, ie
below its planned annual capex of MYR40bn over the past two years – at only MYR30.5- Analyst
MYR33bn in 2020-2021. Many projects were affected by the prolonged movement
Sean Lim Ooi Leong
restrictions and supply disruptions. During the latest 4Q21 results, we were guided that
activities have been picking up since early 2022. As such, the national oil & gas company +603 9280 8867
sean.lim@rhbgroup.com
could boost its capex spending to MYR40-50bn this year – riding on stronger oil prices –
with an equal split between domestic and international operations.

55
If Petronas is spending MYR20bn in capex annually for upstream activities in 2022, this
would point to a strong increase of 37% from FY21’s MYR14.6bn. We believe the domestic
upstream space will be the beneficiary, if 60% of this is allocated to the domestic arm.
Upstream activities are likely to be seasonally lower during the monsoon season, then pick
up in 2Q22. We understand that upstream activities will not be able to return to pre-COVID-
19 levels, but industry players are still expecting work orders to pick up in 2022. Labour
shortages remain an issue for manpower-intensive services players in East Malaysia, given
slow approvals of work permits.
We notice there is a slight change in Petronas’ contracting strategy, especially with the
recent drilling contract awarded to Velesto Energy (Velesto), the largest jack-up rig owner
in Malaysia. The company landed a long-term 2+1+1 years call-out drilling contract from
Petronas Carigali in early March. Under this contract, Velesto can charter any of its rigs
based on their availability, while still bidding for other jobs. The base charter rates have
been agreed upon, but will vary according to specifications. Average daily charter rates
remain steady at above USD70,000 per day, which are generally lower than the global
average due to the specification differences and lower work scope. With that, we believe
Petronas is likely to operate up to nine full rigs in 2022 –in accordance with its latest Activity
Outlook report.
Meanwhile, maintenance-related works under Pan-Malaysia maintenance, construction,
and modification (MCM) have picked up starting 2Q22. Some of these MCM contracts have
been renewed for another year. We think this will allow Petronas to maintain previous rates,
especially in the rising oil price environment.
Apart from that, there is also market talk about the possibility of the national oil & gas
company reviewing its contracting strategies, potentially including hook-up & commissioning
works into umbrella contracts that are on a call-out basis. If this materialises, we believe the
incumbents with strong track records and decent financials – eg Dayang Enterprise (5141
MK, NR) – stand a better chance to be shortlisted
Figure 71: Oil & gas stocks' valuations

MISC 7.35 7.79 32,809 21.2 16.5 21.7 28.6 1.0 8.3 4.5 4.5 Buy
Dialog 2.74 3.40 15,461 30.6 27.1 10.0 13.0 3.5 42.0 11.7 1.5 Buy
Yinson^ 4.80 6.49 5,108 16.7 11.6 0.7 44.7 2.0 8.7 12.4 1.3 Buy
Bumi Armada 0.41 0.65 2,422 4.1 3.9 63.9 4.8 0.5 2.9 13.9 0.0 Buy
Petronas Chemicals 9.60 10.86 76,800 14.4 14.3 (27.0) 1.0 2.0 13.1 14.7 3.5 Buy
MMHE 0.39 0.42 624 96.2 26.4 102.5 264.6 0.4 3.9 0.4 0.0 Neutral
Petronas Dagangan 20.42 19.90 20,286 29.1 25.8 27.0 13.0 3.5 (24.4) 12.3 2.7 Neutral
Sapura Energy^ 0.04 0.02 559 n.m. n.m. 79.4 45.2 (1.7) (2.7) 972.3 0.0 Sell
Sector Avg 17.2 15.7 18.8 9.9
Source: RHB

56
Media: Stock-Picking Still Key NEUTRAL

Maintain sector NEUTRAL. Just when the global economy is emerging from one of the
worst health pandemics in history, markets are now having to contend with another black
swan event in Russia’s invasion of Ukraine, which has catapulted risk premiums and
weighed down on the recovery in advertising expenditure (adex) sentiment. We argue that
a prognosis of the media sector should not detract from the fact that media companies are
still beset by the digital onslaught. Against the backdrop of a volatile macroeconomic
environment, a stock-picking investment strategy is still apt. We continue to like Astro
(ASTRO MK, BUY, TP: MYR1.30) due to its operating model shift and digital pivot. The
recent launch of its fibre broadband and content bundle should aid in customer retention,
with lower churn envisaged. Astro’s prospective dividend yields of over 7% are compelling.
Adex growth of 19% YoY in Jan 2022 is off a low 2021 base. Gross adex (including
digital) for Jan 2022 jumped 19.1% YoY, led by free-to-air (FTA) television (+24.8%), radio
(+52%), and digital (+13%), based on the latest Nielsen Media Research (NMR)
compilation. The stronger growth was nonetheless against a low Jan 2021 base, which
coincided with the start of MCO 2.0. On an annualised basis, adex was up by 7% in January.
We see some normalisation in adex growth from the normalisation of the base effect in
1Q22, with support coming from the earlier Aidil Fitri celebrations in 2Q22.
Figure 72: Gross industry adex (monthly)

Total Gross Adex (LHS) YoY chg (RHS) (%)
700 100%
600 80%
60%
500
40%
400
(MYRm)
20%
300
0%
200
-20%
100 -40%
0 -60%
Apr-18
Oct-18
Apr-19
Oct-19
Apr-20
Oct-20
Apr-21
Oct-21
Jan-18
Jul-18
Jan-19
Jul-19
Jan-20
Jul-20
Jan-21
Jul-21
Jan-22
Source: NMR
Stronger earnings delivery. The recent quarterly earnings performance of media

companies that we track has been commendable. Media Prima (MPR MK, BUY, TP:
MYR0.90) marked a return to profitability in FY21 after four consecutive years of losses.
The integrated media group is now on a significantly better cost footing aligned to new
revenue models. Astro also saw a notably better January quarter (4QFY22) from the
economic reopening and the strong rebound in adex.
Timing of polls is a sector wildcard. The timing of GE15 is a key wildcard and sector re-
rating catalyst, as media companies typically benefit in the run-up to elections, with the
resultant adex bump from pre-electoral campaigns and related sponsorships. The current
Parliamentary sitting ends in mid-2023, with a general election to be called no later than Jul
2023. Following the landslide win by the BN-led coalition in the recent Johor state election,
there are calls for the general election to be held sooner rather than later. Under the MOU
on Transformation and Political Stability inked last September, between the ruling coalition and
the PH opposition bloc, Parliament will not be dissolved before 31 Jul 2022.
Analyst
Key risks for the sector/stocks include: i) A weaker-than-expected reboound in the domestic
Jeffrey Tan
economy, ii) negative global macroeconomic and geo-political developments, iii) weaker +603 9280 8863
MYR/USD and iv) earnings disappointments. jeffrey.tan@rhbgroup.com

57
Figure 73: Media stocks' valuations

Astro^ 1.10 1.37 5,736 10.3 9.3 17.4 10.1 4.6 3.4 47.2 7.4 Buy
Media Prima 0.64 0.90 704 8.1 6.9 18.4 16.8 1.0 4.6 12.8 3.1 Buy
Sector Avg 10.0 9.0 17.5 11.0
Source: RHB

58
NBFIs: Still Optimistic On Topline Growth OVERWEIGHT

Maintain OVERWEIGHT on sector, Top Picks: Allianz Malaysia (ALLZ MK, BUY, TP:
MYR17.90) and Aeon Credit Service (ACSM MK, NEUTRAL, TP: MYR16.20) – both offering
investors exposure to the recovery theme.
Insurance: ALLZ and Syarikat Takaful Malaysia Keluarga (STMB MK, BUY, TP: MYR4.90)
reported results that were ahead of expectations, with strong topline growth in 4Q21, as
they benefited from the gradual reopening of the economy. We understand that general
insurance is off to a strong start in 2022, while life insurance remains soft in the early part
of the year. Overall, we expect robust topline growth for both insurers, while earnings growth
should moderate on the normalisation in claim ratios. We think both insurers’ valuations
remain attractive despite market concerns over the day-1 impact of MFRS 17. That said, for
a more resilient pick on the back of smaller exposure to single premium products, ALLZ
makes the perfect candidate – given its strong in-force book, which will continue contributing
to its bottomline.
Non-bank lenders: We understand that demand for personal financing remains robust as
economic activities are picking up and business sentiment is improving, helped by the lifting
of movement restrictions and borders reopening. We upgraded RCE Capital (RCE MK, TP:
MYR1.90) to BUY from Neutral in our results review report, as its valuation has turned
attractive. Its share price has retreated by about 20% from the peak, post dividend payout
and bonus issue. YTD-March, its share price has dropped by 8% - which still presents an
opportunity for investors to accumulate, in our view. Its niche salary deduction collection
scheme, and pure exposure to civil servants – a segment where job security is hardly a
concern – are the main catalysts. As for Aeon Credit Service (ACSM MK, NEUTRAL,
MYR16.20), management indicated that business operations have normalised after the
Analysts
temporary blip in 4QFY22. At 1.73x P/BV against an ROE of 17.3%, valuations are fair, with
Eddy Do Wey Qing
recovery prospects well in the price. We recommend that investors nibble on its share price
+603 9280 8856
weakness. Key catalyst: The company turning out to be the winner of a digital bank license, wey.qing.do@rhbgroup.com
which is set to be announced by 1H22.
Exchange: Fundamentally, the higher trading stamp duty of 15bps (from 10bps previously), Fiona Leong
and the higher MYR1,000 stamp duty limit (from MYR200) on each contract note, will likely +603 9280 8886
dampen trading activities on Bursa Malaysia securities, in our view. We lowered our fiona.leong@rhbgroup.com
estimated SADV for Bursa Malaysia (BURSA MK, NEUTRAL, TP: MYR6.10) in January,
citing weakness in trading volume and value. Contrary to our expectations, with earnings
surprises and the Russia-Ukraine conflict inducing market volatility, trading volume and
value picked up considerably in February and March. Its YTD-March SADV was at
MYR2.68bn, which is ahead of our forecast of MYR2.33bn. That said, we continue to see
heightened market volatility on the back of the geopolitical conflict.
Figure 74: NBFI stocks' valuations

Price Target Mkt Cap P/E (x) EPS Growth (%) P/BV (x) ROE (%) DY (%) Rec
CTOS Digital 1.58 2.40 3,650 44.8 36.0 75.8 24.4 5.9 5.7 17.5 1.3 Buy
Syarikat Takaful 3.63 4.90 3,033 9.9 8.7 (11.0) 14.5 1.6 1.5 16.8 4.1 Buy
Allianz Malaysia 12.72 17.90 2,264 8.9 7.8 (2.9) 14.3 0.9 0.9 11.0 2.9 Buy
RCE Capital 1.85 1.90 1,354 9.9 9.5 1.3 4.3 1.6 1.6 15.3 4.1 Buy
Bursa Malaysia 7.07 6.10 5,722 28.3 26.9 (43.2) 5.5 6.8 6.7 24.4 3.2 Neutral
Aeon Credit^ 15.12 16.20 3,860 10.9 10.9 58.7 (0.7) 1.9 1.7 19.2 3.2 Neutral
Sector Avg 13.9 12.8 (3.7) 8.2
Source: RHB

59
Plantations: Uncertainty – The Only Certainty NEUTRAL
Stock/usage ratios rising to above historical averages in 2022F. The latest Oil World
and US Department of Agriculture (USDA) forecasts continue to indicate that supply and
demand dynamics should improve in 2022F – assuming production returns to relative
normalcy, while demand also recovers post-pandemic. We note that stock/usage ratios for
the composites of 17 oils and fats, eight vegetable oils, and 10 oilseeds are all expected to
rise to above historical averages in 2022F. This could pave the way for a moderation in
prices.
Three wild cards. However, we believe there are three wild cards that could affect CPO
supply in a significant manner for 2022:
i. The Russia-Ukraine war, and impact on oilseed output and commodity prices – Russia
and Ukraine together produce 7-8% of total global oilseed supply. Should this not be
planted or made available, stock/usage ratios of the 10 oilseeds could decrease
significantly. We estimate stock/usage ratio of the 10 oilseeds could fall to as low as
16.7% (from 19% in 2021), slightly above the historical average of 16%, if Ukraine is
unable to plant up its crop this season;
ii. Fertiliser availability (also tying in with the war) – Russia and Belarus are large fertiliser
producers, producing potash, phosphate and nitrogen containing fertilisers. Together,
they produce more than 50m tonnes a year of fertilisers, or 13% of the global total.
Planters will need to change the composition of fertiliser application, if supplies from
Russia and Belarus remain unavailable. While most planters have some carry forward
stock of fertiliser from 2021, this will only last them for part of 1H22. Should supply be
unavailable in 2H22, production of vegetable oils will be affected in 2023;
iii. Labour issues in Malaysia – if this remains unresolved, CPO production, and therefore,
stock levels would be lower-than-expected in Malaysia in 2022.
On the demand side, the Food vs Fuel debate is stronger than ever, and this could
affect demand in three ways in 2022:
i. High prices causing inflationary pressures and food shortages;
ii. Demand rationing – particularly in price-sensitive countries like China, India, Pakistan,
Bangladesh etc;
iii. Risk of biodiesel mandates being cut back – amidst supply shortages and high prices.
Indonesia’s biodiesel mandate is set to take up 15% of total palm oil output in Indonesia
in 2022. This seems to be unsustainable, as the country is facing a shortage of cooking
oil after the Government imposed a price ceiling. We have seen a reduction in biofuel
mandates in Brazil and Thailand so far, with the US also proposing to cut mandates.
There could be more to come.
Overall, supply and demand of vegetable oils and CPO looks relatively tight for 1H22
– which will keep prices high in 1H22. But this is expected to improve in 2H22, barring any
unforeseen circumstances, which should mean that CPO prices will moderate in 2H22.
However, this is provided the wild cards do not eventuate. We assume:
i. War does not drag on, with planting, harvesting and exporting of oilseeds and fertiliser
able to occur in Russia and Ukraine;
ii. Extreme climate conditions do not recur in 2022;
iii. Labour shortage in Malaysia will resolve in 2H22.
On the demand side, we also assume:
i. Demand rationing will continue for as long as prices remain at historic highs;
ii. There will be no changes to biodiesel mandates.
We maintain our NEUTRAL call on the sector. Our CPO price assumptions are
MYR4,300 per tonne for 2022 and MYR3,700 for 2023. While this is considerably lower than
Analyst
current spot prices, we prefer to relook at our price assumptions at a later stage, ie once
Hoe Lee Leng
prices are less volatile. Top Picks are purer Malaysian planters and planters with
+603 9280 8860
downstream Indonesian exposure, including Sarawak Oil Palms (SOP MK, BUY, TP: hoe.lee.leng@rhbgroup.com
MYR6.05), Ta Ann (TAH MK, BUY, TP: MYR6.40) and KL Kepong (KLK MK, BUY, TP:
MYR31.45).

60
Figure 75: Plantation stocks' valuations

Sarawak Oil Palms 5.40 6.05 3,093 6.0 7.2 11.9 (17.4) 1.0 3.7 17.1 2.0 Buy
Ta Ann 5.15 6.40 2,268 5.8 8.2 37.3 (29.4) 1.2 4.1 22.7 6.8 Buy
Kuala Lumpur Kepong 25.20 31.45 27,170 13.1 15.2 10.9 (13.6) 2.1 13.9 16.8 4.6 Buy
IOI Corp 4.12 4.70 25,597 13.5 16.0 73.2 (15.2) 2.3 12.1 17.9 2.7 Neutral
Genting Plantation 8.55 8.90 7,671 15.4 17.7 14.4 (13.3) 1.4 12.8 9.4 2.5 Neutral
CB Inudstrial Product 1.52 1.40 725 7.7 8.0 1.6 (4.0) 0.9 7.2 11.7 5.0 Neutral
Sime Darby Plantations 4.97 5.30 34,371 13.9 16.7 24.5 (16.6) 2.3 7.9 15.8 4.4 Neutral
FGV Holdings 1.98 2.05 7,223 8.2 11.2 59.7 (26.3) 1.2 1.8 15.3 3.0 Neutral
Sector Avg 12.3 14.8 30.2 (16.8)
Source: RHB

61
Property: High Construction Costs a Major Concern NEUTRAL

Maintain NEUTRAL; Top Pick: Matrix Concepts (MCH MK, BUY, TP: MYR2.66). Despite
the relatively strong sales being spurred by the Home Ownership Campaign (HOC) last
year, we believe the property sales momentum will slow down in 2022. Developers’
earnings, meanwhile, will likely be affected by the stubbornly high construction costs, as a
result of the spike in prices of various commodities. Market sentiment may also be affected
by the timing and news flow on the next general election. This may potentially cause a sector
overhang.
2022 sales targets are generally lower YoY. Developers generally set a lower target for
this year (about 10% down) after recording strong property sales in 2021. Last year,
aggregate property sales grew 38% YoY despite the rolling lockdowns in Jun-Aug 2021. A
few developers, indeed, exceeded their sales targets. These included SP Setia (SPSB MK,
NEUTRAL, TP: MYR1.28), Sime Darby Property (SDPR MK, BUY, TP: MYR0.75), UEM
Sunrise (UEMS MK, NEUTRAL, TP: MYR0.38), and Tambun Indah (TILB MK, BUY, TP:
MYR0.87). In our view, 2022’s more conservative sales targets are probably due to the
absence of the HOC, the expectation of an interest rate hike in 2H22, and rising inflationary
pressure.
High construction costs a major concern. Building material prices have been on an
uptrend since 2Q21. Major commodity prices saw significant price hikes, including that of
crude oil, steel bar, copper, aluminium, etc. The resulting price increases in cement, sand,
tiles, and related products collectively added to the surge in total construction costs.
Assuming the uptrend in commodity prices persists over the next 6-9 months, we think
developers will tend to be more prudent with their launches, as they may want to price their
products correctly and avoid locking in construction costs at the peak. Hence, we expect
some major launches to be delayed.
Rising inflationary pressure may deter demand for property. On the macroeconomic
front, we are also cautious on the rising inflationary pressure, which may potentially dampen
households’ disposable incomes. In line with commodity prices, food and consumer product
prices are also on the rise. Given that the market has just recovered from last year’s
lockdown, demand for property may be negatively affected if inflationary pressures worsen
further, as property is deemed a big-ticket item that is considered non-discretionary.
The upcoming general election may cause sector overhang. Given the conclusion of
the state elections in Melaka, Sarawak, and Johor over the last six months, some political
parties are calling for the next general election to be held soon. Taking a cue from historical
trends, investor interest in the property sector is typically lukewarm and the performance of
most property stocks tends to be lacklustre six months prior to an election – possibly due to
the uncertain outlook and potential policy changes after an election. As the next general
election is due by Jul 2023, we think speculation will be rife in the coming months on the
timing of the event.
Valuations. The property sector is still trading at around a 66% discount to RNAV, ie
relatively unchanged since the beginning of this year. The sector will unlikely outperform,
given the market headwinds mentioned above. Developers will likely post softer property
sales in 1H22, in our view, given the expiry of the HOC.
Matrix Concepts is our Top Pick. We like the company for its solid balance sheet, and Analyst
consistent property sales, earnings, and dividend delivery. Its strategic exposure in Loong Kok Wen, CFA
affordable landed township development will likely ensure sustainable demand, in our view, +603 9280 8861
and – more importantly – consistent cash flow. Matrix also has an ESG score of 3.2 vs the loong.kok.wen@rhbgroup.com
country mean of 3.0 and is particularly strong in the “Social” pillar.

62
Figure 76: Property stocks' valuations

Sunway 1.75 2.06 8,556 24.5 19.8 15.9 24.2 0.9 13.3 3.8 1.1 Buy
IOI Prop 0.98 1.38 5,396 7.7 7.6 2.1 1.9 0.3 3.5 3.5 3.1 Buy
Sime Darby Property 0.59 0.75 4,012 22.5 20.6 30.4 9.2 0.4 32.6 1.9 2.0 Buy
Matrix Concept^ 2.37 2.66 1,977 8.1 7.7 5.0 5.3 1.0 6.6 12.4 5.5 Buy
LBS Bina 0.49 0.63 764 8.7 8.8 (1.7) (0.6) 0.6 47.0 7.6 1.4 Buy
Tambun Indah 0.83 0.87 362 6.1 6.1 (3.2) 0.9 0.5 6.3 8.2 7.0 Buy
SP Setia 1.26 1.28 5,126 13.5 15.8 33.4 (14.7) 0.4 10.6 2.7 0.8 Neutral
UOA Dev 1.76 1.78 4,095 19.3 16.6 (4.5) 15.8 0.7 10.6 3.8 5.7 Neutral
UEM Sunrise 0.34 0.38 1,720 65.8 24.3 112.2 171.3 0.3 15.9 0.4 0.0 Neutral
Mah Sing 0.68 0.78 1,651 9.4 8.6 9.5 9.0 0.5 9.7 5.0 4.4 Neutral
Eastern & Oriental^ 0.53 0.48 762 85.5 29.1 160.4 193.8 0.5 8.5 0.6 0.0 Sell
Sector Avg 14.3 13.3 24.8 7.9
Source: RHB

63
REITs: Unappealing Yield Play NEUTRAL

Maintain NEUTRAL on REITs. We expect a gradual recovery for MREITs this year, in line
with the recovery of the broader economy, and reopening of international borders on 1 Apr
2022 – which is especially welcome for the hotel segment and tourist-reliant malls. The
recovery is already underway, as reflected by the stronger earnings reported in 4Q21, after
a restriction-laden year. However, we maintain our NEUTRAL call on the sector as the
combination of flat rental reversions and expected rate hikes will keep yields at unappealing
levels. Axis REIT (AXRB MK, BUY, TP: MYR2.28) remains our only Top Pick, with the
industrial segment continuing to be attractive, given the robust demand from the technology
and e-commerce sectors.
Unappealing yield play in FY22. The yield spread between MREITs and Malaysian bonds
is currently c.30bps (well below -2SD from the historical mean). With our RHB economics
team forecasting a 25bps rate hike in 2H22 followed by a 50bps rate hike in 2023, the bond
yield curve should steepen further, keeping the yield spread at relatively unattractive levels.
While MREITs are expected to benefit from the recovery theme of the overall economy (our
economists expect 5.5% GDP growth), we are cautiously optimistic on the retail sub-sector,
as the underlying oversupply situation and tenants still recovering from the pandemic
(requiring rental assistance) may lead to soft reversion rates ahead.
Figure 77: MREITs’ dividend yield spreads over government Figure 78: Yield spread is currently at c.30bps
bond yields
Note: Data as at 30 Mar 2022 Note: Data as at 30 Mar 2022

Mixed prospects for retail and hospitality segment. Despite COVID-19 cases reaching
c.30k per day at end-February due to the Omicron variant, management revealed that
footfalls remained stable, only displaying an expected post-Lunar New Year dip. While we
remain cautious – as we cannot rule out new COVID-19 variants that could prove more
disruptive in the future – we think that this is encouraging for the sub-sector that is just
beginning to recover, affirming that the country is in a better position now to manage the
pandemic.
That said, rental reversions are likely to remain flat this year, as retail REITs will be focused
on improving their occupancy rates. The tenant drop-out risk is still high, against the
backdrop of a supply glut in the retail space, and as malls will look to maintain competitive
rental rates to retain tenants. Rental assistance is also likely to continue this year, albeit at
a smaller quantum, as tenants recover at different rates. There is also the influx of new retail
space from new malls in the Klang Valley (estimated NFA of >4.5m), adding pressure on
REITs to maintain occupancy rates.
The reopening of borders on 1 Apr for international travel is a much-needed boost for REITs
with tourist-centric malls and hotels. Unlike malls with more domestic shopper profiles that Loong Kok Wen, CFA
have seen normalisation of footfall, Suria KLCC only saw 50% of pre-pandemic foot traffic +603 9280 8861
in 4Q21 due to seasonal factors. Hotels should see a pick-up in room occupancy rates, as loong.kok.wen@rhbgroup.com
the country’s tourism sector recovers.

64
However, we expect it to take time to recover to pre-pandemic levels, especially as the world
has not officially moved to an endemic phase yet. Some restrictions remain, as travellers
still need to record negative COVID-19 test results before boarding flights. The threat of
alternative accommodations is another downside risk for hotels, and the number of business
conferences has been on a downward trend, with companies opting to host events online.
Office segment to remain resilient. Despite the prominent work-from-home (WFH) trend
after two years of working during a pandemic, office occupancy rates for REITs under our
coverage have remained stable. However, the situation remains fluid, as tenants adopt a
wait-and-see approach before committing to a permanent working arrangement. The focus
for investors should be on REITs with good-quality office assets that are likely to remain
appealing to tenants, whereas lower-grade offices are at higher risk of lower renewals, as
tenants opt to downsize their operations. We prefer KLCCP Stapled (KLCCSS MK,
NEUTRAL, TP: MYR6.90) in this segment, due to its iconic Grade-A buildings that are fully
tenanted.
Still positive on the industrial segment, given the fast expansion of e-commerce
industries, partly due to the pandemic. The demand for warehousing space is driven by the
expansion along the e-commerce value chain, ie storage and logistics. Axis REIT
announced a “greenfield development”, constructing a 620,096sqf distribution centre in
Shah Alam to be leased to Shopee Express Malaysia for 15 years upon completion. Sunway
REIT (SREIT MK, NEUTRAL, TP: MYR1.45) and CLMT (CMMT MK, SELL, TP: MYR0.50)
have both expressed their intentions to include industrial assets in their respective portfolios
to capture the growth opportunity.
Axis REIT is our preferred pick. The REIT is a key player in the resilient industrial segment
and stands to benefit from the rise in e-commerce. We like its prospects of stable earnings
ahead, as Axis REIT picks up the acquisition pace from the slowdown seen during the
pandemic. We also like its strong management team, whose experience in aggressive
acquisitions over the past few years puts the REIT on a steady growth path.
Key risks: A resurgence of COVID-19 infections that may lead to a prolonged lockdown,
slower-than-expected economic recovery, and delays in the progress of mass vaccinations
given.
Figure 79: REIT stocks' valuations

IGB REIT 1.53 1.92 5,470 18.7 16.5 46.3 13.3 1.4 15.3 7.7 5.1 Buy
Pavilion REIT 1.32 1.48 4,030 20.1 16.6 58.6 21.2 1.0 11.0 5.2 5.1 Buy
Axis REIT 1.86 2.28 3,040 19.4 19.0 7.3 2.3 1.2 8.1 6.2 5.2 Buy
Sentral REIT 0.95 1.02 1,013 12.2 12.0 2.8 1.7 0.8 12.6 6.3 8.1 Buy
KLCCP Stapled 6.56 6.90 11,843 18.2 16.8 1.9 8.2 0.9 22.4 6.0 5.4 Neutral
Sunway REIT 1.41 1.45 4,829 17.5 16.3 16.8 7.7 0.9 16.9 5.2 5.7 Neutral
CLMT 0.58 0.50 1,238 27.3 23.2 42.1 17.7 0.5 9.3 1.8 3.7 Sell
Sector Avg 18.5 16.8 16.3 9.9
Source: RHB

65
Rubber Gloves: Upward Cost Pressures Ahead NEUTRAL

ASPs approaching bottom. Glove manufacturers have noted that glove ASPs have
reverted back to pre-pandemic levels, with current prices hovering at USD24.00-25.00 per
1,000 pieces. At current levels, these manufacturers have begun negotiating for cost pass-
throughs with their customers. That said, we are less optimistic on a complete pass-through
amidst an ample supply and heightened competition.
Utilisation rate ramp-up hinges upon:
i. Demand. Glove manufacturers have noted increasing enquiries from their customers
as glove selling prices inch closer to pre-pandemic levels. We believe distributors that
previously held back restocking activities are now back in the market. However, after
two years of rapid expansion, which was brought forward to the present due to the
pandemic, we believe the pick-up in the utilisation rate will be gradual from hereon as
demand catches up on supply. As such, we do not discount the possibility of further
capacity scale-backs/deferments;
ii. Labour availability. Foreign labour availability remains a bottleneck for the glove
makers, with shortages cited between 10% and 15%. We expect the situation to
improve upon the reopening of borders;
iii. Shipping. The availability of container vessels remains a persistent issue globally. The
continued logistical challenge may hamper the ability of glovemakers to accept future
orders and affect revenue recognition.
Cost pressures to kick in. Latex concentrate prices have risen to an estimated USD1.60
per kg currently, from USD1.30 per kg at the start of this year – largely due to the seasonal
wintering period. Similarly, nitrile latex prices have risen to an estimated USD1.40 per kg
from USD1.10 per kg at the start of the year, due to the rapid rise in crude oil prices amidst
heightened geopolitical tensions. Elsewhere, natural gas and electricity tariffs have risen
12% and 17% QoQ. Additionally, the Government has announced a hike in the minimum
wage requirement to MYR1.5k per month from MYR1.2k, which will add further pressure on
operating margins in our view.
Figure 80 : Natural latex concentrate prices Figure 81: Nitrile latex, acrylonitrile, and butadiene prices
Source: Bloomberg, RHB Note: Implied nitrile latex prices are based on the following formula, (1/3*butadiene
+ 2/3*acrylonitrile)
Operating margins to dip below pre-pandemic levels. While ASPs are coming close to
the bottom, operating margins are likely to narrow below pre-pandemic levels should
manufacturers’ efforts in cost pass-throughs not materialise. We are less optimistic on a
complete pass-through amid the heightened competition. Chinese manufacturers are
absorbing the US-imposed 7.5% tariff to maintain their competitiveness despite the risk of
losses. Smaller glove manufacturers like Malaysia have already begun reporting operating Analyst
losses, given their lack of scale and higher cost bases. Moving forward, we expect smaller Malaysia Research
players to eventually phase out their expansion plans/exit the industry completely, while +603 9280 8888
Chinese players will remain as a threat to supply & demand dynamics. research.my.equity@rhbgroup.com

66
Maintain NEUTRAL. The dreaded ASP erosion has come to its final legs, but we do not yet
foresee any immediate re-rating catalysts on the horizon. While share prices have
undergone another leg down, earnings estimates were similarly trimmed. Nonetheless, after
the latest earnings review, we note the deviation between our estimates and that of the
consensus has narrowed significantly, as the market prices in the potential margin
compression ahead with downside risks look increasingly limited.
Valuations remain the supporting basis of our recommendation. We continue to prefer
Kossan Rubber Industries (KRI MK, BUY, TP: MYR2.05), as it is currently trading below its
pre-pandemic 10-year mean. Additionally, its current optimal utilisation means a more
efficient usage of assets when compared to other peers, where lacklustre utilisation
contributed to poorer margins. Hartalega (HART MK, NEUTRAL, TP: MYR5.10) looks fair,
as it is currently trading at 24x 2023F P/E (in line with its 10-year pre-pandemic mean). We
continue to maintain our SELL recommendations for Supermax Corp (SUCB MK, TP:
MYR0.92) as investors overestimate their liquidity controls over the company’s cash position
while valuations remain unattractive for the latter.
Key risks: Imposition of US Customs & Border Protection bans, slower-/quicker-than-
expected industry consolidations, higher-/lower-than-expect ASPs, fluctuations in
USD/MYR, and changes in raw material prices.
Figure 82: Rubber products stocks' valuations

Kossan Rubber 1.96 2.05 5,001 15.4 15.1 (88.7) 2.1 1.2 10.8 7.9 2.9 Buy
Hartalega^ 4.85 5.10 16,575 5.2 26.6 7.2 (80.3) 2.6 5.1 56.4 11.4 Neutral
Supermax 1.18 0.92 3,145 3.9 18.0 (79.6) (78.1) 0.6 2.7 15.5 5.1 Sell
Sector Avg 8.4 23.8 (72.5) (64.8)
Source: RHB

67
Technology: Valuations Are Now Sensible OVERWEIGHT

4Q21 results. The sector’s FY21 aggregate core PATAMI grew 21% YoY, thanks to yet
another solid performance from outsourced semiconductor assembly and test (OSAT)
players, while non-OSAT companies also staged a rebound – attributed to the strong
underlying demand for semiconductor integrated circuits and pent-up demand post-
reopening. A similar improvement was seen in 4Q21 aggregate core profit, which grew 15%
QoQ (11% YoY). Post results review, there were no changes to our ratings, except for GHL
Systems (GHLS MK, BUY, TP: MYR1.65), which we upgraded to BUY following its steep
share price correction, in view of the strong growth momentum in the adoption of digital
payments. All in all, our FY21F sector earnings are unchanged, as most of the companies
reported a good set of results.
Prolonged semiconductor upcycle. The semiconductor industry is expected to reach
USD613.5bn in value, sustaining growth (+10.4%) into 2022, ie a third consecutive year of
growth, according to World Semiconductor Trade Statistics (WSTS). The strong 4Q21
numbers (+8.3% QoQ, +30.9% YoY) from the top 10 foundries are expected to continue
into 1H22, leading the growth for the semiconductor sector, although supply chain
bottlenecks and the appreciation in ASP are likely to persist, potentially prolonging this
upcycle.
Limited impact from the Russia-Ukraine crisis for now as Russia is not a major
semiconductor producer, and accounts for less than 0.1% of the USD556bn global
semiconductor chip market. However, the majority of the world’s semiconductor-grade neon
(critical for lasers used to make chips), comes from Ukraine. Russia accounts for 30-40%
of global palladium supply – this is mainly used by automakers in catalytic converters.
Should the tensions be prolonged and current inventory of major fabrications be exhausted,
these may exacerbate the tight supply of chips.
The dust has settled. The US Fed’s hawkish tone alluded to another six rate hikes after
the 25bps increase last week, but the dust has settled and the market is pricing in the
aggressive expectations. Any fewer rate hikes than six would be a positive to the market –
if the high inflation scenario is contained. The steep correction of the KLTEC Index (-24%
YTD) has sent the sector valuation to a compelling risk-reward level at 25x P/E (5-year
mean). Given the interest rate hike, the current sector valuation has de-rated to 2019 levels
despite the growth on offer and relatively lower MGS10YR and UST10YR compared to then.
Meanwhile, the NASDAQ and SOX indexes are still a tad above 2019 levels, given the
robust outlook and upcycle of the semiconductor sector.
Strategy. Following the steep share price correction, we believe investors should take the
opportunity to buy into quality technology names with a competitive edge and strong track
record. We maintain our OVERWEIGHT rating, given the expectation of sustained earnings
growth going into 1HFY22 – albeit – at a moderated growth level and with mid-term
structural catalysts in motion. The sector’s valuation has also de-rated to reasonable levels,
ie at the 5-year mean, which makes it more compelling to invest – given the better risk-
reward ratio. Domestically, an export-oriented and apolitical sector such as technology will
be in favour, amid political uncertainties and a strong USD.
The robust shipments growth of 14% YoY for silicon wafers in 4Q21 should continue to fill
up the demand for OSATs. For the automatic test equipment (ATE) subsector, we believe
that margin pressure will continue to the challenge – especially with short order visibility
going into the next two quarters. Investment themes on 5G, the front-ended semiconductor
exposure, as well as semiconductor boom in China will continue to remain in play. On a
cautious note, however, the high expectations built into current valuations may be
undermined by diminishing growth, margin pressure from higher material prices, compliance
costs, and peak demand.
Sector Top Picks. Inari Amertron (INRI MK, BUY, TP: MYR3.59) remains our Top Pick, as
it is primed to ride on the 5G theme, on the back of strong demand for its radio frequency
business in smartphones. It is the only technology stock in the FBM KLCI while potential
new customer onboarding and recovery in the optoelectronic segment could provide further
upsides. We also like Malaysian Pacific Industries (MPI MK, BUY, TP: MYR43.30) for its
Analyst
resilient pipeline and its earnings visibility – with the additional capacity coming on-stream,
Lee Meng Horng
on top of the recovery in the automotive sector, China’s localisation efforts, and the
+603 9280 8866
company’s adoption of new packaging technology. Furthermore, its rock-solid balance sheet lee.meng.horng@rhbgroup.com
(with a net cash per share of MYR4.23) should enable inorganic growth opportunities.

68
Downside risks: Smartphone sales softening, the MYR strengthening vs the USD,
inventory adjustments, weak electronic product/gadget demand (subdued consumer
sentiment), and higher-than-expected inflation. On ESG, labour dependency under the
“Social” segment will be a significant risk, in our view. However, there have been no
significant concerns in this regard for stocks under our coverage.
Figure 83: Technology stocks' valuations

Inari Amertron 3.07 3.59 11,376 28.8 25.5 21.1 12.6 4.5 33.8 20.3 3.0 Buy
MPI 36.40 43.30 7,240 24.4 20.5 21.1 18.9 3.9 56.9 17.2 0.9 Buy
Unisem 3.14 3.75 5,065 21.3 18.5 17.5 15.1 2.2 13.2 10.7 2.5 Buy
GHL Systems 1.52 1.65 1,735 48.9 41.9 19.9 16.7 3.2 21.1 6.7 0.0 Buy
Datasonic^ 0.48 0.57 1,361 20.7 21.9 103.6 317.9 3.7 28.3 18.5 3.4 Buy
Globetronics 1.52 1.46 1,018 20.9 19.2 (7.8) 8.8 3.3 17.6 15.9 3.8 Neutral
Sector Avg 25.7 22.6 24.0 13.8
Source: RHB

69
Telecommunications: Waiting To Exhale NEUTRAL
Slightly stronger mobile revenue uplift for 2022. We continue to see the quest for wallet
share as the mobile operators’ utmost priority, given that monetisation has been hamstrung
by competition at the lower end of the market, coupled with the still-aggressive data offers.
The reopening of borders for international travellers should drive the recovery in roaming
revenue and sales of prepaid starter packs. While 5G has made landfall, actual
commercialisation is still pending wholesale agreements to be inked with Digital Nasional
(DNB), the de facto 5G single wholesale network (SWN) provider. Overall, we see industry
mobile service revenue growing by 2-3% in 2022 (2021: +1.3%) from stronger economic
activities and the lifting of travel restrictions.
Competition should remain keen. The year started off with the mobile network operators
(MNOs) sharpening their prepaid and postpaid value propositions. In late February, U
Mobile unveiled new fixed-speed “unlimited” entry-level prepaid plans priced at MYR20.00
(U25) and MYR35.00 (U35). This was followed by new Xpax postpaid plans – Xpax 40
(MYR40.00 and Xpax 60 (MYR60.00) – by Celcom that replaced the former XP Lite plans
with larger 10GB (3Mbps) and 20GB (6Mbps) of data.
On 3 Mar, DiGi.Com (Digi) (DIGI MK, NEUTRAL, TP: MYR4.18) refreshed its prepaid
offerings with the doubling of data quotas for the entry-level MYR15.00 Next starter pack
(6GB). Additional 5GB of data was also dished out for the Postpaid 60/120/150 plans to
better align with Celcom’s packages. Post the enhancements, Digi’s postpaid plans now
offer a tad more value than comparable Celcom plans with larger bundled data and high-
speed internet, while U Mobile has retained its stranglehold at the lower end of the market.
Figure 84: Celcom’s new Xpax 40/60 plans were unveiled on 1 Figure 85: Digi refreshed its prepaid Next 15/30 plans
Mar with more data quotas on 3 Mar
Celcom closed 2021 on a high note, Digi ceded the most revenue share among the
Big-3 telcos. Overall industry mobile service revenue (MSR) (Big-3) decreased by a
marginal 0.6% QoQ in 4Q21 from +1.1% QoQ in 3Q21, following the expiration of the B40
acquisition campaigns in early September and some impact from the sun-setting of 3G. Digi
and Maxis’ (MAXIS MK, NEUTRAL, TP: MYR4.45) revenue market share (RMS) narrowed
1.2% and 0.6% between 4Q20 and 4Q21, at the expense of Celcom, which grew 1.9%. An
untimely billing glitch saw Digi’s prepaid revenue contract 3.1% QoQ in 4Q21, while Maxis’
fell 4.4% QoQ as prepaid ARPU slipped 5.2%. Celcom’s prepaid RMS reached a new high
of 30.6% in 4Q21, up 3.5% from year ago after adding 0.7m subs in 2021- the highest
among the Big-3 telcos.
Fixed line players continue to outperform mobile peers. We expect fixed line players to
continue outperforming their mobile peers due to structural growth in demand for fibre
broadband services, higher wholesale growth (5G mobile backhaul fibre-isation and access
services) and the expanding fibre footprint under the JENDELA project. Telekom Malaysia‘s
(TM) (T MK, BUY, TP: MYR7.65) and Time dotCom’s (TDC MK, BUY, TP: MYR5.00) core Analyst
earnings expanded 15% and 16.2% QoQ in 4Q21, driven by a combination of stronger fibre Jeffrey Tan
broadband revenue, wholesale services and data centre sales. This compares with the +603 9280 8863
4.5% sequential expansion in industry mobile revenue (Big-3 telcos), with the fall in Maxis jeffrey.tan@rhbgroup.com
and Digi’s earnings partly offset by stronger earnings from Celcom.

70
Figure 86: MSR share (Big-3)

Celcom Maxis Digi
45%
43%
40%
38%
35%
33%
30%
28%
25%
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
1Q21
2Q21
3Q21
4Q21
SWN divestment could still see lapses. While the Government’s decision to retain the
SWN for 5G has removed the sector impasse, we see some risks to the timeline for the
divestment of the 70% stake in DNB, especially if discussions with the MNOs stumble over
valuation, pricing, and/or control. The mechanics of the equity sale are still being finalised,
and there is little clarity on how the stake would be split among operators, as well as if the
larger MNOs have the upper hand. Having direct ownership in DNB aligns the interest of
the MNOs with the SWN, and should ensure that network rollout is expedited.
We believe DNB’s supply-driven framework and cost-recovery model may be subject to
some adjustments, with the potential for the overall costs for the rollout – estimated by DNB
at MYR16.5bn – to be lowered. This could come from greater sharing of infrastructure and
reduction in corporate costs (previously budgeted at MYR4bn), as the MNOs can capitalise
on their own internal resources, ie network and field staff.
Other developments to be on the look-out for include the outcome of Celcom-Digi’s
merger and revelation of digital banking winners. The merger between the two is conditional
upon a no-objecton ruling obtained from the regulator – which is still pending – as well as
shareholder approvals. So far, the management teams of both companies have said the
integration has been proceeding as planned, with a target completion by end-2Q22.
Meanwhile, Bank Negara Malaysia is expected to announce the winners of the five digital
banking licenses by end-March. We see the Axiata (AXIATA MK, BUY, TP:
MYR5.03)/Boost-RHB Banking Group consortium as a front-runner for a license. There is
scope for greater value extraction for Axiata’s digital services arm – Axiata Digital Services
– given the addressable market of more than MYR40bn for digital lending. This comprises
the unbanked and under-banked segments of the population.
Maintain sector NEUTRAL, penchant still for fixed-line operators. The share prices of
Malaysian telcos have fallen by 6-18% YTD due to the 5G policy uncertainty and concerns
over earnings prospects. We see sector earnings falling by 8% in FY22 (FY21: +11.3%), as
the recovery in topline would be offset by the impact of Cukai Makmur and some pressure
on margins.
We continue to favour fixed line players, as their earnings are less predisposed to price
competition and are inherently more defensive with structural drivers at play, eg the
JENDELA programme and enterprise digitalisation efforts. Note: Our forecasts have yet to
incorporate any 5G impact. Top picks are TM, Time dotCom and OCK Group (OCK MK,
BUY, TP: MYR0.56). For mobile exposure, we like Axiata on an earnings recovery thesis
and dividend upside potential. Key downside risks for the sector are competition, regulatory
setbacks, and negative earnings surprises.

71
Figure 87: Sector 1-year forward rolling EV/EBITDA (x)
EV/EBITDA Mean EV/EBITDA

12.0 +1 sd +2 sd
-1 sd -2 sd
11.5
11.0
10.5
10.0
9.5
9.0
8.5
8.0
7.5
Jul-15
Jul-17
Jul-19
Jul-16
Jul-18
Jul-20
Jul-21
Jan-16
Jan-19
Jan-21
Jan-15
Jan-17
Jan-18
Jan-20
Jan-22
Oct-15
Apr-17
Oct-17
Oct-20
Apr-21
Apr-15
Apr-16
Oct-16
Apr-18
Oct-18
Apr-19
Oct-19
Apr-20
Oct-21
Figure 88: Telecommunication stocks' valuations

Axiata 3.79 5.03 34,780 27.1 23.0 (4.5) 17.6 1.9 3.6 7.0 3.1 Buy
TM 4.89 7.65 18,453 15.5 13.5 (4.8) 15.0 2.0 3.8 14.1 3.3 Buy
Time dotCom 4.30 5.00 7,850 18.5 15.1 12.3 21.9 2.3 13.9 13.0 2.7 Buy
OCK 0.43 0.56 448 14.4 12.7 31.1 13.4 0.8 3.5 5.6 2.2 Buy
Maxis 3.93 4.45 30,757 24.4 21.8 (7.4) 11.8 4.1 7.9 17.5 4.5 Neutral
DiGi.Com 3.90 4.18 30,323 31.3 28.5 (21.4) 10.0 54.8 12.2 163.2 3.2 Neutral
Sector Avg 23.8 20.8 (7.7) 14.5
Source: RHB

72
Transport: Looking Forward To Better Quarters Ahead NEUTRAL

Maintain NEUTRAL, with TASCO as our preferred pick. While most counters under our
transportation sector coverage offer investors exposure to the “recovery” theme, we stay
selective on our stock picks and prefer those with resilient growth.
We continue to anticipate positive throughput volume momentum for TASCO (TASCO MK,
BUY, TP: MYR2.14) as the ongoing economic recovery takes place. The bulk of TASCO’s
customers, especially in the technology sector, are growing healthily amidst favourable
sector tailwinds. The group should continue to benefit from the organic growth of its
customers, and be further boosted by new business wins from the retail trading segment.
The prolonged tightness in air and ocean freight should bode well for its international
business segment, especially as TASCO is able to leverage on NYK Group’s expansive
global logistics network. In the medium term, the construction of a 650k sq ft warehouse
under Phase 1 of the Shah Alam Logistics Centre expansion (expected completion in end-
2023) should allow the group to capture opportunities from the warehouse shortage.
Cautiously optimistic on Malaysia Airports’ (MAHB MK, NEUTRAL, TP: MYR7.20)
recovery. With MAHB’s share price having rallied by 72% from its 2-year low in Oct 2020,
we believe that the prospects of a recovery have largely been priced in. Although indications
of a normalisation in footfall have become more palpable in the recent quarter – as the
progress of the national vaccination drive continues to point to an encouraging uptrend and
lower mortalities – we choose to stay cautious of the recovery prospects, due to the threat
of new variants and still-high transmission rates. This could pose further downside risks to
our passenger volume forecasts.
Westports continues to expect single-digit container throughput growth for FY22.
TEU volume growth is likely to be seen only in the second half, with management indicating
that TEU growth in 1H22 should continue to trend in negative territory, given the persistent
yard congestion situation. We forecast a slight dip in Westports’ (WPRTS MK, NEUTRAL,
TP: MYR4.32) revenue, mainly due to a smaller value-added services (VAS) contribution in
FY22, with expectations of easing yard congestions relative to FY21. Earnings are expected
to be adversely impacted by Cukai Makmur.
We foresee challenges remaining for GD Express (GDX MK, NEUTRAL, TP: MYR0.29)
within the courier landscape, due to the price war that is likely to persist among the players
– especially in the face of the broader reopening of the economy and resumption of physical
retail businesses, which would see demand for online activities slowing down. On the
expansion front, the establishment of an automated sorting hub should see a significant
increase in its existing capacity from 150,000 parcels/day to 350,000 parcels/day (targeted
to be operational by 2H22). While this will enable it to deliver a higher volume of parcels,
the competitive business environment could result in lower ASPs to attract customers and
ramp up capacity. This would lead to lower margins, partially capping volume growth.
Lukewarm outlook for POS Malaysia (POSM MK, NEUTRAL,TP: MYR0.75). The broader
re-opening of the economy should lead to better volume loading for POSM going forward,
especially for its retail, logistics, and aviation segments. The appointment of Charles Brewer
as the new group CEO is also expected to bring meaningful changes, given his vast
experience in the logistics industry. With its CEO, the group will embark on a transformation
journey to turn the business around. This will be through ongoing cost optimisation initiatives
and efforts to improve service offerings. Nevertheless, we believe this is a long-term
process. The near-term operating environment remains challenging, due to the fast-
declining mailing business and stiff competition within the last mile delivery space.
FM Global Logistics remains optimistic on throughput volumes ahead, and has raised Analyst
its net profit growth target to >30% for FY22 (previous target at 10-15%), in line with our Raja Nur Aqilah Raja Ali
forecast. Growth will be supported by a rebound in post-pandemic global trade flow and
+603 9280 8885
from the group’s ongoing customer acquisition efforts. FM Global Logistics (FM MK, BUY, raja.nur.aqilah@rhbgroup.com
TP: MYR1.20) aims to expand its customer base and grow its overseas freight forwarding
contribution. For the third-party logistics (3PL) and warehousing segment, the group will
continue to on-board and enhance its client portfolio – looking for customers with quicker
inventory turnover and credit terms – and streamline underperforming units to improve
profitability.

73
Figure 89: Transport stocks' valuations

Tasco 1.11 2.14 888 12.6 11.8 11.3 7.0 1.6 7.6 0.0 2.4 Buy
FM Global 0.67 1.20 374 9.4 9.1 34.6 3.5 1.1 7.1 11.6 5.2 Buy
Westports 4.00 4.32 13,640 20.7 16.4 (8.6) 26.3 4.3 13.9 21.3 3.6 Neutral
MAHB 6.95 7.20 11,531 n.m. 24.4 56.7 242.6 1.5 19.5 (4.5) 0.0 Neutral
GD Express 0.22 0.29 1,228 36.1 30.5 (21.1) 18.4 2.5 23.1 7.0 0.9 Neutral
Pos Malaysia^ 0.65 0.75 505 n.m. 15.5 83.7 199.7 0.6 (90.0) (4.1) 0.0 Neutral
Sector Avg 64.3 18.9 497.7 241.1
Source: RHB

74
Utilities: Decent RP3 OVERWEIGHT
Keep OVERWEIGHT; Top Pick: Tenaga Nasional (TNB MK, BUY, TP: MYR11.50). With
the disclosure of some key parameters for Regulatory Period (RP) 3, we are overall positive
– there was no reduction in WACC and we estimate the Regulated Asset Base (RAB) could
grow by 3.7% pa in 2022-2024. That said, the lower approved opex suggests TNB has to
be more cost-effective.
Decent RP3 parameters. West Malaysia’s electricity demand recovered strongly in 4Q21
(+3.2% YoY, +9.5% QoQ). TNB also announced some key RP3 parameters. Average
annual approved capex for this period was higher at MYR6.85bn than the actual spend of
MYR6.57bn under RP2 – however, it was lower than the approved MYR7.3bn under RP2+.
WACC remains unchanged at 7.3%. Overall, we estimate the RAB will grow 3.8% pa during
RP3. The coal benchmark has also been lifted to USD79.00 per tonne from RP2 and RP2+’s
USD75.00 and USD67.45 while the gas price benchmark is fixed at MYR26.00/mmbtu from
MYR24.20-27.20 under RP2 and RP2+.
With the Imbalance Cost Pass-Through (ICPT) mechanism still in place, we think the higher
generation costs will be passed through to end-users or partially absorbed by Kumpulan
Wang Industri Elektrik (KWIE) going forward. The average annual approved opex is also
lower at MYR5.99bn vs the approved MYR6.07-6.30bn under RP2 and RP2+, which
suggests that TNB has to be more cost-effective in its operations to earn the desired
regulated earnings.
ICPT mechanism provides earnings certainty amidst elevated fuel prices. The ICPT is
important to insulate TNB from rising gas and coal prices, as these excessive costs are
likely to be transferred to end consumers via a surcharge. Alternatively, the Government
could choose to subsidise it from the KWIE fund. Recall: The Government has also
approved a 3.7 sen per kWh surcharge for non-domestic users while maintaining a 2 sen
per kWh rebate for domestic users for 1H22 (starting February). The surcharge was to cater
to generation costs in West Malaysia, which has surged 45% as a result of escalated coal
prices. Meanwhile, MYR715m was utilised from the KWIE fund to maintain the rebate for
domestic users. We do not know the amount left in the fund, but the Government may have
to subsidise domestic users at a higher amount, given that coal prices remain elevated.
Any chance for TNB to bear the costs? We do not discount the possibility of TNB
supporting domestic users, but we believe the amount will not be significant. This is because
the company is still responsible for maintaining capex spending to maintain and expand the
electricity grid. In 2022, 41% of the approved MYR6.8bn capex will be used to maintain
network and system safety and resiliency while 46% is being allocated to meet the growing
and changing needs of customers. The remaining 13% is being allocated to support the
energy transition.
More solar projects to be rolled out in 2H22? Solar players should continue to see robust
demand from commercial & industrial or C&I and Large Scale Solar (LSS) 4 engineering,
procurement, construction & commissioning jobs. While the pipeline is robust, we are
cautious over potential delays in project execution, especially with the ongoing supply chain
disruptions faced by the solar industry that can lead to raw material price fluctuations.
While players like Solarvest (SOLAR MK, NEUTRAL, TP: MYR1.09) can pass on some of
the escalating costs, we understand that customers may opt to delay the projects in hopes
of getting better pricing in the future. Any delays in construction will push back the revenue
recognition.
Following the award of LSS4 projects in Mar 2021, we have yet to hear the call for new
tenders – we believe the new round of tenders could materialise in 2H22. The tendering
requirements should be very similar to that of LSS4’s, in our view, whereby applications are
open to 100% locally owned companies that are incorporated and/or registered Analyst
domestically. Additionally, any Malaysia-listed company must have at least 75% local Sean Lim Ooi Leong
shareholdings to participate. The maximum bidding capacity of each developer could also +603 9280 8867
be kept at 50MW – this is to allow more local solar players to participate in the bids, vis-à- sean.lim@rhbgroup.com
vis the 100MW under LSS3.

75
Figure 90: Utilities stocks' valuations

Tenaga 9.00 11.50 51,535 11.4 10.1 3.3 12.7 0.9 2.4 7.8 5.1 Buy
YTL Power 0.66 0.68 5,347 16.5 13.6 (15.4) 21.4 0.4 4.7 2.3 4.9 Buy
Taliworks Corp 0.93 1.03 1,875 23.2 21.4 15.0 8.4 2.2 20.3 9.2 7.1 Buy
Ranhill Utilities 0.51 0.76 652 11.8 9.0 65.1 30.5 0.9 2.4 7.8 4.8 Buy
Petronas Gas 16.66 17.72 32,966 16.8 17.3 (5.1) (3.1) 2.5 13.5 14.8 4.9 Neutral
Solarvest^ 0.80 1.09 531 73.2 19.0 (51.6) 285.4 3.1 51.2 4.8 0.0 Neutral
Sector Avg 13.4 12.3 (0.4) 9.0
Source: RHB

76
Appendix
Figure 91: Valuations and ratings of individual stocks under our coverage
FYE Price Target Core EPS EPS Growth P/E EV/EBITDA
(sen) (%) (x) (x)
(MYR/s) (MYR/s) 21 22F 23F 21 22F 23F 21 22F 23F 21 22F 23F
BUY
Advancecon Dec 0.31 0.38 0.3 4.0 4.6 (44.7) 1274.5 15.3 +>100 7.8 6.8 3.6 1.6 1.3
Alliance Bank^ Mar 3.76 4.00 36.0 38.3 42.2 55.4 6.2 10.2 10.4 9.8 8.9 n.a. n.a. n.a.
Allianz Malaysia Dec 12.72 17.90 147.7 143.5 164.0 (0.6) (2.9) 14.3 8.6 8.9 7.8 n.a. n.a. n.a.
AMMB^ Mar 3.71 4.00 42.6 50.4 54.8 33.2 18.4 8.8 8.7 7.4 6.8 n.a. n.a. n.a.
Astro^ Jan 1.10 1.37 9.1 10.7 11.8 (11.0) 17.4 10.1 12.1 10.3 9.3 5.8 5.3 5.1
Axiata Dec 3.79 5.03 14.7 14.0 16.5 53.2 (4.5) 17.6 25.9 27.1 23.0 4.8 4.3 3.9
Axis REIT Dec 1.86 2.28 8.9 9.6 9.8 2.3 7.3 2.3 20.8 19.4 19.0 2.0 1.9 1.8
Berjaya Food Jun 3.79 4.20 9.6 24.0 23.7 269.4 150.2 (1.3) 39.6 15.8 16.0 10.5 7.1 7.3
Sports Toto Jun 1.92 2.39 13.0 10.0 18.1 39.1 (23.4) 81.2 14.7 19.2 10.6 7.6 9.1 6.2
Bumi Armada Dec 0.41 0.65 6.2 10.1 10.6 (24.0) 63.9 4.8 6.7 4.1 3.9 4.1 2.5 1.7
CMS Dec 1.09 1.60 19.4 22.6 23.2 84.0 16.8 2.6 5.6 4.8 4.7 6.8 4.6 4.0
CIMB Dec 5.33 6.40 46.4 47.4 59.6 286.7 2.2 25.7 11.5 11.2 8.9 n.a. n.a. n.a.
CTOS Digital Dec 1.58 2.40 2.0 3.5 4.4 5.7 75.8 24.4 78.8 44.8 36.0 61.5 42.8 34.8
Datasonic^ Mar 0.48 0.57 0.5 2.3 2.2 103.6 317.9 (5.5) 86.5 20.7 21.9 41.5 14.6 15.1
Dialog Jun 2.74 3.40 8.2 9.0 10.1 (16.2) 10.0 13.0 33.6 30.6 27.1 33.8 28.1 23.4
Duopharma Biotech Dec 1.49 1.92 7.0 8.2 9.1 9.2 17.1 10.6 21.2 18.1 16.3 13.9 12.2 10.3
FM Global Logistics Jun 0.67 1.20 5.3 7.1 7.4 132.6 34.6 3.5 12.6 9.4 9.1 6.4 6.3 5.9
Gabungan AQRS Dec 0.40 0.60 4.0 10.1 9.5 140.0 150.0 (6.0) 9.8 3.9 4.2 8.6 2.6 2.9
Genting Bhd Dec 4.68 6.39 (21.0) 28.2 45.9 (225.2) 234.0 62.9 n.m. 16.6 10.2 13.7 6.6 5.8
Genting Malaysia Dec 2.98 3.58 (16.8) 17.1 24.7 28.7 201.4 44.9 n.m. 17.5 12.0 53.5 7.6 6.7
GHL Systems Dec 1.52 1.65 2.6 3.1 3.6 (4.4) 19.9 16.7 58.6 48.9 41.9 23.0 19.0 16.5
Guan Chong Dec 2.65 4.00 15.5 24.6 27.0 (20.0) 59.2 9.5 17.1 10.8 9.8 14.5 9.4 8.5
Heineken Dec 22.48 25.80 81.3 94.8 115.1 40.1 16.5 21.4 27.6 23.7 19.5 15.8 12.8 11.6
Hong Leong Bank Jun 20.20 23.50 139.8 149.6 173.2 14.7 7.0 15.8 14.5 13.5 11.7 n.a. n.a. n.a.
IGB REIT Dec 1.53 1.92 5.6 8.2 9.3 (15.7) 46.3 13.3 27.3 18.7 16.5 (2.7) (2.0) (1.9)
IHH Healthcare Dec 6.20 7.50 17.7 18.0 20.7 117.1 1.9 14.8 35.0 34.4 29.9 14.4 14.1 12.9
Inari Amertron Jun 3.07 3.59 8.8 10.7 12.0 113.6 21.1 12.6 34.8 28.8 25.5 25.0 19.0 16.7
IOI Properties Jun 0.98 1.38 12.5 12.7 13.0 21.7 2.1 1.9 7.9 7.7 7.6 14.5 20.6 20.4
Kelington Dec 1.37 2.40 3.7 5.2 5.4 108.3 40.0 3.2 36.8 26.3 25.5 19.6 14.2 13.5
Kerjaya Prospek Dec 1.13 1.56 7.8 13.9 16.8 6.6 77.7 21.1 14.5 8.2 6.7 7.3 3.9 3.0
KLK Sep 25.20 31.45 172.9 191.7 165.7 168.3 10.9 (13.6) 14.6 13.1 15.2 9.0 8.1 8.7
Kossan Dec 1.96 2.05 112.6 12.7 13.0 165.9 (88.7) 2.1 1.7 15.4 15.1 0.5 3.7 3.7
LBS Bina Dec 0.49 0.63 5.7 5.6 5.6 107.9 (1.7) (0.6) 8.6 8.7 8.8 5.1 5.1 4.8
Leong Hup Int Dec 0.52 0.83 2.3 5.6 6.0 (20.8) 140.3 7.3 22.2 9.3 8.6 9.2 6.5 6.0
Magnum Dec 1.82 2.51 0.9 15.0 17.4 (87.6) 1556.9 15.8 +>100 12.1 10.5 31.4 7.5 7.2
Malayan Cement Jun 2.41 3.65 0.8 10.7 11.9 102.6 1220.2 11.1 +>100 22.5 20.2 11257.6 13.2 13.3
Matrix^ Mar 2.37 2.66 27.8 29.2 30.8 (11.4) 5.0 5.3 8.5 8.1 7.7 2.4 2.1 1.9
Maybank Dec 8.94 10.40 68.2 68.5 81.9 18.3 0.5 19.5 13.1 13.0 10.9 n.a. n.a. n.a.
Media Prima Dec 0.64 0.90 6.6 7.8 9.1 1658.8 18.4 16.8 9.6 8.1 6.9 2.4 2.1 1.4
MGB Dec 0.73 0.99 5.3 11.2 17.7 149.6 108.7 58.5 13.6 6.5 4.1 6.2 1.6 0.4
MISC Dec 7.35 7.79 28.5 34.7 44.6 (28.8) 21.7 28.6 25.8 21.2 16.5 10.2 9.6 8.7
MPI Jun 36.40 43.30 123.3 149.3 177.5 57.3 21.1 18.9 29.5 24.4 20.5 14.4 12.5 10.6
Mr DIY Group Dec 3.46 4.59 6.9 9.6 11.1 23.4 39.2 16.0 50.3 36.1 31.1 24.8 18.4 15.8
OCK Group Dec 0.43 0.56 2.3 3.0 3.4 0.1 31.1 13.4 18.8 14.4 12.7 6.0 5.1 4.3
Note: ^FY21, 22 & 23 valuations refer to those of FY22, 23 & 24

77
Figure 92: (continued from previous page): Valuations and ratings of individual stocks under coverage
P/CF P/BV DIV YIELD ROE % Chg in price Mkt
(x) (x) (%) (%) cap
21 22F 23F 21 22F 23F 21 22F 23F 21 22F 23F 1Mth 3 Mth 12 Mth (MYRm)
BUY
5.9 1.6 3.1 0.6 0.6 0.5 0.5 2.6 3.0 1.5 7.6 8.3 (3.1) 1.6 (20.5) 150
n.a. n.a. n.a. 0.9 0.8 0.8 3.5 4.0 4.9 8.6 8.6 8.9 9.6 31.5 41.9 5,821
n.a n.a n.a 1.0 0.9 0.9 2.9 2.9 3.0 11.1 11.0 11.7 0.5 (1.1) (5.8) 2,264
n.a. n.a. n.a. 0.7 0.7 0.6 0.0 5.0 5.5 8.9 9.5 9.4 10.4 17.0 26.6 12,283
5.6 3.4 4.7 5.2 4.6 4.1 6.1 7.4 8.2 43.7 47.2 46.1 11.1 15.8 14.6 5,736
3.4 3.6 3.1 1.9 1.9 1.9 2.5 3.1 3.7 7.4 7.0 8.3 (3.6) (8.9) 3.8 34,780
9.0 8.1 7.2 1.1 1.2 1.2 4.5 5.2 5.3 6.1 6.2 6.3 (0.5) (4.1) (4.6) 3,040
7.7 7.4 8.1 3.9 3.4 3.1 1.6 3.2 3.1 13.3 23.0 20.3 18.1 76.3 103.8 1,366
5.2 10.5 7.2 3.2 3.1 3.0 4.2 4.7 8.3 23.4 16.4 29.0 0.5 1.1 (9.0) 2,576
3.7 2.9 2.3 0.6 0.5 0.5 0.0 0.0 0.0 10.2 13.9 12.8 (13.7) (12.8) (2.4) 2,422
3.9 (95.4) 7.1 0.4 0.4 0.3 1.8 3.2 4.3 7.2 7.8 7.5 (9.2) (14.8) (50.0) 1,171
n.a. n.a. n.a. 0.9 0.9 0.8 3.0 3.7 4.1 7.5 8.0 9.4 (6.7) (2.2) 22.8 54,480
119.3 65.6 37.0 11.3 5.9 5.7 0.7 1.3 1.7 21.1 17.5 16.4 (0.6) (12.7) N/A 3,650
47.9 28.3 19.4 3.9 3.7 3.5 0.8 3.4 3.2 5.6 18.5 16.6 4.4 15.9 (13.6) 1,361
32.0 42.0 27.2 3.7 3.5 3.2 1.1 1.5 1.7 11.6 11.7 12.4 (2.8) 4.6 (11.9) 15,461
28.5 8.1 13.5 2.2 2.1 2.0 1.9 2.7 3.3 10.4 12.0 12.5 (1.3) (11.3) (27.8) 1,403
20.7 7.1 6.8 1.1 1.1 1.0 3.7 5.2 5.2 8.7 11.6 11.3 (11.8) (22.5) (2.2) 374
(8.0) 4.8 3.2 0.4 0.4 0.4 2.5 5.1 5.1 2.7 10.3 9.1 2.6 (11.2) (36.8) 214
6.0 2.6 2.1 0.6 0.6 0.5 2.4 4.3 4.3 (4.2) 3.4 5.5 0.9 0.2 (7.0) 18,021
37.6 5.7 6.4 1.3 1.3 1.2 3.0 5.0 5.4 (7.0) 7.3 10.4 2.8 6.7 0.1 16,882
19.9 21.1 23.8 3.4 3.2 3.0 0.0 0.0 0.0 6.0 6.7 7.3 (2.6) (12.6) (12.1) 1,735
(101.7) 7.3 8.5 2.0 1.7 1.5 1.3 2.1 2.3 12.3 17.2 16.6 (2.6) (5.4) (15.6) 2,800
19.5 19.6 16.2 17.2 17.0 16.9 3.6 4.2 5.1 62.1 71.8 86.5 1.9 7.9 (12.9) 6,791
n.a. n.a. n.a. 1.4 1.3 1.2 2.5 2.7 3.0 10.1 10.2 11.1 0.7 8.5 8.0 43,788
20.9 15.3 14.1 1.4 1.4 1.4 4.8 5.1 5.1 5.3 7.7 8.7 7.7 (7.3) (12.1) 5,470
15.4 18.5 14.7 2.4 2.3 2.2 1.0 1.0 1.0 8.3 6.9 7.6 (5.6) (15.5) 16.5 54,577
23.2 33.8 23.1 8.2 4.5 4.3 2.7 3.0 3.3 24.8 20.3 17.3 (4.7) (23.3) (5.9) 11,376
2.2 3.5 4.2 0.3 0.3 0.3 1.5 3.1 3.6 3.4 3.5 3.5 (4.9) (10.9) (31.5) 5,396
(191.3) 37.6 23.2 6.1 5.2 4.5 0.7 1.0 1.0 17.6 21.3 19.0 (0.7) (20.3) 38.4 881
26.9 3.8 6.6 1.2 1.1 1.0 2.4 4.3 5.2 8.5 14.0 15.3 (3.4) (6.6) (14.4) 1,398
17.5 13.9 12.2 2.3 2.1 2.0 4.0 4.6 4.0 23.4 16.8 13.7 (3.1) 15.7 9.9 27,170
1.6 10.8 12.2 1.2 1.2 1.1 24.4 2.9 3.0 88.2 7.9 7.7 13.3 2.1 (39.9) 5,001
13.6 47.0 43.1 0.7 0.6 0.6 0.0 1.4 1.4 7.8 7.6 7.3 (3.9) (4.9) 3.2 764
56.2 3.1 3.1 1.1 1.0 0.9 1.3 3.2 3.5 4.9 10.9 10.9 (1.0) (1.0) (24.6) 1,898
221.4 9.5 8.7 1.1 1.1 1.1 0.8 7.1 8.8 0.0 9.1 10.4 (3.7) (4.2) (17.3) 2,616
296.4 22.5 20.2 0.8 0.8 1.0 0.0 0.0 0.0 (6.2) 4.3 5.1 0.4 (5.5) (7.3) 3,158
7.4 6.6 6.9 1.0 1.0 0.9 5.4 5.5 5.7 12.5 12.4 12.3 (1.7) 7.7 22.8 1,977
n.a. n.a. n.a. 1.2 1.2 1.2 6.3 6.4 7.3 9.5 9.4 11.1 2.1 7.7 8.4 106,194
2.5 4.6 3.6 1.1 1.0 0.9 2.4 3.1 3.1 12.1 12.8 13.2 13.4 53.0 2.4 704
4.8 1.7 2.8 0.7 0.7 0.6 0.6 3.1 4.9 5.6 10.8 15.4 (2.7) 0.0 (27.1) 429
11.3 8.3 6.3 1.0 1.0 0.9 4.5 4.5 4.5 3.8 4.5 5.8 0.0 4.3 7.8 32,809
13.8 56.9 12.6 4.5 3.9 3.4 0.9 0.9 0.9 16.8 17.2 17.8 1.7 (26.3) (6.4) 7,240
33.5 29.8 24.0 18.9 15.0 12.1 0.9 1.4 1.6 42.6 46.2 42.9 (4.7) (4.2) (16.0) 21,740
2.3 3.5 1.1 0.8 0.8 1.1 1.1 2.2 2.2 4.6 5.6 7.3 6.2 (7.6) (13.3) 448

78
(sen) (%) (x) (x)
BUY
Pavilion REIT Dec 1.32 1.48 4.1 6.6 8.0 7.9 58.6 21.2 31.8 20.1 16.6 27.9 19.7 17.2
Petronas Chemicals Dec 9.60 10.86 91.3 66.6 67.2 280.1 (27.0) 1.0 10.5 14.4 14.3 6.7 7.2 6.9
Pintaras Jun 2.60 3.24 35.2 35.5 37.5 66.7 0.6 5.6 7.4 7.3 6.9 3.4 3.1 2.7
Press Metal Dec 6.20 8.25 12.7 28.4 31.3 121.1 123.1 9.9 48.6 21.8 19.8 30.2 16.5 15.1
Ranhill Utilities Dec 0.51 0.76 2.6 4.3 5.6 (26.3) 65.1 30.5 19.5 11.8 9.0 2.6 2.0 1.8
RCE Capital^ Mar 1.85 1.90 18.4 18.6 19.4 (46.9) 1.3 4.3 10.1 9.9 9.5 n.a. n.a. n.a.
Sarawak Oil Palms Dec 5.40 6.05 80.6 90.2 74.5 110.5 11.9 (17.4) 6.7 6.0 7.2 3.9 3.5 3.5
Scientex Jul 4.06 4.68 29.1 27.3 34.5 15.0 (6.2) 26.2 13.9 14.9 11.8 10.8 10.5 10.9
Sentral REIT Dec 0.95 1.02 7.5 7.7 7.9 (0.3) 2.8 1.7 12.5 12.2 12.0 (3.6) (2.8) (2.7)
Sime Darby Property Dec 0.59 0.75 2.0 2.6 2.9 133.7 30.4 9.2 29.3 22.5 20.6 11.6 15.8 13.5
SKP Resources^ Mar 1.41 2.40 10.3 13.1 14.0 24.7 26.2 7.0 13.6 10.8 10.1 9.3 7.4 6.7
Sunway Construction Dec 1.72 1.74 8.5 10.9 11.7 19.9 27.6 7.8 20.2 15.8 14.7 10.2 6.2 5.4
Sunway Bhd Dec 1.75 2.06 6.2 7.1 8.9 (31.4) 15.9 24.2 28.5 24.5 19.8 52.0 48.1 36.0
Syarikat Takaful Dec 3.63 4.90 41.1 36.6 41.9 (5.7) (11.0) 14.5 8.8 9.9 8.7 n.a. n.a. n.a.
Ta Ann Dec 5.15 6.40 64.9 89.1 62.9 291.4 37.3 (29.4) 7.9 5.8 8.2 5.0 3.0 3.8
Taliworks Corp Dec 0.93 1.03 3.5 4.0 4.4 21.5 15.0 8.4 26.6 23.2 21.4 11.8 11.2 10.7
Tambun Indah Dec 0.83 0.87 13.9 13.5 13.6 139.3 (3.2) 0.9 5.9 6.1 6.1 3.6 3.1 2.7
Tasco Bhd Mar 1.11 2.14 7.9 8.8 9.4 53.2 11.3 7.0 14.0 12.6 11.8 9.1 8.7 8.1
Telekom Dec 4.89 7.65 33.0 31.5 36.2 25.2 (4.8) 15.0 14.8 15.5 13.5 5.3 4.9 4.3
Tenaga Dec 9.00 11.50 76.6 79.1 89.2 22.0 3.3 12.7 11.8 11.4 10.1 5.0 4.6 4.6
Time dotCom Dec 4.30 5.00 20.7 23.3 28.4 8.0 12.3 21.9 20.7 18.5 15.1 9.2 8.5 7.8
Unisem Dec 3.14 3.75 12.5 14.7 17.0 34.8 17.5 15.1 25.0 21.3 18.5 11.8 9.9 8.8
VS Industry Jul 1.03 1.26 6.4 5.4 9.3 99.8 (16.4) 73.6 16.0 19.2 11.0 8.3 9.1 6.1
Yinson^ Jan 4.80 6.49 28.5 28.7 41.5 (13.9) 0.7 44.7 16.8 16.7 11.6 7.7 10.1 7.3
YTL Power Jun 0.66 0.68 4.7 4.0 4.9 12.5 (15.4) 21.4 13.9 16.5 13.6 10.6 9.6 8.8
NEUTRAL
AEON Co. Dec 1.58 1.41 6.1 7.5 8.6 105.9 23.7 15.1 26.0 21.0 18.3 3.6 2.9 2.7
Aeon Credit^ Feb 15.12 16.20 87.7 139.2 138.2 (18.4) 58.7 (0.7) 17.2 10.9 10.9 n.a. n.a. n.a.
Affin Bank Dec 2.00 2.00 25.2 25.3 32.6 120.7 0.5 28.6 7.9 7.9 6.1 n.a. n.a. n.a.
BAT Dec 12.44 13.50 103.0 97.5 106.8 12.8 (5.3) 9.6 12.1 12.8 11.6 10.8 10.2 10.3
Bermaz Auto^ Apr 1.79 1.74 11.2 13.6 17.0 (3.2) 21.6 25.3 16.0 13.2 10.5 10.2 7.8 6.2
BIMB Dec 2.95 3.30 25.7 27.0 31.9 18.5 5.0 18.1 11.5 10.9 9.2 n.a. n.a. n.a.
Bursa Malaysia Dec 7.07 6.10 43.9 24.9 26.3 (6.0) (43.2) 5.5 16.1 28.3 26.9 9.3 15.6 15.4
Carlsberg Dec 21.72 23.80 67.6 85.8 105.3 15.6 26.9 22.7 32.1 25.3 20.6 22.7 16.7 14.3
CBIP Dec 1.52 1.40 19.4 19.7 19.0 52.4 1.6 (4.0) 7.8 7.7 8.0 5.8 5.3 5.0
DiGi.Com Dec 3.90 4.18 15.8 12.4 13.7 (8.0) (21.4) 10.0 24.6 31.3 28.5 11.5 11.8 11.5
Econpile Jun 0.29 0.28 0.8 0.3 2.1 375.8 (61.8) 573.2 35.0 91.5 13.6 9.4 10.6 5.0
FGV Holdings Dec 1.98 2.05 15.1 24.1 17.7 432.6 59.7 (26.3) 13.1 8.2 11.2 4.3 3.6 4.5
Gamuda Jul 3.46 3.55 23.4 23.6 27.1 12.1 1.0 14.5 14.8 14.6 12.8 10.0 7.8 6.7
GD Express Jun 0.22 0.29 0.8 0.6 0.7 100.0 (21.1) 18.4 28.5 36.1 30.5 8.9 12.8 11.2
Genting Plantations Dec 8.55 8.90 48.7 55.7 48.3 80.3 14.4 (13.3) 17.6 15.4 17.7 8.4 7.8 8.5
Globetronics Dec 1.52 1.46 7.9 7.3 7.9 2.3 (7.8) 8.8 19.2 20.9 19.2 9.2 9.6 8.9
Hartalega^ Mar 4.85 5.10 92.5 18.2 21.6 524.5 7.2 (80.3) 5.6 5.2 26.6 3.7 2.9 13.8
IJM Corp^ Mar 1.67 1.66 5.8 7.1 8.0 (48.1) 23.0 13.2 28.9 23.5 20.8 11.7 10.7 9.8
IOI Corp Jun 4.12 4.70 17.6 30.4 25.8 39.1 73.2 (15.2) 23.5 13.5 16.0 10.3 7.6 8.8
KLCCP Stapled Dec 6.56 6.90 35.4 36.0 39.0 16.0 1.9 8.2 18.6 18.2 16.8 1.6 1.1 1.0
Mah Sing Dec 0.68 0.78 6.6 7.3 7.9 60.2 9.5 9.0 10.3 9.4 8.6 7.2 6.5 6.5
MAHB Dec 6.95 7.20 (46.2) (20.0) 28.5 31.3 56.7 242.6 n.m. n.m. 24.4 58.9 12.9 7.0
Maxis Dec 3.93 4.45 17.4 16.1 18.0 (5.5) (7.4) 11.8 22.6 24.4 21.8 10.0 9.2 8.6
MBM Resources Dec 3.09 3.38 43.0 50.3 54.5 0.7 16.9 8.5 7.2 6.1 5.7 (5.7) (6.2) (7.2)
MMHE Dec 0.39 0.42 (16.4) 0.4 1.5 (246.4) 102.5 264.6 n.m. 96.2 26.4 na 2.1 1.5
MRCB Dec 0.37 0.38 0.4 0.7 1.4 (39.7) 83.5 116.4 +>100 55.4 25.6 24.8 16.7 17.5

79
(x) (x) (%) (%) cap
BUY
16.3 11.0 11.0 1.0 1.0 1.0 3.4 5.1 6.2 3.3 5.2 6.3 5.6 5.6 (5.7) 4,030
9.4 13.1 11.0 2.2 2.0 1.9 5.8 3.5 3.5 22.3 14.7 13.8 0.5 7.6 21.4 76,800
11.6 6.0 4.7 1.2 1.1 1.0 3.8 5.8 7.7 18.4 15.1 14.8 3.2 (7.1) (0.4) 431
336.4 25.3 17.1 12.8 9.7 7.6 0.9 2.1 2.3 26.0 50.5 43.0 (9.2) 7.3 25.3 50,073
2.5 2.4 3.3 0.9 0.9 0.9 1.4 4.8 6.5 5.3 7.8 9.7 (0.5) 176.8 (0.5) (37)
n.a. n.a. n.a. 1.5 1.6 1.6 3.1 4.1 4.1 15.7 15.3 16.8 10.8 (6.5) 35.5 1,354
6.7 3.7 4.7 1.1 1.0 0.9 2.1 2.0 1.7 19.7 17.1 12.4 (13.3) 54.7 35.7 3,093
9.0 14.1 9.4 2.2 2.0 1.8 2.1 2.5 3.0 16.7 14.0 16.0 (8.4) (15.2) 1.2 6,297
12.9 12.6 12.4 0.8 0.8 0.8 8.3 8.1 8.2 6.1 6.3 6.4 3.8 4.4 4.4 1,013
(87.2) 32.6 12.5 0.4 0.4 0.4 1.7 2.0 2.2 1.5 1.9 2.1 (4.1) (0.8) (9.2) 4,012
12.1 12.5 9.6 2.8 2.6 2.3 4.4 5.6 5.9 21.8 25.0 24.2 (5.4) (19.0) (20.2) 2,203
18.8 42.5 10.9 3.2 2.9 2.6 3.0 3.2 3.4 16.5 19.2 18.8 13.9 10.3 (4.4) 2,218
18.9 13.3 38.5 0.9 0.9 0.9 0.9 1.1 1.4 3.3 3.8 4.6 2.9 1.7 2.9 8,556
n.a. n.a. n.a. 1.7 1.6 1.5 4.0 4.1 5.2 21.1 16.8 17.8 (2.4) (1.9) (23.6) 3,033
4.6 4.1 4.9 1.4 1.2 1.1 5.8 6.8 4.9 20.6 22.7 14.4 (6.2) 46.7 80.7 2,268
12.3 20.3 13.5 2.1 2.2 2.3 7.1 7.1 7.1 8.4 9.2 10.6 (4.6) 7.5 12.0 1,875
7.4 6.3 4.7 0.5 0.5 0.5 6.7 7.0 7.2 8.9 8.2 7.9 5.1 14.5 26.7 362
8.3 7.6 7.1 1.7 1.6 1.4 2.1 2.4 2.5 12.9 0.0 0.0 4.7 (4.3) 5.7 888
5.5 3.8 4.6 2.4 2.0 1.9 2.7 3.3 3.3 17.0 14.1 14.2 (3.4) (11.1) (20.2) 18,453
3.8 2.4 3.0 0.9 0.9 0.8 4.4 5.1 5.7 7.7 7.8 8.5 (1.9) (3.6) (11.1) 51,535
17.2 13.9 11.7 2.5 2.3 2.2 5.0 2.7 3.3 12.2 13.0 14.7 1.7 (6.0) (7.6) 7,850
14.2 13.2 10.8 2.3 2.2 2.1 2.5 2.5 2.5 9.0 10.7 11.7 6.8 (23.0) (18.2) 5,065
33.7 13.6 13.3 1.9 1.9 1.8 4.1 3.4 5.9 13.1 9.9 16.4 (10.4) (24.8) (27.7) 3,932
(5.0) 8.7 4.3 2.2 2.0 1.7 1.3 1.3 1.3 18.9 12.4 16.0 (8.7) (20.0) (10.9) 5,108
4.1 4.7 4.1 0.4 0.4 0.3 6.8 4.9 5.9 3.1 2.3 2.6 9.1 7.3 (9.6) 5,347
NEUTRAL
3.4 2.8 3.1 1.3 1.2 1.2 1.9 2.5 2.7 5.0 6.0 6.7 8.2 12.1 22.5 2,218
n.m n.m n.m 2.3 1.9 1.7 1.9 3.2 3.0 13.8 19.2 16.6 3.0 11.0 23.1 3,860
n.a. n.a. n.a. 0.4 0.4 0.4 6.3 6.3 8.2 5.5 5.4 6.7 13.0 15.6 15.6 4,248
102.0 9.6 10.8 9.3 9.2 9.0 7.9 7.7 8.4 75.4 72.3 78.0 2.0 (11.0) (5.0) 3,552
(31.0) 13.6 18.0 3.5 3.2 2.9 3.9 5.0 6.4 22.4 25.5 29.1 0.0 13.3 25.8 2,080
n.a. n.a. n.a. 1.0 0.9 0.8 3.2 3.7 4.3 8.4 8.5 9.3 (1.3) (1.7) (6.8) 6,358
15.2 36.0 24.6 7.0 6.8 6.7 5.8 3.2 3.4 41.4 24.4 25.1 12.0 7.9 (21.0) 5,722
24.0 20.2 17.0 31.4 27.9 27.5 2.6 3.6 4.8 108.9 116.7 134.5 7.5 8.2 (9.0) 6,641
9.1 7.2 8.2 0.9 0.9 0.8 5.0 5.0 5.4 11.0 11.7 10.5 7.0 29.9 21.6 725
11.1 12.2 11.2 47.9 54.8 52.8 3.8 3.2 3.4 198.8 163.2 188.8 (3.7) (10.6) 7.1 30,323
(70.9) 4.9 10.7 0.9 0.9 0.9 0.0 0.2 1.8 2.7 1.0 6.6 (3.3) (10.8) (39.6) 411
1.6 1.8 2.3 1.3 1.2 1.1 4.0 3.0 2.5 36.8 15.3 10.3 (2.9) 33.8 46.7 7,223
10.0 35.3 13.1 1.0 0.9 0.9 0.0 3.5 3.5 6.7 6.4 7.1 20.1 19.3 (3.4) 8,837
10.1 23.1 19.3 2.6 2.5 2.3 0.9 0.9 0.9 8.9 7.0 7.8 (12.0) (22.8) (38.0) 1,228
8.1 12.8 10.1 1.5 1.4 1.3 3.4 2.5 2.3 7.4 9.4 7.8 (4.6) 29.7 (4.5) 7,671
12.1 17.6 13.1 3.4 3.3 3.2 4.2 3.8 4.2 17.6 15.9 16.7 10.2 (7.1) (43.2) 1,018
5.4 5.1 22.6 2.7 2.6 2.4 3.6 11.4 2.3 76.8 56.4 9.8 5.0 (15.4) (45.7) 16,575
(224.4) 8.6 7.3 0.6 0.6 0.6 1.6 2.6 2.9 2.1 2.6 2.9 8.4 9.9 8.1 5,899
28.8 12.1 13.9 2.6 2.3 2.1 2.0 2.7 2.7 14.5 17.9 13.8 (10.4) 10.5 (1.7) 25,597
24.9 22.4 14.0 0.9 0.9 0.9 5.1 5.4 5.8 3.2 6.0 6.3 0.2 0.2 (6.0) 11,843
10.9 9.7 34.4 0.5 0.5 0.4 3.9 4.4 4.9 4.7 5.0 5.3 0.7 (1.4) (19.5) 1,651
33.2 19.5 13.6 1.6 1.5 1.5 0.0 0.0 0.0 (10.0) (4.5) 6.1 13.0 16.2 11.2 11,531
7.8 7.9 7.4 4.4 4.1 4.1 4.5 4.5 4.5 19.0 17.5 18.9 (2.0) (18.8) (12.8) 30,757
98.2 30.1 23.4 0.6 0.6 0.6 6.5 7.6 8.2 9.0 10.0 10.3 (1.3) (0.4) (7.1) 1,208
(45.5) 3.9 9.4 0.4 0.4 0.4 0.0 0.0 0.0 -14.3 0.4 1.4 1.3 (1.3) (40.0) 624
16.5 7.4 28.0 0.4 0.4 0.4 2.7 0.5 1.2 (0.8) 0.6 1.4 2.8 2.8 (20.7) 1,631

80
(sen) (%) (x) (x)
NEUTRAL
Mynews Holdings Oct 0.71 0.70 (6.1) 0.9 2.6 (349.9) 115.2 182.5 n.m. 76.6 27.1 na 12.2 8.5
Nestle Dec 133.60 138.00 243.5 258.8 301.7 2.3 6.3 16.6 54.9 51.6 44.3 32.8 28.6 27.3
NTPM^ Apr 0.44 0.48 2.6 3.8 4.5 (55.1) 44.3 18.9 16.9 11.7 9.8 8.0 6.7 5.8
Padini Jun 3.45 3.15 8.2 16.8 21.6 (28.1) 104.2 28.4 41.9 20.5 16.0 7.0 8.5 6.7
Petronas Dagangan Dec 20.42 19.90 55.2 70.2 79.3 71.7 27.0 13.0 37.0 29.1 25.8 15.6 13.2 11.0
Petronas Gas Dec 16.66 17.72 104.7 99.4 96.3 4.3 (5.1) (3.1) 15.9 16.8 17.3 8.7 8.7 8.8
Pos Malaysia^ Dec 0.65 0.75 (25.6) (4.2) 4.2 7.9 83.7 199.7 n.m. n.m. 15.5 9.0 3.6 2.4
Power Root^ Mar 1.36 1.33 4.3 7.4 8.9 (28.0) 73.9 19.5 31.8 18.3 15.3 17.2 10.9 9.3
Public Bank Dec 4.67 4.70 28.5 29.0 33.8 16.7 1.5 16.7 16.4 16.1 13.8 n.a. n.a. n.a.
QL Resources^ Mar 5.02 4.67 8.3 10.4 11.9 (13.2) 26.0 13.7 60.6 48.1 42.3 21.9 19.5 17.7
Sime Darby Jun 2.40 2.40 18.4 17.7 19.0 20.0 (3.4) 7.4 13.1 13.5 12.6 3.4 4.3 3.7
Sime Darby Plantations Dec 4.97 5.30 28.7 35.7 29.8 117.2 24.5 (16.6) 17.3 13.9 16.7 8.2 8.0 8.8
Solarvest^ Mar 0.80 1.09 2.2 1.1 4.2 (23.9) (51.6) 285.4 35.4 73.2 19.0 24.3 41.1 15.7
SP Setia Dec 1.26 1.28 7.0 9.3 8.0 186.9 33.4 (14.7) 18.0 13.5 15.8 15.8 14.4 15.1
Sunway REIT Dec 1.41 1.45 6.9 8.0 8.7 (11.3) 16.8 7.7 20.5 17.5 16.3 0.5 0.2 0.1
UEM Edgenta Dec 1.63 1.70 9.1 11.1 12.1 25.9 21.8 9.2 17.9 14.7 13.4 6.0 5.2 4.8
UEM Sunrise Dec 0.34 0.38 (4.2) 0.5 1.4 26.7 112.2 171.3 n.m. 65.8 24.3 na 37.9 25.5
UMW Dec 3.29 3.29 22.2 24.5 32.5 (9.0) 10.5 32.6 14.8 13.4 10.1 9.8 4.0 3.2
UOA Development Dec 1.76 1.78 9.6 9.1 10.6 (45.8) (4.5) 15.8 18.4 19.3 16.6 8.1 8.5 7.3
Westports Dec 4.00 4.32 21.1 19.3 24.4 10.1 (8.6) 26.3 18.9 20.7 16.4 12.3 12.0 10.9
SELL
CLMT Dec 0.58 0.50 1.5 2.1 2.5 (54.5) 42.1 17.7 38.7 27.3 23.2 (15.4) (13.8) (13.1)
E&O^ Mar 0.53 0.48 (1.0) 0.6 1.8 69.0 160.4 193.8 n.m. 85.5 29.1 63.0 27.7 19.4
Sapura Energy^ Jan 0.04 0.02 (16.9) (3.5) (1.9) (1236.3) 79.4 45.2 n.m. n.m. n.m. na 18.2 10.4
Supermax Jun 1.18 0.92 147.0 30.0 6.6 632.2 (79.6) (78.1) 0.8 3.9 18.0 (0.2) (1.0) (2.3)

81
(x) (x) (%) (%) cap
NEUTRAL
(29.8) 71.0 22.3 2.1 2.1 1.9 0.0 0.3 0.9 (16.5) 2.7 7.4 (12.3) (15.0) (19.8) 484
35.3 39.3 32.3 53.8 53.2 52.6 1.8 1.9 2.2 99.8 103.6 119.4 (0.3) (0.4) (1.0) 31,329
5.9 6.5 5.3 1.0 1.0 0.9 0.0 0.0 0.0 5.9 8.4 9.7 (6.4) (8.3) (27.3) 494
11.2 24.2 14.0 2.8 2.7 2.6 0.7 3.5 4.4 6.9 13.5 16.6 2.4 23.2 15.0 2,270
102.9 (24.4) 4.8 3.6 3.5 3.5 3.4 2.7 3.1 9.8 12.3 13.6 (5.1) (0.9) 1.9 20,286
10.2 13.5 11.0 2.5 2.5 2.4 4.9 4.9 4.7 15.5 14.8 14.0 (3.7) (6.9) 4.7 32,966
13.9 (90.0) 2.7 0.4 0.6 0.6 0.0 0.0 0.0 (34.3) (4.1) 4.1 6.6 (1.5) (27.1) 505
25.2 20.0 14.8 2.4 2.4 2.3 2.9 4.8 5.9 7.6 13.1 15.4 3.0 2.3 (20.9) 568
n.a. n.a. n.a. 1.9 1.8 1.7 3.3 3.3 3.5 11.6 11.4 12.5 4.9 12.3 11.2 90,648
30.7 25.5 22.8 5.0 4.7 4.4 0.6 0.7 0.8 8.5 10.0 10.7 1.4 9.8 (17.2) 12,217
5.9 5.0 7.8 1.0 1.0 1.0 6.3 4.2 4.2 8.1 7.5 7.7 5.7 3.4 2.2 16,344
10.0 7.9 9.8 2.5 2.3 2.1 4.1 4.4 3.6 13.7 15.8 12.4 1.2 32.2 7.6 34,371
97.4 51.2 89.6 4.0 3.1 2.7 0.8 0.0 0.0 15.2 4.8 15.3 (16.3) (35.9) (48.0) 531
5.7 10.6 4.5 0.4 0.4 0.4 0.5 0.8 0.8 2.0 2.7 2.3 (1.6) (2.3) 20.0 5,126
16.1 16.9 19.5 0.8 0.9 0.9 4.5 5.7 6.1 4.4 5.2 5.6 1.4 0.0 (5.4) 4,829
8.0 7.3 7.0 0.9 0.8 0.8 3.4 4.4 5.2 4.9 5.8 6.3 4.5 0.6 (7.9) 1,356
23.2 15.9 100.3 0.3 0.3 0.3 0.0 0.0 0.0 (3.1) 0.4 1.0 4.6 6.3 (21.8) 1,720
14.7 8.7 7.1 0.9 0.9 0.8 1.8 1.8 1.8 (1.9) 6.7 0.0 7.2 10.8 0.9 3,844
18.3 10.6 8.8 0.7 0.7 0.8 5.7 5.7 5.7 3.8 3.8 4.6 0.6 5.4 (1.7) 4,095
13.8 13.9 11.8 4.5 4.3 4.0 4.0 3.6 4.6 24.7 21.3 25.4 2.3 (1.2) (4.8) 13,640
SELL
10.2 9.3 8.5 0.5 0.5 0.5 2.6 3.7 4.3 1.3 1.8 2.2 4.5 0.0 (12.9) 1,238
3.6 8.5 4.1 0.5 0.5 0.5 0.0 0.0 0.0 (0.9) 0.6 1.6 (9.5) (12.5) (12.5) 762
1.3 (2.7) (49.5) 2.5 (1.7) (0.9) 0.0 0.0 0.0 (193.4) 972.3 62.5 (12.5) (30.0) (75.9) 559
0.8 2.7 15.5 0.6 0.6 0.6 14.5 5.1 1.1 121.4 15.5 3.2 12.4 (19.7) (65.4) 3,145

82
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84
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Malaysia Strategy

7 April 2022 Market Outlook | Market Strategy

Nonetheless, the resulting spike in commodity prices will exacerbate

measures in the run-up to the 15th general election (GE15).

Source: Company data, RHB

See important disclosures at the end of this report

FBM KLCI FROM A TECHNICAL PERSPECTIVE 37

See important disclosures at the end of this report

Geopolitics a party pooper

Implications of the Ukraine crisis for equity markets

Figure 1: 2021 top crude oil producers

United States 10.2M

Russia 9.7M barrels per day

Saudi Arabia 9.3M

Source: Rystad Energy

See important disclosures at the end of this report

We have seen this picture before

COVID-19: The arrival of the new normal

See important disclosures at the end of this report

Figure 2: Test and quarantine requirements for travellers (Malaysia)

 PCR test on day 4/RTK-

Children and adolescents 17 and below RTK-Ag professional test at  No test

Source: MOH, RHB

See important disclosures at the end of this report

Figure 3: Regional comparison on arrival/departure requirements

Source: MOH, RHB Source: MOH, RHB

See important disclosures at the end of this report

Note: Table excludes latest data undergoing verification

Politics – Is GE15 a market-moving event?

See important disclosures at the end of this report

Figure 7: KLCI during GE11 Figure 8: KLCI during GE12

Source: Bloomberg, RHB Source: Bloomberg, RHB

Figure 9: KLCI during GE13 Figure 10: KLCI during GE14

Source: Bloomberg, RHB Source: Bloomberg, RHB

See important disclosures at the end of this report

June 14-15 Jun FOMC meeting

5 - 6 Jul 4th Monetary Policy Committee meeting

August 12 Aug Release of 2Q22 Malaysia GDP report

7-8 Sep 5th Monetary Policy Committee meeting

26 Oct-15 Dec 3rd Malaysia Parliament Sitting

1-2 Nov FOMC meeting

December 13-14 Dec FOMC meeting

Figure 12: Key economic forecasts (prior to the Russia-Ukraine war)

See important disclosures at the end of this report

Domestic macroeconomics: Neutral outlook for growth

Figure 14: Key economic forecasts

See important disclosures at the end of this report

Source: RHB Economics & Market Strategy.

See important disclosures at the end of this report

FX: Softer USD in 2H22

G10FX 2Q22 3Q22 4Q22 2023

Oil: Higher for longer

See important disclosures at the end of this report

World oil demand and supply balance (mbpd)

See important disclosures at the end of this report

Source: EIA Source: EIA

Source: Bloomberg Source: Bloomberg

See important disclosures at the end of this report

Source: Bloomberg Source: Bloomberg

See important disclosures at the end of this report

Portfolio equity flows: Defensive ASEAN attracts foreign funds

Figure 24: Regional foreign equity flows

USDm 2022 YTD (USDm) 2021 YTD (USDm)