RHB Report My - 2020 Budget Review - 20191012 - RHB 28423277063490795da1806422fe0

Malaysia Strategy
11 October 2019 Strategy | Strategy - Malaysia
Strategy – Malaysia 2020 Budget

Stocks Covered 154
Structural Reforms To Sustain Prosperity
Ratings (Buy/Neutral/Sell): 74 / 65 / 15
Last 12m Earnings Negative
Revision Trend:
 The Finance Minister tabled a relatively market-friendly Budget 2020 that
was broadly in line with expectations and free of unpleasant surprises. It
Analyst
was a people-centric Budget that contained multiple proposals to address
issues affecting the B40 segment, in addition to initiatives to pump-prime the
Alexander Chia
economy via the construction sector. We are also encouraged by wide-
ranging proposals to kick-start labour reform. Accordingly, the construction +603 9280 8889
and consumer sectors are the biggest winners, while measures are also alexander.chia@rhbgroup.com
mildly positive for plantations, property and telcos. Economist
 An expansionary budget in 2020. Despite the narrowing of fiscal deficit to
3.2% of GDP in 2020, from 3.4% in 2019, Budget 2020 placed more Peck Boon Soon
emphasis on increasing spending to help support economic growth – on +603 9280 2163
which the Government projects a pick-up to 4.8% in 2020 (2019F: 4.7%). bspeck@rhbgroup.com
Nonetheless, we fear that official growth forecasts may be too optimistic, as
we maintain our real GDP forecast at 4.3% next year, slowing from 4.5%
estimated for 2019 amidst unresolved trade disputes and a slowing global FBM KLCI 7-year forward consensus P/E
growth environment.
 No change to stock recommendations and sector weightings. There are
(x)
18.2
no changes in our stock and sector calls arising from the budget proposals. 17.8
2sd: 17.5x
Our OVERWEIGHT call on the construction sector was supported by key 17.4 1.5sd: 17.2x
proposals that included a 4.3% bump in development expenditure to 17.0 1sd: 16.9x
MYR56bn, with measures for rural development, infrastructure maintenance, 16.6

Average: 16.3x
new hospitals, and confirmation that the Rapid Transit System between 16.2
Johor Bahru and Singapore will proceed. It was also confirmed that the 15.8
-1sd: 15.8x
-1.5sd: 15.5x
proposal to acquire four Klang Valley highways received Cabinet approval. 15.4 -2sd: 15.2x
The Budget proposals also contained a slew of measures supporting the 15.0
forecasted +6.9% rise in private consumption including allocations for 14.6
subsidies, cash hand-outs and minimum wage hike. Labour reform initiatives 14.2
to shift the economy up the value chain address unemployed graduates, 2012 2013 2014 2015 2016 2017 2018 2019
increasing female participation in the workforce, and vocational training.

Source: Bloomberg
 Look for trading opportunities in a low-yield, low-growth world. The
local market has lagged on growth concerns and unattractive valuations,
exacerbated by various external and domestic worries. A comprehensive
trade agreement between the US and China that includes the elimination of
punitive tariffs would be a significant upside risk, although this is not our
base case scenario. Bottom-up stock-picking will be key, focusing on quality
laggards, resilient yield plays and defensive stocks as tactical options. Small
and mid-caps offer more robust growth at sensible valuations. We are
OVERWEIGHT on construction, gaming, rubber gloves, NBFIs and REITs.
We make no change to our end-2019 FBM KLCI target of 1,620 pts.
 Amidst a challenging global economic environment, the Government
allowed its fiscal consolidation path to be pushed back slightly by running a
higher 3.2% of GDP deficit in 2020 (3% earlier). It is a welcome move,
placing more emphasis on increasing spending to help support economic
growth, which the Government projects to pick up to 4.8% in 2020.
Nonetheless, we think its forecasts are optimistic. We keep our real GDP
growth forecasts at 4.3% for next year, marking a deceleration from +4.5%
estimated for 2019 amidst unresolved trade disputes and slowing global
economic growth.
TP % Upside P/E (x) P/BV (x) (x)Yield (%)
Company Name Rating
(MYR) (Downside) Dec-19F Dec-19F Dec-19F
Allianz Malaysia Buy 16.25 16.4 11.7 1.3 3.1
Astro Malaysia^ Buy 1.85 34.1 11.7 9.3 7.2
DRB-HICOM Buy 3.35 37.3 21.5 0.5 0.4
Genting M'sia Buy 3.90 27.9 13.0 1.0 5.2
Guan Chong Buy 6.00 28.5 11.5 2.7 1.3
Hartalega^ Buy 6.05 16.3 31.6 7.8 1.9
IJM Corp^ Buy 2.78 22.5 18.9 0.8 2.6
JHM Consolidation Buy 1.75 28.7 17.2 3.6 2.2
KL Kepong Buy 28.35 32.5 34.4 2.0 1.9
Power Root^ Buy 2.49 18.6 20.1 3.8 4.3
Syarikat Takaful Buy 8.00 27.0 13.8 4.4 3.6
Time dotCom Buy 10.90 20.8 16.0 1.9 2.5
Yinson^ Buy 8.22 20.2 34.5 2.1 0.6
Source: Company data, RHB; Note: ^FY19 valuations refer to those of FY20
See important disclosures at the end of this report
1
Market Dateline / PP19489/05/2019(035080)
Malaysia Strategy
An Expansionary Budget For 2020

Minister of Finance Lim Guan Eng tabled a budget of MYR297bn for 2020,
representing a decline of 7.1% YoY from 2019 and 18.5% of GDP. Excluding the one-
off items like the tax refund of MYR37bn in 2019, the budget was, however, 6.5%
higher than 2019’s. Operating expenditure (OE) allocation for 2020 will increase by
7% YoY from MYR225.3bn after excluding one-off items, while the development
expenditure was 4.6% higher at MYR56bn. The Government also expects revenue to
decline by 7.1% YoY to MYR244.5bn for 2020, but it should still represent an
increase of 4.8% in 2020, excluding the one-off Petronas special dividend of
MYR30bn in 2019.
As a result, the budget is expected to record a larger deficit of 3.2% of GDP or
MYR51.7bn in 2020, compared with the earlier fiscal target of 3% of GDP as outlined
in the Medium Term Fiscal Framework 2019-2021. Still, we believe this is unlikely to
prompt a sovereign credit downgrade by the credit rating agencies, as the fiscal
consolidation roadmap is only being pushed back slightly. This is as the deficit will still
be smaller than a deficit of 3.4% of GDP, or MYR51.8bn estimated for 2019 – which
indicates that the fiscal consolidation remains on track.
Overall, we believe the larger fiscal deficit of 3.2% of GDP is likely to help
support Malaysia’s economic growth in 2020. Although the DE allocation came in
slightly below what we expected (MYR58bn), we think the increase will likely buoy
stronger construction activity and be supportive of economic growth next year.
This was reflected in the higher allocation for development expenditure of MYR56bn,
compared to MYR53.7bn in 2019. Amongst the measures are:
i. The construction of new hospitals, clinics, schools;
ii. Upgrades of existing facilities; as well as
iii. Greater allocations for rural development, especially in Sabah and Sarawak.
Along with the revival of some infrastructure projects, this would likely benefit
contractors and help to cushion the decline in public investment this year.
Figure 1: The Government’s financial position

Excl one-off items
2018 2019E 2020F in 2019
MYRbn %YoY MYRbn %YoY MYRbn %YoY %YoY
Revenue 232.9 5.7 263.3 13.1 244.5 -7.1 4.8
Total expenditure 287.1 9.3 316.0 10.1 297.0 -6.0 6.5
Opex 231.0 6.1 262.3 13.6 241.0 -8.1 7.0
Gross development expenditure 56.1 25.0 53.7 -4.3 56.0 4.3 4.3
Less : Loan recoveries 0.8 -57.5 0.9 14.2 0.8 -14.9 -14.9
Net development expenditure 55.3 28.5 52.8 -4.5 55.2 4.6 4.6
Overall balance -53.4 - -51.8 - -51.7 - -
% to GDP -3.7 - -3.4 - -3.2 - -
Sources of financing
Net domestic borrowings 54.4 - 44.7 - - - -
Net external borrowings -0.3 - 7.2 - - - -
Change in assets -0.7 - -0.1 - - - -
Note: E= Estimates, F = Forecasts
Source: MOF Fiscal Outlook 2020
In addition, Budget 2020 introduced various measures that are mainly beneficial to
consumers, especially in the B40 group. These include a minimum wage hike to
MYR1,200 from MYR1,100 in urban areas, the continued cash handouts of the
Bantuan Sara Hidup (BSH) amounting to MYR5bn (same as the previous year), and
the wage incentives for unemployed graduates and women. These initiatives will
likely continue providing support to private consumption, which is projected by the
Government to grow at a faster 6.9% next year (2019E: 6.8%).
However, we are inclined to maintain our private consumption growth forecast of
6.5% for next year, as the floating of fuel prices will likely lead to higher inflation as
well as generally weaker consumer sentiment due to global economic uncertainty
next year. We believe consumers are likely to take a more cautious stance in their
spending. The optimistic private consumption projection for 2020 may disappoint, in
our view.

2
Malaysia Strategy
On the other hand, in line with more expansionary fiscal spending, the
Government expects real GDP growth to pick up to 4.8% in 2020, from an
estimated 4.7% this year. We view the growth projection as optimistic – as it will be
primarily lifted by private consumption, which is projected to contribute more than
60% of overall GDP growth for 2020. If private consumption fails to deliver, the
Government’s real GDP forecast may disappoint as well. Meanwhile, we are
keeping our real GDP growth forecasts unchanged (RHB 2019E: 4.5%, 20F: 4.3%),
as we expect a weaker growth of private consumption and weaker exports – given
the challenging global and domestic economic environment
Figure 2: MOF’s GDP growth forecasts

%
7
6.0 5.9
6 5.5
5.1
4.7 4.7 4.7 4.8
5
4.2
4
0
12 13 14 15 16 17 18 19E 20F
Source: MOF, RHB
For businesses, the Government has provided some incentives that include
MYR1bn in investment incentives to attract Fortune 500 companies and global
unicorns, as well as a MYR1bn per year special investment incentive package for
five years to local companies capable of penetrating overseas markets. To facilitate
digitalisation of the economy and encourage automation, the Government is also
offering matching grants and increased allocation for the adoption of 5G, fibre optic
infrastructure, production of digital content, and digitalisation of operations for
Malaysian SMEs. We believe these measures, while not very significant in the near
term, would collectively prepare the country for a stronger pace of investment and
economic growth over the distant future.
On housing, the Government is still addressing the property overhang issue which
is worsening, by lowering the threshold for foreign ownership from MYR1m to
MYR600,000 and shifting the real property gains tax (RPGT) base year to
encourage more property transactions in the market.
All in, there are no major surprises in Budget 2020. Broadly, Budget 2020
supports our GDP forecast of 4.3% for 2020 and compared with +4.5% estimated
for this year – although our growth estimates are lower than MOF’s forecast. This
was mainly due to a divergence in views, in terms of private consumption growth.

3
Malaysia Strategy
First Thrust: Driving Economic Growth In The

New Economy And Digital Era
Strategy 1: Making Malaysia the preferred destination for investment
Trade war opportunities:
i. MYR1bn worth of customised packaged investment incentives will be made available
over five years to attract targeted Fortune 500 companies and global unicorns in high
technology, manufacturing, creative, and new economic sectors;
ii. The Government will allocate MYR10m for the the Ministry of International Trade &
Industry to give additional focus on post-approval investment monitoring and
realisation;
iii. The Government will be providing tax incentives to promote the electrical &
electronics (E&E) industry to transition Malaysia into a 5G digital economy and
Industry 4.0:
 Income tax exemption up to 10 years to E&E companies investing in selected
knowledge-based services;
 Special investment tax allowance to encourage the reinvestment by companies in
E&E sector;
iv. There will be allocation to encourage automation:
 Accelerated and automation equipment capital allowances for the first MYR2m
and MYR4m for the manufacturing sector has been extended to 2023;
 The incentives will be expanded to the services sectors for the first MYR2m on
capex from 2020 to 2023.
Improving competitiveness:
i. The Government will reduce the number of steps to register a business to improve
the business climate;
ii. The Government will undertake a feasibility study on development on Pulau Carey;
iii. MYR50m will be allocated for the repair and maintain roads leading to Port Klang;
iv. A feasible study will be commenced on Serendah-Port Klang Rail Bypass for cargo
shipments and the Klang Logistics Corridor, as well as a dedicated privatised
highway connecting Northport and Westport worth MYR8.3bn;
v. A deferred payment facility will be introduced to expedite the clearance process of
cross border transactions for time and cost savings across the border trade;
vi. The Government will strengthen trade with Thailand via the Kota Perdana Special
Border Economic Zone at Bukit Kayu Hitam;
vii. MYR50m is to be allocated to stimulate public-private partnerships for further
development of a truck depot;
viii. The construction of primary infrastructure will be supported by the Government;
ix. MYR1.1bn will be used to support projects for corridor development activities,
including:
 MYR50m for development of Chuping Valley Industrial Area in Perlis by the
Northern Corridor Implementation Authority;
 MYR69.5m for the Kuantan Port-related projects by the East Coast Economic
Region Development Council;
 MYR42m for the construction of Sungai Segget Centralised Sewerage Treatment
Plant in Johor by the Iskandar Regional Development Authority;
 MYR55m for infrastructure in the Samalaju Industrial Park in Sarawak by the
Regional Corridor Development Authority;
 MYR20m for Sabah Agro-Industrial Precinct by Sabah Economic Development &
Investment Authority.

4
Malaysia Strategy
Strategy 2: Accelerating the digital economy

Building the digital infrastructure:
i. The Government will be implementing the National Fiberisation & Connectivity Plan
(NFCP) over the next five years to provide high speed and quality digital connectivity;
ii. With public-private partnership in the NFCP, at least half of the total MYR21.6bn
investment will be invested by the Government;
iii. Connectivity in remote areas will be improved – especially in Sabah and Sarawak;
iv. The Government will be allocating MYR250m to leverage on various technologies;
v. MYR210m is being allocated to accelerate the deployment of new digital
infrastructure for public buildings.
Building digital applications:
i. The Government is adopting a 5G ecosystem development grant worth MYR50m;
ii. MYR25m will be set up for contestable matching grant fund to spur more pilot
projects on digital applications;
iii. MYR20m has been set aside to Malaysian Digital Economy Corporation (MDEC) to
grow local champions in creating digital content.
Building digital companies:
i. MYR500m of matching grants will be given to the first 100,000 small & medium
enterprises (SMEs) that apply to upgrade their digital systems over the next five
years;
ii. MYR550m is being allocated to provide smart automation matching grants to 1,000
manufacturing and 1,000 services companies – with a maximum of MYR2m per
company;
iii. MYR70m will be invested to set up 14 one-stop digital enhancement centres to
facilitate access to financing and capacity building of businesses;
iv. Three new digital libraries will be set up in Kedah, Perak, and Johor;
v. The Government will allocate MYR20m to Cradle Fund for the provision of training
and grants to seed companies.
Building digital Malaysians:
i. The Government will implement the concept of Digital Social Responsibility (DSR) to
contribute to digital economic development;
ii. A tax deduction will be given to the companies that contribute towards DSR;
iii. MYR10m of funds will be continued to provide to MDEC to train micro-digital
entrepreneurs and technologists;
iv. An addition of MYR20m allocations will be provided to eSports for 2020;
v. The Government will be allocating MYR450m to offer a one-time MYR30 digital
stimulus to qualified Malaysians aged 18 with annual incomes less than
MYR100,000.

5
Malaysia Strategy
Strategy 3: Strengthening access to financing for business

i. The Government will enhance the Skim Jaminan Pinjaman Perniagaan (SJPP) for
SMEs to facilitate better access to financing;
ii. Government guarantees will be increased from 70% to 80%, while guarantee fees will
be reduced to 0.75% for bumiputera and export-oriented SMEs, as well as SMEs
investing in automation and digitalisation;
iii. MYR500m in guarantee facilities will be allocated to SJPP;
iv. An annual interest subsidy of 2% will be provided to reduce borrowing costs as:
 MYR200m fund for women entrepreneurs, together with loans of up to MYR1m
per SME;
 MYR300m fund for potential regional champions from Bumiputera SMEs,
especially halal product producers and high local content manufacturers;
v. MYR10m will be set aside to focus on advocacy and awareness for halal certification,
halal product development, and providing platforms for local players in the global
halal market;
vi. The Government will raise the ceiling per company for market development grants
from MYR200,000 to MYR300,000 yearly;
vii. MYR50m will be used to encourage SMEs to engage in export activities;
viii. Bank Negara Malaysia (BNM) is finalising the licensing framework for digital banks to
be issued by year’s end for public consultation;
ix. An additional allocation of MYR50m will be used to leverage new digital financial
innovations – eg equity crowd funding and peer-to-peer platforms to help finance the
underserved SMEs;
x. Tax incentives will be given to venture capital and angel investors will be continued
until 2023;
xi. MYR1bn will be provided by the Government for 1:5 matching guarantees for
dedicated private equity funds to invest in Malaysia;
xii. MYR445m will be granted to support bumiputera entrepreneurial development as
follows:
 MYR150m for entrepreneurship development and upskilling by Perbadanan
Usahawan Nasional;
 MYR75m for capacity building and export focus for bumiputera SMEs;
 MYR170m for access of financing via TEKUN, SME Bank, and Pelaburan
Hartanah;
 MYR50m for entrepreneurship under Unit Peneraju Agenda Bumiputera, Ministry
of Economic Affairs;
xiii. Government support on projects through financing programmes under Bank
Pembangunan Malaysia: A 2% interest subsidy pa is offered via the:
 Sustainable Development Financing Fund by MYR2bn – increased from
MYR1bn;
 Maritime & Logistic Fund by MYR1bn;
 Industry Digitalisation Transformation Fund by MYR2bn;
xiv. MYR100m is being provided for small business loans for the Chinese community at
an interest rate of 4%;
xv. MYR20m is being provided for Indian entrepreneurs at an interest rate of 4%.

6
Malaysia Strategy
Restructuring development financial institutions:

i. A 2-phase restructuring plan will be proposed by BNM to form a new financial
institution through the merger of Bank Pembangunan Malaysia, Danajamin Nasional,
SME Bank, and the Export-Import Bank of Malaysia.
Growing Islamic finance:
i. A special Islamic finance committee will be established to formulate the Islamic
Economic Blueprint with all relevant agencies and organise outreach initiatives and
professional courses to promote deeper understanding of Islamic finance nationwide;
ii. A 5-year extension period on the tax deductions on cost of issuance and additional
deductions on sukuk issuance costs;
iii. A 3-year extension period on tax exemptions for fund management companies
managing shariah-compliant funds and socially responsible investing (SRI) funds, as
well as tax deductions on the cost of issuing SRI sukuks.
Strategy 4: Strengthening economic diversity

Green growth and energy for the future:
i. The Government has set a target of generating 20% of energy consumption from
renewable sources by 2025;
ii. The green investment tax allowance and green income tax exemption incentives will
be extended to 2023;
iii. A 70% income tax exemption of up to 10 years will be given to companies
undertaking solar leasing activities;
iv. The Government will accelerate the energy performance contracting implementation
for public sector buildings.
Commodities development:
i. The Government will support the palm oil industry by:
 Allocating MYR550m for replanting loan fund for smallholders at an interest rate
of 2% pa with a tenure of 12 years;
 Allocating MYR27m to market palm oil internationally and counter anti-palm oil
campaigns;
 Enhancing implementation of biodiesel for the transportation sector by 2020;
ii. MYR200m will be set up for Bantuan Musim Tengkujuh to eligible rubber
smallholders;
iii. The Government will allocate MYR100m for the rubber production incentive in 2020;
iv. MYR810m will be used by the Government for the welfare of the Federal Land
Development Authority or FELDA community as follows:
 MYR250m for an income enhancement programme;
 MYR300m to write-off the interest of settlers’ debts;
 MYR100m for the FELDA water supply projects;
 MYR70m for housing the new generation of FELDA settlers;
 MYR90m for the upgrading of FELDA roads and basic infrastructure;
v. MYR738m will be provided by the Government for the Rubber Industry Smallholders
Development Authority or RISDA and Federal Land Consolidation & Rehabilitation
Authority or FELCRA.
Increasing the income of farmers:
i. Increase the allocation to the Ministry of Agriculture from MYR4.4bn in 2019 to
MYR4.9bn in 2020, with a special focus towards enhancing the income of farmers;
ii. A proposal to increase a fisherman’s allowance from MYR200 to MYR250 a month
with a total allocation of MYR152m for 2020;
iii. Allocate a sum of MYR150m to facilitate crop integration to help supplement farmers,
fishermen, and smallholders diversify their income;

7
Malaysia Strategy
iv. Allocate MYR30m for the production of glutinous rice in Langkawi Island, which is
expected to benefit 1,200 farmers;
v. Increase the allocation for padi inputs from MYR796m in 2019 to MYR855m in 2020
under the Skim Baja Padi Kerajaan Persekutuan and Skim Insentif Pengeluaran
Padi, and continue the subsidies for padi bukit and padi huma;
vi. Allocate MYR43m for Agriculture Industry 4.0 to develop new crop varieties with
higher productivity and quality.
Enhancing the research & development (R&D) framework

i. Intensifying R&D in the public sector with an allocation of MYR524m to ministries and
public agencies;
ii. Allocate MYR30m for R&D matching grants for collaborations with industry and
academia to develop higher value-added downstream uses of palm oil, specifically
tocotrienol in pharmaceuticals and bio-jet fuels;
iii. Allocation of MYR10m to centralise and coordinate management of public research
resources with the establishment of a Research Management Agency;
iv. Research universities – beginning with University Malaya – will establish a one-stop
innovation office to transform intellectual property (IP) into commercially exploitable
opportunities;
v. Tax exemption for a period of up to 10 years will be given to IP-generated income
based on the modified nexus approach derived from patents and copyright software;
vi. Allocate MYR11m towards initiatives by the Ministry of Education in collaboration with
Ministry of Environment, Science, Technology & Climate Change to inculcate the
science, technology & innovation culture, encouraging more students into the fields of
science, technology, engineering and mathematics.
Visit Malaysia 2020 (VMY2020):
i. Allocate 50% of tourism tax to respective state governments to support their efforts in
conjunction with VMY2020;
ii. Allocated MYR1.1bn to the Ministry of Tourism, Arts & Culture – including an
allocation of MYR90m to drive awareness, promotions, and programmes for the
VMY2020 campaign. A substantial portion of the departure levy collected will be
allocated for tourism infrastructure projects;
iii. Income tax exemption to be given for organisers of approved arts and cultural
activities, approved international sports recreational competitions, and conferences
organisers;
iv. income tax exemption of 100% of statutory income or investment tax allowance of
100% to be set off against 70% for five years will be given to new investments in
international theme park projects;
v. Increasing tax deductions given to companies sponsoring arts, cultural, and heritage
activities in Malaysia from MYR700,000 to MYR1,000,000 per year;
vi. Accelerated capital allowance for expenditure incurred on the purchase of new locally
assembled excursion buses to be fully claimed within two years;
vii. Excise duty exemption of 50% for locally assembled vehicles be given to tour
operators for the purchase of qualified new tourism vehicles;
viii. Contribute MYR100m towards the construction of a new cable car system to Penang
Hill, with any additional costs to be financed by the Penang State Government;
ix. Allocate MYR5m to Cultural Economy Development Agency to support Malaysian
visual art galleries and exhibition organisers in holding art exhibitions;
x. Allocate MYR10m to Think City to preserve culture and urban heritage;
xi. Allocate MYR25 million to the Malaysian Healthcare Tourism Council to strengthen
the position of Malaysia as the preferred destination for health tourism in ASEAN for
oncology, cardiology, and fertility treatment;
xii. To facilitate the visa application process, licensed travel agents under the Ministry of
Tourism, Arts & Culture are allowed to submit group application for up to 100 people
per transaction through the eNTRI and eVISA systems.

8
Malaysia Strategy
Second Thrust: Investing In Malaysians –

Levelling Up Human Capital
Strategy 5: Enhancing job opportunities for Malaysians
Malaysians@Work:
i. The Government will be launching the Malaysians@Work initiative which will be
divided into four programmes directed at providing both wage incentives for workers
and hiring incentives for employers:
 Graduates@Work: Graduates who secures work will receive a wage incentive of
MYR500 per month for a duration of two years, while employers will receive a
hiring incentive up to MYR300 per month for each new hire for two years;
 Women@Work: The wage incentives for returning women workers is MYR500
per month for two years. There is also a corresponding hiring incentive for
employers of up to MYR300 per month for two years. In addition, the current
income tax exemption for women who return to work after a career break will be
extended for another four years until 2023;
 Locals@Work: The wage incentive for Malaysians who are hired to replace
foreign workers is at either MYR350 or MYR500 per month – depending on the
sectors – for a duration of two years. There us a corresponding hiring incentive
for employers of up to MYR250 per month for two years;
 Apprentice@Work is a Technical & Vocational Education & Training (TVET)
incentive programme with an additional MYR100 per month on existing allowance
for trainees on apprenticeships. The Government will also extend double tax
deduction on expenses incurred by companies participating in Skim Latihan Dual
Nasional for another two years. In addition, the double tax deduction currently
given to companies undertaking Structured Internship Programme approved by
Talent Corp Malaysia will be expanded to include students from all academic
fields.
ii. The Malaysians@Work initiatives will be managed by the Employees Provident Fund
(EPF) and will be subsequently integrated with the Employment Insurance System
and other active labour market programmes. The Government anticipates the
Malaysians@Work initiative to cost MYR6.5bn over five years;
iii. Allocate an additional MYR30m in 2020 to provide more childcare centres or taskas.
Individual tax relief for fees paid will be increased from MYR1,000 to MYR2,000.

9
Malaysia Strategy
Strategy 6: Modernising the labour market

i. The Employment Act 1955 will be review, which includes the following:
 Increase maternity leave from 60 days to 90 days effective 2021;
 Extend the eligibility to overtime from those earning less MYR2,000 to those
earning less than MYR4,000 per month;
 Improve protection and procedures for handling sexual harassment complaints,
 Introduce new provisions on the prohibition of discrimination on religion, ethnicity,
and gender;
ii. The Government is also proposing to increase the minimum wage rate – only in
major cities – to MYR1,200 per month effective 2020.
Enhancing social protection:
i. EPF will extend coverage to contract workers – for those under contract for services
and professionals;
ii. The current Self-Employment Social Security Scheme by the Social Security
Organisation (SOCSO) will be expanded to enable contributions by other self-
employed groups across 18 key sectors;
iii. SOCSO will build a new MYR500m rehabilitation centre in Perak.
i-Suri for spouse:
i. The i-Suri programme will also be expanded, whereby husbands may voluntary elect
to contribute 2% from their 11% EPF employee contributions to their wives’ EPF
accounts;
ii. Allocate MYR20m in 2020 to further extend the benefits under i-Suri via the social
safety coverage under SOCSO;
iii. EPF will extend coverage to contract workers under contract for services and
professionals.

10
Malaysia Strategy
Strategy 7: Investing in education and talent

The Ministry of Education will receive the largest allocation – MYR64.1bn – in 2020 from
MYR60.2bn in 2019.
Upgrading our schools:
i. Increase the allocation for school maintenance and upgrading works from MYR652m
as announced in Budget 2019 to MYR735m in 2020;
ii. Focus on repairing dilapidated schools by providing MYR783m in 2020, particularly
for schools in Sabah and Sarawak. The Government will construct schools in 2020 in
places like Langkawi, Kulai, Hulu Langat, Putrajaya, Pasir Gudang, Tumpat, Marang,
and Johor Bahru;
iii. For national schools, the Government will further allocate MYR23m to ensure that
their facilities are disable-friendly;
iv. Increase the amount of utility assistance to include sewerage services, with an
additional allocation of MYR12m benefitting 2,000 government-aided schools.
Mainstreaming TVET:
i. The Government is increasing the allocation from MYR5.7bn in 2019 to MYR5.9bn in
2020 on TVET. This includes providing:
 MYR50m through Perbadanan Tabung Pembangunan Kemahiran to fund TVET
courses conducted by State Skills Development Centres or SSDCs;
 Providing matching grant funds of MYR20m to support customised TVET courses
undertaken in collaboration with industries;
 Pathways for TVET graduates to pursue further studies and secure jobs will be
expanded by the Government;
 Provide MYR30m to train more than 3,000 youths from low-income households.
Professional certifications:
i. MYR20m will be allocated to be matched by another MYR20m from the Human
Resources Development Fund towards encouraging working adults to undertake
professional certification examinations in fields relating to the fourth industrial
revolution or IR4.0.
MARA and Yayasan Peneraju:
i. MYR1.3bn will allocated in 2020 for Yayasan Peneraju, a targeted assistance by
MARA for low-income, rural bumiputeras through education institutions, with an
additional MYR2bn for student loans benefitting 50,000 students. MYR192m is to be
allocated for professional certification programmes.

11
Malaysia Strategy
Third Thrust: Creating a United, Inclusive and

Equitable Society
Strategy 8: Inclusive development – MYR10.9bn allocated for rural
development
The Government will increase the allocation for rural development projects from
MYR9.7bn in 2019 to MYR10.9bn in 2020 in an effort to reduce income inequality between
rural and urban areas.
Narrowing Inequality and the rural-urban divide:
i. The coverage of basic infrastructure for rural areas to be expanded, particularly for
Sabah and Sarawak;
ii. MYR587m will be allocated for rural water projects – MYR470m for Sabah and
Sarawak to achieve 99% access to clean water;
iii. MYR500m to be spent on rural electrification, benefitting 30,000 rural households,
mostly in Sabah and Sarawak;
iv. MYR1bn to be allocated on rural roads, with projects in Sabah and Sarawak
amounting to MYR326m and MYR224m, benefitting 145,000 people in rural areas;
v. The cost of the Pan Borneo Highway project – a catalyst for economic growth in East
Malaysia – has been reduced to MYR29bn via the on-going cost rationalisation to
date of MYR1.2bn. This makes room for more planning, such as the 165km Trans-
Borneo Highway connecting Sabah and Sarawak to Eastern Kalimantan. An
important component of this project is the MYR600m 40km Jalan Kalabakan-
Serudong, as well as the construction of the Customs, Immigration, Quarantine &
Security Complex or CIQS and government housing quarters;
vi. MYR5.2bn and MYR4.4bn in development expenditure is to be given to Sabah and
Sarawak to show that Pakatan Harapan prioritises the needs of East Malaysians.
Financial grants disbursed to the two states under the Malaysia Agreement 1963 are
to be increased;
vii. The Special Grant – under Section 112D of the Federal Constitution – will be
increased to MYR53.4m and MYR32m for Sabah and Sarawak. The rate will be
doubled to MYR106.8m for the former and MYR64m for the latter within the next five
years;
viii. MYR4.85bn will be provided under the MARRIS fund from the Federal to all state
governments for road maintenance, now allowed to be used for the upgrading of
roads, slopes, bridges and drains utilising up to 15% or MYR20m from Malaysian
Road Records Information System or MARRIS funds allocated to each state,
whichever is lower;
ix. MYR170m to be allocated to subsidise the cost of transportation and distribution of
basic goods to rural areas – to enable rural communities in East Malaysia to obtain
necessities like LPG and petrol at reasonable prices.
Subsidies increased to MYR24.2bn:
i. The allocation for total subsidies and social assistance to be increased from
MYR22.3bn to MYR24.2bn in 2020, including welfare assistance such as BSH and
subsidy payments, eg agriculture-related, fuel and interest subsidies.
BSH:
i. MYR5bn to be allocated for BSH to cover 1.1m single individuals above the age of 40
earning less than MYR2k per month, as well as disabled persons above the age of
18 with an income less than MYR2k per month. They will be entitled to receive
MYR300 and automatically qualify as a recipient of the free mySalam Takaful
scheme.

12
Malaysia Strategy
Social enterprise and community development:

i. Welfare agencies and non-governmental organisations (NGOs) to continue to be
supported by the Government:
 MYR575m socioeconomic assistance to benefit 137,000 seniors whose
household income is below the poverty level. MYR4.6m will be allocated to the
Senior Citizens Activity Centre or PAWE to cover the expenditure of 129 centres
across Malaysia – benefitting 37,000 senior citizens;
 MYR80m allocated to upgrading, repair and maintenance of 67 various
institutions under the Department of Social Welfare or JKM, including childcare,
disabled and elderly centres;
 MYR25m allocated for the administration and expansion of the food bank
programme throughout Malaysia to distribute 3,000 tonnes of excess food that is
donated to needy target groups;
 MYR20m allocated for five new independent learning centres, down syndrome
training, and a disabled taska. Training and coaching services offered to disabled
persons will be exempted from service tax;
 MYR15m allocated to the National Anti-Drugs Agency’s pilot RINTIS programme
on drug addict rehabilitation with NGOs and local communities;
 MYR4.5m allocated to Anjung Singgah to benefit 7,000 homeless Malaysians;
ii. MYR20m to be allocated to expand skills training and programmes that meet the
national TVET standard for inmates in areas such as food & beverages, carpentry,
laundromats, and metal works.
iii. MYR10m to be provided to Malaysian Global Innovation & Creativity Centre or
MaGIC to support the growth of social enterprises, which will help improve the socio-
economy of local communities;
iv. An additional MYR10m to be allocated to Malaysia Co-Investment Fund (MyCIF)
specifically for social enterprises to fundraise via peer-to-peer financing platforms –
MyCIF will co-invest with private investors by providing financing at affordable rates
for social enterprises;
v. The donation reporting threshold to be increased from MYR10,000 to MYR20,000
under Subsection 44(6) of the Income Tax Act 1967 beginning 2020 to encourage
private sector to donate as part of their corporate social responsibility;
vi. Tax deduction on donation for charitable and sports activities of national interest to
be capped at 10% – from the current 7% – from tax payers’ aggregate incomes. Tax
deductions are also expanded to:
 Cash wakaf contributions to state religious authorities or a body established by
state religious authorities administering wakaf;
 Cash wakaf contributions to public universities allowed by the state religious
authorities to receive wakaf;
 Cash endowment contributions to public universities;
vii. Income tax exemptions will be extended to include religious institution or organisation
registered as a company limited by guarantee with the Companies Commission of
Malaysia;
viii. MYR57m allocated to Department of Orang Asli Development or JAKOA to improve
the welfare and assistance of the Orang Asli. MYR83m will be allocated for overall
economic development, education, and infrastructure of the Orang Asli;
ix. A grant of MYR100m allocated to Malaysian Indian Transformation Unit or MITRA for
Budget 2020, of which 80% is programme based to strengthen initiatives that improve
the socio-economic situation, skills development, health, education, and women
empowerment of the community;
x. MYR85m allocated to support the development and repair of basic infrastructure in
new villages.

13
Malaysia Strategy
Bumiputera agenda:
i. MYR8bn allocated to assist bumiputera institutions and entrepreneurs, including:
 MYR6.6bn provided for bumiputera institutions focused on education such as
MARA, UiTM, and Yayasan Peneraju Pendidikan Bumiputera;
 MYR1bn of financing allocated for bumiputera SMEs such as through SJPP and
SME Bank;
 MYR445m provided for entrepreneurship programmes mainly under SME Corp,
Pelaburan Hartanah, PUNB, TEKUN, and TERAJU;
ii. At least 30% of tenders of each ministry are reserved for only bumiputera contractors.
Upholding Islam:
i. MYR1.3bn allocated for Islamic affairs under the Prime Minister’s Department to
continue upholding the Federal Constitutional position of Islam as the religion of the
Federation;
ii. Allowance to Al-Quran & Fardu Ain classes or KAFA will be increased by MYR100 a
month to 33,200 KAFA teachers, costing MYR46m;
iii. MYR500 one-off special bonus proposed for each imam, bilal (muezzin), tok
siak/noja/merbot (mosque caretakers) and guru takmir;
iv. MYR10m allocated to the Department of Islamic Development Malaysia or JAKIM for
Rahmatan Lil-Alamin to develop a greater understanding of Maqasid Shariah via
advocacy programmes and deliberations.

14
Malaysia Strategy
Strategy 9: Towards better health services

i. MYR30.6bn will be allocated to the Ministry of Health for healthcare services,
including:
 MYR1.6bn for the construction of new hospitals and the upgrading/expansion of
existing ones, including Tengku Ampuan Rahimah Hospital, Kampar Hospital,
Labuan Hospital and Queen Elizabeth II hospital in Sabah;
 MYR319m for the construction and upgrading of health and dental clinics, and
quarters. New clinics are to be built in Setiu, Sungai Petani, Cameron Highlands,
Sabah (Kudat and Tawau) and Sarawak (Long San and Sungai Simunjan);
 MYR227m to upgrade medical equipment, MYR95m for renovating medical
infrastructure and facilities such as at Pontian Hospital – in line with 3R: Repair,
Replace and Restore;
 MYR60m will be allocated to kick-start pneumococcal vaccination drives for
children;
 MYR59m will be allocated in collaboration with NGO medical ambulance services
to acquire more ambulances, to ensure more responsive emergency and trauma
services;
 MYR31m will go to the upgrade and maintenance of ICT services, including a
pilot project for hospital electronic medical records;
 MYR5m to provide medical clinics in rural areas, especially Orang Asli villages, in
line with sustainable development goals of achieving universal health coverage.
Expansion of mySalam and PeKA B40:
i. MYR8,000 cash payout will be given to those diagnosed with a critical illness this
year, and those warded at Government hospitals can claim MYR50 income
replacement each day for up to 14 days. Household recipients of BSH aged 18-55
are automatically covered;
ii. Starting 1 Jan 2020, coverage is extended to:
 45 illnesses from 36, including polio and terminal illness;
 Those up to 65 years of age, compared to 55, benefitting an additional 1.5m
individuals;
 Those with gross annual income up to MYR100k to receive critical illness payouts
of MYR4,000, and MYR50 in daily hospitalisation income replacements for up to
14 days when diagnosed and warded at government hospitals – this is estimated
to benefit an additional 5m Malaysians.
iii. Launching of Skim Peduli Kesihatan (PeKA) B40 to provide screenings and early
intervention for non-communicable diseases such as mental health and cancer for
those between 40-60 years of age, from 50-60 previously.
Fertility incentive:
i. EPF to introduce a new category of withdrawals, allowing for fertility treatments such
as in vitro fertilisation (IVF) procedure, in addition to income tax relief of up to
MYR6,000 on expenses incurred for medical treatment of serious illnesses. This now
includes expenses incurred from fertility treatments.
Private retirement schemes or PRS:
i. The Government is to allow pre-retirement withdrawals for PRS for healthcare and
housing, with the same terms and conditions as that allowed by EPF, and not subject
to any penalty for early withdrawals.

15
Malaysia Strategy
Strategy 10: Enhancing the transportation ecosystem

Prioritising public transport:
i. MYR450m will be invested to acquire up to 500 electric buses in selected cities, to
improve public transport and nurture cleaner cities;
ii. MYR146m will be allocated to subsidise bus operators to support interconnectivity in
rural and urban areas;
iii. MYR50m will be allocated to upgrade rail tracks from Gorge Line between Halogilat
Station to Tenom Station in Sabah, at a cost of MYR50m, to enhance the travelling
experience for locals and provide a memorable experience for tourists.
Sultan Azlan Shah Airport, Ipoh:
i. Proposals on a public-private partnership basis invited for the upgrade of the airport,
including extending its runway.
Easing Johor Causeway traffic:
i. MYR85m will be invested towards enhancing vehicle and traffic flow through the
CIQS, to address the congestion problem at Johor Causeway. An additional 50
counters will be opened for motorcyclists, alongside the streamlining of immigration
and PLUS counters. The Government will proceed with the Rapid Transit System
(RTS) between Johor Bahru and Singapore.
Reducing the highway toll burden:
i. The Cabinet will consider all proposals, including those from Khazanah, to acquire or
dispose all shares of PLUS Malaysia, including a minimum reduction of average toll
charges by a 18% discount across all PLUS highways. All proposals must be fiscal-
positive, without increasing the present debt burden or the debt service charges of
the Government. The 18% discount on toll charges for the North-South Expressway
will save highway users up to MYR1,130m in 2020, and MYR43bn over the entire
concession period until 2038;
ii. Cabinet has approved the offer to acquire four Klang Valley highways – KESAS,
LDP, SPRINT and SMART – to be funded via Government borrowings. Congestion
charges will be lowered by up to 30% of present toll rates during near-peak and
normal hours, and free during off-peak hours – this will save highway users
MYR180m a year and MYR2bn over the respective concession periods. There will be
no extension of concession contracts;
iii. The acquisition of these highways will not burden the Government because the
financing, operations and maintenance cost will be entirely funded by the collection of
toll and congestion charges;
iv. Toll rates for cars at the Penang Second Bridge will be reduced from MYR8.50 to
MYR7 to align toll rates between the First and Second Penang Bridges effective 1
Jan 2020;
v. Eligible BSH recipients will receive MYR30 per month and MYR12 for car and
motorcycle owners respectively every four months;
vi. Other motorists who are not eligible BSH recipients will receive a special Kad95
which allows them to enjoy a fuel subsidy at a discount of 30 sen per litre (limited to
100 litres per month for cars or 40 litres per month for motorcycles) when purchasing
RON95 at the petrol station;
vii. Ron 95 and diesel retail prices will be gradually floated with the market price
determined by the automatic pricing mechanism;
viii. The Government will allocate MYR2.2bn for the proposed scheme, which will benefit
more than 8m motorists;
ix. Motorists in Sabah and Sarawak will continue to enjoy a fuel price ceiling of MYR2.08
per litre for RON95 and MYR2.18 per litre for diesel.

16
Malaysia Strategy
Strategy 11: Promoting access to housing

Fund for affordable homes:
i. A rent-to-own (RTO) financing scheme will be introduced to address those who are
unable to afford the initial 10% deposit and access to financing in purchasing their
homes;
ii. This RTO scheme is for the purchase of first homes priced up to MYR500,000. Under
this scheme, the applicant will rent the property for up to five years and after the first
year, the tenant will have the option to purchase the house;
iii. To reduce the supply overhang of condominiums and apartments, the Government
will lower the threshold on high-rise property prices in urban areas for foreign
ownership from MYR1m to MYR600,000;
iv. The Youth Housing Scheme is further extended to assist youth in purchasing their
first home;
v. Real Property Gains Tax or RGPT treatment was enhanced by revising the base year
for asset acquisition at 1 Jan 2013 for assets acquired before 1 Jan 2013 vs the base
year of 1 Jan 2000 previously.
Maintenance of Public Housing
i. MYR100m will be allocated for repairs and refurbishment works;
ii. MYR15m will go to the Safe City Initiative (Bandar Selamat) to provide outdoor
lighting, parking with security features for motorcycles, anti-climb fences, and safety
advocacy programmes.
Strategy 12: Unity through sports

The Government will allocate the following for sports:
i. MYR299m to implement the Sports for All programme, including rehabilitating and
upgrading overall sports facilities, youth and sports complexes and community sports
complexes throughout the country;
ii. MYR179m for preparation in international sporting events such as the Tokyo
Olympics 2020 and Hanoi Sea Games 2021 which include the development of
Paralympic athletes;
iii. MYR45m for the National Football Development Programme;
iv. MYR10m to further promote women in sports and nurture the next generation of
world class sportswomen.

17
Malaysia Strategy
Strategy 13: Promoting environmental sustainability

i. MYR30m will be allocated to raise the capabilities and capacities of the Department
of Environment and Department of Chemistry;
ii. MYR443.9m and MYR150m will go to flood mitigation projects and the maintenance
of existing flood retention ponds;
iii. To assist farmers in their time in need, the Government will establish a MYR100m
disaster assistance fund to provide loans at an interest rate of 4%
Preserve our forests:
i. MYR48m will be allocated to preserve Malaysia’s pristine forests and natural
biodiversity;
ii. MYR15m will be allocated to protect endangered animals;
iii. MYR20m will be allocated to employ more forest rangers among retired soldiers and
local Orang Asli communities.
Sustainable Development Goals (SDG):
i. MYR10m will be allocated towards a joint Government-United Nations Sustainable
Development Goals fund to co-finance SDG initiatives. MYR5m will be allocated to
support the convening of Parliamentary Select Committee meetings and also for
greater engagement by Members of Parliament with civil society, including
addressing the SDG at local levels.
Defence and public security:
i. MYR16.9bn will be allocated to the Ministry of Home Affairs;
ii. MYR15.6bn will be allocated to the Ministry of Defence to enhance readiness,
including improving armed forces mobility, meeting the changing nature of threats,
having fast interceptor craft for safeguarding Sabah waters.

18
Malaysia Strategy
Fourth Thrust: Revitalisation Of Public

Institutions And Finances Access To Housing
i. For 2019, the Government is paying MYR2.4bn to service debt interest in 2019 and
MYR2.7bn in 2020 for 1MDB and SRC International;
ii. MYR1.45bn returned by international authorities as of Jul 2019 – including proceeds
from the sale of Equanimity. Goldman Sachs will be pursued;
iii. Overall debt and liabilities ratio will rise to 77.1% as at end Jun 2019 due to the
continuation of the Mass Rapid Transit and Pan Borneo infrastructure projects – as
well as the MYR20bn bailout of Tabung Haji, or 1.3% of GDP;
iv. Japan Bank for International Cooperation has offered to guarantee an additional
tranche of Samurai bond with an uneven lower interest rate of less than 0.5%,
intended to be issued early next year.
Strategy 14: Commitment to fiscal consolidation

i. The Government is on track to achieve is targeted deficit of 3.4% in 2019;
ii. A mildly expansionary budget, with a revised target of 3.2% fiscal deficit in 2020 will
be adopted – to reduce the average fiscal deficit to 2.8% over the medium term;
iii. MYR297bn of total expenditure allocated, excluding contingency reserve of MYR2bn,
after excluding the one-off allocation for outstanding GST and income tax refunds.
The 2020 Budget comprises opex of MYR241bn and development expenditure of
MYR56bn.
Enhancing government revenue:
i. MYR244.5bn in revenue is expected to be collected in 2020 (an increase of
MYR11.2bn from 2019), after excluding a one-off Petronas special dividend of
MYR30bn – higher tax revenue, but still lower compared to Vietnam, South Korea,
Poland and Chile;
ii. Taxable income in excess of MYR2m to be introduced and taxed at 30%, affecting
2,000 top income earners in the country;
iii. SME income tax rate for chargeable income up to the first MYR600k is at 17%,
subject to the SME having paid-up capital of not more than MYR2.5m and annual
sales of not more than MYR50m;
iv. Pakatan Harapan has fulfilled its promise of refunding a significant portion of the
MYR37bn taxes unjustly withheld the past five years;
v. The Special Commissioner of Income Tax and Customs Appeal Tribunal will merge
into the Tax Appeal Tribunal – to improve efficiency in managing taxpayer appeals;
vi. Digital services tax to be implemented from 1 Jan 2020, to include downloaded
software, music, video or digital advertising. Foreign service providers can
commence registration with the Royal Customs Department or RMCD as of 1 Oct
2019;
vii. Malaysians above 18 years of age and corporations will be assigned a tax
identification number beginning Jan 2021 – stakeholders will be engaged next year;
viii. MYR235m to be allocated to purchase 20 additional cargo scanners to be placed at
ports of entry to reduce leakages from smuggling and wrongful declaration for
customs duties;
ix. Penalty of MYR100,000 proposed for illegal gamblers, and minimum six months’ jail
sentence. Higher minimum mandatory penalty of MYR1m and one 12-month
minimum mandatory jail sentence will be imposed. Commencing 2020, special draws
for number forecast operators will be reduced to eight times from 11 times a year;
x. Revenue of MYR3bn expected in 2020 from disposal of assets approved previously
via competitive bidding;
xi. Bandar Malaysia Project will now include a People’s Park, with an additional 5,000
units of affordable homes and greater bumiputera participation throughout the
project.

19
Malaysia Strategy
Rationalising government expenditure:

i. The Government will centralise and combine the tender and procurement of
MYR500m worth of medicine across the Ministry of Health, Ministry of Defence, and
university hospitals to generate savings from bulk purchases;
ii. Opex allocation for the maintenance and repair of existing public assets will increase
to MYR10.5bn in 2020, from MYR6.3bn in 2019.
Local content procurement policy:
i. Buy Made in Malaysia product campaigns will be intensified – based on a minimum
allocation of 30%;
ii. Expand opportunities for more bumiputera contractors to participate in government
procurement. The Government has reopened registration for contractors with
Bumiputera Gred 1 beginning 1 Sep 2019.
Strategy 15: Strengthening Institutions, Governance & Integrity

i. 100 additional personnel in 2020 and MYR10m allocated to undertake risk
assessment tests at all ministries, departments and agencies;
ii. Reforms, including establishing laws and institutions such as:
 Independent Police Complaints & Misconduct Commission or IPCMC;
 Malaysian Ombudsman – to replace the Bureau of Public Complaints;
iii. MYR50m allocated through the National Centre for Governance, Integrity, and anti-
corruption or GIACC to enhance detention procedures and facilities, particularly the
installation of 11,500 units of CCTVs in police detention and immigration entry points.
Uplifting the public service:
i. Improving the remuneration of civil servants through:
 Cost of Living Allowance or COLA to increase to MYR50 per month beginning
2020, and additional MYR350m allocated annually
 Civil servants will be allowed early redemption of accumulated leave for up to 75
days as replacement pay for those with at least 15 years of service;
 LPPSA will offer free personal accident insurance (up to MYR100k coverage) for
two years to new government housing loan borrowers.
ii. For the dependents of civil servants who have died:
 Ex-gratia Death Benefit of up to MYR150k will be introduced, payable to
dependents of the deceased;
 Annual salary movement or PGT is brought forward for civil servants who have
died in service before the salary movement date (TPG);
iii. The People’s Volunteer Corps or RELA will enjoy higher allowance of MYR2 per hour
beginning 1 Jan 2020, resulting in an allocation of MYR26m;
iv. All personnel of Jabatan Perkhidmatan Bomba & Penyelamat Malaysia will receive a
special allowance of MYR200 a month – totalling MYR35m – which will benefit
14,400 personnel;
v. Accord one-off payment of MYR500 to 70,000 holders of Pingat Jasa Malaysia with
an allocation of MYR35m;
vi. Allocate MYR330m to the Property & Land Management Division under the Prime
Ministers Department to repair and maintain the public service quarters. In addition,
MYR150m and MYR250m is allocated for the repair/refurbishment of Malaysian
Armed Forces family housing units and Royal Malaysian Police Force or PDRM
quarters;
vii. Special payment of MYR500 for civil servants Grade 56 and below as a sign of
appreciation;
viii. Special Payment of MYR250 will be paid to government retirees and extended to
non-pensionable veterans. All to be paid before end of 2019.

20
Malaysia Strategy
Figure 3: Earnings outlook and valuations

FBM KLCI RHB BASKET RHB BASKET (EX-FBMKLCI)
COMPOSITE INDEX @ 1,556.84 2018 2019F 2020F 2018 2019F 2020F 2018 2019F 2020F
11 Oct 2019
Revenue Growth (%) 3.1 (1.2) 5.3 1.4 1.8 4.9 (0.8) 5.8 4.5
EBITDA Growth (%) 2.0 2.4 5.7 (2.0) 3.7 6.5 (9.9) 6.3 8.2
Normalised Earnings Growth (%) 1.0 (5.6) 5.9 (1.9) (1.8) 8.0 (8.8) 8.5 13.1
Normalised EPS (sen) 40.9 38.4 40.3 21.9 21.4 23.0 9.7 10.5 11.8
Normalised EPS Growth (%) (0.4) (6.1) 5.0 (3.4) (2.3) 7.3 (10.4) 8.0 12.5
Normalised EPS Growth (%) ex-Plantation (0.1) (3.2) 3.5 (2.3) 0.1 5.8 (7.0) 8.4 11.0
Prospective PER (x) 16.7 17.8 16.9 17.0 17.4 16.2 17.9 16.6 14.7
Prospective PER (x) ex-Plantation 16.2 16.7 16.1 16.4 16.4 15.5 17.2 15.8 14.2
Price/BV (x) 1.7 1.6 1.5 1.5 1.4 1.4 1.1 1.1 1.1
Div Yld (%) 3.7 3.4 3.6 3.6 3.4 3.6 3.3 3.3 3.6
ROE (%) 10.2 9.0 9.1 8.8 8.2 8.5 6.4 6.7 7.3
Note: FBM KLCI stocks not under our coverage: Hong Leong Financial Group (HLFG), RHB Bank, PPB and Hap Seng Consolidated
Source: Bloomberg, RHB
Figure 4: FBM KLCI – weightings & valuations

Market Cap Weight EPS Growth (%) P/E (x)
MYRbn (%) FY18 FY19F FY20F FY18 FY19F FY20F
Sime Darby 15.4 1.69 11.8 10.9 (4.4) 17.9 16.2 16.9
Auto 15.4 1.69 11.8 10.9 (4.4) 17.9 16.2 16.9
AMMB^ 11.6 1.28 5.9 14.5 (1.4) 9.1 7.9 8.1

CIMB 47.3 5.20 0.3 6.8 (0.0) 9.8 9.1 9.1
HL Bank 35.2 3.87 17.4 1.0 (1.8) 12.6 12.5 12.7
Maybank 94.9 10.43 3.0 (7.7) 2.1 11.4 12.3 12.1
Public bank 74.1 8.14 2.2 (1.7) 0.8 13.2 13.4 13.3
Banking 263.0 28.92 3.4 (1.2) (0.0) 11.5 11.6 11.5
Press Metal 18.9 2.08 3.3 (16.6) 10.9 29.7 35.6 32.1
Basic Material 18.9 2.08 3.3 (16.6) 10.9 29.7 35.6 32.1
Nestle 33.7 3.71 2.5 3.6 6.1 51.1 49.3 46.5

Consumer 33.7 3.71 2.5 3.6 6.1 51.1 49.3 46.5
Genting Bhd 21.6 2.38 16.2 (19.7) 0.5 7.2 9.0 8.9
Genting Malaysia 17.2 1.90 30.4 (24.4) (2.1) 9.8 13.0 13.2
Gaming 38.8 4.27 21.3 (21.5) (0.5) 8.2 10.4 10.5
Dialog 19.2 2.11 17.6 25.0 10.1 49.3 39.4 35.8

MISC 37.0 4.06 (34.9) 29.1 13.1 27.0 20.9 18.5
Petronas Chemicals 57.8 6.36 19.2 (23.5) 5.4 11.6 15.2 14.4
Petronas Dagangan 22.9 2.52 (21.0) 3.4 5.5 26.8 25.9 24.5
Oil & Gas 136.9 15.05 (3.8) (8.3) 7.7 18.2 19.8 18.4
IOI Corp 26.5 2.91 2.8 (33.0) 5.7 25.0 37.2 35.2
KLK 22.8 2.51 (22.3) (22.4) 33.2 26.6 34.4 25.8
Sime Darby Plantations 31.8 3.50 6.7 (94.2) 845.5 26.0 +>100.0 47.2
Plantation 81.1 8.91 (4.6) (53.8) 58.7 25.8 55.8 35.1
Hartalega 17.5 1.92 3.9 19.3 22.2 37.7 31.6 25.9

Top Glove 11.0 1.21 28.2 (12.6) 14.6 25.9 29.6 25.8
Rubber Products 28.5 3.13 14.3 3.9 19.1 32.0 30.8 25.9
Axiata 39.2 4.31 (31.6) 25.9 16.0 47.1 37.4 32.2

DiGi.Com 36.5 4.01 6.6 (0.2) 4.6 23.1 23.1 22.1
Maxis 42.2 4.63 (2.7) (22.9) (1.0) 20.8 27.0 27.3
Telecommunication 117.8 12.95 (7.1) (5.7) 5.3 26.5 28.1 26.7
MAHB 14.5 1.59 80.4 22.6 21.8 33.5 27.3 22.4

Transport 14.5 1.59 80.4 22.6 21.8 33.5 27.3 22.4
Petronas Gas 32.5 3.57 1.0 1.1 (8.1) 17.9 17.7 19.3
Tenaga 78.9 8.68 (28.0) 1.2 2.8 14.8 14.6 14.2
Utilities 111.4 12.25 (22.3) 1.1 0.1 15.6 15.4 15.4
FBM KLCI 909.5 100.00 (0.4) (6.1) 5.0 16.7 17.8 16.9
Source: Bloomberg, RHB

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Malaysia Strategy
Figure 5: Top BUYs

Market EPS EPS Growth 3-year P/E P/BV P/CF DY
FYE Price TP Shariah
Cap (sen) (%) EPS (x) (x) (x) (%)
CAGR
(MYR/s) (MYR/s) compliant (MYRm) FY19F FY20F FY19F FY20F (%) FY19F FY20F FY20F FY20F FY20F
11 Oct 2019
KL Kepong Sep 21.40 28.35 Y 22,790 62.3 83.0 (22.4) 33.2 (7.0) 34.4 25.8 1.9 13.3 2.1
Hartalega^ Mar 5.20 6.05 Y 17,480 16.5 20.1 19.3 22.2 14.8 31.6 25.9 7.4 20.0 2.3
Genting M'sia Dec 3.05 3.90 N 17,244 23.5 23.0 (24.4) (2.1) (1.2) 13.0 13.2 0.9 6.1 5.1
IJM Corp^ Mar 2.27 2.78 Y 8,239 12.0 13.4 8.8 11.3 8.9 18.9 17.0 0.8 12.5 3.5
Yinson^ Jan 6.84 8.22 Y 7,392 19.8 35.5 (16.5) 79.3 10.0 34.5 19.3 2.0 3.6 0.6
Astro Malaysia^ Jan 1.38 1.85 N 7,196 11.8 13.4 32.6 13.7 (3.3) 11.7 10.3 8.1 4.5 8.2
Time dotCom Dec 9.02 10.90 Y 5,282 56.2 62.5 17.2 11.2 23.0 16.0 14.4 1.8 10.1 2.8
Syarikat Takaful Dec 6.30 8.00 Y 5,209 45.7 50.8 28.1 11.2 26.6 13.8 12.4 3.8 n.a. 4.0
DRB-HICOM Dec 2.44 3.35 Y 4,717 11.3 12.4 556.6 9.7 (225.5) 21.5 19.6 0.4 15.4 0.4
Allianz Malaysia Dec 13.96 16.25 N 2,469 119.1 124.4 9.2 4.4 11.7 11.7 11.2 1.3 n.a 3.2
Guan Chong Dec 4.67 6.00 N 2,343 40.5 46.4 8.2 14.4 41.5 11.5 10.1 2.2 8.5 1.5
Power Root^ Mar 2.10 2.49 Y 839 10.5 11.9 21.0 14.0 45.0 20.1 17.6 3.6 21.8 4.8
JHM Consolidation Dec 1.36 1.75 Y 758 7.9 9.6 33.7 21.6 18.7 17.2 14.2 3.0 16.5 2.2
Note: ^FY19-20 valuations refer to those of FY20-21
Source: RHB
Figure 6: Top SELLs

Market EPS EPS Growth 3-year P/E P/BV P/CF DY
FYE Price TP Shariah
Cap (sen) (%) EPS (x) (x) (x) (%)
CAGR
(MYR/s) (MYR/s) compliant (MYRm) FY19F FY20F FY19F FY20F (%) FY19F FY20F FY20F FY20F FY20F
11 Oct 2019
Axiata Dec 4.29 4.00 Y 39,162 11.5 13.3 25.9 16.0 (0.0) 37.4 32.2 1.9 4.3 2.6
Maxis Dec 5.39 4.65 Y 42,152 19.9 19.7 (22.9) (1.0) (9.4) 27.0 27.3 5.0 12.6 2.8
Sime Plantation Dec 4.62 4.25 Y 31,807 1.0 9.8 (94.2) 845.5 (16.3) +>100.0 47.2 2.3 15.7 1.3
Affin Bank Dec 1.94 1.75 N 3,853 25.1 22.9 (2.9) (8.9) (1.5) 7.7 8.5 0.4 n.a. 3.1
CMMT Dec 1.05 0.90 N 2,154 5.9 6.1 (11.1) 3.3 (7.8) 17.8 17.2 0.8 9.8 6.3
Unisem Dec 2.54 1.67 Y 1,847 9.1 11.2 (23.0) 22.4 (19.1) 27.8 22.7 1.3 7.7 2.9
MMHE Dec 0.90 0.59 Y 1,440 (5.8) (2.6) (24.5) (54.3) (211.4) n.m. n.m. 0.6 25.4 0.0
TSH Resources Dec 0.92 0.75 Y 1,270 1.7 3.0 (55.6) 74.4 (27.1) 53.6 30.7 0.9 5.0 1.1
Media Prima Dec 0.41 0.35 N 455 (5.9) (0.9) 6.3 (84.4) (59.5) n.m. n.m. 0.3 1.7 0.0
Prestariang Jun 0.48 0.27 Y 232 0.5 1.7 (90.2) 263.6 (29.1) +>100.0 29.0 2.1 6.8 3.4
Kim Hin Dec 1.05 0.83 Y 147 (20.8) 140.2 (15.0) (774.7) 220.7 n.m. 0.7 0.4 11.0 0.0
Source: RHB

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Malaysia Strategy
Figure 7: High-dividend yield stocks

DY EPS Growth P/E P/BV ROE
Price
(%) (%) (x) (x) (x)
(MYR/s) FY19F FY20F FY19F FY20F FY19F FY20F FY20F FY20F
11 Oct 2019
BAT 17.24 8.1 9.3 (6.2) 14.6 11.7 10.2 10.4 104.8
Apollo Food^ 3.87 7.8 7.8 (2.4) 1.0 18.0 17.8 1.3 7.4
Astro^ 1.38 7.2 8.2 32.6 13.7 11.7 10.3 8.1 84.2
Matrix Concepts^ 1.88 6.9 7.2 6.3 5.5 6.4 6.1 0.9 16.0
YTL Power 0.74 6.8 5.4 (26.0) (17.9) 11.0 13.4 0.5 4.0
Bermaz Auto^ 2.19 6.8 7.7 (12.5) 12.1 10.9 9.7 3.8 40.9
Maybank 8.44 6.8 7.0 (7.7) 2.1 12.3 12.1 1.1 9.2
APM 2.25 6.7 6.7 2.3 4.3 11.2 10.7 0.3 3.2
UOA Development 1.97 6.6 7.1 (18.1) 4.7 11.7 11.2 0.8 7.3
B-Toto^ 2.54 6.2 7.0 20.6 (20.3) 10.8 13.6 4.7 18.7
Magnum Bhd 2.75 6.2 6.2 3.6 1.2 15.2 15.0 1.6 18.3
Pintaras 3.25 6.2 6.8 153.8 14.2 13.3 11.6 3.3 28.0
Tambun Indah 0.74 6.1 6.8 (20.0) 10.5 7.2 6.5 0.5 7.7
CMMT 1.05 6.1 6.3 (11.1) 3.3 17.8 17.2 0.8 4.6
MRCB-Quill REIT 1.01 5.9 5.9 (1.5) (1.4) 15.0 15.2 0.8 5.2
Al-Salam REIT 0.87 5.7 5.7 (6.3) (3.3) 16.8 17.4 0.8 4.7
Freight Mgmt 0.62 5.7 4.1 (25.7) 16.2 12.6 10.9 0.6 5.3
Alliance Bank^ 2.70 5.6 6.5 (11.1) 16.3 8.7 7.5 0.7 9.1
CIMB 4.86 5.6 5.8 6.8 (0.0) 9.1 9.1 0.8 9.4
Source: RHB
Figure 8: RHB basket of stocks – sector weightings & valuations

Covered Sector Mkt cap Weight EPS growth (%) P/E (x) Recommendation
MYRbn % FY18 FY19F FY20F FY18 FY19F FY20F
Plantation 98.4 7.7 (22.4) (52.9) 76.3 29.4 62.5 35.4 Overweight
Gaming 46.2 3.6 20.1 (18.3) (1.8) 8.8 10.8 11.0 Overweight
Property-REITs 38.5 3.0 3.3 2.1 4.4 20.0 19.6 18.8 Overweight
Rubber Products 36.3 2.8 13.2 7.7 17.8 30.2 28.1 23.8 Overweight
Construction 33.6 2.6 (6.3) 4.7 16.3 15.1 14.4 12.4 Overweight
Non-Bank Financials 16.9 1.3 20.0 7.8 7.4 14.9 13.8 12.9 Overweight
Banking 278.2 21.8 3.4 (1.3) 0.5 11.3 11.4 11.3 Neutral
Oil & Gas 161.6 12.7 (13.0) (0.0) 15.9 20.9 20.9 18.0 Neutral
Telecommunications 137.0 10.7 (8.3) 2.2 5.0 25.5 24.9 23.8 Neutral
Utilities 122.2 9.6 (22.9) (1.8) (0.9) 14.9 15.2 15.3 Neutral
Consumer 91.0 7.1 9.7 5.7 10.8 26.2 24.8 22.4 Neutral
Healthcare 53.4 4.2 59.4 15.9 24.3 41.8 36.1 29.1 Neutral
Transport 41.4 3.2 (25.9) 31.6 23.8 36.4 27.6 22.3 Neutral
Property 39.1 3.1 (19.3) (3.0) 0.4 10.9 11.3 11.1 Neutral
Auto 34.3 2.7 64.7 17.2 3.8 16.7 14.2 13.7 Neutral
Technology 14.9 1.2 (14.3) (2.3) 20.3 23.4 23.9 19.9 Neutral
Media 7.7 0.6 (4.6) 9.6 25.4 15.3 14.0 11.1 Neutral
RHB BASKET 1277.0 100.0 (3.4) (2.3) 7.3 17.0 17.4 16.2
Source: RHB

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Malaysia Strategy
Sector Review
Construction – Holistic Measures In Place OVERWEIGHT
A bigger development expenditure of MYR56bn for 2020 – up 4.3% YoY from MYR53.7bn
for 2019 – was announced in Budget 2020. The allocation for the transportation sub-sector
increased by a greater magnitude of 9% YoY, to MYR12.2bn for 2020 from MYR11.2bn
for 2019. There was emphasis on existing projects that are people-centric and can deliver
high multiplier effects.
At the same time, the Government provided some clarity on certain stalled mega projects
such as Bandar Malaysia, Johor-Singapore Rapid Transit System (RTS) and the Pan
Borneo Highway. Finance Minister Lim Guan Eng also highlighted that feasibility studies
are being conducted on two new major road projects valued at MYR8.3bn. These are the
Serendah-Klang Rail Bypass for cargo shipments, and the Klang Logistics Corridor, a
privatised dedicated highway linking Northport and Westport – which is part of the
Government’s plan to create a regional maritime centre and logistics hub in Port Klang
and Pulau Carey.
Figure 9: Transport subsector allocations to total development budget
MYRm/year 2018 2019 2020
Total development expenditure 54,900 53,700 56,000
Transport subsector 17,004 11,209 12,195
% Growth 48.6% -13.6% 9%
% Allocation 31.0% 20.5% 21.8%
Source: Company data, RHB
The Government is forecasting construction to grow 3.7% in 2020, from 1.7% for 2019,
premised on the revival of infrastructure projects, rural development and public amenities.
This indicates that the sector is likely to be more active in 2020, and further rationalises
our OVERWEIGHT stance.
Higher allocation for East Malaysia. Budget 2020’s development expenditure for Sabah
and Sarawak amounts to MYR5.2bn and MYR4.4bn, representing the largest portion of
the development expenditure. Among others, MYR587m and MYR470m will be allocated
to increase access to clean water for Sabah and Sarawak, while MYR326m and
MYR224m are for the development of rural roads. The Pan Borneo Highway project
remains relevant to spur economic growth in East Malaysia. This indicates the likelihood of
more contracts being awarded over the next 12 months for the remaining packages of the
Pan Borneo Sabah project (to date, only 12 out of 35 projects for this initiative have been
awarded). We opine that the higher allocation for East Malaysia will benefit local
contractors and basic material players there, particularly Hock Seng Lee and Cahya Mata
Sarawak.
Public infrastructure projects still in the limelight. There is now more clarity on certain
stalled projects. The RTS project was given the go-ahead. Additionally, the Government
decided to proceed with the development of Bandar Malaysia – Sunway Construction and
Econpile are potential beneficiaries for the project’s civil works, in our view. And although
not stated in the Budget speech, we believe the revival of Bandar Malaysia raises the
likelihood of the high-speed rail project eventually following suit. Recall that a technical
advisory consultant (TAC) and commercial advisory consultant (CAC) were appointed to
conduct feasibility studies earlier this year.
A step forward in the toll road saga. The Government approved the proposal to acquire
four Klang Valley highways: Shah Alam Expressway (KESAS), Damansara-Puchong
Expressway (LDP), Sprint Expressway (SPRINT) and SMART Tunnel (SMART). We
believe the offer is well-balanced, as it fairly compensates toll concessionaires.
On the other hand, the Government is still considering all proposals for the acquisition or
disposal shares of PLUS Malaysia. We understand that this would also involve a minimum
reduction of average toll charges by 18% across all PLUS highways, if approved. Besides
that, toll rates for cars at the Second Penang Bridge was reduced by 18% from MYR8.50
to MYR7.00.
The minimum wage being increased by 9% to MYR1,200 (from MYR1,100) is expected
to have a muted impact on the construction sector. This is as we believe that the majority
of construction workers earn wages above the minimum level, due to overtime payments.

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Malaysia Strategy
Construction contracts keep flowing. Aside from projects mentioned in Budget 2020,
there are still many more projects in the pipeline that are scheduled to be awarded in the
coming months through 1H20. All eyes are on the ECRL, which was given the go-ahead in
April, after the project cost was reduced by MYR21.5bn to RM44bn.
Reiterate OVERWEIGHT. Budget 2020 showed the Government’s strong commitment
towards rural development and amenities, as well as existing infrastructure projects –
which we think should help sustain orderbooks of local contractors at healthy levels.
We still prefer IJM, in view that it may pay a special dividend – premised on a possible
acquisition of its toll road assets by the Government, exposure to the East Coast Rail Link,
on top of its robust earnings. We also like HSL for its medium-term earnings visibility and
potential to win more projects in the near future, due to its exposure in Sarawak. Key
downside risks for the sector include new job awards falling short of our estimates and
higher input costs, which may translate to poor margins.
Alexander Chia +603 9280 8889
alexander.chia@rhbgroup.com
Gaming – Tax Hike Concerns Lifted OVERWEIGHT
In Budget 2020, the Government proposed the following measures:

i. For illegal gamblers, a higher minimum mandatory penalty of MYR100,000 for illegal
gamblers, along with a minimum mandatory jail sentence of six months;
ii. For illegal operators, a higher minimum mandatory penalty of MYR1m and a minimum
mandatory jail sentence of 12 months;
iii. Reduce the total number of special draws for NFOs from 11 to eight times a year starting
from 2020.
To curb illegal gambling, the Government proposed stricter penalties for illegal gamblers
and operators, which we deem as positive for the gaming sector. Once the laws are
passed, gamblers/punters will be subjected to stricter laws, deter them from placing
wagers with illegal operators. This should also benefit the legal operators. Similarly, illegal
operators are discouraged by the sterner laws – given the relative risks and rewards in
running a low-margin illegal lottery business. Generally, the stricter laws should help to
curb gambling-related social problems and improve tax collection for the Government at
the same time.
We are surprised by the reduction in special draws, but not overly concerned about it.
Based on our estimates, the earnings impact from this is negligible (<1%) for both Berjaya
Sports Toto and Magnum, as it is just a decrease of three days (vs c.160 draw days a
year). Moreover, special draws generate lower margins compared to normal draw days,
due to the additional 10% special contribution (on the net sales) paid to the Government.
In fact, both Magnum and Berjaya Sports Toto showed that they were able to post YoY
growth in 1H19 despite the huge reduction in special draw days by 50% (11 days and 16
days respectively) as announced in Budget 2019 last year.
We believe Budget 2020 is a relief for the gaming sector, as there is no gaming-related
tax/duty hike this time around. As concerns on a potential tax/duty hike are now lifted,
sentiment on the sector should recover from here – especially as fundamentals remain
solid. All in, we maintain our OVERWEIGHT stance as the sector will remain robust
despite the current macro-economic uncertainties and the low-yield environment. Genting
Malaysia is our Top Pick in the casino space on the back of its c.5% yield, strong results
and ability to mitigate the gaming tax hike. We believe the steep share price correction
following the related-party transaction has severely overshot fundamentals. In the number
forecast operator space, we prefer Magnum on its consistent growth in sales per draw,
healthy yield outlook (c.6%) and potential non-core investment monetisation.
Lee Meng Horng +603 9280 8866
lee.meng.horng@rhbgroup.com
NBFI – Better Protection For The In Needs OVERWEIGHT
There are no changes to income tax relief pertaining to life insurance premiums/takaful
contributions. However, the scope of the mySalam scheme has been expanded. There is

25
Malaysia Strategy
also an additional personal accident coverage for civil servants that borrow from the Public
Sector Housing Board or LPPSA.
To recap, the Government launched mySalam in 2019 for the lower-income B40 group.
This health protection scheme is an initiative to provide 3.8m B40 individuals – aged 18 to
55 years and their spouses – with free takaful health protection. Note that there will be a
one-off cash support of MYR8,000 given to recipients diagnosed with one of 36 critical
illnesses, as well as income replacements of MYR50 per day – for a maximum of 14 days
– will be given to those warded at government hospitals.
The scope and coverage has now been expanded to provide free takaful health protection
to individuals aged 56 to 65 – benefiting an additional 1.5m individuals – and covers up to
45 critical illnesses from 36 previously.
Separately, individuals with gross annual income up to MYR100,000 – and diagnosed with
one of the 45 critical illnesses – will receive a one-off cash payout of MYR4,000 and
additional income replacements of MYR50 per day for those warded at government
hospitals – subject to the same 14-day cap. This is expected to benefit up to 5m additional
Malaysians.
Civil servants who undertake mortgages from the LPPSA will now enjoy free personal
accident insurance coverage up to MYR100,000 for a 2-year period – this measure will
only apply to new mortgages. It is currently unclear whether such costs will be borne by
the Government or the insurers. Syarikat Takaful Malaysia, as one of the panel takaful
providers, will likely be affected by this new measure. While management is still assessing
the impact, we believe the latter should be fairly manageable, given the short coverage
period and cap on payouts – which should limit the company’s exposure.
Fiona Leong +603 9280 8886
fiona.leong@rhbgroup.com
Plantation: Higher Replanting Incentives and B20 Biodiesel Implementation

OVERWEIGHT
The main initiatives in Budget 2020 that affect the plantation industry include:
i. Allocating MYR550m for an oil palm replanting loan fund for smallholders that will be
collateral-free, at an interest rate of 2% pa, with a tenure of 12 years including a 4-
year moratorium on repayment. The replanting will be undertaken using the latest
seedlings, and also be in compliance with Malaysian Sustainable Palm Oil (MSPO)
standards, to ensure better productivity and marketability;
ii. An allocation of MYR27m to support Malaysian Palm Oil Board’s (MPOB) efforts to
market palm oil internationally and counter anti-palm oil campaigns;
iii. Enhance the implementation of biodiesel, with B20 biodiesel for the transport sector
to be implemented by the end of 2020. This is expected to increase palm oil demand
by 500,000 tonnes pa;
iv. The Locals@Work hiring cost equalisation programme is aimed at incentivising the
shift away from low-skilled foreign workers dependency. The wage incentive for
Malaysians hired to replace foreign workers is at either MYR350 or MYR500 per
month, depending on the sector, for two years. The corresponding hiring incentive for
employers is up to MYR250 per month for two years;
v. The minimum wage for major cities will be increased to MYR1,200 per month
effective 2020 (from MYR1,100/tonne);
vi. For the rubber farmers, the Government will allocate MYR200m for Bantuan Musim
Tengkujuh to eligible rubber smallholders under Rubber Industry Smallholders
Development Authority (RISDA) and Lembaga Industri Getah Sabah (LIGS). The
Government will provide MYR100m for rubber production incentives in 2020 to
enhance the income of smallholders faced with low rubber prices;
vii. For the Felda community, there will be MYR250m for an income-enhancement
programme benefiting 11,600 settlers; MYR300m to write off the interest of the
settlers’ debts; MYR100m for Felda water supply projects; MYR70m for housing the
new generation of Felda settlers; and MYR90m for the upgrading of Felda roads and
basic infrastructure. Separately, the Government will provide MYR738m for RISDA
and Federal Land Consolidation and Rehabilitation Authority (FELCRA) to implement
various income-generating programmes to benefit the more than 300,000 RISDA and
100,000 FELCRA smallholders.

26
Malaysia Strategy
Overall, we believe Budget 2020 is positive for the plantation industry. We note with relief
that the minimum wage hike is only applicable to major cities – which means plantation
companies are not likely to be affected, given that the bulk of their estates are in smaller
cities and rural areas. The wage incentive to hire locals instead of foreign workers may
work more for other sectors like industrial and manufacturing, and is not really suitable for
plantations, where the bulk of the work is out in the field.
A potential positive impact to prices could come in the form of the B20 biodiesel mandate
for the transport sector to be implemented by 2021, as this would eliminate 0.5m tonnes of
CPO stock in the market. This would be a decline of about 3.4% from estimated stock
levels at end-2019. However, we are wary of the feasibility of the implementation of this
mandate, given the potentially negative feedback from other stakeholders like motor
vehicle manufacturers. In addition, the Government has yet to address the issue of
potential subsidies required to fund the biodiesel industry if the palm oil-gas oil spread
goes to negative, and biodiesel is no longer financially feasible. In order for B20 to be
implemented without hiccups, there should be a mechanism in place for a biodiesel fund –
similar to that of Indonesia.
The allocation to assist smallholders to replant landbank is also positive, and we estimate
MYR550m could help at least 30,000 ha of land get replanted, assuming replanting costs
of around MYR18,000/ha.
Lastly, the incentives for rubber smallholders would help the rubber industry, but are
unlikely to be available for larger listed players with rubber landbank. In addition, the
incentives for Felda settlers would be positive for palm oil smallholders, but would not
have any major impact on listed planters.
Overall, we believe Budget 2020 should have a net positive impact for the sector, although
the impact may not be very significant. We make no changes to our OVERWEIGHT sector
call.
Hoe Lee Leng, +603 9280 8860
hoe.lee.leng@rhbgroup.com
Rubber Products – Minimal Impact OVERWEIGHT
Higher minimum wage of MYR1,200 in major cities

The Government is proposing the increase in minimum wage rate in “major cities” to
MYR1,200 per month from MYR1,100 currently. Pending clarity and details on the major
cities list, we keep our earnings forecasts and TPs for the rubber products producers.
We understand labour costs make up only 8-12% of the rubber glove makers’ total costs.
Hence, the 9% increase in labour costs will only increase total costs marginally: c.1%. As
a result, we believe the impact to earnings is minimal, even if the increase does hit the
areas where the rubber glove players have their operations.
Alan Lim +603 9280 8890
alan.lim@rhbgroup.com
Banks – Strengthening Access To Financing NEUTRAL
Financing for SMEs. As part of the effort made to strengthen access to financing for
businesses, Budget 2020 contained several proposals for SMEs in priority segments –
those that are export-oriented, produce halal products, or invest in automation and
digitalisation. The proposals include higher government guarantees and allocations, an
annual interest rate subsidy of 2% to reduce borrowing costs, and support for equity
crowd-funding and peer-to-peer (P2P) platforms.
Currently, several banks participate in Credit Guarantee Corporation Malaysia’s (CGC)
guarantee schemes for lending to SMEs. CGC, which is 78.6%-owned by Bank Negara
Malaysia (BNM), facilitates SMEs’ access to financing through its guarantee schemes.
The proposals for higher allocation and guarantees, we believe, would support banks’
continued efforts to grow their SME loan portfolios.
Merger of DFIs. To strengthen the development finance ecosystem, BNM is proposing a
2-phase restructuring plan to form a new financial institution through the merger of Bank
Pembangunan Malaysia, Danajamin Nasional, SME Bank and the Export-Import Bank of
Malaysia. There were, however, no details on the merger plans for these development
financial institutions (DFIs).

27
Malaysia Strategy
We believe the rationale for a consolidation of the DFIs could perhaps be driven by the
potential for improvement in operational efficiency and a more structured strategy to
support the country’s development goals. Overall, we believe this would not have any
material impact on the listed banking groups.
License for digital banks. There was a reiteration of BNM’s plans to finalise the licensing
framework for digital banks by end-2019 for public consultation. The final framework will
be issued by 1H20, to invite applications.
In late March, BNM announced that it was working towards the release of licensing
guidelines for digital banks in Malaysia by end-2019. By June, BNM revealed that more
than 10 parties have expressed interest in setting up digital banks in Malaysia. This
includes Grab, and at least four banks.
How disruptive this new breed of banks would be, should depend on the parameters under
which digital banks will be allowed to operate. For incumbent banks, a level playing field –
such as requirements on capital, liquidity, know-your-customer rules, and responsibility in
serving the under-banked – would be important, as this would enable old and new players
to compete effectively.
Fiona Leong +603 9280 8886
fiona.leong@rhbgroup.com
Consumer – Nominally Positive NEUTRAL

Unsurprisingly, Budget 2020 is, by and large, a consumer-friendly one. Essentially, total
allocation for subsidies and social assistance will be raised to MYR24.2bn in 2020, from
MYR22.3bn in 2019. Specifically, the allocation for cash handouts – Bantuan Sara Hidup
(BSH) to the B40 group will be unchanged from last year. This will help to contain the
inflationary pressure within the low-income segment.
The higher minimum wage of MYR1,200 from MYR1,100 in major cities will lead to higher
disposable income. This, together with the Malaysians@work initiative and the strategy to
attract FDI will create more job opportunities – which lends support to consumer spending.
As such, we foresee resilient topline growth for consumer staple companies including
Power Root, NTPM, and Nestle.
Meanwhile, the focus in driving tourism under the Visit Malaysia 2020 (VMY2020) effort
bodes well for the sector. The Government is targeting 30m tourist arrivals in 2020, which
implies an increase of c.10% YoY. If the target is met, we believe retail-based consumer
companies including AEON, Padini and Berjaya Food, will be able to benefit. Convenience
store operators, namely Mynews and 7-Eleven Malaysia, can also capitalise from the
higher footfall to stores.
Elsewhere, the clear intention not to revert to GST would be positive to businesses in
eliminating the uncertainties and avoiding another round of transition hassles. The
absence of a sin tax is a relief for both the tobacco and brewer industries. That said, we
highlight that the last round of excise duty hike in either of the industries was not
announced in the Budget. The flotation of the fuel price should increase transportation
costs. That said, the minimum 18% reduction in PLUS toll rates is likely to relieve some of
the pressure. Further downside risks are the potential spillover effects of the increase in
fuel prices on general prices.
All in all, we are nominally positive on the Budget 2020, given the usual approach and
focus in supporting consumer spending, and managed inflationary pressure. We maintain
NEUTRAL on the sector, in anticipation of resilient consumer spending – but current
valuations are not compelling. Our Top Picks include Power Root, Padini, Heineken and
NTPM.
Soong Wei Siang +603 9280 8865
soong.wei.siang@rhbgroup.com
Healthcare – Enjoying Minimal Boost NEUTRAL

Private hospitals benefited slightly
The Ministry of Health received a higher allocation of MYR30.6bn vs last year’s

MYR28.7bn. We believe that several announcements – related to the healthcare sector in
the form of the Malaysia Year of Healthcare Travel and expanded scope of mySalam –

28
Malaysia Strategy
should have a long-term positive impact. However, the near-term earnings impact is
minimal. Hence, we keep our NEUTRAL call.
There is a new initiative: 2020 will be the Malaysia Year of Healthcare Travel. The aim is
to strengthen the country’s image as the first choice for medical tourists in the region. We
expect private hospitals to benefit from this, as it should lead to a higher number of
inpatient and outpatient numbers. Historically, the growth of medical tourism has been
astounding: 17% annual growth from 2015 to 2018. In 2018, there were 1.2m healthcare
travellers that visited Malaysia, contributing MYR1.5bn in revenue receipts to the country.
For this purpose, MYR25m was allocated to the Malaysian Healthcare Tourism Council.
The Government has also expanded the scope of the mySalam scheme. To recap, the
Government launched this health protection scheme on 24 Jan for the lower-income B40
group. It is an initiative to provide 3.8m B40 individuals – aged 18 to 55 years and their
spouses – with free takaful health protection. It offered a one-off cash support of
MYR8,000 given to recipients diagnosed with one of 36 critical illnesses and income
replacements of MYR50 per day. This will be for a maximum of 14 days and will be given
to those warded at government hospitals.
From 2020 onwards, the scope and coverage has now been expanded to provide free
takaful health protection to individuals aged 56 to 65 – benefiting 1.5m additional
individuals – and covers up to 45 critical illnesses from 36 previously. Separately,
individuals with gross annual income up to MYR100,000 – and diagnosed with one of 45
critical illnesses – will receive a one-off cash pay-out of MYR4,000. There will also be
additional income replacement of MYR50 per day for those warded at government
hospitals – subject to the same 14-day cap. This is expected to benefit up to 5m additional
Malaysians.
Overall, we expect KPJ Healthcare and other hospitals to benefit from Malaysia Year of
Healthcare Travel in 2020. However, the impact from the expanded scope of mySalam is
neutral, as it is targeted at B40 individuals to visit government hospitals.
Alan Lim, CFA +603 9280 8890
Oil & Gas: No Special Dividend From Petronas NEUTRAL

The Government will not request any special dividend from Petronas this year, unlike in
2018 when the national oil company forked out a MYR30bn one-off special dividend. With
that, Petronas does not need to incur substantial cash outflow, and will be able to ramp up
capex spending. Recall that Petronas spent MYR15.8bn in 1H19 (-21% YoY), which
accounted for only 32% of its targeted full-year capex of RM50bn (+7% YoY).
Meanwhile, we have better clarity on the implementation of the fuel targeted subsidy
programme (PSP). Individuals who own not more than two cars and two motorcycles are
eligible to receive PSP for one vehicle – as long as the vehicle is:
i. A passenger car with a 1,600cc engine capacity and below;
ii. Any car with a capacity of 1,600cc that is more than 10 years old;
iii. A qualified motorcycle with 150cc and below; or
iv. Any motorcycles above 150cc that are more than seven years old.
PSP will be launched in Peninsular Malaysia in Jan 2020. For eligible recipients of BSH,
the petrol subsidy receivable of MYR30 per month (car owners) and MYR12 per month
(motorcycle owners) will be deposited into the recipient’s bank account every four months,
from Apr 2020 onwards. All other motorists who are not BSH recipients will receive a
special Kad95 to enjoy the fuel subsidy when purchasing RON95 at the petrol station. The
Kad95 will be implemented progressively during the first quarter of 2020. We see muted
earnings impact to fuel retailers, Petronas Dagangan and Petron Malaysia.
Overall, Budget 2020 is a non-event for the oil and gas sector as no material initiatives
were announced. Reiterate NEUTRAL on the sector with our Top Picks being Dialog and
Yinson.
Sean Lim Ooi Leong +603 9280 8867
sean.lim@rhbgroup.com

29
Malaysia Strategy
Property – Some Relief But Insufficient For a Recovery NEUTRAL

Key highlights for the property sector under Budget 2020 are:
i. The threshold on high-rise property prices in urban areas for foreign ownership is
lowered to MYR600,000 from MYR1m in 2020;
ii. The base year for real property gains tax (RPGT) is revised to 1 Jan 2013 for assets
acquired before 1 Jan 2013, vs the previous base year of 1 Jan 2000;
iii. MYR10bn financing will be provided by the financial institutions (FIs) under the rent-to-
own (RTO) scheme, with support from the Government via a 30% or MYR3bn guarantee.
The RTO scheme is for the purchase of a first home up to a MYR500,000 property price.
The Government will also provide stamp duty exemptions on the instruments of transfer
between the developer and FIs, and between FIs and the buyer in this scheme;
We are mildly positive on Budget 2020. The relief measures targeted at the property
sector should have a slight positive impact over the near term.
The lower minimum price for foreign ownership should encourage foreigners to purchase
a wider pool of properties, but the effectiveness of this initiative would depend on whether
each individual state would follow the guideline. Currently, Penang and Selangor are the
states that have different floor prices for foreign property buyers. Assuming all the states
follow the new standards, we believe this should help to ease the glut in the high-end
property segment more effectively.
Meanwhile, although there is no change in the RPGT regime, the revision in base year to
1 Jan 2013 would result in property owners incurring lesser RPGT upon the disposal of
their properties. Property prices peaked in 2012/2013, and hence, by setting the market
value on 1 Jan 2013 as the property acquisition price (vs 1 Jan 2000 previously), the
amount of gain subject to tax should be lower.
Given the Government’s support for the RTO scheme, first-time home buyers are allowed
to use the scheme to purchase property of up to MYR500,000/unit. Although this could
encourage more banks to participate, we believe interest from developers would remain
lukewarm, given the discounts and deferred payment terms that they have to accept from
the financial institutions.
The Government’s commitment to proceed with the Bandar Malaysia project and Rapid
Transit System (RTS) between Johor Bahru and Singapore should provide good
confidence as the market was not certain if both projects would be carried out previously,
due to the lack of follow-ups. The RTS is likely to have a more profound impact on the
Iskandar property market, as connectivity between Johor Bahru and Singapore would be
improved significantly.
We also applaud the Government’s initiative to make Port Klang a regional maritime
centre and cargo hub. If the Government decides to expand the port to Pulau Carey, Sime
Darby Property should be the prime beneficiary – since it has an option to buy 2,000 acres
of land there. The Government is currently undertaking an in-depth feasibility study on the
potential development. We also welcome its plan to boost FDI and the tourism sector next
year, as this should help to create a higher number of quality jobs, as well as improve the
inflow of foreign visitors over the medium term.
Despite the relaxation of certain policies, we do not expect an immediate and significant
change in real property demand, as the impact of the overall Budget 2020 on economic
growth would be rather muted. Our Top Pick remains Sunway.
Loong Kok Wen, CFA +603 9280 8861
loong.kok.wen@rhbgroup.com
Technology – Digital Transformation NEUTRAL

In Budget 2020, the Government emphasised the digital transformation and will provide
tax incentives to further promote high-value-added activities in the electrical and
electronics (E&E) industry, to transition into a 5G digital economy and Industry 4.0. Below,
we list the measures that could potentially benefit E&E companies under the technology
sector, such as Globetronics Technology, Inari Amertron, JHM Consolidation, Malaysian
Pacific Industries (MPI) and Unisem.
i. Income tax exemption of up to 10 years for E&E companies investing in selected
knowledge-based services;

30
Malaysia Strategy
ii. Special investment tax allowance to encourage companies in the E&E sector that have
exhausted the reinvestment allowance to further reinvest in Malaysia;
iii. Allocate RM550m to provide smart automation matching grants to 1,000 manufacturing
and 1,000 service companies to automate their business processes. This grant will be
given on a matching basis, and capped at MYR2m per company;
iv. Accelerated capital allowance and automation equipment capital allowance for the
manufacturing sector on the first MYR2m and MYR4m incurred on qualifying capital
expenditure, is extended to the year of assessment 2023;
v. The incentive is also to be expanded to include the services sector on the first MYR2m
incurred on qualifying capital expenditure from the year of assessment 2020 to the
year of assessment 2023.
However, the proposed increase in minimum wage to MYR1,200 per month effective 2020
from MYR1,100 per month in major cities is a slight negative to the manufacturing
companies – as they are mainly based in Penang and Klang Valley. Although most of
them are paying above the minimum wage level, there are some operators paying
minimum wage salaries, and there could be a small increment in costs if this cannot be
passed on to the customers.
In the meantime, GHL Systems and Revenue Group could benefit from the initiative in
building a Digital Malaysia:
i. A 50% matching grant of up to RM5,000 per company for the adoption of
digitalisation measures, including electronic point-of-sale systems (e-POS),
enterprise resource planning (ERP), and electronic payroll system. This matching
grant will be worth MYR500m over five years, limited to the first 100,000 SMEs
applying to upgrade their systems;
ii. A one-time RM30 digital stimulus to qualified Malaysians aged 18 and above, with
annual income of less than RM100,000. It can be redeemed and used for a 2-month
period commencing 1 Jan 2020 and expiring on 29 Feb 2020. Khazanah Nasional
will be tasked to implement this MYR450m initiative.
Lee Meng Horng +603 9280 8866
lee.meng.horng@rhbgroup.com
Telecommunications: NFCP Impetus NEUTRAL

The Government will set aside MYR250m from the National Fiberisation & Connectivity
Plan (NFCP) to improve broadband access and connectivity in remote areas – more
specifically Sabah and Sarawak – via various technologies, including the use of satellite
technology for broadband. MYR210m will also be allocated to accelerate the deployment
of digital infrastructure for public buildings, ie schools and high economic impact areas
such as industrial parks/zones.
Broadly, the allocations should benefit the telcos, which are already capitalising on the
MYR21.6bn NFCP blueprint –launched by the Government on 19 Sep. The focus on East
Malaysia is to be expected, given the significantly lower broadband penetration vs West
Malaysia.
We note that Maxis, DiGi.Com (Digi), and Celcom have rolled out commercial broadband
services in Sabah and Sarawak – leveraging on the revamped Mandatory Standards of
Access Pricing framework. Maxis is the largest broadband access seeker, with access
agreements inked with Telekom Malaysia (TM), Sacofa, and Celcom Timur. Digi also
recently inked fibre backhaul and inter-region submarine connectivity agreements with
TM, which allows the company to strengthen its fixed and mobile broadband offerings in
the two states.
We expect the telco infrastructure and service providers – such as OCK Group and
Redtone – to also benefit from the allocations. This is given the demand for additional cell
sites for coverage in rural areas, capacity demands, and potentially greater 5G spending
in the medium to longer term.
The industry is still awaiting further clarity on mobile spectrum allocations, which should
have a bearing on the level of capex spending to meet NFCP obligations and for 5G
rollout. The Malaysian Communications & Multimedia Commission plans to assign 5G
spectrum in 1H20, with the spectrum to come into effect from Jul 2020.
Jeffrey Tan, +603 9280 8863
jeffrey.tan@rhbgroup.com

31
Malaysia Strategy
Transport – Airports And Ports To Benefit NEUTRAL

Recognising key beneficiaries
We believe several announcements related to the transportation sector – in the form of
Visit Malaysia 2020 (VMY2020), infrastructure developments, feasibility studies, and a
logistics hub – will have a long-term positive impact. However, the near-term earnings
impact should be minimal. We maintain our NEUTRAL weighting on the sector.
We expect a positive impact in the aviation sub-sector. We forecast a higher passenger
volume for both Malaysia Airports and AirAsia X in 2020, due to the VMY2020 campaign,
which aims to bring in more tourists to Malaysia. The Government has allocated
MYR1.1bn to the Ministry of Tourism, Arts and Culture – with a specific amount of
MYR90m dedicated to boost awareness, promotions and programmes for VMY2020.
There is also a plan to upgrade Sultan Azlan Shah Airport in Ipoh, which is managed by
MAHB. The upgrade is for an extension of the runway and funding will be on a public-
private partnership basis.
For the ports, the Ministry Of Transport (MOT) will commence two projects with a total
cost of MYR8.3bn for:
i. Feasibility studies on the Serendah-Port Klang Rail Bypass for cargo shipments;
ii. The Klang Logistics Corridor, which is a dedicated privatised highway connecting
Northport and Westport for commercial vehicles.
For Port Klang road repair and maintenance works, a sum of MYR50m has been
allocated.
The Government is also undertaking an in-depth feasibility study on the development of
Carey Island. It aims to turn Port Klang into a regional maritime centre and cargo logistics
hub combining manufacturing, distribution, cargo consolidation, bunkering and ship repair
services. We expect the impact to be neutral, as this should be a long-term development –
so there should be no major expansion of capacity in the near term.
We believe these initiatives will be a long-term positive for Westports and Malaysia port
players, as better connectivity should lead to higher efficiency and a bigger competitive
advantage over ports in other countries. However, the near-term impact on earnings is
minimal – so we maintain our FY19-21 forecasts.
On the logistics sub-sector, the Government plans to strengthen trade with Thailand via a
100-acre logistics hub called Kota Perdana Special Border Economic Zone (SBEZ) at
Bukit Kayu Hitam. This should be slightly positive to Freight Management’s trucking
division but neutral for POS Malaysia and GD Express. However, as the near-term
earnings impact will be minimal, we make no change to our projections for FY19-21.
Alan Lim, CFA +603 9280 8890
Utilities: Renewable Energy Push Continues NEUTRAL

In Budget 2020, the Government reiterated its stance to migrate the current power
purchase system towards a wholesale market in future. It is also continuing to push for
renewable energy initiatives with the extension of the Green Investment Tax Allowance
and Green Income Tax Exemption incentives to 2023. At the same time, a 70% income
tax exemption of up to 10 years will be given to companies undertaking solar leasing
activities.
All this is no surprise to us, as it is in line with the recently approved Malaysia Electricity
Supply Industry 2.0 reform initiative. While industry regulatory reform will be a long journey
to pursue, we see muted near-term earnings impact towards the listed utilities stocks. In
all, we maintain NEUTRAL on the sector.
Sean Lim +603 9280 8867
sean.lim@rhbgroup.com

32
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Berhad must be placed with and through Auerbach Grayson (“AG”). Any order for the and the information contained in this report is not considered as insider information
purchase or sale of all other securities discussed herein must be placed with and prohibited by law. Insider means:
through such other registered U.S. broker-dealer as appointed by RHB from time to a. a commissioner, director or employee of an Issuer or Public Company;
time as required by the Exchange Act Rule 15a-6. This report is confidential and not b. a substantial shareholder of an Issuer or Public Company;
intended for distribution to, or use by, persons other than the recipient and its c. an individual, who because of his position or profession, or because of a
employees, agents and advisors, as applicable. Additionally, where research is business relationship with an Issuer or Public Company, has access to inside
distributed via Electronic Service Provider, the analysts whose names appear in this information; and
report are not registered or qualified as research analysts in the United States and d. an individual who within the last six months was a Person defined in letters a, b
are not associated persons of Auerbach Grayson AG or such other registered U.S. or c, above.
broker-dealer as appointed by RHB from time to time and therefore may not be
subject to any applicable restrictions under Financial Industry Regulatory Authority Singapore
(“FINRA”) rules on communications with a subject company, public appearances and Save as disclosed in the following link (RHB Research conflict disclosures – Oct
personal trading. Investing in any non-U.S. securities or related financial instruments 2019) and to the best of our knowledge, RHB Securities Singapore Pte Ltd hereby
discussed in this research report may present certain risks. The securities of non- declares that:
U.S. issuers may not be registered with, or be subject to the regulations of, the U.S. 1. RHB Securities Singapore Pte Ltd, its subsidiaries and/or associated
Securities and Exchange Commission. Information on non-U.S. securities or related companies do not make a market in any issuer covered in this report.
financial instruments may be limited. Foreign companies may not be subject to audit 2. RHB Securities Singapore Pte Ltd, its subsidiaries and/or its associated
and reporting standards and regulatory requirements comparable to those in the companies and its analysts do not have a financial interest (including a
United States. The financial instruments discussed in this report may not be suitable shareholding of 1% or more) in the issuer covered in this report.
for all investors. Transactions in foreign markets may be subject to regulations that 3. RHB Securities, its staff or connected persons do not serve on the board or
differ from or offer less protection than those in the United States. trustee positions of the issuer covered in this report.
4. RHB Securities Singapore Pte Ltd, its subsidiaries and/or its associated
companies do not have and have not within the last 12 months had any
DISCLOSURE OF CONFLICTS OF INTEREST corporate finance advisory relationship with the issuer covered in this report or
any other relationship that may create a potential conflict of interest.
RHB Investment Bank Berhad, its subsidiaries (including its regional offices) and 5. RHB Securities Singapore Pte Ltd, or person associated or connected to it do
associated companies, (“RHBIB Group”) form a diversified financial group, not have any interest in the acquisition or disposal of, the securities, specified
undertaking various investment banking activities which include, amongst others, securities based derivatives contracts or units in a collective investment
underwriting, securities trading, market making and corporate finance advisory. scheme covered in this report.
34
6. RHB Securities Singapore Pte Ltd and its analysts do not receive any
compensation or benefit in connection with the production of this research
report or recommendation.
Hong Kong
The following disclosures relate to relationships between RHBHK and companies
covered by Research Department of RHBSHK and referred to in this research report:
RHBSHK hereby certifies that no part of RHBSHK analyst compensation was, is or

will be, directly or indirectly, related to the specific recommendations or views
expressed in this research report.
RHBHK had an investment banking services client relationships during the past 12
months with: -.
RHBHK has received compensation for investment banking services, during the past
12 months from: -.
RHBHK managed/co-managed public offerings, in the past 12 months for: -.
On a principal basis. RHBHK has a position of over 1% market capitalization of: -.
Additionally, please note the following:
Ownership and material conflicts of interest: RHBSHK policy prohibits its

analysts and associates reporting to analysts from owning securities of any company
covered by the analyst.
Analyst as officer or director: RHBSHK policy prohibits its analysts, and

associates reporting to analysts from serving as an officer, director, advisory board
member or employee of any company covered by the analyst.
RHBHK salespeople, traders, and other non-research professionals may provide oral
or written market commentary or trading strategies to RHB clients that reflect
opinions that are contrary to the opinions expressed in this research report.
KUALA LUMPUR JAKARTA

RHB Investment Bank Bhd PT RHB Sekuritas Indonesia
Level 3A, Tower One, RHB Centre Revenue Tower, 11th Floor, District 8 - SCBD
Jalan Tun Razak Jl. Jendral Sudirman Kav 52-53
Kuala Lumpur 50400 Jakarta 12190
Malaysia Indonesia
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HONG KONG BANGKOK

RHB Securities Hong Kong Ltd. RHB Securities (Thailand) PCL
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Hong Kong Thailand
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SINGAPORE
RHB Securities Singapore
Pte Ltd.
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Tel : +65 6533 1818
Fax : +65 6532 6211
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RHB Report My - 2020 Budget Review - 20191012 - RHB 28423277063490795da1806422fe0

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RHB Report My - 2020 Budget Review - 20191012 - RHB 28423277063490795da1806422fe0

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Malaysia Strategy

11 October 2019 Strategy | Strategy - Malaysia

Strategy – Malaysia 2020 Budget

MYR56bn, with measures for rural development, infrastructure maintenance, 16.6

increasing female participation in the workforce, and vocational training.

An Expansionary Budget For 2020

Figure 1: The Government’s financial position

See important disclosures at the end of this report

Figure 2: MOF’s GDP growth forecasts

Source: MOF, RHB

See important disclosures at the end of this report

First Thrust: Driving Economic Growth In The

See important disclosures at the end of this report

Strategy 2: Accelerating the digital economy

See important disclosures at the end of this report

Strategy 3: Strengthening access to financing for business

See important disclosures at the end of this report

Restructuring development financial institutions:

Strategy 4: Strengthening economic diversity

See important disclosures at the end of this report

Enhancing the research & development (R&D) framework

See important disclosures at the end of this report

Second Thrust: Investing In Malaysians –

See important disclosures at the end of this report

Strategy 6: Modernising the labour market

See important disclosures at the end of this report

Strategy 7: Investing in education and talent

See important disclosures at the end of this report

Third Thrust: Creating a United, Inclusive and

See important disclosures at the end of this report

Social enterprise and community development:

See important disclosures at the end of this report

See important disclosures at the end of this report

Strategy 9: Towards better health services

See important disclosures at the end of this report

Strategy 10: Enhancing the transportation ecosystem

See important disclosures at the end of this report

Strategy 11: Promoting access to housing

Strategy 12: Unity through sports

See important disclosures at the end of this report

Strategy 13: Promoting environmental sustainability

See important disclosures at the end of this report

Fourth Thrust: Revitalisation Of Public

Strategy 14: Commitment to fiscal consolidation

See important disclosures at the end of this report

Rationalising government expenditure:

Strategy 15: Strengthening Institutions, Governance & Integrity

See important disclosures at the end of this report

Figure 3: Earnings outlook and valuations

Figure 4: FBM KLCI – weightings & valuations

AMMB^ 11.6 1.28 5.9 14.5 (1.4) 9.1 7.9 8.1

Nestle 33.7 3.71 2.5 3.6 6.1 51.1 49.3 46.5

Dialog 19.2 2.11 17.6 25.0 10.1 49.3 39.4 35.8

Hartalega 17.5 1.92 3.9 19.3 22.2 37.7 31.6 25.9

Axiata 39.2 4.31 (31.6) 25.9 16.0 47.1 37.4 32.2

MAHB 14.5 1.59 80.4 22.6 21.8 33.5 27.3 22.4

See important disclosures at the end of this report

Figure 5: Top BUYs

Figure 6: Top SELLs

See important disclosures at the end of this report

Figure 7: High-dividend yield stocks

Figure 8: RHB basket of stocks – sector weightings & valuations

See important disclosures at the end of this report