Strategy Note - Must-Own Stocks For Long-Term Investing

MalaysiaEquity researchOctober 9, 2015
Strategy Note
Malaysia Strategy
Must-own stocks for long-term investing
Highlighted companies
GHL Systems Bhd
ADD, TP RM1.65, RM1.09 close
GHL is entering an exciting growth phase with
its physical and online merchant acquisition
strategy following the implementation of
transaction payment acquisition model in
Malaysia and Philippines this year. We expect
GHL to benefit from the Malaysian
governments ETP initiatives to promote epayment adoption.
MY E.G. Services
We like MyEG's management for its
innovative and entrepreneurial ability to add
commercial value to its e-government
services. Over the next few years, strong
earnings growth will be driven, in our view, by
the foreign workers working permit renewal
services and the custom service tax
monitoring project.
Only World Group Holdings
We like OWG for its captive market business
model in Genting Highlands and Komtar. This
superior long-term economic moat will drive
explosive earnings growth over the next few
years, in our view, as the new 20th Century
Fox theme park and Komtar comes onstream
and matures.
What stocks should investors buy for 3-5 year horizons when it is difficult enough to
outperform in 6-12 months?
Based on a matrix taking into consideration management, financials, valuation and

growth, we come out with a list of top choices for each sector.
Greatest upside come from companies that 1) are smaller in size, 2) have ambitious
and aggressive management and 3) trade at attractive valuations.
Top-5 stocks with greatest long-term share price upside are Only World Group
(OWG), MyEG, GHL Systems, Hovid and RHB Capital.
Taking a long-term investment approach

While analysts typically have three-year earnings forecasts for companies under
coverage, it is standard practice to have price targets of only 6-12 month time horizons.
It is rare to have price targets of 18 months or further out due to the volatility of share
prices and demands from investors. It is our challenge to develop a methodology that
will help determine which stocks to choose for relatively long 3-5 year investment
horizons, and to estimate their share price upsides.
What determines share prices in long term?

Short-term share price movements are a function of the direction of sector and broader
market trends, quarterly results performance, corporate newsflow and analyst
recommendations and coverage. We believe long-term share price is determined more
by fundamentals of the stock such as management capability, financial strength, relative
valuations and earnings prospects. These are the four factors we focus on in this report.
Smaller caps with ambitious management tops

This exercise is not meant to pick the best sectors to overweight or underweight, but to
choose the one stock within each sector that we believe investors with very long-term
investment holding periods should buy. Based on the bottom-up approach, naturally it is
smaller caps that should enjoy stronger EPS growth and therefore higher long-term price
upside. Also, we believe those with aggressive and ambitious management that trade on
attractive valuations have the potential to provide the highest returns.
Long term large cap and smaller cap picks

Note that our assumptions for the longer term are biased towards a more positive macro
outlook without any major company-specific negative shocks. That means there could
be downside to our targets should any unforeseen developments take place. For larger
caps, the top-3 stocks with the highest potential share price upsides are RHB Cap,
Hartalega and Gamuda. For smaller caps, it is OWG, Myeg and GHL Systems.
Figure 1: Long-term stock-picking by sector

2018 target
Analyst
Terence WONG, CFA

T (60) 3 2261 9088
E terence.wong@cimb.com
Price (RM)
price (RM)
2020 target
Sector
Companies
2018 upside
Autos
Berjaya Auto
1.83
3.58
95.6%
price (RM)
4.17
2020 upside
127.9%
Banks
RHB Capital
6.13
13.12
114.0%
15.28
149.3%
Construction Gamuda
4.55
6.40
40.7%
7.20
58.2%
Consumer
QL Resources
4.12
5.52
34.0%
7.58
84.0%
Gaming
Genting Malaysia
4.48
6.00
33.9%
7.00
56.3%
Gloves
Hartalega
4.73
7.30
54.3%
8.30
75.5%
Healthcare
Hovid
0.46
1.00
117.4%
1.30
182.6%
Media
Astro
48.6%
Plantations
Genting Plant
Property
2.96
4.06
37.2%
4.40
10.30
14.72
42.9%
15.78
53.2%
Eco World
1.38
2.47
79.0%
3.37
144.2%
REIT
Axis REIT
1.69
2.04
20.7%
2.43
43.8%
Small caps
MyEG
2.68
6.65
148.1%
9.65
260.1%
Technology
GHL Systems
1.09
2.40
120.2%
3.65
234.9%
Telcos
Axiata
6.21
7.00
12.7%
9.00
44.9%
Timber
Ta Ann
3.79
5.40
42.5%
6.00
58.3%
Transport
Malaysia Airports
5.40
7.40
37.0%
7.69
42.4%
Utilities
Tenaga
12.28
16.06
30.8%
18.40
49.8%
Others
Only World Group
2.27
8.67
281.9%
14.66
545.8%
Average
74.6%
125.5%
SOURCES: CIMB, COMPANY REPORTS

IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.
Powered by EFA
SOURCE: COMPANY DATA, CIMB FORECASTS
TABLE OF CONTENTS
Long-term investments ............................................................................................................. 4
Stock selection criteria .............................................................................................................. 4
Which companies come out tops?............................................................................................. 5
Banking sector ........................................................................................................................ 11
Construction sector ................................................................................................................. 14
Gaming sector ........................................................................................................................ 19
Gloves sector ......................................................................................................................... 21
Healthcare sector.................................................................................................................... 25
Media sector ........................................................................................................................... 27
Plantation sector ..................................................................................................................... 30
Property sector ....................................................................................................................... 34
Smallcaps sector .................................................................................................................... 40
Technology sector .................................................................................................................. 43
Telecommunication sector ...................................................................................................... 47
Timber sector ......................................................................................................................... 50
Transport sector ..................................................................................................................... 52
Utilities sector ......................................................................................................................... 56
Others .................................................................................................................................... 59
Company Briefs................................................................................................................... 61
Figure 2: Must-own stocks for long-term investing

Company
Price
Target Price
(local curr)
(local curr)
CY2015
CY2016
2.96
3.70
3,635
24.8
Add
6.21
6.60
12,765
AXRB MK
Add
1.69
3.79
437
Bloomberg Ticker
Recom.
Astro Malaysia
ASTRO MK
Add
Axiata Group
AXIATA MK
Axis REIT
Berjaya Auto
Market Cap (US$ m)
Core P/E (x)
CY2016
Recurring ROE
(%)
CY2016
Dividend Yield
(%)
CY2016
22.17
98.5%
4.1%
2.50
11.8%
3.5%
-3.2%
0.92
11.1%
10.6%
3-year EPS CAGR

(%)
P/BV (x)
19.7
10.0%
24.2
23.7
-6.3%
8.6
8.5
BAUTO MK
Add
1.83
3.04
492
9.0
8.2
3.5%
3.18
49.6%
5.2%
Eco World Development Group Bhd
ECW MK
Add
1.38
1.90
770
46.7
27.2
192.4%
0.99
2.7%
0.7%
Gamuda
GAM MK
Add
4.55
5.88
2,585
16.2
15.8
2.8%
1.71
11.1%
2.5%
Genting Malaysia
GENM MK
Add
4.48
5.00
5,997
18.4
15.4
14.3%
1.42
8.5%
2.2%
Genting Plantations
GENP MK
Add
10.30
10.50
1,891
35.9
24.6
-7.5%
1.91
6.1%
1.6%
GHL Systems Bhd
GHLS MK
Add
1.09
1.65
166
45.9
26.3
51.0%
2.61
7.3%
0.0%
Hartalega Holdings
HART MK
Hold
4.73
4.62
1,832
29.5
23.5
11.1%
5.02
22.2%
1.7%
HOV MK
Hold
0.46
0.42
86
16.0
14.2
2.7%
1.77
13.3%
2.5%
Malaysia Airports Holdings
MAHB MK
Hold
5.40
5.43
2,115
58.8
38.8
15.5%
1.04
1.9%
0.8%
MY E.G. Services
MYEG MK
Add
2.68
3.92
758
24.5
14.4
63.2%
7.16
57.6%
1.1%
OWG MK
Add
2.27
3.66
99
22.0
13.9
38.7%
2.39
14.6%
0.7%
QLG MK
Add
4.12
4.93
1,214
24.5
20.8
7.9%
2.98
15.4%
1.2%
RHBC MK
Add
6.13
9.00
3,746
7.4
6.8
-1.8%
0.75
12.3%
4.0%
Ta Ann
TAH MK
Hold
3.79
3.35
332
11.8
9.5
5.6%
1.20
12.0%
5.5%
Tenaga Nasional
TNB MK
Add
12.28
16.38
16,363
10.2
9.6
0.7%
1.25
15.2%
2.5%
24.1
17.8
26.7%
3.4
16.7%
2.1%
Hovid Bhd

QL Resources
RHB Capital Bhd
Average
Must-own stocks for long-term

investing
Long-term investments
Background
The purpose of this report is to identify stocks that investors can buy and hold
for long periods of time without worrying too much, while at the same time
enjoying significant price appreciation. The idea behind this report first
emerged two years ago ahead of the 2013 general elections, when investors
that were tired of the short-term political risks wanted us to generate a list of
stocks that funds could hold for 2-3 years or longer without causing sleepless
nights. Some investors requested stocks with even longer holdings periods of
3-5 years. The list we generated was intuitively derived from the top blue chips
of each sector, companies that had size, scale and track records to be
considered "safe" investments.
While these safe investments likely protected investors from downside risks,
whether they would have provided the best long term returns is another matter.
As a result, this time around we attempt to approach the issue more
systematically and to develop a stock picking model based on criteria that we
believe will have the greatest impact on share prices, not in the immediate to
short term, which is anything from weeks to a year, but in the medium to long
term which should be anywhere from 2-5 years. Although some investors also
hold stock beyond the 5-year or even 10-year period, they far less common.
Definition of long term

Different investors have different definitions of "long term." For analysts, target
prices are typically within 6-12 months or by calendar year-end. Occasionally, it
is 15 months and, really stretching it, analysts have a price target for 18 months
down the road, which could be next year-end's target price. As a result, the
analysts' definition of long term is perhaps one year, while the definition of
medium term is generally half a year and the definition of short term is a few
weeks to perhaps three months. Warren Buffet, on the other hand, often holds
stocks for 30 years or longer and prefers never to sell. Such a definition of
long term does not exist in analysts' vocabulary. If it did, many brokers could
go out of business.
But in this report, we hope to stretch the time horizon longer to at least 2-3
years, or even 3-5 years, and that requires a different kind of stock-picking
discipline. A long-term stock-picking methodology has several advantages over
its relatively short-term counterparts, including looking beyond immediate- to
short-term hiccups suffered by certain companies, or even short- to mediumterm down cycles suffered by certain sectors. Another advantage, in our view,
of the methodology that we have applied is that it places heavy emphasis on
the quality of the management of a firm, which we believe getting right means
half the battle being won.
Stock selection criteria

Methodology
Short-term share price movements (6-12 months) are a function of many
factors including the direction of the sector and broader market, quarterly
results performance, corporate newsflow and analyst recommendations and
coverage. A buoyant stocks market in general lifts all boats, while a buoyant
sector will help rerate all stocks within that sector. Strong earnings results that
4
beat analysts expectations often lead to immediate share price

outperformance, too. Positive corporate developments, whether relating to the
award of new contracts and projects, favourable M&A activity or positive policy
measures, also help build momentum for a stock's price ascent. Finally, a
favourable rating from analysts or a new initiation could boost interest and
funds flow into a stock. Likewise, the reverse is true for all these factors, as well.
The above are some of the factors that analysts pay close attention to in order
to pick stocks that will outperform or underperform during a one-year period.
But long-term share price performance (2-5 years) strips out a lot of these
"noises" and "bumps" that often gets analysts and investors excited or
depressed for days, week or perhaps even months, and we have identified four
key criteria that we believe are of highest importance. These are 1)
management capability, 2) financial strength, 3) relative valuations and 4)
earnings prospects.
Management capability can be broken down into five areas, i.e. corporate
governance, ambition, execution, innovation and transparency. A company
that practices strong corporate governance and is transparent provides
investors greatest comfort against corporate transgressions. A firm with
management that has high ambitions, strong execution and practices
innovation is primed for robust growth, especially over the longer term.
Financial strength of a company determines its ability to weather
downturns and black swan events. It also helps determine a company's
capacity to fund organic growth, pay dividends and take advantage of
emerging opportunities. We measure financial strength by looking at a
company's ROE, net gearing and profit margins.
Relative valuations are traditional financial measures used by analysts to
determine whether or not a company's share price is attractively priced.
Common measures used which we have also included are sum-of-parts
(SOP) or revalued net asset value (RNAV), dividend yield, price to earnings
ratio (P/E) and price to book values (P/BV). These financial measures are
used by analysts to set price targets for stocks.
Earnings growth over the long term or the compounded annual growth rate
(CAGR) is crucial in facilitating share price outperformance. As Albert
Einstein said, "compound interest is the 8th wonder of the world." A
company that can grow at a brisk pace of 25%-35% per annum will double
its earnings every 2-3 years. The share price of a stock generally moves in
line with its earnings, and this is particularly true over the long term.
In our stock-picking matrix, for simplicity we have assigned equal weighting to
all four criteria. While it is debatable whether that should be the case and
whether it will result in a correct prediction of the long-term outlook of a
company, this entire exercise can be considered very subjective in nature in
the first place and is meant to give investors food for thought and a rough
means of coming to a stock-picking conclusion. It is certainly not an exact
science.
Which companies come out tops?

Highest-rated company in each sector
All in, we have rated 18 sectors ranging from the major ones such as banks,
plantations, telecommunications and utilities to far smaller ones such as
properties, gloves, technology, autos and smaller caps. The scoring we have
undertaken is not strictly comparable between different sectors but is
comparable within the same sector, as different analysts have different relative
scores assigned to the various criteria and sub-criteria. Not surprising is that
many of the companies which top their sectors in this exercise coincide with
our top sector picks, too. If this were not the case, it would mean that our
existing favourite sector picks were short term in nature.
However, for several sectors the second-placed company scored closely
behind the top-placed company. These include Maybank in the banking sector,
Mah Sing in the property sector, Cypark in the utilities sector, Inari in the
5
technology sector band Berjaya Food in the consumer sector. That means our
top companies based on the four criteria in banks (RHB Cap), property (Eco
World Development), utilities (Tenaga), technology (GHL Systems) and
consumer (QL Resources) have strong competition and that the second placed
companies could also be worth investing in for the long term.
Figure 3: Stocks to invest in for 3-5 year horizon
Autos
Banks
Construction
Consumer
Gaming
Gloves
Healthcare
Media
Plantations
B Auto
RHB Cap
Gamuda
QL
Gent M'sia
Hartalega
Hovid
Astro
Genting Plants
-Corp governance
4.00
4.50
4.00
4.50
3.00
4.00
4.00
3.00
4.00
-Ambition
4.00
4.50
4.00
4.50
3.00
5.00
5.00
3.50
4.00
-Execution
4.50
3.00
4.00
4.50
4.00
4.00
4.00
4.00
3.50
-Innovation
4.00
4.00
4.00
4.00
3.00
4.00
4.00
3.50
2.00
-Transparency
4.00
4.00
4.00
4.50
2.00
4.00
4.00
3.00
4.00
Average
4.10
4.00
4.00
4.40
3.00
4.20
4.20
3.40
3.50
-ROE
4.50
3.00
4.00
4.00
3.00
5.00
4.00
4.00
2.00
-Gearing
5.00
3.50
4.00
3.50
5.00
5.00
5.00
3.50
4.00
-Profit margins
4.50
3.50
4.00
3.50
3.00
5.00
4.00
4.00
3.00
Average
4.67
3.33
4.00
3.67
3.67
5.00
4.33
3.83
3.00
Management
Financials
Valuation
-SOP/RNAV
4.00
4.00
3.00
3.00
4.00
-Div yield
3.50
3.00
3.00
3.00
1.00
3.50
3.00
3.00
2.00
-P/E
4.00
4.50
4.00
4.50
3.00
3.00
3.00
3.00
2.00
-P/BV
3.00
4.50
3.00
3.50
3.00
2.00
4.00
3.00
3.00
Average
3.63
4.00
3.50
3.67
2.50
2.83
3.25
3.00
2.75
-short term
4.00
4.00
3.00
4.50
3.00
4.00
4.00
3.50
3.00
-long term
4.00
5.00
5.00
5.00
3.00
5.00
4.00
3.50
4.00
Average
4.00
4.50
4.00
4.75
3.00
4.50
4.00
3.50
3.50
Total average
4.10
3.96
3.88
4.12
3.04
4.13
3.95
3.43
3.19
Growth
Figure 4: Stocks to invest in for 3-5 year horizon

Property
REITs
Small caps
Technology
Telcos
Timber
Transport
Utilities
Others
Eco World
Axis REIT
Myeg
GHL Systems
Axiata
Ta Ann
M'sia Airports
Tenaga
OWG
-Corp governance
4.00
4.00
3.00
4.00
4.00
3.00
4.00
4.00
3.00
-Ambition
5.00
4.00
4.00
4.50
4.00
3.00
5.00
3.00
5.00
-Execution
5.00
4.00
4.00
4.00
3.50
4.00
4.00
3.00
4.00
-Innovation
5.00
3.00
5.00
4.00
3.00
4.00
5.00
3.00
5.00
-Transparency
4.00
4.00
3.50
4.00
4.00
3.00
4.50
3.00
4.00
Average
4.60
3.80
3.90
4.10
3.70
3.40
4.50
3.20
4.20
-ROE
1.00
3.00
5.00
3.50
3.00
3.00
4.00
4.00
4.00
-Gearing
3.00
2.50
5.00
4.00
2.50
3.00
1.00
5.00
3.00
-Profit margins
2.00
3.00
5.00
3.50
3.50
3.00
3.00
4.00
4.00
Average
2.00
2.83
5.00
3.67
3.00
3.00
2.67
4.33
3.67
-SOP/RNAV
4.00
3.50
3.00
3.00
3.00
4.00
4.00
4.00
-Div yield
1.00
4.00
1.00
2.00
3.50
4.00
5.00
2.00
1.00
-P/E
2.00
3.50
3.00
4.00
1.00
3.00
5.00
5.00
4.00
-P/BV
3.00
3.50
1.00
3.00
2.00
3.00
5.00
4.00
3.00
Average
2.50
3.63
2.00
3.00
2.38
3.25
4.75
3.75
3.00
-short term
5.00
3.50
5.00
3.50
2.00
3.00
5.00
3.00
5.00
-long term
5.00
4.00
5.00
5.00
4.00
3.00
2.00
3.00
5.00
Average
5.00
3.75
5.00
4.25
3.00
3.00
3.50
3.00
5.00
Total average
3.53
3.50
3.98
3.75
3.02
3.16
3.85
3.57
3.97
Management
Financials
Valuation
Growth
Share price upside in long term

Note that for this exercise we take an optimistic view about the countrys
longer-term macro outlook (particularly in view of turbulent environment this
year) and also a positive bias on the prospects for various sectors. We believe
that within the next five years, cyclical sectors such as properties, construction,
technology, etc. should enjoy an upturn, while for more defensive sectors such
as consumer, REITs and utilites, the environment should remain stable. Hence,
the upside to our long-term share price targets carry with it a key caveat that
Malaysia does not suffer major external shocks and the various sectors we
cover enjoy steady progress or at least a stable outlook. While this is an
unlikely scenario, as there are always negative surprises, it is a simple way to
derive a reasonably realistic target price so many years out. But what it means
is that there could be downside to our targets should any unforeseen
developments take place.
The upside to share prices for the top stocks in each sector ranges from 4050% to a few hundred percent. Not surprisingly, stocks from the larger and
more mature sectors suffer lower growth prospects and therefore will likely
offer investors lower upside, too. RHB Cap is perhaps the only exception, as
despite its large market cap and position within the mature and highly
competitive banking sector, the group is trading on low valuations, and we are
th
excited about long-term prospects. RHB Cap is ranked 5 highest on our list in
terms of upside to long-term target price. The other four stocks ahead of it are
all smaller caps, and Only World Group is in pole position.
We included Only World Group under the others sector category, as the
company is a unique combination of captive F&B and a tourism play on
Genting Highlands and Penang. If the company executes well, the upside to
share price, according to our calculations, is massive over the next 3-5 years.
The second-highest comes from MyEG under the small cap sector category.
Although the stock has appreciated many fold over the past three years, we
believe the companys outlook remains bright and it has several aces up its
sleeve. In third place is GHL Systems under the technology sector as its new
business model of acquiring merchants and sharing in the fees charged for
credit card usage could potentially transform the company tremendously in the
coming years. Fourth place goes to drug maker Hovid, but a major assumption
is that the clinical trials for its Tocovid Suprabio vitamin will enjoy some positive
progress.
Figure 5: Long-term stock picking by sector
2018 target
Price (RM)
price (RM)
2020 target
Sector
Companies
2018 upside
Autos
Berjaya Auto
1.83
3.58
95.6%
price (RM)
4.17
2020 upside
127.9%
Banks
RHB Capital
6.13
13.12
114.0%
15.28
149.3%
Construction Gamuda
4.55
6.40
40.7%
7.20
58.2%
Consumer
QL Resources
4.12
5.52
34.0%
7.58
84.0%
Gaming
Genting Malaysia
4.48
6.00
33.9%
7.00
56.3%
Gloves
Hartalega
4.73
7.30
54.3%
8.30
75.5%
Healthcare
Hovid
0.46
1.00
117.4%
1.30
182.6%
Media
Astro
48.6%
Plantations
Genting Plant
Property
2.96
4.06
37.2%
4.40
10.30
14.72
42.9%
15.78
53.2%
Eco World
1.38
2.47
79.0%
3.37
144.2%
REIT
Axis REIT
1.69
2.04
20.7%
2.43
43.8%
Small caps
MyEG
2.68
6.65
148.1%
9.65
260.1%
Technology
GHL Systems
1.09
2.40
120.2%
3.65
234.9%
Telcos
Axiata
6.21
7.00
12.7%
9.00
44.9%
Timber
Ta Ann
3.79
5.40
42.5%
6.00
58.3%
Transport
Malaysia Airports
5.40
7.40
37.0%
7.69
42.4%
Utilities
Tenaga
12.28
16.06
30.8%
18.40
49.8%
Others
Only World Group
2.27
8.67
281.9%
14.66
545.8%
Average
74.6%
125.5%
Auto sector
Berjaya Auto tops the scoring
Berjaya Auto scores the highest in our long-term auto sector stock-picking
matrix mainly because its high scores in the management, financials and
growth categories. A relatively newcomer to the auto industry its history
basically only began in 2008 when it was awarded the rights by Mazda Japan
to distribute specific models of Mazda completely built-up (CBU) vehicles,
spare parts, accessories and tools in Malaysia Berjaya Auto has been
outperforming its more experienced competitors in the local market in terms of
brand awareness, sales volume growth, and financial strength, which we
believe can be attributed mainly to the strength of its management team.
DRB-Hicom came in second in our scoring, mainly due to what we see as its
undemanding valuation and long-term growth outlook. DRB is currently trading
at a steep discount to its net asset value, which we believe is due to investors
concerns on the current state of its subsidiary Proton, which is still in the red.
However, we believe DRBs management is moving in the right direction in
turning around Proton, and we expect it to break even by FY17. Coupled with
other growing and profitable businesses under its staple, we believe the longterm growth outlook for the conglomerate is positive.
UMW Holdings came in third due to its favorable scores in the management
and valuation categories. One of the success stories of the governments GLC
transformation program, UMW has in place a strong management team,
proven by its ability to grow the company over the years to become a
diversified conglomerate, with businesses ranging from automotive to oil & gas
to aeronautics, while maintaining a decent dividend yield of 5-6%. However, the
subdued growth outlook, mainly due to its size, is the pulling factor on its
scoring. Tan Chong, meanwhile, has an experienced management team.
However, it scores unfavorably in the valuation and financial categories.
Figure 6: Long-term stock-picking matrix
Berjaya Auto
DRB-Hicom
UMW
Tan Chong
-Corp governance
4.00
3.50
4.00
3.50
-Ambition
4.00
4.00
3.50
4.00
-Execution
4.50
3.50
3.50
3.50
-Innovation
4.00
3.50
3.50
3.50
-Transparency
4.00
3.00
3.50
3.50
Average
4.10
3.50
3.60
3.60
-ROE
4.50
3.00
3.50
3.00
-Gearing
5.00
3.00
3.50
3.00
-Profit margins
4.50
3.50
3.00
3.00
Average
4.67
3.17
3.33
3.00
-SOP
4.00
4.00
3.00
3.00
-Div yield
3.50
3.00
3.50
3.00
-P/E
4.00
4.00
3.50
3.00
-P/BV
3.00
4.50
3.50
3.50
Average
3.63
3.88
3.38
3.13
-short term
4.00
3.00
3.00
3.00
-long term
4.00
4.00
3.00
3.00
Average
4.00
3.50
3.00
3.00
Total average
4.10
3.51
3.33
3.18
Management
Financials
Valuation
Growth
Berjaya Auto
Berjaya Auto is led by its chief executive officer and executive director, Dato
Sri Ben Yeoh Choon San, a highly experienced figure in the Malaysian
automotive scene. He started his career with Cycle and Carriage Berhad in
1972 as a technical executive, and after stints with a few other auto companies,
he joined Proton in 1987 as the general manager of Business Operation and
International Export. During his tenure with the Proton group, he was involved
in technical services, manufacturing, sales and marketing including
international business development, primarily the export of Proton products to
the UK, Europe, Australia and Oceania markets. He left Proton in 1996 as
executive director/chief operating officer of Proton Corporation Sdn Bhd (a
wholly owned subsidiary of Proton).
In 2000, he was appointed as the managing director of Hyumal Motor Sdn Bhd
and has been associated with Hyundais motor business operated under
Hyundai-Berjaya Corporation Berhad and subsequently Hyundai-Sime Darby
Corporation Bhd from 2000 to 2007. With the Hyundai franchise, he revived
and modernized the Inokom plant in 2000, taking over the responsibility of
managing the plant for the production of quality passenger cars. He led the
team that was responsible for turning around the sales performance of
Hyundais passenger vehicles in the Malaysian market, and managed its
distribution and retail operations in Malaysia between 2000 and 2007. Hyundai
sales picked up rapidly under his leadership from 1,300 units in 2001 to 24,300
units in 2004, leading to successful sale of Berjayas Hyundai franchise to Sime
Darby in 2004 for a valuation of RM1.1bn. With over 40 years of experience in
the automotive industry, encompassing the various fields of retail, distribution
and manufacturing, we believe his experience and expertise, coupled with the
capabilities of other key members of management, played a major role in
securing the distributorship of Mazda vehicles in Malaysia and subsequently in
the Philippines from Mazda Japan.
Since joining Berjaya Auto in 2008, Dato Sri Ben Yeoh has replicated his
previous success with Hyundai and has grown Mazda to be where it is today.
Since obtaining the rights to distribute Mazda cars in Malaysia, Berjaya Auto
has registered outstanding growth that has far outpaced the industrys and its
competitors growth rates. From a mere 886 units sold in Malaysia in FY4/09,
Berjaya Auto grew its sales of Mazda vehicles in Malaysia to 12,209 units in
FY4/15, translating into a six-year compounded annual growth rate (CAGR) of
54.8%. This success has been replicated in the Philippines. Starting with 657
units of Mazda vehicles sold in FY4/13, Berjaya Auto delivered 3,561 units of
Mazda vehicles in FY4/15, translating into a two-year 132.81% CAGR.
This success can be attributed to a few factors, in our view. We believe the
most important factor has been the highly capable and experienced
management team that is highly familiar with the local automotive scene and
ever changing consumer demand trends, allowing it to come up with the best
strategy for success. We also believe management has been helped by the
improving brand awareness of Mazda worldwide. Mazda has seen a
turnaround over the past few years, with strong sales growth not just in Japan
but also around the world. This can be attributed to its attractive new model
designs, which is guided by its KODO: Soul of Motion principle, and also to its
own unique SKYACTIV technology, resulting in one of the most fuel-efficient
internal combustion engines available in the market.
We also like Berjaya Autos asset-light business model, which we believe is the
right strategy to allow it to sustain its strong growth with limited capital outlay.
Its partnership with Mazda Japan for its assembly operations allows Berjaya
Auto to limit its capital expenditure for its manufacturing facility and remain
focused on growing its sales. The asset-light business model is further
evidenced at the dealership level. Currently, Berjaya Auto only owns 8 of the
total 72 dealers of Mazda in Malaysia, with the remaining owned by third
parties. This allows Berjaya Auto to expand its sales and services outreach
faster without having to fork out huge capital outlays, as the dealers
themselves will have to bear the costs of building and preparing the new sales
and service centers.
9
Figure 7: Total vehicle sales (units) in Malaysia

14,000
12,209
12,000
9,497
10,000
8,142
8,000
5,909
6,000
4,826
4,000
2,113
2,000
886
0
FY09
FY10
FY11
FY12
FY13
FY14
FY15
Figure 8: Total vehicle sales (units) in the Philippines

4,000
3,561
3,500
3,000
2,500
2,283
2,000
1,500
1,000
657
500
0
FY13
FY14
FY15
Long-term target price for Berjaya Auto

We believe Berjaya Auto will be able to sustain its growth momentum in the
next few years under the leadership of Dato Sri Ben Yeoh and his highly capable
management team. Underpinned by Mazdas strong and growing brand equity,
attractive design and leading-edge technology, and the right business model, we
believe Berjaya Auto is a stock to be held over the long term with substantial price
appreciation potential. As the values of auto companies move in tandem with its
earnings outlook, Berjaya Autos target price in the next three or five years will
depend on its projected earnings at that particular point in time.
Berjaya Auto currently trades at 9.0x CY16F P/E, which we believe is
unjustified given its positive growth outlook and strong financials. We expect
Berjaya Auto to continue to deliver strong sales volume growth in both
Malaysia and the Philippines, which should translate into higher earnings, and
a higher stock price in the future. Assuming a conservative 8% annual revenue
growth from FY19 onwards with a 9% net profit margin, based on our current
target price basis of 14.0x CY19F P/E, and a 10% premium over the sector
average due to BAutos higher growth trajectory, we believe the three yeartarget price for BAuto shares could increase to RM3.58 by 2018. Based on the
same assumptions, a five-year target price for the stock, derived from 14.0x
CY21F P/E, could increase to RM4.17 by 2020.
10
Banking sector
The highest score for RHB Capital
Among the Malaysian banks, RHB Capital has the highest score, as it excels in
the growth category and does fairly well in most of other categories. We think
that it will have the best growth prospects in the long term (with the highest
score of 5) given its drive for regional expansion, backed by a strong
management team and EPF, Malaysias national pension fund, as its
shareholder. It also has the highest score for valuation as the stock is trading
below its FY16F BV/share and at a single-digit FY16F P/E.
Overall, Maybank is ranked second (behind RHB Capital), emanating from its
outstanding marks for management, valuation and growth categories. For the
management category, we gave high scores to Maybank, Public Bank and
RHB Capital. Meanwhile, Public Bank and BIMB ruled in the financial category,
as the two command the best ROEs in the sector.
Figure 9: Long-term stock-picking matrix - banks
RHB
Capital
Maybank
AMMB
Alliance
BIMB
Affin
Public
-Corp governance
4.50
4.50
3.00
4.00
3.00
3.00
5.00
-Ambition
4.50
4.00
3.50
3.00
3.00
3.50
3.00
-Execution
3.00
4.00
3.00
3.50
3.00
3.00
5.00
-Innovation
4.00
4.00
3.00
3.00
3.00
2.00
3.00
-Transparency
4.00
4.00
4.00
3.00
3.00
1.00
4.50
Average
4.00
4.10
3.30
3.30
3.00
2.50
4.10
-ROE
3.00
3.50
3.00
3.00
4.50
1.00
4.50
-Gearing
3.50
4.00
3.00
3.50
4.00
4.00
4.00
-Profit margins
3.50
3.50
3.00
3.50
3.50
2.00
3.50
Average
3.33
3.67
3.00
3.33
4.00
2.33
4.00
Management
Financials
Valuation
-SOP
-Div yield
3.00
4.50
3.00
3.00
3.00
4.50
3.00
-P/E
4.50
3.50
4.00
3.00
3.00
5.00
1.00
-P/BV
4.50
3.50
4.00
3.00
3.00
5.00
1.00
Average
4.00
3.83
3.67
3.00
3.00
4.83
1.67
-short term
4.00
4.00
2.00
3.00
3.00
1.00
2.00
-long term
5.00
4.00
2.00
3.00
3.00
2.00
2.00
Average
4.50
4.00
2.00
3.00
3.00
1.50
2.00
Total average
3.96
3.90
2.99
3.16
3.25
2.79
2.94
Growth
RHB Capital is our long-term pick

RHB Capital is our long-term pick, as we believe that the group will turn in the
strongest earnings growth among the Malaysian banks over the next 3-5 years,
via organic growth and M&As. Potential earnings catalysts include (1) the
IGNITE 17 transformation programme, and (2) the drive for regional expansion.
Despite the above potential, the stock is trading at attractive valuation with endFY16F P/BV of only 0.7x and FY16F P/E of only 7x.
11
Transformation programme laid out until 2017

RHB Capital has a comprehensive transformation programme, dubbed IGNITE
2017, in place until 2017. We are positive on the implementation of exercise as
it aims at improving the areas that RHB Capital is traditionally weak in, like
Islamic banking, SME, wealth management and treasury. The 17 initiatives for
the programme are:
1. Affluent segment strategy leveraging on strong relationship with SME
owners and the senior managers of corporates to increase market share
2. Mass affluent segment strategy deepening share of wallet by offering
attractive products and a positive digital experience for customers.
3. SME growth strategy building proposition around SME ecosystem to
capture end-to-end value chain and strengthening credit capabilities
4. Asset management strategy rapid expansion of agency force and
leveraging on RHB Group distribution network
5. Regional treasury strategy establishing Singapore as non-Ringgit hub
with country-specific strategies
6. Singapore growth strategy focusing on growth through regional treasury,
SME and collaboration with its investment bank
7. Corporate and investment banking (CIB) growth strategy rewiring CIB
across the region and increasing the share of wallet through regional
collaboration
8. Tactical cost savings reducing non-payroll cost of 10%
9. Productivity improvements
10. Network strategy and optimisation optimising network across the group
and reducing the cost to serve through EASY-nisation (embedding the
EASY model in the bank branches)
11. Talent management engaging, sustaining and developing its talent pool
into high-performing teams
12. Capital optimisation reducing capital consumption through model
refinements and migration to internal rating-based (IRB) approach
13. RAROC (risk-adjusted return on capital) and profitability enhancements
RAROC analysis and portfolio improvement strategies
14. CONNECT and RHB Way delighting customers through personalising its
service, making it simple and fast.
15. Central client onboarding delivering quality and seamless customer
interactions across the group
16. Enhancing customer experience through operational efficiency enabling
RHB Way through operational improvements and innovations
17. Digital and payments strategy delivering segment-driven ecosystem
through digital and payments innovation with industry collaboration.
With the above strategies, we believe that the group would be achieve the
following in the longer term:
Better profitability from the Islamic banking operations
An increase in market share in the SME segment, though it will still trail
the larger players such as Public Bank.
Higher contributions from treasury business, partly via cross-selling from
other business segments.
Increased contributions from wealth management business
Enhanced IT capabilities for branch and mobile banking the group has
successfully exploited the technology for fast loan approval in its EASY
outlets and it has plans to replicate the model for RHB Bank branches.
12
The next Malaysia-based regional bank

For the past 5-6 years, RHB Capital has been indicating to the market its
aspirations of becoming a regional banking group, following the footsteps of
Maybank and CIMB. The bank already has a banking operation in Singapore
with seven branches, and it has another two Thailand. After acquiring OSK
Investment Bank in 2012, its investment banking unit has emerged as a
regional player, with operations in Malaysia, Singapore, Indonesia, Thailand
Hong Kong. We see a good chance for the group to transform into a regional
player, supported by (1) EPF as its major shareholder, and (2) a solid
management team, led by the Group MD, Datuk Khairulssaleh Ramli, who was
the ex-CFO of Maybank and the ex-president director of Maybank-owned Bank
Internasional Indonesia.
To expand its reach, RHB Capital proposed to acquire an 80% stake in
Indonesia-based Bank Mestika. However, this was called off in Jul 14, as the
group was not able to secure the approval from the regulators in Indonesia for
the deal. Management guided that the group will focus on organic growth in the
next few years, but it is still keen on expanding in the region via M&As. The
next target market would be Indonesia, and the group is also eyeing an entry
into the Philippines and China in the longer term.
Aiming high for ROE

We are encouraged that the management is guiding for higher ROE target of
13% in 2017 and 15% in 2020 (vs. 11.5% in 2014). Under the companys
planning, this would be achieved via:
Boosting revenue from key growth areas
Managing cost and enhancing productivity
Optimising capital and balance sheet
Delivering superior customer experience
Building ecosystem for digital and payments enablement
Engaging and developing its talent into high performance teams
In our view, the above targets are challenging, especially when the sectors
ROE is falling due to:
The slow top-line and earnings growth given the unfavourable operating
environment, plagued by slow loan growth and margin contraction
The cap to the dividend payout ratio at 40-50% for most banks due to the
higher capital requirement under the BASEL III accords.
The 13% ROE target is above our projection of 11.5% for FY17. If the group
manages to achieve the target, there could be upside of 13-15% to our FY17
net earnings forecast.
Long-term target price for RHB Capital

Despite its ambitious plans to grow regionally and well-diversified business
portfolio, RHB Capital is trading below its BV/share and at single-digit FY16F
P/E. In our view, this is mainly because its FY15-17F ROE of 11-12% (based
on our projection) is below the sectors 13-14%. Another drag on its valuation is
the overhang for its dilutive rights issue exercise.
Using the same DDM model, we derive an estimated target price of RM13.12
for 2018, translating to upside of 115%. This is based on the assumptions of: (1)
five-year CAGR of 9% for net earnings growth in 2015-2020; (2) 11.8% cost of
equity; and (3) a 4% long-term growth rate. We think that the target price is
reasonable, as it only implies a FY19 P/E of 10x and end-FY18 P/BV of 1.2x.
Using the same parameters and extending the horizon to 2020, the estimated
target price for RHB Capital would be at RM15.28 in 2020.
13
Construction sector
The blue chips have similar qualities on certain criteria
Gamuda scores the highest in our long-term stock-picking matrix compared to
the other major player IJM Corp, though we also acknowledge that these two
blue chips of the construction sector do have equal qualities on certain aspects.
There is no doubt that on the levels of management, execution, and corporate
governance, both companies' scores are equally strong if we set it against
other smaller non-infra conglomerates. In fact, both Gamuda and IJM Corp can
be considered as among the earlier pure contractor pioneers which took on
major infrastructure projects especially during the boom days of Malaysian
construction 10-20 years ago. Both companies also managed to diversify
through
various
types
of
civil
and
infra
works,
including
privatisation/concession-based projects for highways and water infrastructure,
started and expanded its property development business and ventured
overseas.
Gamuda
However, what sets them apart, in our view, is Gamuda's higher score in terms
of innovation due to its proven capability to better leverage its strength and
expertise into executing larger-scale projects over longer periods of time. This
can be attributable to the leadership of founder and Group Managing Director
Dato' Lin Yun Ling, with his 35 years of experience in civil engineering and
construction. He joined Gamuda in 1978 and the group has since carved major
milestones.
To highlight some key examples, he was instrumental to the group's securing 1)
its first domestic water concession Sungai Selangor phase 3 (SSP 3) in 2000
apart from several highway concessions prior to that, 2) its first major MRT
project 43km Kaohsiung MRT in Taiwan in 2002, 3) its first (and the world's
first) major storm-water/flood mitigation and underground highway project in
2004 in Kuala Lumpur (RM1.9bn), which was featured in the extreme
engineering slot of the Discovery Channel, and 4) its first overseas 800-acre
township in Hanoi (RM8bn GDV) in 2007; currently, Gamuda has over RM50bn
of total unsold GDV, 32% of which are overseas). Other major overseas
construction jobs include two highway build-operate-transfer (BOT) jobs in
India, Dukhan Highway in Qatar, and as one of the major contractors for the
mammoth New Doha International Airport (NDIA).
Pioneering role
Gamudas job track record over the past decade or more has not only become
more specialised, but it has also evolved from turnkey works to higher-level
project management. Case in point is Gamuda's arguably pioneering role in the
Malaysian construction space in the areas of holistic public transport planning,
on grade and underground rail development and tunneling, and integrated flood
mitigation jobs. Its approach in maintaining closer collaboration with the
government (federal and state) by initiating major transformative public
transport proposals has landed the group two project delivery partner (PDP)
roles which, in a way, have entirely changed the way government jobs are
rolled out. It has also become an ideal model for future mega government
contracts, in our view.
14
King of PDP
Gamuda's success story in implementing PDP-driven jobs has echoed in other
parts of the country, too. On top of its existing PDP roles for two major MRT
projects, it has recently expanded substantially beyond Klang Valley by
securing the RM10bn Transport Master Plan (TMP) for the entire state of
Penang. This is a multi-year project with a time-frame stretching beyond 2020
and could translate to a total project value of over RM30bn. It looks likely to
emerge as the single largest non-cash land reclamation swap deal and over
time, could present Gamuda with a sizeable land bank ownership potential,
likely surpassing existing players in the state, in our view.
This, we believe, gives a better sense on how the group could maximise profit
margins by benefitting from PDP fees, property development earnings, and
potential land sale. For cash contract PDP-type work such as the MRT,
construction margins are much higher. Putting the timeline in perspective,
Gamuda's PDP earnings stream stretches over five years from 2015 for MRT
or up to 2030 if other phases of the Penang TMP are implemented.
Tunneling specialist
Apart from being the leader in project management capabilities for multi-billion
ringgit projects, Gamuda's track record in its own mega turnkey contracts also
speaks for itself in terms of quality, scale and engineering capabilities. Among
local industry players today, Gamuda is recognised for its superior tunnel
boring expertise. Major projects currently underway and in the past include: 1)
RM12.5bn Gemas-JB double tracking project 329km of new electrified rail
double track to northern Peninsula Malaysia; 2) RM1.9bn SMART tunnel
project Klang Valley's first major tunneling and flood mitigation project; 3)
Malaysia's first RM23bn Mass Rapid Transit (MRT) project 9.5km of tunneling;
4) The upcoming RM28bn MRT 2 project 10km of tunneling works; and in the
future, potentially 5) The over RM30bn MRT 3 entirely tunneling works; 6)
RM8bn Gemas-Johor rail double tracking project; and 7) A portion of the
RM27bn Pan-Borneo Highway.
Gamuda
IJM Corp
MRCB
Muhibbah
Mudajaya
Benalec
Salcon
Sunway
WCT
YTL Corp
Engineering
Management
-Corp governance
4.00
4.00
3.00
4.00
2.00
2.00
4.00
4.00
3.00
4.00
-Ambition
4.00
4.00
3.00
4.00
2.00
2.00
3.00
3.00
2.00
4.00
-Execution
4.00
4.00
3.00
3.50
2.00
3.00
4.00
4.00
2.00
3.50
-Innovation
4.00
3.00
2.00
3.00
2.00
3.00
3.00
3.00
2.00
3.50
-Transparency
4.00
4.00
2.00
4.00
2.00
2.00
4.00
3.00
2.00
2.50
Average
4.00
3.80
2.60
3.70
2.00
2.40
3.60
3.40
2.20
3.50
-ROE
4.00
4.00
3.00
4.00
2.00
3.00
3.00
3.00
3.00
3.00
-Gearing
4.00
3.50
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
-Profit margins
4.00
3.50
3.00
3.00
2.00
2.00
4.00
4.00
3.00
3.00
Average
4.00
3.67
3.00
3.33
2.33
2.67
3.33
3.33
3.00
3.00
-SOP
4.00
4.00
3.00
4.00
3.00
3.00
4.00
4.00
3.00
4.00
-Div yield
3.00
3.00
2.00
3.00
3.00
1.00
3.00
3.00
2.00
4.00
-P/E
4.00
4.00
2.00
4.00
2.00
2.00
3.00
3.00
3.00
3.00
-P/BV
3.00
3.00
2.00
3.00
2.00
2.00
3.00
3.00
3.00
3.00
Average
3.50
3.50
2.25
3.50
2.50
2.00
3.25
3.25
2.75
3.50
-short term
3.00
3.00
2.00
3.00
1.00
3.00
3.00
3.00
2.00
3.00
-long term
5.00
4.00
3.00
4.00
2.00
3.00
4.00
3.00
2.00
4.00
Average
4.00
3.50
2.50
3.50
1.50
3.00
3.50
3.00
2.00
3.50
Total average
3.88
3.62
2.59
3.51
2.08
2.52
3.42
3.25
2.49
3.38
Financials
Valuation
Growth
SOURCE: CIMB RESEARCH, COMPANY DATA
15
Long-term target price for Gamuda

A big chunk of Gamuda's RNAV comes from its outstanding land bank of over
3,900 acres locally and overseas, which constitutes 60% of its RNAV. The
balance is made up of concessions (30%) and construction (10%). Gamuda is
at an early stage of its earnings growth recovery cycle following a steep
depletion in order book in FY15, and we believe we are observing signs of a
bottoming of the weak domestic property market. Gamudas order book is
bound to play catch up, in our view, and could increase by more than sevenfold
in 2016 with MRT 2. The shares currently trade at a steep 30-40% discount to
RNAV but should trade at narrower discount once major jobs in the sector are
in full swing, in our view.
Working on assumptions of: 1) 5% appreciation in land values p.a. over the
next 2-5 years for its domestic land bank (especially in new growth area in
Rawang ie. South West of Klang Valley, with the expectations the property
market should recover); 2) a low-base recovery effect for its Hanoi and Ho Chi
Minh City property ventures, which should translate to improving land values of
5% p.a.; 3) a higher construction burn-rate and a higher blended pretax margin
of 10% due to a ramp-up in order book and stronger progress billings from
MRT 2; and 4) DCF-value for the RM16bn PDP portion of MRT 2, we arrive at
a 2018 indicative target price of RM6.40 based on an unchanged 10% discount
to RNAV.
Assuming that the execution of the Penang TMP kicks-off with the RM5.3bn
high-priority LRT project and is completed within the next 5-6 years, this could
translate to new potential reclaimed land bank of c.800 acres based on RM150
psf break even reclamation cost. Imputing this component based on the
group's 60% stake in the PDP JV would raise the target price further to RM7.20
based on a similar discount to RNAV.
16
Consumer sector
QL Resources scores the highest
QL Resources tops the scoring in our long-term consumer sector stock-picking
matrix mainly owing to its high scores in the management and growth
categories. Its management has exhibited great ambition and executional
capability to bring the group to where it is today, underscored by consistent
revenue and profit growth over the past 27 years since its inception. Berjaya
Food came at second place due to its scores in the financials and valuation
categories, as we believe its current valuation does not justify its positive
growth outlook.
Carlsberg and 7-Eleven are tied at third. 7-Eleven scored favorably in the
management and growth segments, while Carlsberg gained high points in the
financials and valuation segments, due to its strong balance sheet and decent
dividend yield. F&N is next with satisfactory scores in the financials and
valuation segments, while GABs strength lies in its strong financials with high
ROE and low gearing. BAT scores the highest in the financials segment with
high ROE and profit margins coupled with low gearing, but scored unfavorably
in the valuation segment due to its demanding valuation. Nestles scores are
pulled down mainly by what we see as its demanding valuation and a lack of
transparency from management.
Management
7-Eleven
BAT
Berjaya Food
Carlsberg
F&N
GAB
Nestle
QL
-Corp governance
4.00
4.00
4.00
4.00
4.00
4.00
4.00
4.50
-Ambition
5.00
3.50
4.00
3.50
3.50
3.50
4.00
4.50
-Execution
4.00
3.50
4.00
3.50
4.00
3.50
4.00
4.50
-Innovation
3.50
4.00
4.00
3.50
3.50
3.50
4.00
4.00
-Transparency
3.50
3.00
4.50
3.00
3.00
3.00
2.00
4.50
Average
4.00
3.60
4.10
3.50
3.60
3.50
3.60
4.40
-ROE
4.50
5.00
3.50
5.00
4.00
5.00
5.00
4.00
-Gearing
4.50
5.00
3.50
5.00
4.00
5.00
3.00
3.50
-Profit margins
3.00
4.00
4.00
3.50
4.00
3.50
3.50
3.50
Average
4.00
4.67
3.67
4.50
4.00
4.50
3.83
3.67
-Div yield
3.00
3.50
3.50
4.00
3.50
3.50
3.00
3.00
-P/E
3.00
3.50
4.50
4.00
4.00
3.50
3.00
4.50
-P/BV
2.00
2.00
4.00
3.00
4.00
3.00
2.00
3.50
Average
2.67
3.00
4.00
3.67
3.83
3.33
2.67
3.67
-short term
4.50
3.00
4.00
3.00
3.00
3.00
3.00
4.50
-long term
3.50
3.00
4.50
3.00
3.00
3.00
3.00
5.00
Average
4.00
3.00
4.25
3.00
3.00
3.00
3.00
4.75
Total average
3.67
3.57
4.00
3.67
3.61
3.58
3.28
4.12
Financials
Valuation
-SOP/RNAV
Growth
QL Resources
QL Resources is led by Dr. Chia Song Kun, the group managing director, who
is the driving figure that has propelled the company from local feedstuff trader
to multinational agro-food corporation. It is now among Asias largest egg
producers and surimi manufacturers and is building a presence in the
sustainable palm oil sector with activities including milling, plantations and
biomass clean energy. It was founded in 1987 by Dr. Chia and Chia Seong
Pow, currently its executive director, but its history can be traced back to the
late 1970s. Prior to founding QL, Dr. Chia and his brothers supplied local feed
millers with harvested calcium-infused shells of dead molluscs. The success of
this modest business enabled them to expand their product range and open
new branches across Malaysia. After establishing a core business in feedstuff
trading the company diversified into food for human consumption. Today, QLs
17
three principal activities are marine product manufacturing, integrated livestock

farming, and palm oil activities.
Under Dr. Chias leadership, QL has grown to become a multinational agrofood corporation with operation centres in Malaysia, Indonesia, Vietnam, and
China. It is Malaysias largest fishmeal manufacturer and producer of surimiproducts, and Asias largest surimi producer. Its products are distributed
globally across Asia, Europe and North America. QL has also risen to become
one of Malaysias leading operators in animal feed raw materials and poultry
farming. It is among ASEANs leading poultry egg producers with a group
production rate of 4.5m eggs per day. About 40m day old chicks (DOC) are
produced across poultry farms in Malaysia and Indonesia. QL is one of the
biggest distributors of animal feed raw materials in Malaysia, with an annual
volume of 800,000 MT.
From initially milling palm oil and estate ownership, QL has expanded its
capabilities into biomass clean energy. It has two independent crude palm oil
(CPO) mills in Sabah, and its first CPO mill in Eastern Kalimantan, Indonesia,
was commissioned in FY13. It also owns a 1,200 hectare palm oil estate in
Sabah, as well as 15,000 hectare plantation in Eastern Kalimantan, Indonesia.
Despite regional and global financial crises, Dr. Chia and his team has been
successfully sustained consistent growth of QLs earnings over the past 27
years. We attribute this mainly to its diversified revenue streams, and we
expect the diversification to lead to a sustainable earnings growth in the future.
Figure 12: QL's revenue and net profit
3,000.0
200.0
180.0
2,500.0
160.0
140.0
2,000.0
120.0
1,500.0
100.0
80.0
1,000.0
60.0
40.0
500.0
20.0
0.0
0.0
2003
2004
2005
2006
2007
2008
Revenue (RM m) LHS
2009
2010
2011
2012
2013
2014
2015
Net profit (RM m) RHS
Long-term target price for QL Resources

We believe QL will be able to sustain its earnings growth over the next few
years under the leadership of Dr. Chia and his management team. We expect
this to be driven by its consistent expansion and diversification. Hence, we
believe QL is the stock to be held over the long term by inventors that could
offer substantial price appreciation. As the value of consumer companies
typically move in tandem with their earnings outlook, QLs target price in the
next three to five years will very much depend on its earnings-harnessing
capability during that time frame.
Based on our forecast, QLs revenue will hit RM3.8bn in FY3/19 and RM4.2bn
in FY3/20, generating 24.0sen in EPS in CY19. Based on these figures, and
attaching a 23x CY19F P/E, QLs target price would increase to RM5.52 in
three years. For a five-year target price, if we assume a highly conservative
revenue growth forecast of 8.0% for FY3/21 and FY3/22, the EPS for CY21
would be 32.9sen. And if we attach a P/E multiple of 23x CY21F P/E, the target
price for QL in 2020 would be RM7.58.
18
Gaming sector
Genting Malaysia marginally pips Sports Toto
Genting Malaysia (GENM) marginally beats Berjaya Sports Toto (BST) in the
gaming sector stock-picking matrix. GENM beats BST in the growth category
given what we see as the exciting long-term growth prospects of Genting
Highlands when the 20th Century Fox Theme Park is completed in late 2016.
BST comes in a close second mainly due to its strong free cashflow and high
ROE, which translates into strong dividend yields. The numbers forecast
operator (NFO) industry is highly regulated, and only three licences have been
given out. This will continue to underpin and protect BSTs cashflows and
ROEs, in our view, which we do not believe are likely to be under threat in the
foreseeable future.
In the financials category, BST wins out given the strong free cashflow and
high dividend payout of at least 80% of group annual profits annually. This
creates a sector-beating ROE profile at over 40%. In the financials category,
the ROE drag at Genting and Genting Malaysia is caused by managements
tendency to hoard cash and pay little dividends. The numbers forecast operator
(NFO) sectors growth matrix (both long and short term) is plagued by the
continued strength of the illegal market and poor enforcement efforts. NFO
sales continue to contract at low single-digit rates and sector revenues have
been declining since 2009. However, the balance sheets of the NFO operators
remain very healthy and both Magnum and BST are paying solid dividend
yields of 7-8%. The management scores in the gaming universe are quite
similar. The extremely rigid regulatory environment in Malaysia due to the
sensitivities of gaming renders very limited potential for management teams to
be innovative and creative in their business expansion plans. The Genting
Group of companies also tends to lack transparency in its operating disclosures
due similar sensitivities, in our view.
Figure 13: Gaming long-term stock-picking matrix
Genting
Genting Msia
Magnum
BJ Toto
-Corp governance
3.00
3.00
3.00
2.00
-Ambition
3.00
3.00
3.00
3.00
-Execution
3.00
4.00
4.00
4.00
-Innovation
3.00
3.00
3.00
3.00
-Transparency
2.00
2.00
3.00
3.00
Average
2.80
3.00
3.20
3.00
-ROE
2.00
3.00
3.00
5.00
-Gearing
4.00
5.00
3.00
5.00
-Profit margins
3.00
3.00
3.00
2.00
Average
3.00
3.67
3.00
4.00
-SOP/RNAV
2.00
3.00
3.00
3.00
-Div yield
1.00
1.00
5.00
5.00
-P/E
1.00
3.00
2.00
3.00
-P/BV
4.00
3.00
2.00
3.00
Average
2.00
2.50
3.00
3.50
-short term
2.00
3.00
1.00
1.00
-long term
3.00
3.00
2.00
2.00
Average
2.50
3.00
1.50
1.50
Total average
2.58
3.04
2.68
3.00
Management
Financials
Valuation
Growth
Genting Malaysia
GENM is led by Tan Sri Lim Kok Tay (KT Lim), the second son of Tan Sri Dato
Seri Lim Goh Tong, the founder of the Genting Group. GENM tops the scoring
in the growth category. Tan Sri KT Lim is the brainchild behind the aggressive
RM5bn Genting Integrated Tourism Plan, which a goal of transforming Genting
19
Highlands from a domestic casino into a world-class international destination.

The new GITP will feature more gaming capacity, a 10,000-seat arena, a
central retail complex, a new cable car system, parking for 3,000 cars and a
1,500+ room six-star hotel. In addition, it recently expanded the current First
World Hotel by 1,300 rooms. GENM has a resilient and defensive business
model. It is insulated from the anti-corruption crackdown in China, as its
customers are primarily local mass market and Asean-based VIPs. With the
GITP ready, it will further expand its customer base to include international
visitors. In our view, GENMs execution track record is much better
domestically compared to its overseas operations. The performance of its UK
and Bimini operations are patchy, at best. The UK VIP business lacks critical
mass, which lends swings to volatile earnings performance quarterly, and we
believe it will take many years to build up a strong database of VIP customers.
The Bimini operations are still loss-making but is making baby improvement
steps with the new hotel and jetty up and running. The US operations in New
York is a consistent cash cow, but the disappointment of not winning any of the
New York bids seems to have cast some doubt in investors minds about.
GENMs execution ability in the US. Its overseas business still only contributes
20% of GENMs EBITDA, so the success of the GITP is more important to overall
group profitability. We believe that the economic moat behind GENMs business
model is the fact that it remains a domestic casino monopoly and it is highly
unlikely that new casino licences will be issued in Malaysia. With the 20th Century
Fox theme park being 1) the first-of-its kind in the world and 2) strategically located
in a cool climate location like Genting Highlands, this is a huge competitive
advantage that sets it apart from other theme parks in Malaysia.
Figure 14: Genting Integrated Transformation Plan (GITP)
1,300 rooms by end-14
New casino and

Towers 3 & 4 of
First World Hotel
Long-term target price for Genting Malaysia

We believe that investors will reward GENM with a higher EV/EBITDA multiple
when the GITP comes onstream and starts to mature. We currently value
GENMs Malaysian earnings at 9x EV/EBITDA. If this re-rates over the longer
term to the regional average of 10.5x by FY18, GENM could reach RM6.00,
Using similar assumptions, by 2020, GENMs target price could reach RM7.00.
20
Gloves sector
Stick to the market leader
Hartalega scores the highest among our sector top picks over the next 3-5
years. Hartalega tops the scoring in our long-term rubber gloves sector stockpicking matrix because it scores highly in the financial category and joint-first in
the management and growth categories with Karex. We like Hartalega for its
strong growth prospect on the back of new capacity expansion and its marketleader position in the nitrile glove space. Apart from that, we see Karex as
another attractive play in the rubber gloves sector due to its position as the
worlds largest condom manufacturer with rising production capacity. We like
Karexs management for its strategy to move up the value chain through
original brand manufacturer (OBM) business.
Kossan scores highest for short-term growth given our view that Kossan will be
the least impacted by the inflow of new capacity, given its more balanced
rubber gloves product mix. Top Glove is still playing catch-up in the nitrile
space given its gradual capacity expansion, however management is seeing
better traction for its nitrile product in the market. We think Supermax trades at
a discount relative to its peer due to its weaker corporate governance and lack
of transparency. While management seems ambitious to promote its OBM
business, we see limited growth upside given its weaker execution track record.
Figure 15: Long-term stock picking matrix
Hartalega
Top Glove
Kossan
Supermax
Karex
-Corp governance
4.00
4.00
4.00
2.00
4.00
-Ambition
5.00
4.00
5.00
5.00
5.00
-Execution
4.00
4.00
4.00
2.00
4.00
-Innovation
4.00
3.50
4.00
2.00
4.50
-Transparency
4.50
4.00
3.50
2.00
4.00
Average
4.30
3.90
4.10
2.60
4.30
-ROE
5.00
3.50
4.50
3.00
4.50
-Gearing
5.00
4.00
4.50
3.50
5.00
-Profit margins
5.00
3.00
4.00
3.50
4.50
Average
5.00
3.50
4.33
3.33
4.67
-Div yield
3.50
4.00
3.00
4.00
3.00
-P/E
3.00
3.50
3.00
3.50
3.00
-P/BV
3.00
4.00
3.00
4.00
3.50
Average
3.17
3.83
3.00
3.83
3.17
-short term
4.00
3.50
4.50
3.00
4.00
-long term
5.00
4.00
4.00
3.00
5.00
Average
4.50
3.75
4.25
3.00
4.50
Total average
4.24
3.75
3.92
3.19
4.16
Management
Financials
Valuation
-SOP/RNAV
Growth
Hartalega
The history of the Hartalega group can be traced back to 1981 when Hartalega
Sdn Bhd was established by Mr Kuan Kam Hon and his brother Mr Kuan Kam
Peng. The group began their glove manufacturing operations in 1988 and
within the same year, made its foray into the overseas market by exporting to
the US.
Since inception, Hartalega has focused on R&D on automation systems to
improve production efficiency and effectiveness of the groups latex
manufacturing operations. The company has one of the most advanced glove
research and development facilities with full automation and precise simulation
facilities which have allowed it to produce high-quality and differentiated gloves.
21
Hartalega was the first glove manufacturer to invest heavily into nitrile gloves.
In 2002, the company invested in the R&D of thin nitrile gloves for potential
entry into the healthcare sector given that the synthetic gloves were primarily
used in industrial applications due to their heavy weight and thickness that
made them not suitable for medical purposes. Following extensive R&D
processes, Hartalega successfully introduced the world first 4.7 gram nitrile
glove that emulates the elasticity and softness of natural rubber, without protein
allergy risk to its users. We see this is testament to the group strong execution
capability and vision for growth.
Throughout the years, the company has grown by leaps and bounds to become
the worlds largest nitrile glove manufacturer with an annual turnover of
RM1.1bn as of FY15. Revenue from nitrile segment accounts for 91% of its
sales in FY15 and the remaining comes from natural rubber gloves. We expect
nitrile glove demand to outpace natural rubber glove demand due to the switch
from natural rubber to nitrile gloves in developed countries which consume
>60% of rubber gloves globally. We think this is mainly due to stronger health
awareness in the developed markets.
Aggressive capacity expansion

In order to meet the rising global demand for nitrile gloves, Hartalega is building
six manufacturing plants at its Next Generation Integrated Glove Manufacturing
Complex (NGC), which will house a total capacity of 28.5bn pieces p.a. over
the next five years. The complex is built on a 112-acres site located in Sepang,
Selangor. Compared to its historical expansion, NGC is the companys largest
expansion ever. In the past, the company increased its capacity by 1-2bn
pieces p.a., but in FY16, it is looking to increase its annual capacity by 5-6bn
pieces p.a. Hartalega has been commissioning two lines per month since Jan15, and our research shows the company has been running on 18 lines of Plant
1 & 2 as of September 2015. Following the capacity expansion, we expect
group earnings to grow at a 3-year CAGR of 24%.
Figure 16: Hartalegas production capacity growth
40,000
34,258
35,000
35,307
29,739
30,000
24,993
25,000
18,426
20,000
15,000
11,787
12,522
FY14
FY15
10,000
5,000
FY16
FY17
FY18
FY19
FY20
22
Figure 17: NGC plant 1 & 2
SOURCE: CIMB RESEARCH, COMPANY REPORTS
Market leader in efficiency

Hartalega has always stayed ahead of its competition by developing proprietary
machinery and systems like the double former dipping lines, robotic glove
stripping system and the glove puller and stacker system. Overall, this help to
reduce its dependency to labor and improve the groups production efficiency.
The company machines are also far more efficient than its competitors. For
example, Hartalega has the fastest production lines in the industry, its most
advanced production line yield 12% higher rate of output against the industry
fastest. Meanwhile its average production line speed is also 60% higher than
industry average.
Apart from that, the company aspires to improve its production efficiency
through automation, as Hartalega is targeting to improve its productivity by
45% better than the industry average following the full commissioning of the
NGC plant.
Figure 18: Average production line speed
Figure 19: Fastest production line speed
(pcs/hr/line)
(pcs/hr/line)
30,000
46,000
28,000
45,000
45,000
25,000
44,000
20,000
43,000
18,000
42,000
15,000
41,000
40,000
10,000
40,000
39,000
5,000
38,000
-
37,000
Industry average
Hartalega average
Industry average
mean production line spped
Hartalega average
Fastetst production line speed
Long-term target price for Hatalega

We expect Hartalega to remain as the market leader in the rubber gloves
sector due to its strength in product and engineering innovations. Despite
concerns on downward pressure towards nitrile average selling prices following
the industrywide capacity expansion, we believe Hartalega will emerge as the
strongest given that it has the highest margin, hence more buffer to absorb the
pricing pressure. Nonetheless, we also expect the higher sales contributions
from new production lines will partially cushion the impact of pricing pressure
23
given that most new production lines run more efficiently and are highly
automated.
Hartalega is trading at 24x CY16F P/E which we think is currently fair value.
However, as we have projected an annual capacity increment of about 22.5%
over the next five years assuming a gradual decline in margin following ASP
erosion and 80% utilization rates, plus using Hartalegas historical mean P/E of
21x, our three-year target price rises to RM7.30. Using similar assumptions
except for an additional 5% annual capacity expansion beyond FY20, our fiveyear target price rises to RM8.30.
24
Healthcare sector
Hovid tops the list
Hovid is our top long-term pick for the healthcare sector, as it scores well in the
management, financials and growth categories. Hovid has an ambitious
management team and is one of the most innovative local generic drug makers.
It also has a healthy balance sheet and strong earnings growth potential, driven
by strong demand for drugs from its export destinations.
Pharmaniaga comes in second due mainly to its high manufacturing profit
margin. It has a strong relationship with the Ministry of Healthcare of Malaysia
(MOH), which we believe should help to grow its sales to MOH hospitals and
clinics. Its management is also fairly ambitious in expanding the business
beyond Malaysia.
KPJ also has an ambitious management and strong earnings growth potential.
However, its valuation is unattractive given its CY16F P/E of 30x. This is the
key factor that has dragged down its overall score. Although hospitals have
defensive earnings, hospitals are capital intensive and have long payback
periods. In the long run, investors would be better off to bank on businesses
with faster payback, in our view.
Figure 20: Long-term stock picking matrix - Healthcare
KPJ Healthcare
Pharmaniaga
Hovid
-Corp governance
4.00
4.00
4.00
-Ambition
4.00
4.00
5.00
-Execution
3.00
3.00
4.00
-Innovation
3.00
3.00
4.00
-Transparency
4.00
3.00
4.00
Average
3.60
3.40
4.20
-ROE
3.00
5.00
4.00
-Gearing
3.00
3.00
5.00
-Profit margins
3.00
5.00
4.00
Average
3.00
4.33
4.33
-SOP
3.00
3.00
3.00
-Div yield
3.00
4.00
3.00
-P/E
2.00
3.00
3.00
-P/BV
2.00
3.00
4.00
Average
2.50
3.25
3.25
-short term
4.00
3.50
4.00
-long term
4.00
3.50
4.00
Average
4.00
3.50
4.00
Total average
3.28
3.62
3.95
Management
Financials
Valuation
Growth
Hovid Bhd
Hovid started off as a herbal tea maker in 1941 and began producing generic
drugs in the 1980s. It prides itself on having the largest export sales among
Malaysia-listed pharma companies. It also has a strong R&D capability, as it is
the only Malaysia-listed drug maker that holds patents.
The key difference between Hovid and its local peers is that half of its sales are
derived from exports, while those of its peers come mainly from the domestic
market. The big exposure to the export markets gives Hovid an edge in
growing its earnings, as export demand rises much faster than that in Malaysia.
On top of that, the competition between pharmaceutical companies in Hovids
key export markets, such as Nigeria, Cambodia, and the Philippines, is less
intense and the availability of drugs is inferior to Malaysias. By exporting drugs
to these countries, Hovid can extend the life cycle of its products, as drugs that
are no longer popular Malaysia could sell well in these markets.
25
Hovid could also be sitting on a gold mine if its clinical trials on Tocovid
Suprabio are successful. The Tocovid Suprabio is a type of vitamin E that may
reduce brain damage caused by strokes. According to the US Center for
Diesase Control and Prevention, stroke is the fourth-leading cause of death in
US and approximately 49% of its populations are exposed to at least one of the
three key risk factors that can lead to stroke. Hovid holds the formulation patent
for Tocovid Suprabio. Earlier test have produced strong statistical evidence of
the effectiveness of Tocovid in decreasing brain damage caused by strokes. At
this juncture, it is conducting a Phase-2 trial on Tocovid and is hopeful to
launch the drug in the next three to five years.
Figure 21: Tocovid in blister pack
Figure 22: Tocovid in bottle
SOURCES: COMPANY REPORT
SOURCES: COMPANY REPORT
Long-term target price for Hovid

Hovid recently commenced the operation of its new tablet and capsule plant
located in Chemor, Perak. Tablet and capsule (T&C) products account for
about 60% of Hovids revenue, and the plant will boost its T&C production
capacity by 30%. Hovid is also building another T&C plant that will further boost
its capacity by another 70%.
In recent years, Hovid had been facing severe capacity constraint which had
hampered its earnings growth. This, coupled with the strong demand growth
from the export markets, led us to believe that the first plant could be fully
utilized by 2018 while the second could run at full capacity in 2020. These
could raise Hovids earnings in 2018 and 2020 by 30% and 100% from 2015s
level.
These earnings forecast do not reflect the potential of Tocovid being sold as a
drug for stroke patients in the US. Approximately 49% of the US population, or
154m Americans, are exposed to at least one of the three key risk factors that
can lead to stroke high blood pressure, high LDL cholesterol, and smoking. If
Tocovid is approved by 2020 and assuming that 1% of the high-risk group
spends US$2 per day (equivalent to 200mg of Tocovid at the current retail
price) on Tocovid for protection of their brain cells, this would translate into
annual sales of US$1.1bn in the US alone. Assuming a 30% profit margin, the
potential earnings contribution per year works out to US$337m, or RM1.5bn at
the current exchange rate.
Hovid will also have the exclusive rights that will last for at least three years if
Tocovid is approved by the US FDA. By attaching a 20% chance of success of
the drug being approved and a discount rate of 10%, Tocovid would have a
present value at least of RM610m by 2018 and RM740m by 2020.
Also, if Hovids current P/E of 17x for the remaining business remains
unchanged over the next few years, Hovids share price could increase to
RM1.00 by 2018 and RM1.30 by 2020, which includes the potential value of
Tocovid.
26
Media sector
Prefer the defensive
Astro tops the scoring in our long-term media sector stock-picking matrix
because it scores the highest in three of four categories: management,
financials and growth. Astro offers the highest earnings growth prospect in the
sector due to its three-year EPS CAGR of 21%. However, it shares the lowest
score in the valuation segment given its rich multiple; however, we think the
multiple is justify due to its position as the dominant pay-TV operator in
Malaysia with over 98% of pay-TV market share or 4.6m households.
Meanwhile, Star Media group came in second after scoring the highest in the
valuation category. Star offers an attractive dividend yield of 7.3%, the highest
in the sector and the strongest growth among the newspaper players. In
addition, Media Prima also offers an attractive valuation at current levels
supported by its healthy balance sheet and strong free cash flow position.
However, we view Media Prima management to be very conservative and less
aggressive on seeking growth. MCIL has finally embraced the digital space
following its entry into e-commerce and the online news platform; however, this
is not enough to offset the decline in the contribution of its print segment.
Figure 23: Long-term stock picking matrix
Astro
Star Media
Media Prima
MCIL
-Corp governance
3.00
3.00
3.00
3.00
-Ambition
3.50
3.50
2.50
3.00
-Execution
4.00
3.00
2.00
2.50
-Innovation
3.50
3.00
2.50
2.50
-Transparency
3.00
3.00
3.00
2.50
Average
3.40
3.10
2.60
2.70
-ROE
4.00
3.50
2.50
3.00
-Gearing
3.50
3.50
3.00
2.50
-Profit margins
4.00
3.00
3.00
3.00
Average
3.83
3.33
2.83
2.83
Management
Financials
Valuation
-SOP
-Div yield
3.00
4.00
3.50
3.00
-P/E
3.00
3.00
3.00
3.00
-P/BV
3.00
3.00
3.00
3.00
Average
3.00
3.33
3.17
3.00
-short term
3.50
3.00
2.50
2.50
-long term
3.50
3.00
2.50
2.50
Average
3.50
3.00
2.50
2.50
Total average
3.43
3.19
2.78
2.76
Growth
Astro Malaysia
Astro Malaysia is a holding company with operations in: 1) direct-to-home (DTH)
multi-channel subscription TV (pay TV); 2) terrestrial FM and DTH radio; and 3)
publications and digital services. Astro Malaysia is 41% owned by billionaire
Tan Sri Ananda Krishnan mainly through his investment vehicle in Usaha
Tegas Sdn Bhd (UTSB) and its partners. UTSB also controls Bursa Malaysialisted telecommunication service provider, Maxis Bhd and oil & gas marine
support operator Bumi Armada Bhd. We believe companies in this group are
known for their strong management teams and execution.
The company began broadcasting in 1996 with an initial list of 22 TV and eight
radio channels following the launch of Malaysian first satellite service. During
the launch, Astro was the second pay-TV provider in the country after Mega TV.
Despite the strong competition by Mega TV, Astro rose to become the leading
pay-TV operator in the country following its strategy to invest in better and
27
more diversified content that allowed Astro to offer more channels compared to
Mega TV.
Through its sister company, MEASAT Broadcasting Network Systems (MBNS),
Astro Malaysia holds a renewable 25-year licence until 2022. This gives it the
right to offer direct-to-home (DTH) broadcast services and an unlimited number
of channels on an exclusive basis for 20 years until 2017 and thereafter, on a
non-exclusive basis for the remaining duration of its licence. DTH broadcasts
through satellite, where end-users receive signals via parabolic dishes and the
signals are converted using set-top-box (STB). Todays Astro has about 179
TV channels including 49 High-Definition (HD) channels, delivered via DTH,
IPTV and over the top (OTT) platforms.
The company was relisted in 2012 in order to raise proceeds to fund its
subscriber-acquisition drive through the STB swap program. During the twoyear period, Astro successfully swapped out about 2.1m STBs and replaced
them with the new B.yond boxes that allow subscribers to enjoy more valueadded services such as HD, Video-on-Demand and PVR.
Astro is targeting to reach 80-85% Malaysian TV household penetration over
the next three to five years, driven by strong customer growth from its prepaid
TV service, NJOI. Currently, Astro has about 65% of Malaysian TV household
penetration, comprising 50% of subscribers on the pay platform and the
remaining 15% on NJOI. Although NJOI customers contribute lower ARPU
compared to subscribers on the pay-TV platform, they provide a huge base of
customers that could potentially switch to the pay platform. For example, 35K
NJOI customers switched to the pay platform in FY15. This is positive for Astro
given that it does not need to subsidize the STBs to these customers and it
gains a steady flow of ARPU from them.
Figure 24: Astro pay-TV and NJOI household penetration
('000)
(%)
8,000
80.0
7,000
70.0
6,000
60.0
5,000
50.0
4,000
40.0
3,000
30.0
2,000
20.0
1,000
10.0
2005
2006
2007
TV household
2008
2009
2010
2011
2012
Astro Pay-TV household (include NJOI)
2013
2014F
2015F
2016F
Penetration rate (%)
Embracing the digital platform

We also like Astro management for its active strategy to address the shift in
consumption habits among the next generation of subscribers. For example,
Astro launched its Astro-on-the-Go (AOTG) mobile platform back in 2012,
targeting both its own subscribers and non-Astro subscribers. AOTG allows
users to watch selected Astro Malaysia programming including live sports and
VOD on non-TV platforms such as PCs, tablets, iPhones and Android devices.
According to an independent market research group, Informate Mobile
Intelligence, Malaysia is ranked third-highest among the surveyed markets for
average daily smartphone usage of about 3.3 hours. Meanwhile, a separate
Nielsen survey highlighted that average usage of smart mobile devices is
catching up to the average TV consumption.
28
Management explained that the main reason for Astro entering the individual
and smart device space is to address the changes in technology and consumer
needs. For example, as households members spend more time on their smart
mobile devices individually, there will be more demand for content given that
different individuals would want to watch different programs. This is expected to
help boost Astro ARPU.
The company aims to grow AOTG downloads to 2.5m in FY16 with a weekly
viewing time of 180 minutes (vs 1.4m in FY15 with a weekly viewing time of 96
minutes). We think this is achievable given that Astro has about 4.6m
households with an average of four persons per household and Astro also
estimated that an average Malaysian households consumes seven hours of
content on a daily basis.
Figure 25: Smartphone usage across markets
5.0
4.5
Figure 26: Smart devices usage is closing the gap with TV

Title:
Source:
4.7
4.2
4.0
3.5
3.0
2.5
3.3
Please fill in the values above to have them entered in your r
3.1
2.8
2.8
2.4
2.0
2.0
2.0
1.9
1.8
1.8
1.5
1.0
0.5
-
Average smartphone usage (hour/day)
SOURCE: CIMB, INFORMATE MOBILE INTELLIGENCE
SOURCE: CIMB, NIELSEN, 4As
For 1HFY16, Astros EBITDA improved from 24.7% to 25.7% on the back of
stronger sales following a recovery in pay-TV subs addition, higher ARPU and
better adex growth, while it also benefited from lower D&A expenses. As a
result of higher operating leverage, its core net profit grew by 23.1% from
RM266m to RM328m.
We are encouraged to see Astros pay-TV sub addition back on the growth
track after recording a net addition of 15k subs in the quarter. This is an
encouraging reversal compared to the 5k subs loss in 1QFY16. Management is
maintaining its 50k target for new pay-TV subs in FY16. We think this is
achievable given that Astro has about 1m NJOI subs that may potentially
switch to the pay-TV platform.
Long-term target price for Astro

We expect Astro to maintain its position as the dominant pay-TV operator in
Malaysia in years to come mainly due to its strength in content delivery and
content creation. While we see potential competition from OTT players such as
Netflix and iflix taking away some market share from Astro, we are confident
that Astro will stay as the main home entertainment provider for Malaysian
households given its strong content ownership, as the company has produced
over 50,000 hours of TV content across all genres and in various languages.
Astro shares are currently trading at 9x EV/EBITDA, 1-standard deviation
below its historical mean of 10.2x. Assuming Astro successfully raised blended
ARPU by 1-2% annually, raised its customers base through its pay-TV platform
and NJOI by 80-100k per annum and experienced steady growth in adex
revenue of 9%, our three-year and five-year. target price would rise to RM4.06
and RM4.40, respectively.
29
Plantation sector
Stands out for its growth potential
We gave Genting Plantation the highest scores in our long-term plantation
stock-picking matrix primarily because of its strong output growth prospects
and strong balance sheet. The group scored higher than its peers in the growth
category as it has the highest ratio or 55% of total planted oil palm estates
under the immature and young category. This is due largely to its aggressive
new plantings and acquisitions in Indonesia since 2005. The aggressive new
planting has allowed the group to build up 60,645 ha of planted oil palm estates
in Indonesia, trumping its own planted oil palm estates area in Malaysia of
59,255 ha. The group also scored well in the financial categories due to its
lower gearing against its peers and higher profit margin. The recent issuance of
RM1bn Sukuk Murabahah by the group has helped the group to boost its cash
reserves to RM2.07bn, while its net gearing ratio was only 2% as at 30 June
2015.
KL Kepong achieved the second-highest score in our stock matrix due to its
younger estates and strong balance sheet. This is also due to its expansion
into Indonesia to grow its palm oil estates. The group is now looking for new
areas in which to grow, as it has planted most of its land bank in Indonesia. It
has recently expanded into Liberia.
IOI Corp scores highly on management and financials but lower on valuations
and growth. Its 32%-owned associates Bumitama Agri has young estates but
the group does not have control over the estates. However, we are positive on
steps taken by the group to grow its business through the acquisition of UnicoDesa and downstream assets.
Sime Darby ranks highly on management and valuations, but the scores were
brought down by its weaker financials and growth prospects against peers due
to its large assets base. Hap Seng Plantations has the highest score on
valuations due to its low EV/ha for planted assets and high dividend yields but
this was offset by its unexciting growth prospects as management has been
more conservative.
FGVs inability to enhance earnings from its acquisitions of a series of assets
since its IPO, as well as weak output growth from its aging estates, are our key
concerns on the company.
Figure 27: Plantation : Long-term stock-picking matrix
Sime
IOI
KLK
Genting Plants
FGV
HS Plants
-Corp governance
3.50
4.00
4.00
4.00
1.00
4.00
-Ambition
3.00
4.00
3.50
4.00
3.00
1.00
-Execution
3.00
3.50
3.00
3.50
1.00
3.00
-Innovation
2.00
3.00
2.00
2.00
1.00
1.00
-Transparency
4.00
3.00
3.00
4.00
3.00
3.00
Average
3.10
3.50
3.10
3.50
1.80
2.40
-ROE
2.00
4.00
3.00
2.00
1.00
2.00
-Gearing
3.00
2.50
4.00
4.00
3.00
4.00
-Profit margins
2.00
3.00
3.00
3.00
1.00
3.00
Average
2.33
3.17
3.33
3.00
1.67
3.00
-SOP
4.00
3.00
3.00
4.00
3.00
4.00
-Div yield
4.00
3.00
3.00
2.00
3.00
4.00
-P/E
2.00
2.00
3.00
2.00
2.00
3.00
-P/BV
3.00
2.00
2.00
3.00
4.00
4.00
Average
3.25
2.50
2.75
2.75
3.00
3.75
-short term
2.00
2.00
3.00
3.00
1.00
3.00
-long term
3.00
3.00
3.00
4.00
2.00
2.00
Average
2.50
2.50
3.00
3.50
1.50
2.50
Management
Financials
Valuation
Growth
30
Genting Plantations
Genting Plantations is the plantation arm of Genting group and one of the
fastest-growing plantation companies on Bursa Malaysia. The company was
incorporated in 1977 under the name Asiatic Development to spearhead
Gentings plantation business. It was listed on 30 August 1982 and has since
grown leaps and bounds to its current ranking as the third-largest palm oil listed
company by market capitalization on Bursa Malaysia, after IOI Corp and KL
Kepong. Its market cap has grown 5.7x over the past ten years, outpacing the
216% rise in its net profit due to higher CPO production, CPO selling prices
and property contributions. We looked back into the history of Genting
Plantations to appreciate the success story of the group so far.
Figure 28: Genting Plantations market capitalisation (RMm)
Figure 29: Genting Plantations net profit trend (RMm)
9000
500
8000
450
Title:
Source:
400
7000
Please fill in the values above to have them entered in your re
350
6000
300
5000
250
4000
200
3000
150
2000
100
1000
50
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
The group ventured into the palm oil business in April 1980, through the
successful acquisition of Rubber Trust Group, which owned some 13,700 ha of
plantation land in Peninsular Malaysia. In the following year, the group acquired
Ko Rubber Companies, which own about 10,000 ha of plantation land.
The Genting group started to make inroads into Sabah in 1985, through the
acquisition of Asiatic SDC, whose estates were subsequently transferred to
Genting Plantations in 1991, in a rationalization exercise. Since then, the group
snapped up lands in Sabah up until 2004, to grow its business and boost its
earnings.
In June 2005, Genting Plantations expanded its palm oil business overseas to
Indonesia via joint ventures. Its first was with the Sepangjang group on a 70/30
basis to develop 76,000 ha of land. It has subsequently entered into other joint
ventures. In a short span of nine years, the group has built up its planted oil
palm area in Indonesia to 60,645 ha. The expansion over the years resulted in
the group raising its land bank to 245,504 ha, an impressive 18-fold increase
since 1980.
31
Figure 30: Genting Plantations' planted oil palm estates from 1988 (ha)
140,000
120,000
100,000
80,000
60,000
40,000
20,000
Apart from plantation, the group has also been involved in property
development since 1993, mainly to unlock the value of its plantation land ripe
for development. The groups biggest property project is the Genting Indahpura
project in Kulai Johor. In recent years, the group has also sold some lands in
Johor and Kedah, which helped to boost its property earnings. It has also
entered into a JV to develop the Johor Premium Outlet, which has yielded good
returns for the group.
The group has also ventured into the biotechnology industry in 2006, initially
focusing on whole genome sequencing of palm oil. The biotech business is still
loss-making due to R&D costs.
Figure 31: Breakdown of Genting Plantations' 2014 sales
(RMm)
Figure 32: Breakdown of Genting Plantations' 2014 EBIT (RMm)
1,200
1,000
400.0
371.2
350.0
991
Title:
Source:
300.0
250.0
800
200.0
155.1
600
150.0
372
400
100.0
50.0
178
200
101
0.0
(50.0)
Plantation Malaysia
Plantation Indonesia
Property
Biotech
27.7
Others
Plantation Malaysia
Property
Biotech
Others
(50.4)
(4.5)
(100.0)
Genting Plantations earnings were impacted by weaker CPO prices and lower
property earnings in 1H15. However, we project stronger earnings in 2H, as we
expect CPO prices to recover as well as stronger production. The group has
toned down its FFB output growth guidance this year from 10% to 7%, due
mainly to weaker yield achievement from its Sabah estates.
32
Long-term target price for Genting Plantations

We believe Genting Plantations will be able to potentially double its earnings
over the next 5-10 years when all its young and immature estates in Indonesia
have reached their prime yielding age. Currently, 55% of the groups estates
are in the young and immature stage, and most of these estates reside in
Indonesia. We are confident the group can replicate its success in its plantation
business in Malaysia over to its Indonesian estates. This is due to its consistent
track record in achieving high FFB yields at its Malaysian estates of 21.4-24.2
tonnes/ha over the past five years.
In view of its strong organic growth prospects, we believe Genting Plantations
should be a stock for investors to hold over the long term, and we expect the
price appreciation to be substantial during the next bull run on CPO prices.
Apart from young estates, we also like the group due to the strategic location of
its estates in Peninsular Malaysia, some of which are ripe for development.
Assuming the CPO price improves by 2018 to RM2,800 per tonne and the
group achieves FFB output growth of 10% per annum over the next three years,
plus land values appreciate at a moderate pace of 5% per annum, our threeyear target price, which is based on SOP, rises to RM14.72. Using similar
assumptions stretching the earnings to 2020, the target price for Genting
Plantations rises to RM15.78.
Figure 33: Age profile of Genting Plantations OP estates
Figure 34: Age profile of Genting Plantations' Indonesian

estates
> 25 years
3%
Past Prime
12%
Title:
Source:
Prime 1
3%
Immature
27%
Prime 2
14%
Young
47%
Prime 1
16%
Immature
50%
Young
28%
33
Property sector
Top two companies scores nearly equal
Eco World tops the scoring in our long-term property sector stock-picking
matrix primarily because its scores highly in the management and growth
categories. It would have scored higher if not for its shortfall in the financial and
valuation categories, as the company only burst on to the scene in 2013/14 and
can be considered a relatively new company that has yet to fully establish itself.
As a result, Mah Sing Group is a very close second in terms of scoring, and its
recent decision to cancel two land purchases and cut is sales target for 2015
are key factors that dragged down its scores in the management and growth
categories.
UOA Dev scores highly in the financial management and valuation categories,
as it is one of few developers to hold substantial net cash, while its dividend
yields are a mouth-watering 6-7%. But management is very conservative and
growth is low on its list of priorities. E&O holds high ambitions, but execution
has historically been one of its key weaknesses. UEM Sunrise and SP Setia
are owned by government-linked investment companies, and such a structure
is often disadvantaged compared to their more aggressive entrepreneur-driven
counterparts.
Eco World
Mah Sing
UOA Dev
E&O
UEM Sunrise
SP Setia
-Corp governance
4.00
4.00
3.00
3.00
3.00
3.00
-Ambition
5.00
4.00
2.00
3.00
1.00
1.00
-Execution
5.00
3.50
3.00
2.00
2.00
2.00
-Innovation
5.00
4.00
3.00
4.00
2.00
2.00
-Transparency
4.00
4.50
4.00
3.50
3.00
2.00
Average
4.60
4.00
3.00
3.10
2.20
2.00
-ROE
1.00
4.00
3.00
3.00
2.00
3.00
-Gearing
3.00
4.00
5.00
3.00
3.00
3.00
-Profit margins
2.00
3.00
5.00
3.00
3.00
3.00
Average
2.00
3.67
4.33
3.00
2.67
3.00
-SOP/RNAV
4.00
2.00
4.00
4.00
5.00
3.00
-Div yield
1.00
4.00
5.00
3.00
2.00
4.00
-P/E
2.00
4.00
5.00
3.00
3.50
3.50
-P/BV
3.00
3.00
3.00
3.50
5.00
4.00
Average
2.50
3.25
4.25
3.38
3.88
3.63
-short term
5.00
2.00
1.00
2.00
2.00
3.00
-long term
5.00
3.50
2.00
4.00
3.00
2.00
Average
5.00
2.75
1.50
3.00
2.50
2.50
Total average
3.53
3.42
3.27
3.12
2.81
2.78
Management
Financials
Valuation
Growth
Eco World Development Group

Eco World is led by non-executive chairman Tan Sri Liew Kee Sin, who was
previously the founder, CEO and president of Malaysia's preeminent developer,
SP Setia. Several hundred of SP Setia's staff have joined Eco World, and the
latter has aggressively built up its land bank to over 7,000 acres with GDV of
RM75bn in just two to three years. In the group's first full year of operations, it
chalked up sales of RM3.2bn for the period to FY10/14, second only to Mah
Sing's RM3.43bn. Eco World is targeting sales of RM3bn in FY15 and RM4bn
in FY16 and appears on track to meeting these targets. Although the RM3bn
figure is slightly lower than FY14's figure, it is commendable nonetheless, as
most other developers have slashed their sales targets due to the very difficult
property market conditions.
34
To fully appreciate Eco World's potential, we need to look at Tan Sri Liew's
achievements at SP Setia. SP Setia was a role model for many developers, as
this small-to mid-sized firm in the 1990s morphed into Malaysia's largest, bestmanaged and most aggressive developer within 10 years. Its efforts at
distinction in all its endeavours was equally matched by its strong execution
skills. It is still the only developer to have made a successful transition in its
geographical diversification from within Malaysia (from original base of Klang
Valley to other key domestic markets such as Johor, Penang and Sabah) to
other parts of Asia, Australia and Europe. SP Setia can be considered
Malaysia's only truly multinational property company.
SP Setia has won countless awards over the years and even bagged the
prestigious FIABCI Prix dExcellence Worlds Best Master Plan Development
Award twice. This is considered the Oscars for the property industry. SP Setia
was also innovative and the market leader on several other fronts. It was the
first developer to extend the warranty period from the typical 12 months after
completion to 36 months. During the 2008-09 global financial crisis (GFC)
when buyer confidence was weak, SP Setia was also the first developer to
introduce the 5/95 financing plan, which enabled house buyers to put down
only 5% of the cost on signing the sales and purchase agreement, with no
interest payments during construction.
SP Setia was basically a selling machine that could push out sales rain or shine.
This was the case during the 1997-98 Asian financial crisis and again during the
GFC. This strong marketing prowess has now been exported to Eco World.
Success on the sales front will eventually be translated into a corresponding
surge in the revenue and profits, in our view. From a mere RM7m in 1993, SP
Setia's net profit went up more than 50x to RM394m in FY12. Likewise for Eco
World, although the group's profits are low, as the company just underwent a
major restructuring, growth will be very strong in the coming years, we believe,
due to the huge sales achieved starting from last year.
Figure 36: SP Setia revenue and profit trends
3000
2500
2000
1500
1000
500
0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Turnover
Net profit
Thus far this year Eco World has been able to achieve RM2.37bn in sales for
the 10M to Aug. The group undertook four maiden launches in mid-2015 and
was one of the few developers to enjoy overnight queues this year. Besides
domestic sales, Eco World's sister company Eco World International (EWI) has
projects in Australia and the United Kingdom. Tan Sri Liew's ultimate goal is to
merge the two companies into a single entity, which will likely become
Malaysia's largest developer by market cap.
35
Figure 37: Eco Sanctuary launch crowd
Figure 38: Eco Tropics launch queue
SOURCE: CIMB RESEARCH, COMPANY
Figure 39: Eco Business Park III launch crowd
Figure 40: Eco Terraces launch crowd
Long-term target price for Eco World

We believe Tan Sri Liew will be able to replicate his past success at SP Setia
with Eco World, but within a much shorter time frame. He should be able to
achieve this, in our view, given the vast experience gained over the years and
the high-quality management that moved from SP Setia to Eco World. Hence,
we believe Eco World should be the stock for investors to hold over the long
term and the price appreciation could be substantial. As property developers
are measured based on assigning discounts (during property slumps) or even
premiums (during property booms) to RNAV, our target price for Eco World
target price three or five years down the road will depend on the
discount/premium and RNAV at that time.
Eco World is currently trading at a steep discount to RNAV, and assuming that
discount narrows over time because the property market improves from the
current depressed state and land values continue to appreciate, we could
derive a higher target for Eco World over time. Assuming the property market
outlook improves by 2018 and the discount to RNAV assigned to Eco World
also narrows from 30% to 20%, plus land values appreciate at a moderate
pace of 5% per annum, our three-year price target rises to RM2.47. Using
similar assumptions but further narrowing the discount to RNAV from 20% in
2018 to parity (historically the leading developer can command premiums of
20-40% in buoyant property market conditions) in 2020, our target price rises to
RM3.37.
36
REIT sector
Axis REIT comes out on top
Axis REIT scores the highest in our long-term REIT sector stock-picking matrix
due to its management teams strength, attractive valuation, and positive
growth outlook. Its management has demonstrated a high level of ambition in
setting long-term targets and has done well in its execution, resulting in a
sustainable long-term growth for Axis REIT since its listing. In second place is
KLCC Stapled Security, mainly due to the quality of its management and a
favorable growth outlook, although it received lower scores in the valuation
segment. Sunway REIT scores favorably in the management category, but
valuation-wise it does not look attractive to us. The scores for CMMT are quite
similar to those for Sunway REIT, with a quality management but lacking longterm growth excitement.
Pavilion REIT meanwhile scores lower in the management segment mainly due
to a lower level of transparency, while IGB REIT scored the lowest due to what
we view as its lack of transparency.
Axis
KLCC SS
Sunway REIT
CMMT
Pavilion
IGB REIT
-Corp governance
4.00
4.00
3.50
3.50
3.50
3.50
-Ambition
4.00
3.50
4.00
3.50
3.50
3.00
-Execution
4.00
4.00
3.00
3.50
3.00
4.00
-Innovation
3.00
3.00
3.00
3.00
3.00
3.00
-Transparency
4.00
3.50
3.50
3.50
3.00
2.00
Average
3.80
3.60
3.40
3.40
3.20
3.10
-ROE
3.00
3.00
3.00
3.00
3.00
3.00
-Gearing
2.50
2.50
2.50
2.50
2.50
2.50
-Profit margins
3.00
3.00
3.00
3.00
3.00
3.00
Average
2.83
2.83
2.83
2.83
2.83
2.83
-SOP
3.50
3.00
3.00
3.00
3.00
3.00
-Div yield
4.00
3.00
3.00
3.00
3.00
3.00
-P/E
3.50
3.00
3.00
3.00
3.00
3.00
-P/BV
3.50
3.00
3.00
3.00
3.00
3.00
Average
3.63
3.00
3.00
3.00
3.00
3.00
-short term
3.50
3.00
3.50
3.00
3.00
3.00
-long term
4.00
3.50
3.00
3.00
3.00
3.00
Average
3.75
3.25
3.25
3.00
3.00
3.00
Total average
3.50
3.17
3.12
3.06
3.01
2.98
Management
Financials
Valuation
Growth
Axis REIT
Axis REIT is led by its chief executive officer and executive director Dato
George Stewart LaBrooy, a prominent figure in the Malaysian REIT scene, who
has been at the helm of the company since 2008. He was one of the key
figures in the formation of Axis REIT, when in 2003 he spearheaded a project
to identify suitable properties to be injected into Malaysias first REIT, which
was successfully concluded on 3 Aug 2015 when Axis REIT was listed on
Bursa Malaysia. He is also the chairman of the Malaysian REIT Managers
Association, an organization he helped set up in 2010 to give the Malaysian
REIT Managers a single voice in engaging with the regulators and Ministry of
Finance in proposing changes to the industry to promote its growth.
Under his leadership, Axis REIT has grown to become one of the bestmanaged and constantly growing REITs in Malaysia. Apart from being
Malaysias first REIT, Axis REIT was also the first conventional REIT to convert
37
into an Islamic REIT, when it became the worlds first Islamic industrial/office
REIT in December 2008. Axis REIT is currently the largest business space and
industrial REIT listed on Bursa Malaysia. It was also the pioneer in many other
innovative undertakings to improve its business efficiency and better reward
shareholders, as it was the first publicly listed company in Malaysia to adopt
cloud computing and was the first REIT to introduce a income distribution
reinvestment scheme. Axis REIT was also a founding member of the Malaysian
REIT Managers Association. These initiatives have been recognized by
industry players and investors, leading to Axis REIT being presented with many
awards recognizing its achievements, including being named the winner of
Best Practices Award from Asian Public Real Estate Association.
The companys good management practices have led to strong financial gains
for Axis REIT since its listing. Its assets under management have jumped from
RM296m from the time of its listing to RM2.04bn currently, a 691% increment.
Consequently, its space under management has jumped from 978,000 sq. ft. to
7.02m sq. ft. currently, 718% growth. It now has 34 properties under
management from five at the time of listing. The valuation gain registered since
listing stands at RM276m. All of these have translated into a handsome gain for
investors, especially long-term unit holders. Investors who have held on to Axis
REIT since listing would have been rewarded with a total return of 307%.
We believe Axis REIT has the best transparency with respect to the investment
community. It is one of the few REITS that consistently holds briefings for
analysts and fund managers after its quarterly financial results announcements,
which give investors a very clear idea of the direction of the company. It is also
the most aggressive acquirer of assets among the REITs in Malaysia. In the
past five years alone, from 2010 to 2014, it has acquired a total of 15 properties
and disposed of three properties for handsome gains. This, in our view, proves
the strength of the management team in putting in place a very active
acquisition strategy and strong network of contacts scouting for value-accretive
assets for them to buy.
We believe Axis REITs growth and will continue in the years to come, under
the prudent management of Dato George Stewart LeBrooy and his highly
capable team. They have continued with their policy of finding and acquiring
quality yield-accretive assets in 2015. They completed the acquisition of a
property in 1H15, with the acquisitions of another two properties currently
ongoing. Management has also identified another seven acquisition targets
with a total estimated value of RM270m, and is currently performing
assessments for those targets. Having crossed the RM2bn mark, management
has underlined that its next goal is to achieve RM3bn in assets under
management within three years. We believe this target is well within reach.
Figure 42: Axis REIT space under management (m sq. ft.)
8000
7000
6000
5000
4000
3000
2000
1000
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
38
Long-term target price for Axis REIT

Given managements track record, we believe Axis REIT will be able to sustain
its impressive performance in the years to come. We believe its target to
continue to acquire yield-accretive assets in the coming years to achieve
RM3bn in assets under management within three years from 2015 underlines
its commitment to achieve sustainable growth with the purpose of consistently
rewarding unit holders. As such, for investors looking for consistently growing
cash flow returns through dividends with stable price appreciation, we believe
Axis REIT is the stock to hold over the long term. As REITs are valued using
the dividend discount model, our target price for Axis REIT target price three or
five years down the road will depend on its earnings and the distributions it will
able to generate at those particular points in time.
Assuming constant 3.0% yoy annual revenue growth, based on DDM (cost of
equity 8.1%) valuation, our target price for Axis REIT would increase to RM2.04
in three years. Using the same assumptions, our five-year target price would
increase to RM2.43.
39
Smallcaps sector
MyEG comes out on top
MyEGs earnings are recurring and defensive; the car road tax and insurance
renewal is done annually, which is why the company even recorded revenue
and earnings growth during the 2008-2009 global financial crisis. MyEG came
out at the top in our scoring for the long-term small cap sector stock-picking
matrix primarily because its scored highly in the financials and the growth areas.
The score could have been much higher, as the stock trades at high P/E and
PBV valuations. Prestariang was a close second mainly due to lower growth
scores. The company is too dependent on long-term contracts from
governments, and any delays could hurt its earnings, like what happened in
2014. In that year, there was a delay in getting jobs for the IC Citizen project,
and this affected earnings during that financial year. Prestariang recorded high
numbers in financials backed by its healthy net cash balance sheet and high
60% net dividend payout ratio.
Figure 43: Small Cap sector long-term stock-picking matrix
MYEG
Prestariang
IFCA
Signature
Kawan
Daibochi
Thong Guan
Asia File
Tomypak
Wellcall
-Corp governance
3.00
4.00
3.00
4.00
4.00
4.00
3.00
3.00
2.00
2.50
-Ambition
4.00
4.00
5.00
4.00
4.00
4.00
4.00
3.50
3.00
3.00
-Execution
4.00
3.50
3.50
4.00
4.00
4.00
3.00
4.00
3.50
4.00
-Innovation
5.00
5.00
4.00
3.00
4.00
3.00
3.00
4.00
3.00
4.00
-Transparency
3.50
4.00
3.50
4.00
3.50
3.50
3.00
3.00
3.00
3.00
Average
3.90
4.10
3.80
3.80
3.90
3.70
3.20
3.50
2.90
3.30
-ROE
5.00
4.00
4.00
3.50
3.50
3.00
3.00
4.00
3.00
4.00
-Gearing
5.00
5.00
5.00
3.00
3.00
3.00
3.00
5.00
5.00
5.00
-Profit margins
5.00
4.00
4.00
3.00
3.00
2.00
2.00
3.00
2.00
3.00
Average
5.00
4.33
4.33
3.17
3.17
2.67
2.80
3.88
3.23
3.83
-SOP
3.00
4.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
-Div yield
1.00
3.00
1.00
3.00
3.00
3.00
3.00
4.00
4.00
3.00
-P/E
3.00
3.00
3.00
5.00
3.00
3.00
3.00
4.00
4.00
3.00
-P/BV
1.00
1.00
1.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
Average
2.00
2.75
2.00
3.50
3.00
3.00
3.00
3.50
3.50
3.00
-short term
5.00
3.00
3.00
5.00
4.00
3.00
3.00
2.00
3.00
2.00
-long term
5.00
4.00
4.00
3.00
4.00
3.00
3.00
2.00
3.00
2.00
Average
5.00
3.50
3.50
4.00
4.00
3.00
3.00
2.00
3.00
2.00
Total average
3.98
3.67
3.41
3.62
3.52
3.09
3.00
3.22
3.16
3.03
Recommendation
Add
Add
Add
Add
Add
Hold
Add
Add
Add
Management
Financials
Valuation
Growth
Add
SOURCES: CIMB
Management
MyEG is led by its major shareholder and Managing Director, TS Wong. The
companys strength lies in its innovative and entrepreneurship ability to offer
new e-government services to the public and add commercial elements to the
services offered. For example, in 2008, MyEG started the governments online
renewal e-service for the car road tax. The e-government charge was only
RM2.75 per transaction, but the company added another RM6-8 per
transaction to include courier charges. In addition, MyEG also offered online
car insurance renewal services with almost all the insurance companies. The
average online insurance cost per transaction purchased through MyEG is
RM400, and at 10% commission, average commission is around RM40 per
online transaction. Today, MyEG is the largest independent insurance agent
selling car insurance. Greater economies of scale have helped the company
secure higher commission from the insurance companies.
40
Figure 44: MYEGs revenue and net profit (RMm)

160
140
120
100
80
68.4
60
50.4
36
40
20
14.7
17.1
2008
2009
20.8
22.2
2010
2011
27.3
7.1
0
2007
Net profit
2012
2013
2014
2015
Revenue
The company has applied the same principle in its foreign workers annual
working permit renewal services (FWPR). Foreign workers working permits are
renewed annually, and MYEG today handles all renewals nationwide. The
company gets RM35 per FWPR transaction from the government. In addition,
MyEG offers the service to employers to purchase online compulsory foreign
workers insurance, and the company gets RM65-70 in commission from selling
these insurance policies. Through selling online insurance, MyEG is able to
raise revenue per foreign worker from RM35 to around RM100.
From FY2016 onwards, MyEGs FWPR and selling online foreign workers
insurance will be the largest revenue contributor to the company, generating
close to RM250m revenue annually, by our estimate. At 45-50% net profit
margin, FWPR should generate RM112-125m net profit annually to the
company, almost doubling FY15 net profit. In FY2016, we are targeting MyEG
revenue to reach RM405m (up 186% yoy) and net profit at RM168m (up 129%
yoy).
Long-term target price for MyEG

According to management, the company is working to launch another major
project in mid-2016, the custom service tax monitoring (CSTM) project. The
CSTM involves MyEG putting its own dongle in food and beverage (F&B) and
retail outlets to track sales receipts on a live basis. Phase 1 involves linking
around 50,000 F&B outlets nationwide, while Phase 2, which will begin one
year later, will target the retail sector, comprising 500,000 outlets. If CSTM
takes off as scheduled, MyEGs 2018 net profit could be around RM380m
equating to 31.7sen in EPS. If we assume a 21x P/E target, which is in line with
the peers, MyEGs share price in 2018 could be RM6.65.
This does not include potential revenue from the card payment and terminal
business into which management is looking to venture once the CSTM is
launched. In May-2015, MyEG proposed to buy a 55% stake in Cardbiz
Holding S/B, which is involved in IT and credit card rental services. This
indicates MyEGs bigger plans in this market segment, in our view. With the
CSTM in place linking all F&B and retail outlets nationwide, MyEG has the
CSTM infrastructure in place that would allow the company to compete with the
major banks on credit card and debit card services. MyEG is working together
with RHB Bank in this business venture. In 2014, credit card transactions in
Malaysia were around RM91bn, and if MyEG could get 10% market share in
three years, this would be around RM9bn worth of transactions. Assuming 2%
commission charges, potential revenue is RM180m annually. Assuming 50%
net profit margin, this business could contribute RM90-100m to the bottom line.
If MyEGs Group earnings grow a conservative 10% annually in FY2019 and
41
FY2020 and adding potential earnings from the card business, MyEGs 2020
net profit could be around RM550m, or 46sen in EPS. If we continue to assume
the 21x P/E target, which is in line with its peers, our share price in 2020 could
be RM9.65.
Figure 45: Malaysia credit card transaction (RMbn)
100
20%
18%
90
16%
14%
80
12%
70
10%
8%
60
6%
4%
50
2%
40
0%
2007
2008
2009
2010
2011
Transactions (RM bn)
2012
2013
2014
% yoy
SOURCES: CIMB, BNM
42
Technology sector
Riding on the e-payment bandwagon
GHL Systems scored the highest score in our long-term technology stockpicking matrix due to higher point from management and growth categories.
We see GHL as an attractive proxy for the growing transition to e-payment
solution across Asean countries. Apart from that, we see Inari-Amertron as
another attractive play in a different segment of technology, the semiconductor
space, after coming in a very close second after GHL. Inari score the highest in
the financials category due to its strong earnings prospects, three-year
projected EPS CAGR of 31% and healthy net cash position.
MPI came in third with a good score in the financials and valuation segments
given its healthy net cash position and strong free cash flow generation.
Unisem is another experienced player in the semiconductor industry with an
improving balance sheet position. MPI and Unisem are benefiting from the shift
in product portfolios toward miniaturization packages given the rising popularity
of smartphones and tablets. Despite this, both companies are playing second
fiddle to their Taiwanese tier-1 peers that are enjoying better economies of
scale and more advanced technology capability. Finally, Uchi enjoys one of the
highest operating margins in the sector and offers an attractive dividend yield of
6-7% on the back of a healthy balance sheet with a net cash position. However,
the niche product segment and lack of expansion drive by management are
capping the companys growth prospects, in our view.
GHL Systems
Inari-Amertron
MPI
Uchi
Unisem
-Corp governance
4.00
3.50
3.50
3.00
3.00
-Ambition
4.50
4.00
3.00
2.00
3.00
-Execution
4.00
4.00
3.00
3.00
3.00
-Innovation
4.00
4.00
3.00
3.00
3.00
-Transparency
4.00
3.50
2.50
2.50
2.50
Average
4.10
3.80
3.00
2.70
2.90
-ROE
3.00
4.00
3.00
3.00
2.50
-Gearing
4.00
4.50
4.00
3.50
3.50
-Profit margins
3.50
3.50
3.00
3.50
3.00
Average
3.50
4.00
3.33
3.33
3.00
Management
Financials
Valuation
-SOP
-Div yield
2.00
2.50
3.00
4.00
3.00
-P/E
4.50
4.00
3.50
3.00
3.00
-P/BV
3.00
3.00
3.50
3.00
3.50
Average
3.17
3.17
3.33
3.33
3.17
-short term
3.50
3.50
3.00
3.00
3.00
-long term
5.00
4.00
3.00
3.00
3.00
Average
4.25
3.75
3.00
2.50
3.00
Total average
3.75
3.68
3.17
2.97
3.02
Growth
TPA is the game changer for GHL

GHL was loss-making between 2008 and 2011 due to the combination of a
challenging domestic environment and losses at regional operations. However,
the company successfully returned to the black in 2012 following the
introduction of a new shareholder and management team at end-2010. The
new management team, led by CEO Raj Lorenz, who has more than 25 years
of experience in the domestic banking and payment solution industry, began to
turn GHL around by closing its unprofitable operations in China and Indonesia
and instituting other operational improvements.
43
A key strategy for the new management team was to break away from its
traditional business model and become a direct merchants acquirer. This is
how the transaction payment acquisition (TPA) business model was born. GHL
carried out it first TPA model following the acquisition of e-pay in 2014. E-pay is
the pioneer of electronic mobile prepaid and e-billing in Malaysia and it owns
one of the most comprehensive electronic payment service networks in
Malaysia, with over 18,000 locations. Under e-pays business model, GHL
earns a fixed-amount fee for every transactions using the e-pay network.
Figure 47: Target market segment
Currently, GHL is in the midst of implementing another TPA model called the
credit card TPA. Under the credit card TPA arrangement, GHL will acquire the
smaller third- and fourth-tier merchants that are underserved by the banks.
Although the turnover value for these merchants are relatively lower compared
to tier 1 and 2 merchants, we see huge market potential given the tier 3 and 4
merchants make up 90% of the entire market. The merchants who make up
these groups often do not have an e-payment solution on their premises, given
that it falls outside a banks target due to the lack of scale and throughput value.
Nevertheless, GHL is confident that it can cater to these merchants with its lowcost solution.
Figure 48: Asean market potential
35
30
30
25
20
15
8
10
4
2
Philippines
Indonesia
Thailand
Malaysia
Singapore
P OS Terminal per 1, 000 populati on
GHL as an attractive proxy for e-payment growth in Asean, in our view, driven
by rising population income and better broadband infrastructure to facilitate the
e-payment ecosystem. We see huge growth potential for e-payment services
due to a combination low credit card penetration and the high number of cash
transactions in the region.
44
According to a Frost and Sullivan report, Malaysia has relatively lower credit
card penetration of 17% compared to developed countries like Singapore
(58%), United Kingdom (69%) and the US (67%). This is also reflected in the
number of Malaysia POS terminals per capita at 8 units vs 30 units in
Singapore.
One of the major drivers for GHL is the Malaysian governments initiatives to
create an integrated payment ecosystem under its Entry Point Project (EPP) 4
within the Financial Services National Key Economic Area (NKEA). This EPP
aims to reduce the dependence on cash transactions from 91% to 63% by
2020 and increase the number of e-payments to 200 per capita per year from
44 in 2010.
To ensure the success of e-payment adoption, Malaysias central bank, BNM,
is implementing a new payment reform framework under which banks are
targeted to promote POS terminal growth from 250k in 2014 to 800k in 2020.
Also, debit card transaction volume is targeted to increase from 69m in 2014 to
1bn in 2020.
Figure 50: BNMs debit card transaction target
Figure 49: BNM POS terminal target
RM mil
Transaction vol
Title:
Source:
1,200
900
1,800
1,583
1,600
800
1,000
Please fill in the values above to have them entered in your report
1,400
700
1,135
800
600
1,200
1,000
500
600
759
400
300
400
800
600
454
200
400
266
200
100
0
147
182
2014
2015F
200
2015F
2016F
2017F
Contact POS terminals
2018F
2019F
2020F
Contactless POS terminals
2016F
Debit card transaction (mil)
2017F
2018F
2019F
2020F
Est debit card mkt size (RM mil)
Based on the latest payment indicator data from June 2015, we gather that
about 42m debit cards have been issued, more than 5x the 8m credit cards
issued. However, the total transaction value for debit cards is RM8.4bn,
significantly lower than credit cards RM55.5bn during Jan-Jun 2015. The
overall transaction volume for credit cards was also almost 4x that of debit
cards. This is significantly different from developed countries, where the
volume of debit card transactions is higher.
We therefore see huge room for growth in Malaysian debit card transaction
volume and value as consumers become more educated on the benefits of
cashless payments and the infrastructure improves through higher POS
terminal penetration. We estimate that by 2020 when total debit card
transactions reach 1bn, the potential market size for debit card transactions
could be as big as RM1.6bn (vs RM150m in 2014), assuming 100bp MDR per
transaction.
Long term target price for GHL

In our view, GHL offers high risk and reward opportunity for investors, but we
recognize that execution is a key factor to determine GHLs success in the TPA
business. Nevertheless, we believe GHL has the qualified and experienced
management team to steer the company to a greater height. We currently
value the stock at RM1.65, based on a 23x CY17F P/E, a 30% premium to the
sector average. We think this justifiable given GHLs stronger earnings growth
and attractive market opportunities in ASEAN due to the lack of regional e45
payment providers. We project 66.5% earnings CAGR for FY14-17,

significantly higher than its global peers 25.2%.
However, if we look at GHL for a longer horizon of between 3-5 years period,
we see further upside potential, as we expect GHL to have a bigger base of
physical and online merchants in Asean with steady monthly throughput.
Assuming GHL acquires a monthly average of 2k merchants from Malaysia and
the Philippines and a monthly throughput of about RM15k and RM10k for each
market, plus a MDR of about 200bps, our three-year target price rises to
RM2.40. Using similar assumptions from 2018 to 2020, our five-year target
price risesto RM3.65.
46
Telecommunication sector
Axiata scores the highest
Axiata has the highest score in our long term telecommunication sector stockpicking matrix mainly because we rate it highly in the growth and valuation
categories. It would have scored higher if not for its shortfall in the financial
category, as some of its overseas investments have yet to reap the full fruits of
its labour (Bangladesh, India, Cambodia), while others (Indonesia, Malaysia)
are going through a rough patch in the short term. Its other three peers are all
focused on the Malaysian market only and therefore lack in terms of their longterm growth prospects vs Axiata, in our view. Maxis comes in second in our
rankings, as it scores well in the financials category (highest EBITDA margin),
much of it attributable to its position as the mobile market leader (high-ARPU
customers) as well as to its optimal gearing structure (high ROE).
Although TM is on par with Axiata in terms of valuation, it trails its peers in the
financials category given the lower EBITDA margin of its Fixed Line business
and still relatively high-cost structure. DiGis management is as good as its
peers in terms of execution and corporate governance and it is superior to its
peers in the financials category (healthy EBITDA margin, high ROE). However,
its valuations are relatively expensive and it also ranks poorly in terms of shortand long-term growth, as we believe it will be the most impacted by more
intense mobile competition once TM-P1 enters the market in 2016, given its
high prepaid revenue mix.
Axiata
Maxis
TM
DiGi
-Corp governance
4.00
4.00
4.00
4.00
-Ambition
4.00
3.00
4.00
3.00
-Execution
3.50
4.00
3.50
4.00
-Innovation
3.00
3.50
3.00
3.50
-Transparency
4.00
4.00
4.00
4.00
Average
3.70
3.70
3.70
3.70
-ROE
3.00
4.00
3.00
4.50
-Gearing
2.50
2.50
3.00
3.50
-Profit margins
3.50
4.50
3.00
4.00
Average
3.00
3.67
3.00
4.00
-SOP
3.00
2.00
3.00
1.00
-Div yield
3.50
4.00
3.50
4.00
-P/E
1.00
1.00
1.00
1.00
-P/BV
2.00
1.00
2.00
1.00
Average
2.38
2.00
2.38
1.75
-short term
2.00
2.00
1.50
1.00
-long term
4.00
1.50
2.00
1.00
Average
3.00
1.75
1.75
1.00
Total average
3.02
2.78
2.71
2.61
Management
Financials
Valuation
Growth
Axiata Group
Since 2008, Axiata Group has been led by CEO Dato Sri Jamaludin Ibrahim,
who lists impressive credentials in the private sector (CEO of Maxis, CEO of
Digital Equipment Malaysia). Since coming on board, he has implemented a
strong performance-based culture in Axiata, with one of the key focus areas
being talent management. On the back of this and Axiatas transformation into
one of the largest Asian telecommunications groups, it has been able to
successfully attract and hire many highly capable local and international hires.
These include Mohd Khairil Abdullah, CEO of Axiata Digital Services (formerly
Partner at Bain & Company); Rene Werner, Group Chief Strategy Officer
(formerly Head of M&A Strategy at Deutsche Telekom); and Chari TVT, Group
47
Chief Financial Officer (formerly VP, Sales at HP Financial Services Asia

Pacific & Japan).
From the de-merger exercise in 2008, the company has grown its number of
subscribers over sixfold from 40m to more than 260m at end-2014, through
organic expansion and M&As. Besides operating in the more advanced
Malaysia and Singapore markets, Axiata also offers investors exposure in the
emerging markets as a significant mobile player in Indonesia (XL), India (Idea),
Bangladesh (Robi), Sri Lanka (Dialog) and Cambodia (Hello), which are fastgrowing and have bright long-term growth prospects given their lower
penetration.
Currently, Axiatas net profits are still largely derived from its Malaysian
operations. Celcom and Holdco (interest expenses on group debt, regional
tower operations, start-up losses for digital businesses) contributed 68% of
Axiatas net profit in FY14. We expect this will drop to 45% by FY17 as XLs
earnings rebound (13%) and Ideas contribution rises (18%) due to its fast
growth. Dialog (7%) and Robi (11%) will also become more significant earnings
contributors to the Group, we forecast.
Figure 52: Axiatas normalised net profit breakdown, FY14
Figure 53: Axiatas normalised net profit breakdown, FY17F
7.6%
10.7%
5.9%
7.4%
5.8%
6.7%
44.5%
13.5%
17.7%
67.7%
-0.5%
12.9%
Celcom + HoldCo + Others
XL
Idea
M1
Dialog
Robi
Celcom + HoldCo + Others
XL
Idea
M1
Dialog
Robi
Besides improving existing operations, Axiata is also doing a couple of things

on a groupwide level which may help to create some value over the longer term.
For example, it has established a regional tower company, eDotco, which
consolidates all the towers across its market of operations (except Indonesia,
due to local ownership requirements). This could potentially be spun off into a
separately listed company possibly in 2017-18 once tenancy ratios have been
raised and overall cost efficiency and profitability have been improved.
There could also be potential value creation from participating in market
consolidation. Subsidiary Hello Cambodia acquired Latelz in 2013 to become
the second-largest player in Cambodia. Then in Apr 2014, XL acquired no 5
player Axis in March 2014 to strengthen its No 2 market position. Recently,
Axiata announced that Robi has entered into discussions with Airtel to merge
their operations in Bangladesh. Market consolidation could help to enhance the
profitability in these markets by reducing competition or through cost synergies.
Long-term target price for Axiata

Axiata currently trades at FY16F EV/OpFCF of 14.2x. Our 12-month target
price is RM6.60, based on SOP valuation methodology. This implies FY16F
EV/OpFCF of 15.8x, which is more in line with its Malaysian telco peers.
We forecast EBITDA (including associates pretax profit) to grow 20.3%
between 2015-18 and 36.5% between 2015-20. Coupled with a decline in
capex intensity (capex-to-sales) from 24.5% in FY15 to 16.7%/15.2% in
48
FY18/20, we forecast OpFCF to grow 62.8% between FY15-18 and 99.7%

between FY15-20. Given our view that its regional businesses would have
reached greater maturity in three to five years, we believe Axiata should then
trade at lower EV/OpFCF multiples to factor in slower future growth beyond
2018/20.
Assuming a target EV/OpFCF multiple of 12x, we derive a fair value of RM7.00
in 2018 and RM9.00 in 2020, both of which imply decent dividend yields of
4.4% p.a.
49
Timber sector
Diversification to palm oil is the best bet
In the long run, the Sarawak timber players need to diversify their earnings
base as a result of dwindling log production from the natural forest. Fortunately,
most of them have already diversified into oil palm plantations in the early
2000s. Oil palm would have been the biggest contributor to their earnings if not
for the current downcycle in commodity prices.
Among the two timber players under our coverage, Ta Ann is our long-term
pick due mainly to its more superior execution capability and attractive
valuations over Jaya Tiasa.
Figure 54: Long-term stock-picking matrix - Timber
Jaya Tiasa
Ta Ann
-Corp governance
3.00
3.00
-Ambition
3.00
3.00
-Execution
2.00
4.00
-Innovation
3.00
4.00
-Transparency
3.00
3.00
Average
2.80
3.40
-ROE
2.00
3.00
-Gearing
2.00
3.00
-Profit margins
2.00
3.00
Average
2.00
3.00
-SOP
2.00
3.00
-Div yield
1.00
4.00
-P/E
3.00
3.00
-P/BV
3.00
3.00
Average
2.25
3.25
-short term
2.00
3.00
-long term
3.00
3.00
Average
2.50
3.00
Total average
2.39
Management
Financials
Valuation
Growth
3.16
Ta Ann
Ta Ann started as an integrated timber player in Sarawak. Like its local peers, it
is facing structural challenges such as declining log production from the natural
forest, rising awareness on sustainably-produced timber products, and
increased substitutions for tropical timber products. We believe Ta Ann is better
prepared than its peers to face these challenges.
Ta Ann was one of the earliest timber players in Sarawak that ventured into
forest plantation. As at 2014, it had planted 36,044ha of forest. Although this is
only about a tenth of the size of its timber concession, more logs can be
harvested from planted forest than in natural forest. Ta Anns management
reckons that it could sustain its current log production volume in the
foreseeable future by harvesting its planted forest, which could begin in the
next two years. Timber products that are sourced from plantation forest could
also gain wider acceptance as they are perceived to be sustainably produced.
50
Figure 55: Ta Anns planted forest - 1
Figure 56: Ta Anns planted forest - 2
Ta Ann has also planted 39,500ha of oil palm plantations as part of its strategy
to broaden its sources of earnings. We believe its oil palm estates were better
managed than those of its peers, judging from its FFB yield that is 15% above
Sarawaks industry average. Ta Ann also has good potential to expand its
planted area as it has about 60,000ha of unplanted landbank in Sarawak.
Figure 57: Maturity profile of Ta Ann's oil palm estates (average
age of 7-8)
Figure 58: FFB yield of Ta Ann and Sarawak average
Young, 2,570ha,
6%
(tonnes per ha)
Immature,
6,602ha, 17%
Ta Ann
Sarawak
Title:
Source:
22.0
20.0
18.0
16.0
14.0
12.0
Mature,
30,355ha, 77%
10.0
2010
2011
2012
2013
2014
SOURCES: CIMB, MPOB
Long-term target price for Ta Ann

Oil palm plantations would have been the biggest earnings contributor to Ta
Ann if not for of the downcycle in commodity prices. We believe that CPO
prices will recover in the next 3-5 years as new supply declines. Assuming that
CPO prices will recover to its 10-year average of RM2,500 per tonne in 20182020 (current CPO futures indicate that CPO price could rebound to RM2,500
by Mar 2016) and Ta Anns FFB production grow at about 10% p.a., Ta Ann
could deliver an EPS of RM0.45-0.50 in the next three to five years. However,
its growth potential will be weaker by then and its valuation multiple should fall
to about 12x, in line with the planters, with limited growth potential. Based on a
P/E of 12x, we believe Ta Anns share price could rise to RM5.40 by 2018 and
RM6.00 by 2020.
51
Transport sector
MAHB is our top long-term pick
Among the four transport companies under consideration, we rank MAHB only
slightly higher than Westports and MISC, but significantly above AirAsia X. Our
ratings of the top three companies are above the average of three points, and
within a tight dispersion of between 3.13 and 3.41 points.
MAHBs ratings were marked down for its relatively weak financial performance
in the next 2-3 years in light of the capacity cuts and network rationalisation of
major airlines in Malaysia, languid passenger traffic expansion as a result of
the declining purchasing power of Malaysians, as well as the commissioning of
KLIA2 from May 2014, which caused a step-up in operating costs, depreciation,
and interest expense. As a result, P/E valuations will remain steep in the
forecast period, in our view, despite the share price having corrected more than
40% since late-2013.
Having said that, we expect MAHBs earnings to bottom out in 2015, and
recover gradually thereafter as passenger volume expansion continues. Hence,
we think that MAHBs share price has also hit bottom, as it is currently being
valued at a P/BV of around 1x presently. The ultimate prize is the eventual
raising of the KLIA2 passenger service charges (PSC) to close the current gap
with the PSCs at the Main Terminal Building (MTB). This could be a major
catalyst to earnings. MAHB also has sufficient land area to build more terminals
in the future to cater to long-term passenger and air traffic growth.
Westports is very well run and managed, but its scores have been moderated
by its expensive valuations and constrained long-term growth, as its facilities
will likely be fully built-up in the next five years and fully utilised in
approximately the next 10 years.
MISC is currently enjoying the fruits of the tanker rate boom and incoming LNG
assets, with some asset acquisitions being planned. But MISC is not our top
long-term pick because the cyclicality of the shipping business is never easy to
predict, and we are expecting the tanker rate boom to come to a dramatic end
in 2017.
Finally, AAX is faced with very tough conditions and competition is intense. It
has never been profitable at the core earnings level since starting business in
2007, except for one year in 2010.
52

Transport
AirAsia X
MAHB
MISC
Westports
-Corp governance
4.00
4.00
4.00
4.00
-Ambition
4.00
4.00
3.50
4.00
-Execution
2.00
3.00
3.00
5.00
-Innovation
5.00
3.00
3.00
3.00
-Transparency
3.50
4.50
3.00
4.50
Average
3.70
3.70
3.30
4.10
-ROE
1.00
2.50
3.00
4.00
-Gearing
5.00
3.00
4.00
3.00
-Profit margins
1.00
2.00
3.50
5.00
Average
2.33
2.50
3.50
4.00
-SOP
0.00
3.00
5.00
3.00
-Div yield
1.00
3.00
3.00
4.00
-P/E
0.00
2.00
3.00
2.00
-P/BV
2.00
4.00
4.00
1.00
Average
0.75
3.00
3.75
2.50
-short term
0.00
3.00
2.00
3.00
-long term
1.00
5.00
3.00
2.00
Average
0.50
4.00
2.50
2.50
Total average
1.82
3.30
3.26
Management
Financials
Valuation
Growth
3.28
SOURCES: CIMB
Malaysia Airports Holdings Berhad (MAHB)

MAHB is the operator of all of Malaysias airports (with the exception of Senai),
with its 25-year concession ending in 2034. The turning point for MAHB came
in 2009 when it successfully negotiated a new operating agreement with the
government. This agreement ensured that MAHB will be allowed to raise
Passenger Service Charges (PSC) every five years at the cumulative rate of
inflation, be properly compensated should the government prevent the
scheduled PSC hike in the public interest, and also be compensated should the
government require MAHB to bear the burden of uneconomic airports. In
exchange, MAHB will be released from its previous liabilities to the government,
which was too heavy, and the government will be paid a much more affordable
share of revenue until the end of the concession in 2034. Please refer to our
detailed report, Get in for the long haul, dated 7 October 2013 for more details
on the restructuring agreement.
It is currently negotiating with the government to extend the concession until
2069, but progress has been made despite several years of negotiation.
Nevertheless, we are confident that the concession will be extended, with the
only uncertainty being the new terms and conditions attached to the renewal.
MAHB has been enjoying the fruits of the success of the AirAsia group since it
was reborn under the leadership of Tan Sri Tony Fernandes in 2002. At first,
AirAsia operated from Subang airport, then moving to the KLIA MTB. Once the
purpose-built Low Cost Carrier Terminal (LCCT) was ready, AirAsia moved
there, and last year, it moved to the new KLIA2 terminal, which was built as the
LCCT replacement. AirAsia has been a phenomenal success, and the
Malaysian business alone is expected to contribute 18m departing passengers
to MAHB this year, not including the contributions from Thai AirAsia, Indonesia
AirAsia, and Philippines AirAsia. AirAsia X, which is AirAsias sister company,
is expected to contribute some 2m departing passengers to MAHB. These are
significant chunks of the 43m departing passengers expected to travel through
MAHBs airports in Malaysia in 2015.
Other airlines have also contributed to MAHBs growth over the past decade
with MAS generally expanding to short-haul regional destinations although it
has cut back on long-haul intercontinental flights, and relative newcomer
53
Malindo Air also contributing capacity. Competition has generally caused

airfares to decline, which also acts as a stimulus to passenger traffic.
The airport operator currently has ample capacity on its hand to accommodate
future passenger and air traffic growth. KLIA has three runways, even though
the original two were not even fully utilised before the third one was ready for
use from May 2014. It has two terminals the MTB, which can accommodate
25m passengers per year (mppa) and the KLIA2, with a 45mppa capacity. KLIA
MTB is expected to handle 24mppa this year, implying a high utilisation, but the
passenger handling capacity is comfortably more than 25m, as the terminal is
expansive and remote parking facilities are hardly ever used. Furthermore, the
airlines based at MTB are generally expanding at a very slow rate. The KLIA2
terminal is expected to handle 26mppa this year, which implies only 58%
utilisation, which is low enough to handle the faster traffic growth expected from
the LCCs that are based there.
Airports usually suffer in the initial years of the commissioning of a new facility,
as capacity expands in a big step up, but passenger traffic expands at its usual
organic rate, leading to a decline in airport utilisation. MAHB is no exception, as
can be seen in the big decline of its earnings from 2Q14 onwards when the
KLIA2 facility was commissioned. The full-year cost impact from the opening of
KLIA2 will be felt in 2015, and the negative impact to MAHBs earnings is
exacerbated by the ongoing capacity cuts implemented by MAS from August
onwards. As a result, traffic growth at the higher-yielding MTB is being
compromised and the traffic mix is moving unfavourably towards the loweryielding KLIA2.
KLIA2 is low yielding because it has carried over the discounted tariffs of the
LCCT that were first introduced in 2007 as a concession given by the
government to facilitate AirAsias growth and also to acknowledge the less
comfortable LCCT facility compared to the MTB. Although KLIA2 is now a
much better facility, it has applied the same tariffs as were prevailing at the
now-closed LCCT, because of AirAsias successful lobbying.
When KLIA2 was first opened, the Deputy Ministry of Transport said that a
review of KLIA2s PSC charges will take place at the first anniversary of its
opening, i.e. in May 2015. But a hike in KLIA2s PSC did not take place in May,
and is unlikely to take place anytime this year, in our view, given the worsening
economic situation and the cost-of-living pressures faced by Malaysian
consumers, with GST implemented from April 2015 and the imported inflation
caused by the weakening ringgit.
However, we do not think that this situation will continue indefinitely. Ultimately,
it is unfair for MAHB to be charging LCCT-equivalent PSC tariffs at the KLIA2,
which is more costly to build and also much more comfortable for passengers.
While we cannot predict when the government will approve a PSC tariff hike at
KLIA2, we are confident that it will happen in the medium term, which would
significantly boost its earnings. The most important uncertainty is the terms and
conditions attached to the renewal of the concession from 2035 to 2069.
Long-term target price for MAHB

The tariffs that currently apply to at the KLIA2 are RM6 for domestic departures
and RM32 for international departures; these are the tariffs that are paid by the
passenger. MAHB had a right back in February 2014 to raise the PSC charges
which the government did not want passed through to passengers. So, under
the operating agreement signed in 2009, the government has had to
compensate MAHB for the difference in tariff.
Effectively, MAHB is earning RM7 for each domestic departure from KLIA2,
against RM10 for domestic departures from MTB, while it is earning RM35 for
each international departure from KLIA2, against RM71 from the MTB.
Assuming that at the beginning of 2017 MAHB gains the right to raise the
KLIA2 tariffs to a rate which is approximately 20% lower than the equivalent
54
MTB tariffs, then the new KLIA2 tariffs would be RM8 for domestic departures,
and RM60 for international departures.
Our EPS forecasts could more than double in 2017, and our end-2015 group
DCF-based target price could rise to RM7.36 (excluding dividend of around
RM0.04/share expected to be declared for 2015), which is 36% higher than our
current target price of RM5.43. A full tariff equalisation would yield even more
upside for MAHB to more than RM8.13, although we think this is unlikely.
On the back of the same assumptions, our end-2018 group DCF-based target
price could rise to RM7.40 (including dividends paid between 2015 and 2018),
and our end-2020 group DCF-based target price could rise to RM7.69
(including dividends paid between 2015 and 2020).
Figure 60: Passenger service charges at Malaysias airports
Figure 61: Group DCF for MAHB based on different PSC tariffs at KLIA2 (current
DCF is RM5.43)
International PSC at KLIA2
Domestic PSC at KLIA2

7
10
35
5.43
5.45
5.48
5.52
40
5.81
5.84
5.87
5.91
45
6.23
6.26
6.30
6.33
50
6.58
6.61
6.64
6.67
55
6.93
6.96
6.99
7.02
60
7.34
7.36
7.39
7.43
65
7.73
7.75
7.78
7.82
70
8.04
8.07
8.10
8.13
Figure 62: Discounted cashflow valuation (RM m) - current

Malaysia - PV of free cash flow (2016-2034)
Malaysia - PV of free cash flow (2035-2069)
Perpetuity (2070 onwards)
Less : Net debt
DCF value of Malaysia business (RM m)
Value of 100% of ISG ( m)
RM:1
DCF value of 100% of ISG (RM m)
Total DCF value of the MAHB group (RM m)
No of shares (m)
NPV per share (RM/share)
6,618
2,371
-2,726
6,263
625
4.30
2,688
8,950
1,652
5.43
55
Utilities sector
Sector reform continues
We believe the regulatory framework for the Malaysian utilities sector will
continue to evolve in the next few years as the regulator carries on with the
reform initiated a few years ago. Future reform could range from more
transparent regulations for natural monopolies and greater competition among
the utilities players to wider-reaching changes such as disintegration of natural
monopolies and the opening of the sector to foreign players. All these will
create opportunities and risks for the investors.
Tenaga is on top of our long-term utilities sector stock-picking list due mainly to
its relatively cheap valuation. We expect the teething issues faced by the
incentive based regulation (IBR) for Tenagas will be resolved in the next few
years. This should increase the confidence on Tenagas earnings and allow
investors to better appreciate the value of the stock.
Cypark comes in second, as it has a strong earnings growth potential, driven
by the governments plan to expand the renewable energy sector. Cyparks
valuation is also very attractive, in our view, as it trades below its book value.
The third place goes to YTL Power, which scores well in the financials and
valuations categories. We believe reform in the Malaysian utilities sector poses
little risk to YTL Power because its key assets are located in the UK and
Singapore. While it may seem to be exiting the Malaysian power scene, its
strong balance sheet gives it a slight advantage over most of its peers in the
bidding for new power plant projects in the future. However, we think its
earnings growth potential is not as strong as Cyparks while its long-term
earnings are not as resilient as Tenagas, as its Singapore assets are exposed
to intense competition.
Figure 63: Long-term stock-picking matrix - Utilities
TNB
PetGas
YTL Power
Malakoff
Gas Malaysia
Cypark
-Corp governance
4.00
5.00
3.50
4.00
4.00
3.00
-Ambition
3.00
2.00
3.50
4.00
2.00
5.00
-Execution
3.00
3.00
4.00
3.00
3.00
3.00
-Innovation
3.00
4.00
3.00
3.00
4.00
3.00
-Transparency
3.00
3.00
2.00
4.00
4.00
3.00
Average
3.20
3.40
3.20
3.60
3.40
3.40
-ROE
4.00
5.00
3.50
3.00
3.50
4.00
-Gearing
5.00
5.00
3.50
2.00
5.00
2.00
-Profit margins
4.00
4.00
3.50
3.50
3.50
3.00
Average
4.33
4.67
3.50
2.83
4.00
3.00
-SOP
4.00
2.00
3.00
3.00
3.00
4.00
-Div yield
2.00
2.00
4.50
4.00
4.00
2.00
-P/E
5.00
2.00
4.00
2.00
2.00
5.00
-P/BV
4.00
2.00
3.00
2.50
2.00
5.00
Average
3.75
2.00
3.63
2.88
2.75
4.00
-short term
3.00
2.00
2.00
3.00
1.00
4.00
-long term
3.00
2.00
2.00
2.00
2.00
3.00
Average
3.00
2.00
2.00
2.50
1.50
3.50
Total average
3.57
3.02
3.08
2.95
2.91
3.48
Management
Financials
Valuation
Growth
Although PetGas does not face material competition and has arguably the most
resilient earnings among the stocks in our utilities portfolio, it lacks earnings
growth opportunity, in our view. On top of that, its current P/E of 22x may revert
to its long term average of 17x in the next three to five years. These are the
reasons why we rank PetGas as number four on our list.
56
Gas Malaysia is our long-term top Reduce due to significant earnings risk
arising from potential regulatory reform. The IBR for the gas sector is likely to
be implemented in 2016 and will eventually lower Gas Malaysias current return
of 13% closer to its cost of capital of 7-8%.
Tenaga Nasional
Tenaga runs the power transmission and distribution (T&D) network and owns
about 55% of the generation capacity in Peninsular Malaysia. It is one of the
largest stocks by market cap on Bursa and a proxy for the Malaysian economy
as electricity demand tracks closely with the countrys economic activities.
Over the past 10 years, Tenagas net profit has grown at a CAGR of 14%,
outpacing Malaysias average real GDP growth of c.5% in this period. The key
earnings growth driver was the introduction of incentive-based regulation (IBR)
in 2014, which regulates the pass-through of fluctuation in fuel costs to the
consumers via tariff revision. This would make Tenagas earnings neutral from
any fluctuation in fuel prices.
Figure 64: Tenaga's earnings have been volatile in the past
(Tenaga's reported net profit - RM m)
7,000
6,000
5,000
4,000
3,000
2,000
1,000
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
The skeptics have pointed out that tariff revision under the IBR still requires the
approval of the Cabinet, just as before the IBR was introduced, and therefore
contains political elements which weaken the predictability of the amount of
tariff revised. This risk is often used to justify Tenagas wide valuation discount
against the IPPs and its peers in the developed countries.
In the past, tariff hikes have stirred up controversy as they are perceived to be
avoidable since indigenous natural gas was the key fuel in power generation. It
was also perceived that the IPPs were the beneficiaries of a tariff hike.
While these issues could still surface, we believe that the resistance would be
milder going forward. Firstly, Malaysia increasingly relies on imported coal and
LNG for power generation. This weakens the argument that tariff hikes are
avoidable when international fuel prices rise. Secondly, all first-generation IPPs
will expire in the next 2-3 years and the remaining IPPs are far less profitable
than the former. This will remove the perception that tariff hike benefits the
IPPs. On top of that, we expect overall household income and spending to
continue to grow, which would lower the electricity bill as a proportion of total
spending.
In the long run, we believe that consumers will accept market-based pricing of
electricity tariff, such as those in the developed countries. When this happens,
investors will have stronger confidence in Tenagas neutrality to fluctuations in
fuel prices. This will narrow the valuation discount gap between itself and that
of its peers, in our view.
57
Long-term target price for Tenaga

We believe Tenaga will trade at a slight premium over its book value in the long
run. This is because the IBR will ensure that the earnings from its T&D assets
stay close to their cost of capital while competition from other IPPs cap the
return from its generation assets.
Conservatively, we expect Tenaga to generate at least RM6bn of annual net
profit over the next five years. This could raise its adjusted book value to
RM82bn by 2018 and RM94bn 2020. At 1.1x P/BV (similar to its current level),
Tenagas share price could rise to RM16.06 by 2018 and RM18.40.by 2020.
Figure 65: Book value of Tenaga
RM m
Target price based on 1.1x P/BV
46,729
9.11
Current
Reported Shareholders' equity
Adjustments:
Overstated pension liability*
Understated tax assets*
10,210
7,457
Adjusted shareholders' equity
64,396
12.55
By 2018**
82,396
16.06
By 2020**
94,396
18.40
*Estimates; **Assuming average annual net profit of RM6bn in the next 5 years
58
Others
Only World Group (OWG) multibagger in the making
OWG operates food service outlets, primarily in Genting Highlands, which is a
captive and monopolistic market. Its greatest strength is the captive market in
Genting Highlands. We estimate that its Genting food service outlets (FSO)
generate average annual sales per outlet of RM2.8m, which is only 10% lower
than KFC Malaysia but more than 50% higher than Starbucks at RM1.8m,
Kenny Rogers Roasters at RM1.2m, Old Town at RM1.1m, and OWGs own
non-Genting FSOs of RM0.5m. This demonstrates the superior long-term
economic moat of an almost monopolistic market in Genting Highlands. In
addition, certain outlets like Marrybrown and jR Curry operate 24 hours a day
to cater to late-night casino patrons, which further improves revenue per outlet.
Compared to other mall-based FSOs, it is unlikely for Genting Malaysia to raise
its rents significantly for two reasons: 1) unlike a shopping mall, Genting
Malaysias business model is not reliant on rental income; it is first and
foremost a casino 95% of Genting Malaysias revenues in Genting Highlands
are derived from gaming; and 2) increasing visitation is key to Genting
Malaysias success, so the availability of F&B facilities is paramount.
In Dec-12, OWG won a tender to undertake the revitalisation project for the
Komtar Tower (the tallest building in Penang), which involves a transformation
of the buildings top five floors into high-end commercial retail, F&B and a
tourist observation deck. In exchange, it was granted an up-to 60-year
concession to operate the F&B and other outlets on these floors. The crown
jewel, in our view, is the potential tourist receipts from the observation deck,
given that Penang is a major tourist destination.
We are also positive on Komtar as another growth driver. we believe there are
several factors that could help make this project a success:1) Support of the Penang state government. Given that this refurbishment
project is an initiative of the state government, we can expect support from
the state in terms of holding official banquets, dinners and exhibitions at
Komtar;
2) Feeder traffic from Star Cruises. Star Cruise Libra and SuperStar Aquarius
sails from Port Swettenham, Penang, and the cruise terminal is only a 1015 minute drive from Komtar. Given the strong business relationship with
Genting, we expect Star Cruises to include a cruise itinerary that would
feature a visit to Komtar.
3) Domestic tourism. The weakening ringgit is likely to force many Malaysians
to travel locally in 2015-16, which augurs well for tourism in Penang and by
extension, visitation to Komtar. In addition, Visit Malaysia Year 2014 has
been extended into 2015 and has been designated Malaysia Year of
Festivals 2015.
Over the longer term, we believe that OWG could be a multi-bagger when the
GITP and Komtar come onstream and mature. It is not easy to get long-term
profit projections right to the dollar. However, in response to multiple requests
by institutional investors, we have attempted to estimate what OWG might be
worth in the longer term. As such, we try to impute additional net profit
estimates (not in our forecasts yet), when Komtar and GITP are fully rolled out
and matured. This does not include: 1) any additional space that OWG might
be able to secure at Komtar, 2) any earnings contribution from potential M&A
activities, and 3) any additional ventures that OWG may undertake and
replicate in other states.
59
Based on our initial estimates, we believe that OWG could be worth

RM8.67/share in 2018, based on the following assumptions:
1) Incremental GITP net profit of RM17m, based on our estimate that 85% of
OWGs net profit in FY13 (RM17m) came from Genting Highlands (before
the indoor parks were shut for the GITP renovation). Assuming that OWG
is able to secure a space in Sky Avenue/Plaza similar to its existing space,
we believe it should be able to replicate the same business model to
generate similar profits;
2) Around 500,000 visitors per attraction per year (there are four attractions in
Komtar) at blended ticket rate of RM20/ticket and pretax margin of 20%.
These are very conservative estimates, as Ripleys Believe It or Not in
Genting Highlands earned pretax margins of 24-48% in FY12-14;
3) Higher ticket rates. We have assumed a blended ticket rate of RM15 for
level 64 of Komtar. Management intends to drive blended ticket rates
higher as the development matures. Our incremental net profit assumes a
blended ticket rate of RM20;
4) F&B profits based on OWG operating 80% of the F&B space in Komtar
(c.40,000 sq ft) at pretax profit of RM5 per sq ft per month. This is also very
conservative, in our view, as we estimate that OWG generates pretax profit
per sq ft of c.RM50/month in Genting Highlands!
5) Digiphoto contributes c.RM3m in net profit to OWG at Genting Highlands.
We assume this is replicable at Komtar.
6) Escape Room earnings. 10 rooms to be added to Genting Highlands. Each
participant pays RM45 and an average of five participants play in a single
session. Based on 80% utilisation of available rooms per annum, Genting
could generate RM6.5m in revenue. Based on 40% gross margin and 24%
tax rate, this would add RM2m to Escape Rooms existing profit guarantee
of RM2m. Similar business models are replicated in RWS and RWM with
similar RM2m in net profit p.a. accruing to Escape Room per country. New
licensed outlets in other countries generate another RM2m in net profit.
OWGs 60% share of RM8m in incremental net profit amounts to RM4.8m.
Figure 66: OWGs potential target price in 2018
FY17 net profit
Add:
36.67
GITP
17.00
Komtar
Themed attractions
6.08
Higher ticket rates
1.75
F&B
1.90
Digiphoto
3.04
Escape Room
Net profit
4.80
71.24
EPS
0.39
P/E
22.5
Target price
8.67
Assuming that EPS growth moderates from 60% per annum (as per our current
forecasts for FY15-17) to 30% per annum in FY19-20, then net profit in FY20
rises to RM120m, which gives a 2020 target price of RM14.66.
60
Company Briefs
.
61
TV - SatelliteMalaysiaEquity researchOctober 9, 2015
Company Note
Astro Malaysia
Staying dominant
ADD (no change)

Current price:
RM2.96
Target price:
RM3.70
Previous target:
RM3.70
Up/downside:
25.0%
Reuters:
Astro is the dominant pay-TV operator in Malaysia with 4.6m customers.
Its consistently strong free cash flow could lead to dividend upside in FY1/16 and in
future years.
Astro is our top pick in the media sector. It is also our long-term pick with 2018 and
2020 target price of RM4.06 and RM4.40, respectively.
ASTR.KL
Bloomberg:
ASTRO MK
Market cap:
US$3,635m
Management aims to transform Astro into a platform-agnostic content provider that

delivers the best content across all platforms.
RM15,397m
Average daily turnover:
US$2.59m
Rose to dominance
RM10.67m
Astro began broadcasting in 1996 as the second pay-TV provider in Malaysia after Mega
TV with 22 TV and eight radio channels. Despite the strong competition, it rose to be the
leading pay-TV operator following its strategy to invest in quality and diversified content,
which enabled it to cater to various market segments. Today, it has about 179 TV
channels including 49 high-definition (HD) channels, delivered via direct-to-home (DTH),
IPTV and over the top (OTT) platforms.
Current shares o/s
5,202m
Free float:
41.5%
Key changes in this note

No changes
Astro is backed by Tan Sri Ananda Krishnan

Price Close
Astro Malaysia is 41% owned by billionaire Tan Sri Ananda Krishnan mainly through his
investment vehicle in Usaha Tegas Sdn Bhd (UTSB) and its partners. UTSB also
controls Bursa Malaysia-listed telecommunication service provider, Maxis Bhd and oil &
gas marine support operator Bumi Armada Bhd. We believe companies in this group are
known for their strong management teams and execution.
Relative to FBMKLCI (RHS)
3.50
107.8
3.30
103.3
3.10
98.9
2.90
94.4
2.70
20
90.0
Targeting 80-85% of Malaysian households
15
Vol m
10
5
Oct-14
Jan-15
Apr-15
Jul-15
Source: Bloomberg
Price performance
1M
3M
12M
Absolute (%)
2.1
-2.0
-7.2
Relative (%)
-4.5
-1.8
0.1
Astro targets to reach 80-85% of Malaysian TV households over the next 3-5 years,
driven by resilient subs growth from its prepaid TV service NJOI. As at Jul 2015, it has
reached 65% of Malaysian TV household. While NJOI customers contribute lower
ARPU, it provides a huge base of potential customers who could switch to the pay
platform. For example, 35K NJOI customers switched to the pay-TV platform in FY15.
Becoming a platform agnostic content provider

We also like Astro for its active strategy in addressing the shift in consumption habits
among the next generation of subscribers. For example, it launched its Astro-on-the-Go
(AOTG) mobile app in 2012 as part of its strategy to deliver content across all platforms.
AOTG allows users to watch selected Astro programmes including live sports and videoon-demand (VOD) on non-TV platforms e.g. PCs, tablets, iPhones and Android devices.
Long-term target prices

Our target price is based on DCF. Assuming Astro successfully raises its blended ARPU
by 1-2% annually, increases its customer base by 80-100k p.a., and experiences steady
growth in adex revenue of 9%, our three- and five-year forward target price would rise to
RM4.06 and RM4.40, respectively.
Financial Summary
Analyst
Mohd Shanaz NOOR AZAM

T (60) 3 2261 9078
E shanaz.azam@cimb.com
Revenue (RMm)
Operating EBITDA (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
% Change In Core EPS Estimates
CIMB/consensus EPS (x)
Jan-14A
4,791
1,586
447.9
0.09
7.0%
34.35
0.09
2.91%
11.32
26.11
415%
25.09
80%
Jan-15A
5,231
1,808
519.4
0.10
16.0%
29.62
0.11
3.72%
9.71
10.49
301%
22.17
79%
Jan-16F
5,560
1,929
630.3
0.12
21.4%
24.41
0.12
4.10%
9.26
49.46
347%
22.17
91%
0%
0.98
Jan-17F
5,911
2,047
795.5
0.15
26.2%
19.34
0.15
5.17%
8.92
38.63
406%
22.17
115%
0%
1.04
Jan-18F
6,398
2,162
922.2
0.18
15.9%
16.68
0.18
5.99%
8.40
15.44
398%
22.17
133%
0%
1.06

Powered by EFA
Figure 1: Astro pay-TV and NJOI household penetration

('000)
(%)
8,000
80.0
7,000
70.0
6,000
60.0
5,000
50.0
4,000
40.0
3,000
30.0
2,000
20.0
1,000
10.0
2005
2006
2007
2008
TV household
2009
2010
2011
2012
2013
Astro Pay-TV household (include NJOI)
2014F
2015F
2016F
Penetration rate (%)
Figure 2: Smartphone usage across markets
5.0
Figure 3: The gap between usage of smart devices and TV

viewership is narrowing
Title:
Source:
4.7
4.5
4.2
4.0
3.3
3.5
Please fill in the values above to have them entered in your r
3.1
2.8
3.0
2.8
2.4
2.5
2.0
2.0
1.9
2.0
1.8
1.8
1.5
1.0
0.5
-
Average smartphone usage (hour/day)
Figure 4: Astros ARPU trend
Figure 5: Astros churn rate trend
105
12.0
101
10.0
99
100
9.9
9.9
10.0
FY14
FY15
FY16F
10.0
96
95
7.6
8.0
7.0
91
89
90
6.0
85
85
4.0
80
2.0
75
FY11
FY12
FY13
FY14
FY15
FY16F
FY11
ARPU (RM)
FY12
FY13
Churn rate (%)
63
BY THE NUMBERS
Share price info

Share px perf. (%)
1M
3M
Relative
-4.5
-1.8
Absolute
2.1
-2.0
Major shareholders
Astro Networks (M) Sdn Bhd
12M
0.1
-7.2
P/BV vs ROE
12-mth Fwd FD Core P/E vs FD Core EPS
35.0
140.0%
30.0
120.0%
25.0
100.0%
% held
20.0
80.0%
42.4
15.0
60.0%
10.0
40.0%
5.0
20.0%
0.0
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
0.0%
Pantai Cahaya Bulan Ventures
8.3
All Asia Media Equities
7.8
Rolling P/BV (x) (lhs)
Growth
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
12-mth Fwd Rolling FD Core P/E (x) (lhs)
ROE (rhs)
FD Core EPS Growth (rhs)
Profit & Loss

(RMm)
Total Net Revenues
Gross Profit
Operating EBITDA
Depreciation And Amortisation
Operating EBIT
Financial Income/(Expense)
Pretax Income/(Loss) from Assoc.
Non-Operating Income/(Expense)
Profit Before Tax (pre-EI)
Exceptional Items
Pre-tax Profit
Taxation
Exceptional Income - post-tax
Profit After Tax
Minority Interests
Preferred Dividends
FX Gain/(Loss) - post tax
Other Adjustments - post-tax
Net Profit
Recurring Net Profit
Fully Diluted Recurring Net Profit
Jan-14A
4,791
2,853
1,586
(839)
747
(182)
4
0
569
0
569
(121)
0
448
0
0
0
448
448
448
Jan-15A
5,231
3,178
1,808
(935)
873
(145)
(7)
0
721
0
721
(207)
0
514
6
0
0
519
519
519
Jan-16F
5,560
3,381
1,929
(863)
1,066
(212)
4
0
858
0
858
(232)
0
626
4
0
0
630
630
630
Jan-17F
5,911
3,593
2,047
(800)
1,247
(169)
4
0
1,082
0
1,082
(292)
0
790
5
0
0
796
796
796
Jan-18F
6,398
3,856
2,162
(757)
1,405
(154)
4
0
1,255
0
1,255
(339)
0
916
6
0
0
922
922
922
Cash Flow
(RMm)
EBITDA
Cash Flow from Invt. & Assoc.
Change In Working Capital
(Incr)/Decr in Total Provisions
Other Non-Cash (Income)/Expense
Other Operating Cashflow
Net Interest (Paid)/Received
Tax Paid
Cashflow From Operations
Capex
Disposals Of FAs/subsidiaries
Acq. Of Subsidiaries/investments
Other Investing Cashflow
Cash Flow From Investing
Debt Raised/(repaid)
Proceeds From Issue Of Shares
Shares Repurchased
Dividends Paid
Preferred Dividends
Other Financing Cashflow
Cash Flow From Financing
Total Cash Generated
Free Cashflow To Equity
Free Cashflow To Firm
Jan-14A
1,586
Jan-15A
1,808
Jan-16F
1,929
Jan-17F
2,047
Jan-18F
2,162
(197)
479
53
62
111
543
(182)
(121)
1,628
(741)
(192)
(12)
(145)
(207)
1,922
(720)
0
(671)
(212)
(232)
867
(556)
0
(659)
(169)
(292)
989
(591)
0
(143)
(154)
(339)
1,636
(640)
0
(31)
(964)
(75)
0
0
(448)
489
(231)
(225)
0
0
(572)
0
(556)
0
0
0
(630)
0
(591)
0
0
0
(796)
0
(640)
0
0
0
(922)
0
(523)
141
589
932
0
(796)
895
1,467
1,941
0
(630)
(319)
311
586
0
(796)
(397)
398
631
0
(922)
74
996
1,217
64
BY THE NUMBERS
Balance Sheet
(RMm)
Total Cash And Equivalents
Total Debtors
Inventories
Total Other Current Assets
Total Current Assets
Fixed Assets
Total Investments
Intangible Assets
Total Other Non-Current Assets
Total Non-current Assets
Short-term Debt
Current Portion of Long-Term Debt
Total Creditors
Other Current Liabilities
Total Current Liabilities
Total Long-term Debt
Hybrid Debt - Debt Component
Total Other Non-Current Liabilities
Total Non-current Liabilities
Total Provisions
Total Liabilities
Shareholders' Equity
Minority Interests
Total Equity
Jan-14A
1,105
992
18
552
2,666
2,157
0
1,870
410
4,437
302
Jan-15A
1,354
827
13
113
2,307
1,881
0
1,956
588
4,425
400
Jan-16F
1,038
879
14
113
2,044
1,715
0
1,956
1,440
5,111
400
Jan-17F
645
934
15
113
1,707
1,688
0
1,956
1,444
5,088
400
Jan-18F
723
1,011
16
113
1,864
1,773
0
1,956
1,448
5,177
400
1,426
19
1,747
3,362
1,736
72
2,208
3,103
1,841
72
2,313
3,103
1,959
72
2,431
3,103
2,148
72
2,620
3,103
1,378
4,740
0
6,486
613
4
617
706
3,809
0
6,017
694
20
714
1,029
4,132
0
6,445
694
16
710
556
3,659
0
6,091
694
11
705
619
3,722
0
6,343
694
4
698
Jan-14A
12.3%
17.2%
33.1%
(0.49)
0.12
2.79
21.3%
78.7%
66.40
3.87
265.2
16.9%
19.6%
10.5%
Jan-15A
9.2%
14.0%
34.6%
(0.41)
0.13
3.50
28.7%
78.7%
63.43
2.71
281.0
13.7%
23.0%
11.9%
Jan-16F
6.3%
6.7%
34.7%
(0.47)
0.13
3.88
27.0%
73.1%
55.97
2.25
299.6
21.8%
26.8%
14.6%
Jan-17F
6.3%
6.1%
34.6%
(0.55)
0.13
5.35
27.0%
73.1%
56.12
2.25
300.0
21.7%
31.1%
17.3%
Jan-18F
8.2%
5.6%
33.8%
(0.53)
0.13
6.36
27.0%
73.1%
55.49
2.20
294.9
24.9%
35.0%
19.8%
Jan-14A
19.7%
3.0%
5.1%
N/A
13.1%
Jan-15A
-2.4%
5.0%
2.3%
N/A
17.0%
Jan-16F
14.1%
3.3%
2.3%
N/A
4.1%
Jan-17F
13.7%
2.2%
2.2%
N/A
8.2%
Jan-18F
9.0%
5.9%
2.7%
N/A
11.0%
Key Ratios
Revenue Growth
Operating EBITDA Growth
Operating EBITDA Margin
Net Cash Per Share (RM)
BVPS (RM)
Gross Interest Cover
Effective Tax Rate
Net Dividend Payout Ratio
Accounts Receivables Days
Inventory Days
Accounts Payables Days
ROIC (%)
ROCE (%)
Return On Average Assets
Key Drivers
Adex Revenue Growth (%)
ARPU (% Change)
No. Of Subscribers (% Change)
Adex/total Revenue (%)
Programming Costs Change (%)
65
Telco - MobileMalaysiaEquity researchOctober 9, 2015
Company Note
Axiata Group
A leading Asian telco powerhouse
ADD (no change)

Current price:
RM6.21
Target price:
RM6.60
Previous target:
RM6.60
Up/downside:
6.3%
Reuters:
Led by highly-experienced CEO Dato Sri Jamaludin and has been able to
successfully attract/hire capable local and international talent.
Exposure to some of the fastest-growing emerging mobile markets in Asia.
Our top pick and only Add in the telco sector. It is also our long-term pick with 3- and
5-year target prices of RM7.00 and RM9.00, respectively.
AXIA.KL
Bloomberg:
AXIATA MK
Market cap:
US$12,765m
Beyond organic growth, Axiata is looking to create value from driving in-market
consolidation and expanding its tower business.
RM54,065m
US$12.53m
RM51.86m
Current shares o/s
8,582m
Free float:
43.5%

No changes.
Price Close

107.0
7.00
103.0
6.50
99.0
6.00
95.0
5.50
30
91.0
Vol m
10
Apr-15
Axiata Group is led by CEO Dato Sri Jamaludin Ibrahim, who comes with impressive
credentials in the private sector (CEO of Maxis, CEO of Digital Equipment Malaysia). He
implemented a strong performance-based culture in Axiata, with one of the key focus
areas being talent management. On the back of this and Axiatas transformation into one
of the largest Asian telecommunications groups, it has been able to successfully attract
and hire many highly-capable local and international individuals.
Axiata offers exposure to fast-growing emerging markets
20
Jan-15
Axiata has the highest score in our long-term telecommunication sector stock-picking
matrix mainly because we rate it strongly in the growth and valuation categories. It would
have scored higher if not for its shortfall in the financial category as some of its overseas
investments have yet to harvest the full fruit of its labour (Bangladesh, India, Cambodia)
while others (Indonesia, Malaysia) are going through a rough patch in the short term.
Led by highly-experienced Dato Sri Jamaludin
7.50
Oct-14
Highest score in long-term telco stock-picking matrix
Jul-15
Source: Bloomberg
Price performance
1M
3M
12M
Absolute (%)
5.8
-1.6
-11.7
Relative (%)
-0.8
-1.4
-4.4
Besides operating in the more advanced Malaysia and Singapore markets, Axiata also
offers investors exposure to the emerging markets as a significant mobile player in
Indonesia (XL), India (Idea), Bangladesh (Robi), Sri Lanka (Dialog) and Cambodia
(Hello), which are fast-growing and have bright long-term growth prospects given their
lower penetration. We forecast the combined contribution from XL, Idea, Dialog and
Robi to rise from 27% in FY14 to nearly half (49%) of group net profit by FY17.
Expanding the tower business and driving in-market consolidation

Axiatas regional tower company, edotco, currently has 14.7k towers and aims to grow
this to 20k-25k by end-2016. This could be spun off via an IPO in 2017-18 once it has
raised tenancy ratios and improved profitability. Axiata also continues to drive in-market
consolidation. Recently, Axiata announced that Robi entered into discussions with Airtel
to merge in Bangladesh. Market consolidation could help to enhance profitability by
reducing competition or through cost synergies.

Our 12-month SOP-based target price is RM6.60, which implies FY16 EV/OpFCF of
15.8x. As the company increases EBITDA and reduces capex intensity, we forecast
OpFCF to grow 62.8% between FY15 and FY18 and 99.7% between FY15 and FY20.
Assuming a lower target EV/OpFCF multiple of 12x to account for the greater maturity of
the regional businesses, we derive target prices of RM7.00 in 2018 and RM9.00 in 2020,
both of which imply decent dividend yields of 4.4% p.a.
Financial Summary
Analyst
FOONG Choong Chen, CFA

T (60) 3 2261 9081
E choongchen.foong@cimb.com
Revenue (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
ROE
Dec-13A
18,371
7,271
39.6%
2,550
0.31
(5.3%)
19.99
0.22
3.54%
7.52
46.4
32.8%
13.3%
Dec-14A
18,712
6,999
37.4%
2,349
0.26
(15.8%)
23.75
0.22
3.54%
8.04
NA
38.9%
11.1%
Dec-15F
19,800
7,294
36.8%
2,205
0.26
(1.7%)
24.17
0.22
3.54%
7.95
NA
47.4%
10.5%
0%
0.92
Dec-16F
20,865
7,774
37.3%
2,248
0.26
2.0%
23.70
0.24
3.81%
7.62
111.9
53.3%
10.6%
0%
0.86
Dec-17F
21,986
8,229
37.4%
2,487
0.29
10.6%
21.43
0.28
4.44%
7.31
17.7
57.7%
11.6%
0%
0.86

Powered by EFA
Figure 1: Results comparison

FYE Dec (RM m)
Revenue
Operating costs
EBITDA
EBITDA margin (%)
Depn & amort.
EBIT
Interest expense
Interest & invt inc
Associates' contrib
Forex
Exceptionals
Pretax profit
Tax
Tax rate (%)
Minority interests
Net profit
Core net profit
EPS (sen)
Core EPS (sen)
Net DPS (sen)
2QFY15 2QFY14
yoy % 1QFY15
qoq % 2QFY15 2QFY14
yoy %
Prev.
4,707
4,730
(2,992) (2,988)
1,715
1,742
36.4
36.8
(1,000)
(879)
715
863
(173)
(196)
51
49
139
97
(78)
(319)
131
32
784
526
(155)
(122)
19.7
23.2
(19)
51
611
455
586
627
7.1
5.3
6.8
7.3
8.0
8.0
chg
(0.5) 4,751
0.1 (3,010)
(1.6) 1,741
36.6
13.8
(984)
(17.2)
757
(11.6)
(179)
2.9
60
43.8
134
(75.4)
(158)
315
75
49.1
690
26.7
(154)
22.3
(136.9)
49
34.2
585
(6.5)
556
33.5
6.8
(7.0)
6.5
-
chg
Cum
Cum
(0.9) 9,458
9,245
(0.6) (6,002) (5,714)
(1.5) 3,456
3,531
36.5
38.2
1.7 (1,984) (1,717)
(5.5) 1,472
1,814
(3.0)
(352)
(386)
(15.6)
110
104
3.5
273
189
(50.4)
(236)
(158)
74.3
206
(23)
13.7
1,474
1,541
0.5
(308)
(407)
20.9
26.4
(138.7)
30
(4)
4.4
1,196
1,130
5.4
1,142
1,251
4.3
13.9
13
5.3
13.3
15
nm
8.0
8.0
chg
2015F Comments
2.3 19,734 Higher Celcom device sales & growth at other subsidiaries yoy
5.0 (12,628)
(2.1)
7,106 Below. 1Q15 at 23.0%/23.2% of CIMB/consensus FY15 forecast
36.0
15.5
(4,057) In line.
(18.8)
(8.7)
(757)
6.1
214
44.8
548 Above. Expect Idea earnings to be lower in coming quarters
49.9
1,001
(4.3)
3,057
(24.2)
(806) Lower than expected. Expected to normalise
26.4
855.4
(69)
5.8
2,182
(8.7)
5.3
27.2
(9.2)
27.2
23.1 Dividends are paid half-yearly
Figure 2: SOP-based target price is RM6.60
Assets
Country
Celcom
Malaysia
XL Axiata
Indonesia
Idea
India
M1
Singapore
Dialog
Sri Lanka
Robi
Bangladesh
Smart
Cambodia
Total value
Adjust: Net Cash/(Debt) *
SOP-based TP
*Ex-XL, Dialog and Robi's net cash/(debt)
Market cap
Local curr (m)
29,807
35,287,497
719,240
2,885
113,931
127,394
3,115,937
Stake
(%)
100.0%
66.4%
19.9%
28.7%
85.0%
91.6%
90.0%
Forex
rate
1.00
3,500
16.0
2.90
34.0
20.0
1000
Value
(RM m)
29,807
6,698
8,955
2,401
2,847
5,834
2,804
59,346
(2,695)
56,651
FY16
Value/share EV/EBITDA Valuation
(RM)
(x)
Methodology
3.48
9.3
DCF (WACC: 7.5%, TG: 1.0%)
0.78
6.5
DCF (WACC: 9.6%, TG: 3.0%)
1.05
7.1
Based on CIMB's TP of Rs200
0.28
9.1
Based on CIMB's TP of S$3.10
0.33
6.0
Based on 6x EV/EBITDA
0.68
6.0
0.33
6.0
6.93
(0.31)
6.62
Target price rounded down to RM6.60
67
BY THE NUMBERS
Share price info

Share px perf. (%)
1M
3M
12M
P/BV vs ROE

Growth
3.50
16.00%
30.0
40.0%
3.00
13.71%
25.0
30.0%
20.0
20.0%
15.0
10.0%
0.0%
Relative
-0.8
-1.4
-4.4
Absolute
5.8
-1.6
-11.7
2.50
11.43%
% held
2.00
9.14%
38.1
1.50
6.86%
1.00
4.57%
10.0
0.50
2.29%
5.0
-10.0%
0.00
0.00%
0.0
-20.0%
Major shareholders
Khazanah
Employees Provident Fund
Amanah Saham Bumi
11.8
6.6
ROE (rhs)
Profit & Loss
Driven by revenue recovery at Celcom

and XL.
(RMm)
Total Net Revenues
Gross Profit
Operating EBITDA
Operating EBIT
Exceptional Items
Pre-tax Profit
Taxation
Profit After Tax
Minority Interests
Preferred Dividends
Net Profit
Dec-13A
18,371
7,271
7,271
(3,435)
3,836
(459)
255
(350)
3,282
252
3,533
(794)
Dec-14A
18,712
6,999
6,999
(3,672)
3,327
(548)
339
(214)
2,904
211
3,114
(770)
Dec-15F
19,800
7,294
7,294
(4,229)
3,065
(558)
586
0
3,094
0
3,094
(787)
Dec-16F
20,865
7,774
7,774
(4,297)
3,478
(677)
492
0
3,293
0
3,293
(874)
Dec-17F
21,986
8,229
8,229
(4,314)
3,916
(771)
608
0
3,752
0
3,752
(1,008)
2,739
(189)
2,344
4
2,306
(101)
2,419
(170)
2,745
(257)
2,550
2,648
2,648
2,349
2,239
2,239
2,205
2,205
2,205
2,248
2,248
2,248
2,487
2,487
2,487
Cash Flow
Capex will be driven by 3G/4G

network rollout.
(RMm)
EBITDA
Tax Paid
Capex
Shares Repurchased
Dividends Paid
Preferred Dividends
Dec-13A
7,271
(196)
Dec-14A
6,999
1,867
Dec-15F
7,294
Dec-16F
7,774
Dec-17F
8,229
(212)
(818)
(397)
5,648
(4,117)
47
(463)
(834)
(5,367)
860
125
(1,636)
(736)
(909)
5,584
(3,748)
115
(3,043)
328
(6,347)
481
147
(1,636)
(778)
(787)
4,093
(4,859)
0
0
350
(4,509)
267
0
(1,636)
(795)
(874)
4,470
(4,394)
0
0
248
(4,146)
152
0
(1,636)
(881)
(1,008)
4,704
(4,100)
0
0
240
(3,860)
2,166
0
(2,986)
(1,885)
(1,884)
(1,884)
(2,109)
(133)
(2,134)
(1,853)
1,141
1,099
861
(397)
(1,160)
(283)
(27)
0
(1,617)
(2,033)
(149)
362
0
(1,732)
(1,408)
476
1,119
0
57
902
3,011
1,726
68
BY THE NUMBERS
Balance Sheet
Net debt/EBITDA is manageable at

1.25x.
(RMm)
Total Debtors
Inventories
Fixed Assets
Total Investments
Intangible Assets
Short-term Debt
Total Creditors
Total Provisions
Total Liabilities
Minority Interests
Total Equity
Dec-13A
6,433
2,680
63
64
9,240
17,107
6,999
9,549
603
34,257
1,684
Dec-14A
5,116
3,062
80
59
8,316
19,933
7,505
12,816
557
40,811
1,949
Dec-15F
3,266
3,202
80
59
6,607
20,563
8,091
12,816
557
42,027
1,949
Dec-16F
1,859
3,604
96
59
5,617
20,661
8,583
12,816
557
42,617
1,949
Dec-17F
2,761
3,567
89
59
6,475
20,447
9,191
12,816
557
43,011
1,949
6,109
248
8,041
11,752
8,375
236
10,559
11,945
6,150
241
8,339
12,212
8,244
267
10,460
12,364
6,868
307
9,124
14,530
2,325
14,077
0
22,118
19,622
1,757
21,379
4,066
16,011
0
26,570
20,745
1,813
22,558
5,103
17,315
0
25,654
21,066
1,914
22,980
2,035
14,399
0
24,858
21,291
2,085
23,375
2,074
16,605
0
25,729
21,415
2,342
23,757
Dec-13A
4.07%
(2.48%)
39.6%
(0.82)
2.30
5.32
22.5%
81.6%
47.60
1.96
194.7
13.2%
11.8%
6.57%
Dec-14A
1.86%
(3.75%)
37.4%
(1.02)
2.42
4.46
24.7%
88.1%
56.01
2.22
225.7
10.1%
9.9%
5.46%
Dec-15F
5.82%
4.22%
36.8%
(1.27)
2.45
3.94
25.5%
85.4%
57.74
2.33
212.0
7.5%
8.9%
5.50%
Dec-16F
5.38%
6.58%
37.3%
(1.45)
2.48
4.38
26.5%
90.0%
59.69
2.46
201.2
7.7%
9.6%
5.95%
Dec-17F
5.37%
5.85%
37.4%
(1.60)
2.50
4.44
26.9%
95.0%
59.52
2.45
200.5
9.2%
10.3%
6.70%
Dec-13A
12.44
N/A
N/A
N/A
47.0
N/A
N/A
N/A
Dec-14A
12.45
N/A
N/A
N/A
46.0
N/A
N/A
N/A
Dec-15F
12.35
N/A
N/A
N/A
47.6
N/A
N/A
N/A
Dec-16F
12.97
N/A
N/A
N/A
47.6
N/A
N/A
N/A
Dec-17F
13.50
N/A
N/A
N/A
46.5
N/A
N/A
N/A
Key Ratios
Driven by margin improvement at XL.
Revenue Growth
BVPS (RM)
Effective Tax Rate
Inventory Days
ROIC (%)
ROCE (%)
Key Drivers
Due to loss of subscribers at Celcom.
Group Mobile Subscribers (m)

Group Fixed Voice Subscribers (m)
Grp fixed brdband subscribers (m)
Group Pay TV Subs (m)
Group Mobile ARPU (US$/mth)
Grp fixed voice ARPU (US$/mth)
Grp fixed brdband ARPU (US$/mth)
Group Pay TV ARPU (US$/mth)
69
REITMalaysiaEquity researchOctober 9, 2015
Company Note
Axis REIT
Malaysias most aggressive REIT
ADD (no change)

Current price:
RM1.69
Target price:
RM3.79
Previous target:
RM3.79
Up/downside:
124.3%
Reuters:
Axis REIT is arguably the best-managed REIT in Malaysia and is also the most
aggressive acquirer of assets.
It is currently the largest business space and industrial REIT in Malaysia.
Axis REIT is our top pick for the REIT sector and is also our long-term pick with
2018 and 2020 target prices of RM2.04 and RM2.43, respectively.
AXSR.KL
Bloomberg:
AXRB MK
Market cap:
US$437.1m
It has sustained strong growth since listing in 2005, with its assets under
management growing 691% to RM2.04bn currently.
RM1,851m
US$0.43m
RM1.70m
Current shares o/s
1,002m
Free float:
83.8%

No changes.
Price Close
Axis REIT is led by its chief executive officer and executive director, Dato George
Stewart LaBrooy, a prominent figure in the Malaysian REIT scene, who has been at the
helm of the company since 2008. He was one of the key figures in the formation of Axis
REIT, when in 2003 he spearheaded a project to identify suitable properties to be
injected into Malaysias first REIT. Under his leadership, Axis REIT has grown to
become one of the best-managed and constantly growing REITs in Malaysia.

107.0
1.800
104.0
1.700
101.0
1.600
98.0
1.500
10
8
6
4
2
95.0
Strong growth since listing
Vol m
Jan-15
Axis REIT scores the highest in our long-term REIT sector stock picking matrix due to its
management teams strength, attractive valuation and positive growth outlook. Its
management has demonstrated a high level of ambition in setting long-term targets and
has done well in its execution, resulting in sustainable long-term growth for Axis REIT
since its listing. Maintain Add, with further asset injections as potential catalysts.
Axis REIT is led by Dato George Stewart LaBrooy
1.900
Oct-14
Tops in long-term REIT stock picking matrix
Apr-15
Jul-15
Source: Bloomberg
Price performance
1M
3M
12M
Absolute (%)
4.3
-1.8
-7.2
Relative (%)
-2.3
-1.6
0.1
Axis REIT is currently the largest business space and industrial REIT listed on Bursa
Malaysia. Its assets under management have jumped from RM296m from the time of its
listing to RM2.04bn currently, a 691% increment. Consequently, its space under
management has jumped from 978,000 sq. ft. to 7.02m sq. ft. currently, a 718% growth.
It now has 34 properties under its management from five at the time of listing. The
valuation gain registered since listing stands at RM276m.
Best transparency and the most aggressive

We believe Axis REIT has the best transparency towards the investment community. It
is one of the few REITS that consistently holds briefings for analysts and fund managers
after its quarterly financial results announcements, which give investors a very clear idea
of the direction of the company. It is also the most aggressive acquirer of assets among
the REITs in Malaysia. In the last five years alone, from 2010 to 2014, it has acquired in
total of 15 properties and disposed of three properties for handsome gains.

Assuming a constant 3.0% yoy annual revenue growth, based on a DDM (cost of equity
8.1%) valuation, Axis REITs target price should increase to RM2.04 in three years time,
a 21% upside over its current price. Using the same assumptions, its five-year target
price should increase to RM2.43, providing a 44% upside over its current price.
Financial Summary
Analyst
Azman HUSSIN
T (60) 3 2261 9056
E azmanb.hussin@cimb.com
Gross Property Revenue (RMm)

Net Property Income (RMm)
Net Profit (RMm)
Distributable Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
Asset Leverage
BVPS (RM)
P/BV (x)
Recurring ROE
% Change In DPS Estimates
CIMB/consensus DPS (x)
Dec-13A
142.0
121.3
84.5
84.5
0.19
8.0%
9.13
0.19
11.0%
34.3%
2.20
0.77
8.5%
Dec-14A
165.2
141.2
104.4
106.0
0.21
13.1%
8.07
0.22
13.0%
34.3%
1.86
0.91
10.4%
Dec-15F
170.1
145.5
105.7
107.4
0.20
(6.6%)
8.64
0.18
10.6%
39.4%
1.83
0.92
10.6%
0%
1.97
Dec-16F
175.2
149.8
106.9
108.7
0.20
1.1%
8.54
0.20
11.9%
38.7%
1.85
0.92
10.8%
0%
2.10
Dec-17F
180.5
154.3
111.3
113.1
0.21
4.1%
8.20
0.21
12.4%
38.8%
1.84
0.92
11.2%
0%
2.05

Powered by EFA
Figure 1: Results Comparison
Revenue
2Q
FY15
41.3
2Q
FY14
35.1
17.8
Operating costs
(10.2)
(7.8)
30.3
EBITDA
31.1
27.2
14.2
EBITDA margin (%)
75.3
77.6
0.0
0.0
nm
EBIT
31.1
27.2
14.2
Interest expense
(7.5)
(5.6)
Interest & invt inc
0.1
0.2
Associates' contrib
0.0
0.0
Exceptionals & revaln
8.2
FYE Dec (RM m)
Depn & amort.
Pretax profit
1.8
2QFY15
cum
82.0
2QFY14
cum
70.7
-5.5
(21.0)
(17.3)
21.9
(38.1)
4.4
60.9
53.4
14.0
132.0
74.3
75.6
nm
0.0
0.0
nm
0.0
4.4
60.9
53.4
14.0
132.0
34.4
4.4
(14.7)
(11.2)
31.8
(27.7)
-48.4
-40.9
0.3
0.4
-20.5
1.4
nm
nm
0.0
0.0
nm
0.0
#DIV/0!
nm
8.7
1.6
439
yoy % chg
qoq % chg
yoy % chg
16.0
77.6
31.9
21.9
45.8
36.8
55.2
44.3
24.7
Tax
0.0
0.0
nm
nm
0.0
0.0
nm
Tax rate (%)
0.0
0.0
nm
nm
0.0
0.0
nm
Minority interests
Prev.
Comments
FY15F
170.1 Higher revenues due to the new acquisitions
0.0 None as expected

0.0 Revaluation gains
106
0.0 None due to 99% dividend payout
0.0
0.0
0.0
nm
nm
0.0
0.0
nm
Net profit
31.9
21.9
45.8
36.8
55.2
44.3
24.7
106
Distr profit
23.8
20.8
14.4
0.1
47.5
42.1
12.7
Core net profit
23.7
21.9
8.4
4.0
46.5
42.7
9.05
107 In line
106 In line
4.3
4.8
-9.5
4.9
8.4
10.1
-16.4
DPU (sen)
0.0 None as expected
17.9
Figure 2: Axis REIT space under management (m sq. ft.)

8000
7000
6000
5000
4000
3000
2000
1000
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
71
BY THE NUMBERS
Share price info

Share px perf. (%)
Relative
Absolute
1M
-2.3
4.3
3M
-1.6
-1.8
Major shareholders
Employees Provident Fund (EPF)
Tew Peng Hwee
12M
0.1
-7.2
% held
10.8
6.0
P/BV vs Asset Leverage
Dividend Yield vs Net DPS - (RM)
1.200
45.0%
0.250
14.00%
1.000
37.5%
0.200
11.20%
0.800
30.0%
0.150
8.40%
0.600
22.5%
0.400
15.0%
0.100
5.60%
0.200
7.5%
0.050
2.80%
0.000
0.0%
0.000
0.00%
Asset Leverage (rhs)
DPS (lhs)
Dividend Yield (rhs)
Profit & Loss

(RMm)
Rental Revenues
Other Revenues
Gross Property Revenue
Total Property Expenses
Net Property Income
General And Admin. Expenses
Management Fees
Trustee's Fees
Other Operating Expenses
EBITDA
EBIT
Net Interest Income
Associates' Profit
Other Income/(Expenses)
Exceptional Items
Pre-tax Profit
Taxation
Minority Interests
Preferred Dividends
Net Profit
Distributable Profit
Dec-13A
142.0
0.0
142.0
(20.7)
121.3
0.0
(10.0)
(0.5)
(2.8)
107.9
(0.1)
107.9
(23.3)
Dec-14A
165.2
0.0
165.2
(23.9)
141.2
0.0
(10.0)
(0.5)
(2.9)
127.8
(0.1)
127.7
(23.3)
Dec-15F
170.1
0.0
170.1
(24.7)
145.5
0.0
(9.9)
(0.5)
(3.0)
132.1
(0.1)
132.0
(26.3)
Dec-16F
175.2
0.0
175.2
(25.4)
149.8
0.0
(10.0)
(0.5)
(3.1)
136.2
(0.1)
136.2
(29.3)
Dec-17F
180.5
0.0
180.5
(26.2)
154.3
0.0
(10.0)
(0.5)
(3.2)
140.7
(0.1)
140.6
(29.3)
0.0
0.0
0.0
0.0
0.0
84.5
0.0
104.4
0.0
105.7
0.0
106.9
0.0
111.3
0.0
84.5
84.5
104.4
106.0
105.7
107.4
106.9
108.7
111.3
113.1
Cash Flow
(RMm)
Pre-tax Profit
Depreciation And Non-cash Adj.
Tax Paid
Others
Capex
Net Investments And Sale Of FA
Equity Raised/(Repaid)
Dividends Paid
Cash Interest And Others
Dec-13A
84.5
23.4
Dec-14A
104.4
23.4
Dec-15F
105.7
26.4
Dec-16F
106.9
29.3
Dec-17F
111.3
29.3
12.5
120.5
(15.0)
0.0
0.0
(15.0)
0.0
0.0
(84.5)
(23.3)
(107.9)
(2.4)
106.8
82.1
(0.1)
127.7
(15.0)
0.0
0.0
(15.0)
0.0
0.0
(118.8)
(23.3)
(142.1)
(29.4)
114.1
89.4
(0.1)
132.0
(15.0)
0.0
0.0
(15.0)
132.0
0.0
(96.7)
(26.3)
9.0
126.0
118.4
222.7
(0.1)
136.2
(9.0)
0.0
0.0
(9.0)
0.0
0.0
(108.7)
(29.3)
(138.0)
(10.8)
128.5
97.9
(0.1)
140.6
(8.0)
0.0
0.0
(8.0)
0.0
0.0
(113.1)
(29.3)
(142.4)
(9.8)
134.0
103.3
72
BY THE NUMBERS
Balance Sheet
(RMm)
Total Investments
Intangible Assets
Other Long-term Assets
Inventories
Trade Debtors
Other Current Assets
Trade Creditors
Short-term Debt
Long-term Borrowings
Other Long-term Liabilities
Minority Interests
Preferred Shareholders Funds
Total Equity
Dec-13A
1,520
0
16
1,535
40
Dec-14A
1,520
0
31
1,550
25
Dec-15F
1,520
0
54
1,573
128
Dec-16F
1,520
0
84
1,604
128
Dec-17F
1,520
0
92
1,612
118
27
0
67
24
341
0
365
208
27
235
1,002
27
0
52
24
341
0
365
208
27
235
1,002
27
0
155
24
341
0
365
340
35
375
988
27
0
155
24
341
0
365
340
57
397
997
27
0
145
24
341
0
365
340
57
397
995
1,002
1,002
988
997
995
Dec-13A
6.7%
7.8%
85.4%
5.5%
4.37
0%
100%
0.18
0.18
0.11
5.30%
Dec-14A
16.3%
16.4%
85.5%
18.7%
5.17
0%
114%
0.14
0.14
0.07
6.51%
Dec-15F
3.0%
3.0%
85.5%
(18.6%)
4.77
0%
91%
0.42
0.42
0.35
6.35%
Dec-16F
3.0%
3.0%
85.5%
12.5%
4.44
0%
102%
0.42
0.42
0.35
6.13%
Dec-17F
3.0%
3.0%
85.5%
4.1%
4.59
0%
102%
0.40
0.40
0.32
6.33%
Dec-13A
N/A
N/A
N/A
5,372
97.0%
N/A
N/A
Dec-14A
N/A
N/A
N/A
5,372
97.0%
N/A
N/A
Dec-15F
N/A
N/A
N/A
5,372
97.0%
N/A
N/A
Dec-16F
N/A
N/A
N/A
5,372
97.0%
N/A
N/A
Dec-17F
N/A
N/A
N/A
5,372
97.0%
N/A
N/A
Key Ratios
Gross Property Revenue Growth
NPI Growth
Net Property Income Margin
DPS Growth
Effective Tax Rate
Current Ratio
Quick Ratio
Cash Ratio
Key Drivers
Rental Rate Psf Pm (RM)
Acq. (less development) (US$m)
RevPAR (RM)
Net Lettable Area (NLA) ('000 Sf)
Occupancy (%)
Assets Under Management (m) (RM)
Funds Under Management (m) (RM)
73
AutosMalaysiaEquity researchOctober 9, 2015
Company Note
Berjaya Auto
Strong and sustained growth
ADD (no change)

Current price:
RM1.83
Target price:
RM3.04
Previous target:
RM3.04
Up/downside:
66.0%
Reuters:
BJAU.KL
Bloomberg:
BAUTO MK
Market cap:
US$492.4m
RM2,086m
Has arguably the best management team in the Malaysian auto industry led by
Dato Sri Ben Yeoh, its CEO.
Successfully grown the Mazda brand in Malaysia, registering a 6-year CAGR of

54.8% to 12,209 units in FY4/15.
Equally successful in distributing Mazda vehicles in the Philippines, recording a 2year CAGR of 132.8% to 3,561 units in FY4/15.
Berjaya Auto is our top pick for the Malaysian auto sector. It is also our long-term
pick with 2018 and 2020 target price of RM3.58 and RM4.17, respectively.
US$1.47m
RM6.04m
Current shares o/s
1,139m
Free float:
37.8%

No changes.
Highest score in long-term auto stock pick matrix

Berjaya Auto scores the highest in our long-term auto sector stock pick matrix mainly
because its high scores in the management, financials and growth categories. A
relatively newcomer to the local auto industry, Berjaya Auto has been outperforming its
more experienced competitors in the local market in terms of brand awareness, sales
volume growth, and financial strength. We believe this can be attributed mainly to the
strength of its management team.
Led by Dato Sri Ben Yeoh Choon San

Price Close
3.10
137.3
2.60
118.5
2.10
99.8
1.60
15
81.0
Outstanding growth since obtaining the Mazda brand
10
Vol m
Its chief executive officer and executive director Dato Sri Ben Yeoh Choon San has over
40 years of experience in the automotive industry. His experience and expertise,
coupled with the capabilities of other key members of the management team, played a
major role in securing from Mazda Japan the distributorship of Mazda vehicles in
Malaysia, and subsequently in the Philippines.
5
Oct-14
Jan-15
Apr-15
Jul-15
Source: Bloomberg
1M
3M
12M
Absolute (%)
-18.7
-23.1
-17.4
Relative (%)
-25.3
-22.9
-10.1
Price performance
Since obtaining the rights to distribute Mazda cars in Malaysia, Berjaya Auto has
registered outstanding growth that far outpaced those of the industry and its competitors.
From a mere 886 units of sales in Malaysia in FY4/09, Berjaya Auto has grown its sales
of Mazda vehicles in Malaysia to 12,209 units in FY4/15, translating into a 6-year
compounded annual growth rate (CAGR) of 54.8%.
Success replicated in the Philippines

This success has been replicated in the Philippines. Starting with 657 units of Mazda
vehicles sold in FY4/13, Berjaya Auto delivered 3,561 units of Mazda vehicles in FY4/15,
translating to a 2-year 132.81% CAGR.

Assuming a conservative 8% annual revenue growth rate from FY19 onwards with a 9%
net profit margin, and based on our current target price basis of 14.0x CY19 P/E (10%
premium over the sector average due to its higher growth trajectory), we believe Berjaya
Autos target price should increase to RM3.58 by 2018. Based on the same
assumptions, our 2020 target price, derived from 14.0x CY21 P/E, should increase to
RM4.17.
Financial Summary
Analyst
Azman HUSSIN
T (60) 3 2261 9056
Revenue (RMm)
Net Profit (RMm)
Normalised EPS (RM)
Normalised EPS Growth
FD Normalised P/E (x)
DPS (RM)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
% Change In Normalised EPS Estimates
Normalised EPS/consensus EPS (x)
Apr-14A
1,451
175.5
130.6
0.12
147%
15.20
0.05
2.87%
9.89
NA
(53%)
6.01
52.0%
Apr-15A
1,830
292.0
215.4
0.19
55%
9.76
0.10
5.27%
5.94
11.43
(57%)
4.37
52.5%
Apr-16F
2,355
303.0
223.9
0.21
11%
8.82
0.10
5.19%
4.63
7.11
(84%)
3.73
43.3%
0%
1.02
Apr-17F
2,762
354.0
258.2
0.23
7%
8.23
0.10
5.46%
3.75
6.44
(96%)
2.97
40.9%
0%
0.98
Apr-18F
2,903
372.7
272.7
0.24
6%
7.79
0.11
5.74%
2.90
6.08
(104%)
2.42
34.9%
0%
0.92

Powered by EFA
Figure 1: Berjaya Autos total vehicle sales (units) in Malaysia

14,000
12,209
12,000
9,497
10,000
8,142
8,000
5,909
6,000
4,826
4,000
2,113
2,000
886
0
FY09
FY10
FY11
FY12
FY13
FY14
FY15
Figure 2: Berjaya Autos total vehicle sales (units) in the Philippines

4,000
3,561
3,500
3,000
2,500
2,283
2,000
1,500
1,000
657
500
0
FY13
FY14
FY15
75
BY THE NUMBERS
Share price info

Share px perf. (%)
1M
3M
Relative
-25.3
-22.9
Absolute
-18.7
-23.1
Major shareholders
Berjaya Group
12M
-10.1
-17.4
% held
50.5
Podium Success
5.8
5.9
P/BV vs ROE
12-mth Fwd FD Normalised P/E vs FD
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
60.0%
52.5%
45.0%
37.5%
30.0%
22.5%
15.0%
7.5%
0.0%
Normalised EPS Growth

16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
160%
140%
120%
100%
80%
60%
40%
20%
0%
12-mth Fwd Rolling FD Normalised P/E (x) (lhs)
ROE (rhs)
Diluted Normalised EPS Growth (rhs)
Profit & Loss

(RMm)
Total Net Revenues
Gross Profit
Operating EBITDA
Operating EBIT
Exceptional Items
Pre-tax Profit
Taxation
Profit After Tax
Minority Interests
Preferred Dividends
Preference Dividends (Australia)
Net Profit
Normalised Net Profit
Fully Diluted Normalised Profit
Apr-14A
1,451
266
175
(5)
170
(1)
11
0
180
Apr-15A
1,830
134
292
(6)
286
(0)
9
6
301
Apr-16F
2,355
431
303
(11)
292
0
18
0
310
Apr-17F
2,762
505
354
(15)
339
0
20
0
359
Apr-18F
2,903
531
373
(17)
355
0
25
0
380
180
(46)
301
(78)
310
(78)
359
(90)
380
(95)
134
(3)
223
(7)
233
(9)
270
(11)
285
(13)
131
134
131
215
223
215
224
233
224
258
270
258
273
285
273
Cash Flow
(RMm)
EBITDA
Tax Paid
Capex
Shares Repurchased
Dividends Paid
Preferred Dividends
Apr-14A
175.5
Apr-15A
292.0
Apr-16F
303.0
Apr-17F
354.0
Apr-18F
372.7
(49.3)
(1.1)
(41.1)
84.0
(5.5)
8.1
0.0
3.2
5.7
(129.0)
58.9
20.8
0.0
(90.7)
222.1
(8.6)
0.0
(36.1)
6.4
(38.3)
0.0
4.5
71.8
0.0
(77.6)
297.2
(25.0)
0.0
0.0
5.7
(19.3)
0.0
0.0
82.3
0.0
(89.9)
346.5
(25.0)
0.0
0.0
8.4
(16.6)
0.0
0.0
84.5
0.0
(95.1)
362.1
(25.0)
0.0
0.0
12.1
(12.9)
0.0
0.0
(14.1)
(98.1)
(119.5)
(114.0)
(114.0)
(2.3)
(86.5)
3.2
(39.3)
90.8
0.0
(93.6)
90.3
183.8
183.8
0.0
(119.5)
158.4
277.9
277.9
0.0
(114.0)
215.9
329.9
329.9
0.0
(114.0)
235.2
349.2
349.2
76
BY THE NUMBERS
Balance Sheet
(RMm)
Total Debtors
Inventories
Fixed Assets
Total Investments
Intangible Assets
Short-term Debt
Total Creditors
Total Provisions
Total Liabilities
Minority Interests
Total Equity
Apr-14A
186
54
288
0
528
20
34
1
31
86
0
Apr-15A
281
105
216
0
601
23
79
1
28
131
0
Apr-16F
493
72
379
0
945
54
67
1
14
135
0
Apr-17F
709
109
523
0
1,342
65
87
1
14
166
0
Apr-18F
944
81
426
0
1,451
72
112
1
15
199
0
134
61
195
0
121
54
176
0
158
186
344
0
329
239
567
0
132
316
448
0
65
65
0
260
344
11
354
61
61
0
236
477
19
496
152
152
0
495
559
26
584
200
200
0
768
703
37
740
291
291
0
739
862
50
911
Apr-14A
36.3%
115%
12.1%
0.16
0.30
156
25.5%
10.8%
12.68
74.23
39.82
104%
52.3%
24.5%
Apr-15A
26.1%
66%
16.0%
0.25
0.42
3,007
26.1%
45.5%
15.81
54.21
27.52
108%
68.7%
33.1%
Apr-16F
28.7%
4%
12.9%
0.43
0.49
N/A
25.0%
53.4%
13.74
56.59
26.55
112%
54.1%
25.7%
Apr-17F
17.3%
17%
12.8%
0.62
0.62
N/A
25.0%
44.2%
12.00
73.00
39.36
145%
51.3%
20.8%
Apr-18F
5.1%
5%
12.8%
0.83
0.76
N/A
25.0%
41.8%
12.00
73.00
35.48
185%
43.0%
18.1%
Apr-14A
N/A
16.6%
N/A
N/A
-5.1%
N/A
N/A
N/A
N/A
Apr-15A
N/A
27.1%
N/A
N/A
57.0%
N/A
N/A
N/A
N/A
Apr-16F
N/A
33.2%
N/A
N/A
39.5%
N/A
N/A
N/A
N/A
Apr-17F
N/A
14.1%
N/A
N/A
30.0%
N/A
N/A
N/A
N/A
Apr-18F
N/A
10.0%
N/A
N/A
10.0%
N/A
N/A
N/A
N/A
Key Ratios
Revenue Growth
BVPS (RM)
Effective Tax Rate
Inventory Days
ROIC (%)
ROCE (%)
Key Drivers
ASP (% chg, main prod./serv.)
Unit sales grth (%, main prod./serv.)
Util. rate (%, main prod./serv.)
ASP (% chg, 2ndary prod./serv.)
Unit sales grth (%,2ndary prod/serv)
Util. rate (%, 2ndary prod/serv)
ASP (% chg, tertiary prod/serv)
Unit sales grth (%,tertiary prod/serv)
Util. rate (%, tertiary prod/serv)
77
Property Devt & InvtMalaysiaEquity researchOctober 9, 2015
Company Note
Eco World Development Group

Bhd
ADD (no change)

Current price:
RM1.38
Target price:
RM1.90
Previous target:
RM1.90
Up/downside:
37.9%
Reuters:
ECOW.KL
Bloomberg:
ECW MK
Market cap:
US$770.3m
Malaysias most ambitious developer
Arguably the best management team in the property industry and the countrys most
aggressive and ambitious developer.
On track to meeting FY15 sales target of RM3bn; likely to emerge as Malaysias top
developer in 2015.
Sister company EWI is equally aggressive in terms of sales and, when eventually
merged with Eco World, will create a mega property company.
Our top pick and only Add in the property sector. It is also our long-term pick, with
2018 and 2020 target prices of RM2.47 and RM3.37, respectively.
RM3,263m
US$0.65m
RM2.69m
Current shares o/s
2,364m
Free float:
33.4%
Tops in long-term property stock-picking matrix

Eco World tops the scoring in our long-term property sector stock-picking matrix
primarily because it scores highly in the management and growth categories. It would
have scored higher if not for its shortfall in the financial and valuation categories as the
company only burst onto the scene in 2013/14 and can be considered a relatively new
company that has yet to fully establish itself.

No changes.
Eco World is led by Tan Sri Liew Kee Sin

Price Close
2.30
123.0
2.10
115.5
1.90
108.0
1.70
100.5
1.50
93.0
1.30
85.5
1.10
20
78.0
Will likely end 2015 as the top-selling developer
15
10
Vol m
Eco World is led by non-executive chairman Tan Sri Liew Kee Sin, who was previously
the founder, CEO and president of Malaysia's pre-eminent developer, SP Setia. Several
hundred of SP Setia's staff have joined Eco World and the latter has aggressively built
up its land bank to over 7,000 acres with GDV of RM75bn in just 2-3 years.
5
Oct-14
Jan-15
Apr-15
Jul-15
Source: Bloomberg
Price performance
1M
3M
12M
Absolute (%)
3.0
-6.1
-23.6
Relative (%)
-3.6
-5.9
-16.3
Eco World is targeting sales of RM3bn in FY15 and RM4bn in FY16 and appears on
track to meeting these targets. Although the RM3bn figure is slightly lower than FY14's
figure of RM3.19bn, it is commendable nonetheless as most other developers have
slashed their sales targets due to the very difficult property market conditions. With
RM3bn Malaysian sales, Eco World will also likely emerge as the top-selling developer
in Malaysia for 2015.
Eco World and sister company eventually to be merged?

Thus far this year, Eco World has been able to achieve RM2.37bn in sales for the 10M
(Oct 14 to Aug 15). Besides domestic sales, Eco World's sister company Eco World
International (EWI) has projects in Australia and the United Kingdom. Tan Sri Liew's
ultimate goal is to merge the two companies into a single entity, which will likely become
Malaysia's largest developer by market cap.

Assuming the property market outlook improves by 2018 and our discount to RNAV
assigned to Eco World also narrows from 30% to 20% plus land values appreciate at a
moderate pace of 5% per annum, our 3-year price target rises to RM2.47. Using similar
assumptions but further narrowing the discount to RNAV from 20% in 2018 to parity in
2020, Eco World's target price rises to RM3.37.
Financial Summary
Analyst
Terence WONG, CFA

T (60) 3 2261 9088
E terence.wong@cimb.com
Total Net Revenues (RMm)

Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
Oct-13A
155
31.5
22.8
0.037
163%
36.9
0.005
0.33%
28.11
40.2
12.3%
2.64
7.39%
Oct-14A
137
13.1
7.0
0.011
(69%)
121.1
0.00%
78.33
29.5
57.4%
2.58
2.16%
Oct-15F
1,384
54.9
39.1
0.026
131%
61.8
0.010
0.72%
76.06
NA
61.2%
1.03
2.25%
0%
1.25
Oct-16F
1,442
162.9
108.6
0.046
75%
36.7
0.010
0.72%
33.77
167.8
62.7%
1.00
3.39%
0%
0.83
Oct-17F
2,220
291.9
175.7
0.074
62%
22.7
0.010
0.72%
18.91
251.0
60.3%
0.95
5.27%
0%
0.69

Powered by EFA

FYE Oct (RM m)
Revenue
Operating costs
EBIT margin (%)
3Q
FY15
454.3
3Q
FY14
27.3
(434.7) (14.6)
4.3
46.5
EBIT
19.5
12.7
Interest expense
(4.9)
(0.4)
Interest & invt inc
1.1
0.2
Associates' contrib
0.0
Exceptionals
0.0
Pretax profit
15.7
1,564.0
2Q
FY15
417.8
2,877.7
(391.4)
yoy % chg
8.7
3QFY15
cum
1,030.1
3QFY14
cum
68.4
11.1
(976.4)
(60.8)
qoq % chg
6.3
53.8
5.2
11.1
1,406.0
Prev.
Comments
FY15F
519.0 9M is nearly double full year forecast
1,505.8
(463.7)
yoy % chg
(53.1)
10.7 Narrow margins due to high start-up costs
606.9
55.3
26.4
(26.1)
53.7
7.6
(9.7)
(49.6)
(18.2)
(0.9)
453.5
1.0
12.4
3.5
1.0
253.9
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
12.5
25.9
17.7
(11.0)
39.0
7.7
407.0
296.3
(5.9)
8.1
(14.9)
(2.6)
472.2
38.1
33.8
1,125.5
(7.4) Total borrowing fell 11% to RM1.55bn

4.2 Total cash jumped 186% to RM620m
1,934.0
0.0
0.0
52.1 Made up 75% of our full year forecast
(13.0) Above statutory tax rate due to certain
Tax
(6.3)
(1.6)
Tax rate (%)
40.3
12.8
12.9
25.0
Minority interests
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Net profit
9.4
10.9
(13.8)
11.8
(20.4)
24.2
5.1
373.8
39.1 Made up 62% of our full year forecast
Core net profit
9.4
10.9
(13.8)
11.8
(20.4)
24.2
5.1
373.8
39.1
EPS (sen)
0.4
4.3
(90.5)
0.8
(48.1)
1.7
2.0
(15.0)
7.7
Core EPS (sen)
0.4
4.3
(90.5)
0.8
(48.1)
1.7
2.0
(15.0)
7.7
33.2
non tax-deductible expenses
Note that 3QFY14 is period ending Sep 2013

Figure 2: Eco World Development's RNAV

Type
Location
EcoTropics
Johor
Size/units
743.60 ac
Area (sq. ft.)

32,391,216
22.00
100%
712.6
EcoBusiness Park 3
Johor
248.00 ac
10,802,880
22.00
100%
237.7
0-lot bungalows
Saujana, Selangor
3,600,000
100%
21.6
EcoSanctuary
Selangor
13,447,843
60.00
100%
806.9
EcoSky
Jalan Ipoh, Kuala Lumpur
EcoMajestic
Semenyih, Selangor
EcoBotanic
EcoBusiness Park 1
6
308.72 ac
Price (RM psf)
Stake
Value (RM m)
9.60 ac
418,176
500.00
100%
209.1
1,073.10 ac
46,744,236
40.00
100%
1,869.8
Iskandar Malaysia, Johor
325.10 ac
14,161,356
80.00
100%
1,132.9
Senai, Johor
612.00 ac
26,658,720
23.00
100%
613.2
EcoBusiness Park 2
Johor
383.60 ac
16,709,616
23.00
100%
384.3
EcoSpring
Iskandar Malaysia, Johor
613.80 ac
26,737,128
25.00
100%
668.4
EcoTerraces
Penang Island
12.80 ac
557,568
100.00
100%
55.8
EcoMacalister
Penang Island
1.10 ac
47,916
500.00
100%
24.0
EcoMeadows
Seberang Prai, Penang
75.70 ac
3,297,492
60.00
100%
197.8
Semenyih
Selangor
492.66 ac
21,460,139
30.00
100%
643.8
Pudu Jail privatisation
Kuala Lumpur
19.40 ac
845,064
2,000.00
40%
676.1
EcoMarina
Batu Kawan, Penang
470.00 ac
20,473,200
39.00
100%
798.5
Placement proceeds
638.3
Fixed assets
4.2
Investment properties
0.0
Others
0.0
Net current assets less dev. prop.
190.9
Long term borrowings + payables
(3,122.4)
Total RNAV
6,763.4
No. of shares (m)
2,364.3
RNAV per share (RM)
2.86
Warrants @ RM2.08
525.4
Fully diluted number of shares (m)
2,889.7
Fully diluted RNAV per share (RM)
2.72
79
BY THE NUMBERS
Share price info

Share px perf. (%)
1M
3M
12M
Relative
-3.6
-5.9
-16.3
Absolute
3.0
-6.1
-23.6
Major shareholders
Sinarmas Harta
Eco World Development Holdings
Sdn Bhd
Liew Tian Xiong
% held
32.0
23.3
11.3
P/BV vs ROE
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
Jan-11
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16

Growth
140
4,500%
120
3,786%
100
3,071%
80
2,357%
60
1,643%
40
929%
20
214%
0
-500%
ROE (rhs)
Profit & Loss

(RMm)
Total Net Revenues
Gross Profit
Operating EBITDA
Operating EBIT
Exceptional Items
Pre-tax Profit
Taxation
Profit After Tax
Minority Interests
Pref. & Special Div
Net Profit
Oct-13A
155
31
31
(0)
31
(3)
0
0
28
0
28
(5)
23
0
0
0
0
23
23
23
Oct-14A
137
13
13
(0)
13
(1)
0
0
11
0
11
(5)
7
0
0
0
0
7
7
7
Oct-15F
1,384
55
55
(1)
54
(2)
0
0
52
0
52
(13)
39
0
0
0
0
39
39
39
Oct-16F
1,442
163
163
(1)
162
(17)
0
0
145
0
145
(36)
109
0
0
0
0
109
109
109
Oct-17F
2,220
292
292
(1)
291
(57)
0
0
234
0
234
(59)
176
0
0
0
0
176
176
176
Cash Flow
(RMm)
EBITDA
Straight Line Adjustment
Tax Paid
Capex
Disposals of Investment Properties
Shares Repurchased
Dividends Paid
Preferred Dividends
Oct-13A
31
0
(7)
0
Oct-14A
13
0
(143)
0
Oct-15F
55
0
3
1
Oct-16F
163
0
(211)
1
Oct-17F
292
0
(185)
1
(4)
(5)
15
(0)
(3)
(10)
(143)
(5)
(5)
(13)
40
(4,770)
(24)
(36)
(108)
(3)
(64)
(59)
(15)
(3)
1
1
5
0
1
(4)
175
0
9
(4,762)
2,108
2,798
15
11
120
0
7
4
27
0
(2)
(0)
3
0
(2)
173
(9)
122
5,018
(9)
0
112
(9)
0
19
80
BY THE NUMBERS
Balance Sheet
(RMm)
Properties Under Development
Total Debtors
Inventories
Fixed Assets
Total Investments
Intangible Assets
Short-term Debt
Total Creditors
Total Provisions
Total Liabilities
Minority Interests
Total Equity
Oct-13A
27
79
45
40
10
202
1
302
0
0
303
52
Oct-14A
54
40
232
50
4
379
4
303
0
0
307
99
Oct-15F
344
42
226
462
0
1,075
7
5,070
0
0
5,077
89
Oct-16F
351
74
261
481
0
1,168
10
5,070
0
0
5,080
80
Oct-17F
358
78
362
741
0
1,540
12
5,070
0
0
5,083
72
41
3
96
15
0
72
88
0
183
319
2
322
49
0
148
141
0
71
213
0
361
326
(0)
326
456
0
546
2,258
0
72
2,331
0
2,876
3,154
122
3,276
333
0
413
2,387
0
73
2,460
0
2,873
3,254
122
3,375
513
0
585
2,421
0
74
2,495
0
3,080
3,421
122
3,542
Oct-13A
112%
144%
20.3%
(0.06)
0.52
8.21
18.8%
7.6%
91.0
104.4
89.3
18.4%
8.47%
5.05%
Oct-14A
(12%)
(58%)
9.6%
(0.31)
0.53
4.64
39.4%
NA
368.6
132.7
117.6
7.3%
3.03%
1.34%
Oct-15F
912%
318%
4.0%
(0.85)
1.33
10.35
25.0%
22.7%
60.4
70.3
69.4
14.5%
1.85%
1.19%
Oct-16F
4%
197%
11.3%
(0.90)
1.38
6.67
25.0%
8.2%
61.8
135.1
113.0
43.8%
2.95%
1.96%
Oct-17F
54%
79%
13.1%
(0.90)
1.45
4.57
25.0%
5.0%
51.3
115.8
80.0
44.7%
5.02%
3.40%
Oct-13A
N/A
N/A
N/A
4.2
20.3%
N/A
N/A
N/A
N/A
N/A
N/A
Oct-14A
3,190.0
N/A
N/A
6.1
9.6%
N/A
N/A
N/A
N/A
N/A
N/A
Oct-15F
3,000.0
N/A
N/A
20.2
4.0%
N/A
N/A
N/A
N/A
N/A
N/A
Oct-16F
4,000.0
N/A
N/A
22.3
11.3%
N/A
N/A
N/A
N/A
N/A
N/A
Oct-17F
5,000.0
N/A
N/A
22.3
13.1%
N/A
N/A
N/A
N/A
N/A
N/A
Key Ratios
Revenue Growth
BVPS (RM)
Effective Tax Rate
Inventory Days
ROIC (%)
ROCE (%)
Key Drivers
Unbooked Presales (m) (RM)
Unbooked Presales (area: m sm)
Unbooked Presales (units)
Unsold attrib. landbank (area: m sm)
Gross Margins (%)
Contracted Sales ASP (per Sm) (RM)
Residential EBIT Margin (%)
Investment rev / total rev (%)
Residential rev / total rev (%)
Invt. properties rental margin (%)
SG&A / Sales Ratio (%)
81
ConstructionMalaysiaEquity researchOctober 9, 2015
Company Note
Gamuda
On a longer-term growth cycle
ADD (no change)

Current price:
RM4.55
Target price:
RM5.88
Previous target:
RM5.88
Up/downside:
29.2%
Reuters:
GAMU.KL
Bloomberg:
GAM MK
Market cap:
US$2,585m
RM10,947m
US$4.42m
RM18.18m
Current shares o/s
2,066m
Free float:
75.7%
Vol m
Price Close
Secured major project management roles under the PDP model.

Longer-term earnings visibility underpinned by MRT and Penang TMP.
Indicative 2018 target price of RM6.40 and 2020 target price of RM7.20.
Long-term upside of 45-60% based on 10% RNAV discount. Maintain Add.
Highest score in our long-term selection matrix

Gamuda scores the highest in our long term stock picking matrix. What sets it apart is its
innovative qualities, backed by its proven capability to better leverage its strength and
expertise in executing larger-scale projects over longer periods of time. This can be
attributable to the leadership of founder and group MD Dato' Lin Yun Ling - 35 years of
experience in civil engineering and construction. He joined Gamuda in 1978 and the
group has since achieved major milestones.
Its job track record over the past decade or so has not only become more specialised,
but it has also evolved from turnkey works to higher-level project management scope.
Arguably, Gamuda still commands a pioneering role in the Malaysian construction space
in the areas of holistic public transport planning, rail development and tunneling, and
integrated flood mitigation jobs. Order book growth of more than 7-fold is set by mid2016, driven by MRT 2.
5.20
109.7
4.70
104.1
4.20
98.6
3.70
25
20
15
10
5
93.0
Jan-15
Gamuda has superior capability in executing larger-scale projects.
Pioneering role in the domestic construction space
No change
Oct-14
Apr-15
Biggest PDP for large scale projects
Jul-15
Source: Bloomberg
Price performance
1M
3M
12M
Absolute (%)
3.4
-2.8
-5.4
Relative (%)
-3.2
-2.6
1.9
Gamuda's success story in implementing PDP-driven jobs has been echoed in other
parts of the country too. On top of its existing PDP roles for two major MRT projects, it
has recently expanded in a big way beyond the Klang Valley by securing the RM10bn
Transport Master Plan (TMP) for the entire state of Penang. Putting the timeline in
perspective, Gamuda's PDP earnings stream stretches over five years from 2015 for
MRT or up to 2030 if other phases of the Penang TMP are implemented.
Tunneling specialist
Gamuda's own track record in mega turnkey contracts also speaks for itself in terms of
quality, scale and engineering capabilities. Current and previous major projects include
1) RM1.9bn SMART tunnel project - Klang Valley's first major tunneling and flood
mitigation, 2) Malaysia's first RM23bn Mass Rapid Transit (MRT) project - 9.5km of
tunneling, 3) the upcoming RM28bn MRT 2 project - 10km of tunneling works, and in
future, potentially 4) the over RM30bn MRT 3 - entirely tunneling works.
Gamuda's long term target price

Based on a 1) 5% appreciation in land values p.a. in the next 2-5 years for its domestic
and overseas land bank, 2) higher construction burn-rate, and 3) DCF-value for the
RM16bn PDP portion of MRT 2, we arrive at a 2018 indicative target price of RM6.40
based on an unchanged 10% discount to RNAV. Imputing the estimated new land bank
from phase 1 of Penang TMP would raise the target price to RM7.20 based on a similar
discount to RNAV. The 3-5 year target price offers 45-60% potential upside.
Financial Summary
Analyst
Sharizan ROSELY
T (60) 3 2261 9077
E sharizan.rosely@cimb.com
Revenue (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
Jul-14A
2,230
441.3
719.4
0.32
3.4%
14.11
0.12
2.54%
27.17
8.42
30.0%
1.97
13.7%
Jul-15A
2,400
599.5
682.1
0.28
(12.1%)
16.05
0.12
2.54%
21.19
12.48
47.2%
1.73
11.5%
Jul-16F
2,684
613.1
668.5
0.28
(2.0%)
16.38
0.12
2.54%
20.46
27.48
46.5%
1.72
10.5%
0%
0.98
Jul-17F
2,952
674.4
725.6
0.30
8.5%
15.09
0.12
2.54%
18.54
27.97
45.0%
1.69
11.3%
0%
0.95
Jul-18F
3,243
737.3
813.6
0.34
12.1%
13.46
0.12
2.54%
16.84
22.39
42.7%
1.66
12.5%
0%
0.99

Powered by EFA
Figure 1: List of PDP-type jobs and its value
Pan-Borneo Highway
27,000
LRT 3
9,000
Penang TMP phase 1
10,000
MRT 2
28,000
MRT 1
23,000
5,000
10,000
15,000
20,000
25,000
30,000
Figure 2: RNAV
DCF value
Gamuda's
Value
Concession assets
(RM m)
stake (%)
(RM m)
LDP/Litrak
1,973.0
45%
SAE
1,400.0
70%
980.0
Sprint
2,307.6
52%
1,206.9
SSP1&3 (Splash)
887.9
2,800.0
40%
1,120.0
Gamuda Water
500.0
80%
400.0
PPH, India
152.9
50%
76.5
DE, India
108.2
50%
54.1
SMART
963.3
50%
481.6
490.6
50%
245.3
6.5
MRT SBK line PDP

Property
Kota Kemuning
Land size
Value
(acres)
RM psf
10
30.0
50%
100.0
99%
0.0
30
45.0
100%
58.8
Bandar Nusajaya
400
40.0
50%
348.5
Jade Hills
180
45.0
100%
352.8
Madge Mansions
30.0
100%
0.0
The Robertsons
250.0
100%
0.0
Yenso, Hanoi
400
140.0
100%
2,439.4
Celadon City, HCMC
170
157.8
100%
1,168.5
450.0
100%
98.0
770
40.0
100%
1,341.6
Valencia
Bandar Botanic
New land - Kelana Jaya

New land - Serai
New land - Kundang
New land - T12
New land - KK257
Sabah Land
Toa Payoh land
90
20.0
100%
78.4
1530
38.2
100%
2,545.9
257
40.0
100%
447.8
18
20.0
100%
15.7
50.0
50%
3.3
3,014.5
CY16
(RM m)
Construction
Quarry
Property investments, JVs and associates
Net current assets net of dev. prop. (4Q15)
P/E (x)
201.0
15
100%
13.8
13.5
100%
186.1
1,665.7
622.8
Total debt 4Q15
(4,135.4)
Total RNAV
15,711.1
Shares outstanding (m)

FD RNAV/share (RM)
2,405.9
6.53
RNAV discount
10%
Target price (RM)
5.88
83
BY THE NUMBERS
Share price info

Share px perf. (%)
1M
3M
Relative
-3.2
-2.6
Absolute
3.4
-2.8
12M
1.9
-5.4
P/BV vs ROE
3.00
25.0%
2.50
20.8%
2.00
16.7%
% held
1.50
12.5%
10.6
1.00
8.3%
Amanah Raya Trustees
8.2
0.50
4.2%
Generasi Setia
5.5
0.00
0.0%
Major shareholders
EPF


Growth
20.0
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
50.0%
43.0%
36.0%
29.0%
22.0%
15.0%
8.0%
1.0%
-6.0%
-13.0%
-20.0%

ROE (rhs)
Profit & Loss

(RMm)
Total Net Revenues
Gross Profit
Operating EBITDA
Operating EBIT
Exceptional Items
Pre-tax Profit
Taxation
Profit After Tax
Minority Interests
Preferred Dividends
Net Profit
Jul-14A
2,230
2,230
441
(28)
414
1
430
0
845
7
852
(117)
Jul-15A
2,400
2,400
600
(103)
496
(56)
380
38
858
0
858
(133)
Jul-16F
2,684
2,684
613
(39)
574
(14)
319
0
879
0
879
(191)
Jul-17F
2,952
2,952
674
(40)
635
(14)
403
0
1,024
0
1,024
(279)
Jul-18F
3,243
3,243
737
(40)
697
(14)
437
0
1,120
0
1,120
(287)
735
(16)
0
725
(43)
0
688
(20)
0
745
(20)
0
833
(20)
0
719
713
713
682
682
682
669
669
669
726
726
726
814
814
814
Cash Flow
(RMm)
EBITDA
Tax Paid
Capex
Shares Repurchased
Dividends Paid
Preferred Dividends
Jul-14A
441
(657)
Jul-15A
600
164
Jul-16F
613
Jul-17F
674
Jul-18F
737
(15)
48
251
(26)
(138)
(129)
(14)
606
0
0
593
732
0
0
(262)
52
(56)
(88)
671
(10)
0
0
(1,403)
(1,413)
1,620
0
0
(285)
52
(14)
(191)
444
(13)
0
0
0
(13)
(34)
0
0
(289)
52
(14)
(279)
439
(14)
0
0
0
(14)
(33)
0
0
(289)
52
(14)
(287)
536
(14)
0
0
0
(14)
(33)
0
0
(289)
(1,243)
(774)
(310)
1,195
529
(143)
1,191
449
877
(619)
(82)
(405)
27
398
482
(89)
(411)
14
391
473
(144)
(466)
56
489
568
84
BY THE NUMBERS
Balance Sheet
(RMm)
Total Debtors
Inventories
Fixed Assets
Total Investments
Intangible Assets
Short-term Debt
Total Creditors
Total Provisions
Total Liabilities
Minority Interests
Total Equity
Jul-14A
920
1,817
295
1,684
4,715
285
1,234
0
4,191
5,710
792
Jul-15A
1,369
1,455
186
2,221
5,230
312
2,622
0
5,162
8,096
777
Jul-16F
1,396
1,428
176
2,221
5,221
342
2,639
0
5,059
8,041
769
Jul-17F
1,410
1,441
167
2,221
5,239
372
2,657
0
5,084
8,114
769
Jul-18F
1,466
1,455
159
2,221
5,301
402
2,675
0
5,110
8,187
769
959
48
1,799
1,739
1,582
101
2,459
3,358
1,595
101
2,465
3,325
1,609
101
2,479
3,292
1,623
101
2,493
3,259
653
2,392
0
4,191
5,547
687
6,234
815
4,173
0
6,632
6,337
356
6,693
815
4,140
0
6,605
6,372
285
6,657
815
4,106
0
6,585
6,463
304
6,768
815
4,073
0
6,566
6,598
324
6,922
Jul-14A
(42.6%)
(24.2%)
19.8%
(0.78)
2.31
6.22
13.7%
40.5%
237.4
N/A
N/A
8.89%
5.66%
7.18%
Jul-15A
7.6%
35.9%
25.0%
(1.31)
2.63
4.01
15.5%
42.3%
235.2
N/A
N/A
6.83%
5.57%
6.58%
Jul-16F
11.8%
2.3%
22.8%
(1.29)
2.65
11.48
21.7%
43.2%
185.9
N/A
N/A
7.50%
5.45%
5.28%
Jul-17F
10.0%
10.0%
22.8%
(1.27)
2.69
13.22
27.2%
39.8%
167.7
N/A
N/A
8.43%
5.98%
5.71%
Jul-18F
9.8%
9.3%
22.7%
(1.23)
2.74
15.01
25.6%
35.5%
154.2
N/A
N/A
9.20%
6.46%
6.31%
Jul-14A
3,000
1,200
N/A
N/A
N/A
N/A
N/A
N/A
Jul-15A
1,800
1,200
N/A
N/A
N/A
N/A
N/A
N/A
Jul-16F
600
1,200
5,000
N/A
N/A
N/A
N/A
N/A
N/A
Jul-17F
4,400
1,200
1,500
N/A
N/A
N/A
N/A
N/A
N/A
Jul-18F
4,700
1,200
1,500
N/A
N/A
N/A
N/A
N/A
N/A
Key Ratios
Revenue Growth
BVPS (RM)
Effective Tax Rate
Inventory Days
ROIC (%)
ROCE (%)
Key Drivers
(RMm)
Outstanding Orderbook
Order Book Depletion
Orderbook Replenishment
85
GamingMalaysiaEquity researchOctober 9, 2015
Company Note
Genting Malaysia
Genting Highlands from good to great
ADD (no change)

Current price:
RM4.48
Target price:
RM5.00
Previous target:
RM5.00
Up/downside:
11.6%
Reuters:
GENM.KL
Bloomberg:
GENM MK
Market cap:
US$5,997m
RM25,401m
US$4.53m
RM18.54m
Current shares o/s
5,938m
Free float:
50.7%

No change.
GITP to transform Genting Highlands into world-class international destination
GENM to be re-rated with higher EV/EBITDA multiple when GITP comes onstream
Resilient business model: customers mainly local mass market and ASEAN VIPs
The 20th Century Fox theme park located in Gentings cool climate will be the firstof-its kind globally, which is a huge competitive advantage
GENM is our top pick and only Add in the gaming sector. It is also our long-term pick
with 2018 and 2020 target prices of RM6.00 and RM7.00 respectively.
Rejuvenation under second-generation leadership

Genting Malaysia (GENM) is led by Tan Sri Lim Kok Tay (KT Lim), the second son of
Tan Sri Dato Seri Lim Goh Tong, founder of the Genting Group. GENM tops our scoring
in the growth category. Tan Sri KT Lim is the brainchild behind the aggressive RM5bn
Genting Integrated Tourism Plan (GITP) which will transform Genting Highlands from a
domestic casino into a world-class international destination.
Worlds first 20th Century Fox theme park
Price Close
4.70
119.0
4.50
114.0
4.30
109.0
4.10
104.0
3.90
99.0
3.70
40
94.0
30
Vol m
20
10
Oct-14
Jan-15
Apr-15
Resilient business model

In our view, GENM has a resilient and defensive business model. It is insulated from the
anti-corruption crackdown in China as its customers are primarily local mass market and
ASEAN-based VIPs. With the GITP ready, it will further expand its customer base to
include international visitors.
Jul-15
Sustainable economic moat
Source: Bloomberg
1M
3M
12M
Absolute (%)
12.8
6.7
10.9
Relative (%)
6.2
6.9
18.2
Price performance
The new GITP will feature the worlds first 20th Century Fox theme park, more gaming
capacity, a 10,000 seat arena, a central retail complex, a new cable car system, parking
for 3,000 cars and a 1,500+ room six-star hotel. In addition, it recently expanded the
First World Hotel by 1,300 rooms.
We believe that the economic moat surrounding GENMs business model is its domestic
casino monopoly. It is highly unlikely that new casino licences will be issued in Malaysia.
With the 20th Century Fox theme park being 1) the first-of-its kind in the world and 2)
strategically located in a cool climate location like Genting Highlands, this is a huge
competitive advantage that sets it apart from other theme parks in Malaysia.

We believe that investors will reward GENM with a higher EV/EBITDA multiple when the
GITP comes onstream and starts to mature. We now value GENMs Malaysian earnings
at 9x EV/EBITDA. If this re-rates over the longer term to the regional average of 10.5x
by FY18, GENM could reach RM6.00. Using similar assumptions, by 2020, GENMs
target price could reach RM7.00. The 3-year and 5-year target prices would offer
investors 34-56% upside.
Financial Summary
Analyst
Marcus CHAN, CFA

T (60) 3 2261 9070
E marcusty.chan@cimb.com
Revenue (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
Dec-13A
8,328
2,409
1,603
0.28
9.8%
15.75
0.10
2.12%
10.14
20.54
(11.1%)
1.72
11.8%
Dec-14A
8,356
2,410
1,449
0.24
(14.2%)
18.36
0.10
2.12%
10.38
74.07
(9.7%)
1.61
9.1%
Dec-15F
8,802
2,434
1,444
0.24
(0.3%)
18.42
0.10
2.17%
10.20
40.19
(10.2%)
1.52
8.5%
0%
1.05
Dec-16F
9,912
2,828
1,728
0.29
19.6%
15.40
0.10
2.23%
8.24
13.03
(17.6%)
1.42
9.5%
0%
1.11
Dec-17F
11,435
3,357
2,145
0.36
24.1%
12.40
0.11
2.39%
6.36
10.51
(25.7%)
1.30
10.9%
0%
1.21

Powered by EFA

FYE Dec (RM m)
Revenue
Operating costs
adj EBITDA
EBITDA margin (%)
Depn & amort.
EBIT
Interest expense
Interest & invt inc
Exceptionals
Pretax profit
Tax
Tax rate (%)
Minority interests
Net profit
Core net profit
EPS (sen)
Core EPS (sen)
2QFY15
2QFY14
1983
(1547)
436
22.0
(163.3)
272.7
(7.8)
22.9
(16.7)
286.4
(47.9)
16.7
(7.6)
230.9
247.6
10.0
10.7
4408.8
(2986.6)
1422.2
32.3
(448.9)
973.3
(114.1)
162.0
(99.2)
931.0
(234.2)
25.2
(273.9)
422.8
522.0
10.0
12.4
yoy %
chg
(55.0)
(48.2)
(69.3)
qoq %
chg
(5.3)
4.2
(28.3)
(63.6)
(72.0)
(93.2)
(85.9)
(83.2)
(69.2)
(79.5)
2.9
(39.3)
0.0
7.0
(235.8)
(38.2)
(59.1)
(97.2)
(45.4)
(52.6)
0.0
(13.2)
(300.0)
(34.0)
(26.7)
69.8
88.7
2QFY15
Cum
4076
(3032)
1044
25.6
(322.0)
722.0
(15.5)
44.3
(4.4)
746.4
(164.9)
22.1
(11.5)
570.0
574.4
23.4
23.6
2QFY14
Cum
3937
(2871)
1066
27.1
(301.8)
763.7
(21.2)
99.2
(59.8)
782.0
(189.4)
24.2
(20.2)
572.4
632.1
10.8
11.9
Prev.
FY15F
8,802
(6,368)
2,434
27.7
(630)
1,804
(37.9)
98.0
1,864
(429)
23.0
(2,229)
1,444
1,444
23.9
23.9
Comments
Poor performance in UK
lower margin due to GST impact in 1H15
40% of full-year forecast
Figure 2: RNAV breakdown

Method
Malaysia
US
UK
Genting HK
Net cash at March 2015
Miami Land
Total RNAV
Fully-diluted no. of shares
RNAV/share
No. of
shares
('m)
% stake
market
price
Exchange
rate (RM/US$)
EV/EBITDA
EV/EBITDA
EV/EBITDA
7,771
17.81%
USD 0.35
4.00
4.00
Target
EV/EBITDA
9.0
6.0
6.0
2016
EBITDA
2,175
352
301
Value
RMm
19,578.4
2,109.5
1,805.5
1,937.6
1,124.0
2,000.0
28,555.0
5,713.5
5.00
87
BY THE NUMBERS
Share price info

Share px perf. (%)
Relative
Absolute
Major shareholders
Genting Berhad
1M
6.2
12.8
3M
6.9
6.7
12M
P/BV vs ROE
2.50
14.00%
2.00
11.20%
% held
1.50
8.40%
49.3
1.00
5.60%
0.50
2.80%
0.00
0.00%
18.2
10.9
Growth
20.00
18.00
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
60.0%
51.0%
42.0%
33.0%
24.0%
15.0%
6.0%
-3.0%
-12.0%
-21.0%
-30.0%
ROE (rhs)
Profit & Loss

(RMm)
Total Net Revenues
Gross Profit
Operating EBITDA
Operating EBIT
Exceptional Items
Pre-tax Profit
Taxation
Profit After Tax
Minority Interests
Preferred Dividends
Net Profit
Dec-13A
8,328
8,328
2,409
-478
1,931
16
0
-87
1,860
-94
1,767
-182
Dec-14A
8,356
8,356
2,410
-600
1,810
64
0
0
1,874
0
1,874
-431
Dec-15F
8,802
8,802
2,434
-630
1,804
60
0
0
1,864
0
1,864
-429
Dec-16F
9,912
9,912
2,828
-662
2,166
66
0
0
2,232
0
2,232
-513
Dec-17F
11,435
11,435
3,357
-695
2,663
111
0
0
2,774
0
2,774
-638
1,584
19
0
1,443
6
0
1,435
9
0
1,719
9
0
2,136
9
0
1,603
1,687
1,687
1,449
1,449
1,449
1,444
1,444
1,444
1,728
1,728
1,728
2,145
2,145
2,145
Dec-13A
2,409
Dec-14A
2,410
Dec-15F
2,434
Dec-16F
2,828
Dec-17F
3,357
44
-237
43
107
147
63
43
-415
2,144
-1,419
0
0
0
-1,419
568
0
0
-414
63
64
-431
1,869
-1,500
0
0
0
-1,500
-10
0
0
-423
63
60
-429
2,171
-1,500
0
0
0
-1,500
-9
0
0
-423
63
66
-513
2,550
-500
0
0
0
-500
-9
0
0
-463
63
111
-638
3,040
-500
0
0
0
-500
-8
0
0
-468
-44
110
836
1,294
751
237
-196
173
359
407
-43
-476
196
662
709
-107
-579
1,471
2,041
2,088
-147
-623
1,917
2,532
2,578
Cash Flow
(RMm)
EBITDA
Tax Paid
Capex
Shares Repurchased
Dividends Paid
Preferred Dividends
88
BY THE NUMBERS
Balance Sheet
(RMm)
Total Debtors
Inventories
Fixed Assets
Total Investments
Intangible Assets
Short-term Debt
Total Creditors
Total Provisions
Total Liabilities
Minority Interests
Total Equity
Dec-13A
3,396
485
88
1,449
5,418
6,088
3,775
4,387
185
14,435
197
Dec-14A
3,268
526
118
742
4,655
7,042
4,574
4,387
185
16,187
187
Dec-15F
3,446
555
124
782
4,907
7,912
4,560
4,387
185
17,043
178
Dec-16F
4,959
624
140
880
6,604
7,750
4,552
4,387
185
16,873
169
Dec-17F
6,912
720
162
1,015
8,810
7,556
4,549
4,387
185
16,675
161
1,616
227
2,040
1,483
1,451
368
2,006
1,483
1,528
375
2,081
1,483
1,721
437
2,328
1,483
1,986
527
2,674
1,483
188
1,671
663
4,374
15,458
20
15,478
188
1,671
663
4,340
16,484
20
16,503
188
1,671
663
4,415
17,496
20
17,516
188
1,671
663
4,662
18,778
20
18,798
188
1,671
663
5,008
20,447
20
20,466
Dec-13A
5.5%
(2.8%)
28.9%
0.29
2.60
37.07
10.3%
22.5%
19.30
N/A
N/A
15.9%
12.2%
10.1%
Dec-14A
0.3%
0.0%
28.8%
0.27
2.78
47.51
23.0%
22.5%
22.09
N/A
N/A
12.5%
10.4%
9.0%
Dec-15F
5.3%
1.0%
27.7%
0.30
2.95
47.62
23.0%
23.1%
22.41
N/A
N/A
12.1%
9.8%
8.5%
Dec-16F
12.6%
16.2%
28.5%
0.56
3.16
57.51
23.0%
19.9%
21.77
N/A
N/A
13.5%
11.1%
9.6%
Dec-17F
15.4%
18.7%
29.4%
0.89
3.44
71.06
23.0%
17.1%
21.46
N/A
N/A
16.9%
12.8%
11.0%
Dec-13A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
3,000
600
Dec-14A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
3,000
600
Dec-15F
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
3,000
600
Dec-16F
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
3,600
650
Dec-17F
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
4,154
750
Key Ratios
Revenue Growth
BVPS (RM)
Effective Tax Rate
Inventory Days
ROIC (%)
ROCE (%)
Key Drivers
VIP Chip Volume (% Change)
VIP Chip Win Percentage (%)
Mass mkt chip drop (% chg.)
Mass mkt chip win (%-tage)
Slot Handle (% Change)
Slot Hold Percentage (%)
Net Win Per Slot (% Change)
Net Win Per Table (% Change)
No. Of Slots
No. Of Tables
89
PlantationsMalaysiaEquity researchOctober 9, 2015
Company Note
Genting Plantations
Potential to double its current earnings
ADD (no change)

Current price:
RM10.30
Target price:
RM10.50
Previous target:
RM10.50
Up/downside:
1.9%
Reuters:
GENP.KL
Bloomberg:
GENP MK
Market cap:
US$1,891m
Genting Plantation is among the fastest-growing big cap plantation companies in

Malaysia due to its aggressive expansion into Indonesia.
The group more than doubled its planted oil palm estates over the past nine years.
This bodes well for future output growth prospects of the group.
We project stronger 2H earnings performance driven by higher output and prices.

Our top pick and only Add call in the Malaysian plantation sector with 2018 and
2020 target prices of RM14.72 and RM15.78 per share.
RM8,009m
US$0.82m
RM3.38m
Current shares o/s
773.7m
Free float:
26.9%
Top marks in long term stock picking matrix for planters

We gave Genting Plantation the highest score in our long term plantation stock picking
matrix primarily because of its strong output growth prospects and balance sheet. The
group has the highest ratio or 55% of total planted oil palm estates under the immature
and young category and its net gearing ratio was only 2% as at end-June 2015.
One of the fastest-growing planters on Bursa Malaysia
No change
Price Close
Genting Plantations is the plantation arm of Genting group and one of the fastestgrowing plantation companies on Bursa Malaysia. The company was incorporated in
1977 and listed in 1982. It is the third largest palm oil listed company by market
capitalisation on Bursa Malaysia, after IOI Corp and KL Kepong. Its market cap has
grown 5.7x over the past ten years, outpacing the 216% rise in its net profit.

123.0
10.70
118.0
10.20
113.0
9.70
108.0
9.20
103.0
8.70
3
2
2
1
1
98.0
Vol m
11.20
Oct-14
Jan-15
Apr-15
Expansion into Indonesia to fuel future output growth

Genting Plantation ventured into Indonesia in mid-2005 and built up its planted oil palm
estates in Indonesia to 60,645ha over the past nine years. This has allowed the group to
more than double its planted estates from 58,318ha as at end-2005 to 119,900ha as at
end-2014. The group has the potential to double its earnings when all its young and
immature estates in Indonesia reach their prime yielding age.
Jul-15
Source: Bloomberg
Project stronger 2H earnings

Price performance
1M
3M
12M
Absolute (%)
4.4
1.6
5.9
Relative (%)
-2.2
1.8
13.2
Genting Plantations earnings were affected by weaker CPO prices and lower property
earnings in 1H15. However, we project stronger earnings in 2H as we expect CPO
prices to recover as well as stronger production. The group has toned down its FFB
output growth guidance this year from 10% to 7%, due mainly to weaker yield from its
Sabah estates.
Long term target prices

Assuming the CPO price improves by 2018 to RM2,800 per tonne and the group
achieves FFB output growth of 10% p.a. over the next three years, plus land values
appreciate at a moderate pace of 5% p.a., our 3-year target price, which is based on
SOP, rises to RM14.72. Using similar assumptions stretching the earnings to 2020,
Genting Plantations target price rises to RM15.78. The 3-year and 5-year target prices
would offer investors 43-53% upside from the current level.
Financial Summary
Analyst
Ivy NG Lee Fang, CFA

T (60) 3 2261 9073
E ivy.ng@cimb.com
Revenue (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
Dec-13A
1,384
429.3
227.8
0.38
(12.4%)
26.95
0.48
4.65%
18.37
384.7
(1.75%)
2.27
8.4%
Dec-14A
1,643
558.9
377.2
0.50
30.5%
20.89
0.10
0.97%
14.20
37.7
(1.19%)
2.04
10.3%
Dec-15F
1,664
327.5
201.6
0.29
(42.4%)
36.66
0.16
1.55%
24.54
NA
1.06%
2.00
5.5%
0%
0.77
Dec-16F
1,931
493.6
317.0
0.42
45.8%
25.14
0.16
1.55%
16.35
92.4
1.68%
1.91
7.8%
0%
0.93
Dec-17F
2,186
592.9
386.8
0.51
22.0%
20.60
0.16
1.55%
13.51
44.6
0.24%
1.80
9.0%
0%
0.97

Powered by EFA
Figure 1: Genting Plantations' planted oil palm estates since 1988 (ha)
140,000
120,000
100,000
80,000
60,000
40,000
20,000
Figure 2: Age profile of Genting Plantations estates
Figure 3: Breakdown of Genting Plantations' 2014 EBIT (RM m)
> 25 years
3%
400.0
371.2
350.0
Past Prime
12%
Please fill in the values above to have them entered in your rep
300.0
Immature
27%
Title:
Source:
250.0
Prime 2
14%
200.0
155.1
150.0
100.0
Prime 1
16%
50.0
Young
28%
27.7
0.0
(50.0)
Plantation Malaysia
Property
Biotech
Others
(50.4)
(4.5)
(100.0)
Figure 4: SOP valuation

Segments
Plantations
Property
Biotech
Net cash/ (debt)
SOP value for Genting Plantations
No of shares (m)
SOP per share (RM)
Stake
100%
100%
100%
Method
2016 P/E of 20x
RNAV
1x NBV
As at 30 Jun 2015
Value (RM'm)
5,329.7
2,390.0
279.7
(100.7)
8,111.4
773.7
10.50
91
BY THE NUMBERS
Share price info

Share px perf. (%)
1M
3M
Relative
-2.2
1.8
Absolute
4.4
1.6
Major shareholders
12M
13.2
5.9
% held
Genting
53.5
14.6
Kumpulan Wang Persaraan
5.0
P/BV vs ROE
3.00
16.0%
2.50
13.3%
2.00
10.7%
1.50
8.0%
1.00
5.3%
0.50
2.7%
0.00
0.0%
Growth
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
60%
46%
33%
19%
5%
-9%
-23%
-36%
-50%
ROE (rhs)
Profit & Loss

(RMm)
Total Net Revenues
Gross Profit
Operating EBITDA
Operating EBIT
Exceptional Items
Pre-tax Profit
Taxation
Profit After Tax
Minority Interests
Preferred Dividends
Net Profit
Dec-13A
1,384
526
429
(68)
361
23
18
0
402
(102)
300
(80)
Dec-14A
1,643
625
559
(77)
481
21
18
0
520
0
520
(136)
Dec-15F
1,664
633
328
(86)
241
15
18
0
274
0
274
(69)
Dec-16F
1,931
734
494
(95)
398
11
19
0
428
0
428
(107)
Dec-17F
2,186
831
593
(104)
488
10
19
0
518
0
518
(127)
220
8
0
384
(7)
0
206
(4)
0
321
(4)
0
391
(4)
0
228
289
289
377
377
377
202
217
217
317
317
317
387
387
387
Cash Flow
(RMm)
EBITDA
Tax Paid
Capex
Shares Repurchased
Dividends Paid
Preferred Dividends
Dec-13A
429.3
Dec-14A
558.9
Dec-15F
327.5
Dec-16F
493.6
Dec-17F
592.9
13.6
(101.9)
(7.9)
(24.2)
(10.3)
(34.3)
10.2
(76.2)
342.5
(423.3)
0.0
0.0
(5.2)
(428.5)
106.2
0.0
0.0
(318.7)
0.0
32.0
(136.0)
353.0
(306.0)
0.0
0.0
0.0
(306.0)
162.3
0.0
0.0
(362.3)
0.0
26.9
(68.6)
277.9
(300.0)
0.0
0.0
0.0
(300.0)
(27.4)
0.0
0.0
(77.0)
0.0
23.9
(107.0)
386.2
(300.0)
0.0
0.0
0.0
(300.0)
0.0
0.0
0.0
(123.8)
0.0
23.1
(126.8)
478.9
(300.0)
0.0
0.0
0.0
(300.0)
0.0
0.0
0.0
(123.8)
177.6
(34.8)
(120.8)
20.3
(68.3)
119.8
(80.2)
(33.2)
209.3
47.0
0.2
(104.3)
(126.4)
(49.5)
(22.1)
5.0
(118.8)
(32.6)
86.2
86.2
5.0
(118.8)
60.1
178.9
178.9
92
BY THE NUMBERS
Balance Sheet
(RMm)
Total Debtors
Inventories
Fixed Assets
Total Investments
Intangible Assets
Short-term Debt
Total Creditors
Total Provisions
Total Liabilities
Minority Interests
Total Equity
Dec-13A
931
234
89
80
1,334
1,110
169
0
2,242
3,521
7
Dec-14A
1,077
265
105
173
1,620
1,339
246
0
2,386
3,971
27
Dec-15F
955
265
124
179
1,522
1,552
232
0
2,386
4,170
0
Dec-16F
925
298
163
185
1,572
1,757
232
0
2,386
4,375
0
Dec-17F
989
343
180
193
1,704
1,952
232
0
2,386
4,570
0
314
9
330
861
324
17
368
1,000
368
17
385
1,000
423
17
440
1,000
481
17
498
1,000
7
869
52
1,251
3,426
178
3,604
11
1,011
58
1,437
3,898
255
4,153
11
1,011
58
1,454
3,979
260
4,239
11
1,011
58
1,509
4,174
264
4,438
11
1,011
58
1,567
4,439
268
4,707
Dec-13A
12.2%
1.6%
31.0%
0.083
4.53
72.18
26.8%
110%
52.04
46.13
121.1
11.1%
8.7%
6.24%
Dec-14A
18.7%
30.2%
34.0%
0.064
5.04
42.34
26.2%
20%
37.88
34.87
70.3
14.0%
10.5%
6.95%
Dec-15F
1.3%
(41.4%)
19.7%
(0.058)
5.14
20.19
25.0%
57%
25.68
40.47
34.2
6.1%
5.1%
3.66%
Dec-16F
16.0%
50.7%
25.6%
(0.096)
5.40
31.75
25.0%
39%
25.69
43.86
37.2
9.7%
7.8%
5.32%
Dec-17F
13.2%
20.1%
27.1%
(0.014)
5.74
37.11
24.5%
32%
25.80
46.16
37.5
11.2%
9.1%
6.23%
Dec-13A
116,941
74,504
21.7
9.5%
857
Dec-14A
119,900
87,406
20.1
8.6%
840
Dec-15F
129,900
97,406
18.1
6.7%
670
Dec-16F
139,900
107,406
19.2
15.5%
750
Dec-17F
149,900
117,406
19.0
11.3%
800
Key Ratios
Revenue Growth
BVPS (RM)
Effective Tax Rate
Inventory Days
ROIC (%)
ROCE (%)
Key Drivers
Planted Estates (ha)
Mature Estates (ha)
FFB Yield (tonnes/ha)
FFB Output Growth (%)
CPO Price (US$/tonne)
93
IT ServicesMalaysiaEquity researchOctober 9, 2015
Company Note
GHL Systems Bhd

Riding on the e-payment wave
ADD (no change)

Current price:
RM1.09
Target price:
RM1.65
Previous target:
RM1.65
Up/downside:
51.1%
Reuters:
Proxy to e-payment adoption in ASEAN.
Benefits from central banks payment reform initiatives that boost POS-terminal
adoption and debit card transactions.
GHL is our sector top pick. Also our long term pick with 2018 and 2020 target prices
of RM2.40 and RM3.65, respectively.
GHLS.KL
Bloomberg:
GHLS MK
Market cap:
US$166.4m
Strong physical and online presence via TPA model. GHL could deliver 10k-12k
merchants in 2016 and 4k-5k online merchants by 2018.
RM705.0m
US$0.35m
RM1.41m
Current shares o/s
639.5m
Free float:
35.3%
Tops the technology long-term scoring matrix

GHL Systems scored the highest points in our long term technology stock picking matrix
due to more points in management and growth categories. We see GHL as an attractive
proxy to the transition towards e-payment solutions in ASEAN which is supported by
rising population income and better broadband infrastructure.
GHL is led by highly experienced management team
No change.
Price Close
GHL returned to the black in 2012 after suffering 4-years of successive losses following
the entry of a new shareholder and management team in 2010. The new management
team, led by CEO Raj Lorenz, who has more than 25 years of experience in the banking
and payment solution industry, began to turn GHL around by closing its unprofitable
operations in China and Indonesia and instituting other operational improvements.
1.30
150
1.10
130
0.90
110
0.70
90
0.50
30
70
Vol m
20
10
Oct-14
Jan-15
Apr-15
Jul-15
TPA the game changer

GHL carried out it first transaction payment acquisition (TPA) model after the acquisition
of e-pay in 2014. Under e-pay, GHL earns a fixed fee for every transaction that uses the
e-pay network. The company is in the midst of replicating its TPA model into a credit and
debit card TPA model that will allow it to earn merchant acquisition fees for signing on
merchants. We expect GHL to deliver 3-4k card TPA merchants by end-2015.
Source: Bloomberg
New growth driver in online merchant acquisition

Price performance
1M
3M
12M
Absolute (%)
9.0
2.8
29.8
Relative (%)
2.4
3.0
37.1
We are also excited about GHLs new driver, its online merchant acquirer business
through e-GHL, an online payment gateway for small and medium enterprises. As of
Aug 2015, GHL has an online base of about 590 merchants. It aims to grow it to 4k-5k
merchants in the next three years and become one of the largest online merchant
acquirers in the region.
Long term target prices

Assuming GHL acquires 1k merchants per month from Malaysia and the Philippines
each and earns a monthly throughput of about RM15k and RM10k for each market, plus
a MDR of about 200bp, our 3-year target price rise to RM2.40. Using similar
assumptions from 2018 to 2020, our 5-year target price rises to RM3.65. The 3-year and
5-year target prices would offer investors 140-265% upside.
Financial Summary
Analyst

T (60) 3 2261 9078
Revenue (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
Price To Sales (x)
DPS (RM)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
Dec-13A
67.2
5.26
0.012
12.2%
90.42
7.09
0%
42.45
NA
(24.5%)
8.48
10.8%
Dec-14A
165.4
6.81
0.018
49.7%
60.41
3.53
0%
22.18
NA
0.3%
3.09
6.9%
Dec-15F
200.4
15.04
0.024
31.7%
45.86
3.44
0%
20.14
137.5
(1.8%)
2.90
6.5%
0%
1.08
Dec-16F
246.4
26.27
0.041
74.6%
26.27
2.80
0%
14.17
67.8
(5.5%)
2.61
10.5%
0%
1.06
Dec-17F
320.5
44.54
0.070
69.6%
15.49
2.15
0%
9.04
38.3
(10.5%)
2.23
15.5%
0%
1.08

Powered by EFA
Figure 1: TPA drivers
Figure 2: Average days for submission-installation
Figure 3: TPA sales submissions and installations

merchants
379
400
350
323
295
300
242
250
200
194
181
200
158
136
150
100
27
50
0
May-15
Jun-15
Jul-15
Submissions
Aug-15
Sep-15
Installations
Figure 4: BNM POS terminal target
Figure 5: Debit card transaction volume & est market size for
GHL
('000)
RM mil
Transaction vol
900
1,200
1,800
800
1,583
1,600
800
700
1,400
560
600
500
1,135
800
1,200
1,000
430
400
300
1,000
690
600
759
800
330
280
400
600
454
200
400
266
200
100
147
182
2014
2015F
200
0
2015F
2016F
2017F
2018F
2019F
2020F
2016F
Debit card transaction (mil)
POS terminals
2017F
2018F
2019F
2020F
Est debit card mkt size (RM mil)
95
BY THE NUMBERS
Share price info

Share px perf. (%)
1M
3M
Relative
2.4
3.0
Absolute
9.0
2.8
12M
37.1
29.8
Major shareholders
% held
Simon Loh Wee Hian
36.2
Cycas
28.5
P/BV vs ROE
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
14.0%
11.6%
9.1%
6.7%
4.2%
1.8%
-0.7%
-3.1%
-5.6%
-8.0%
Growth
500
450
400
350
300
250
200
150
100
50
0
2,000%
1,750%
1,500%
1,250%
1,000%
750%
500%
250%
0%
-250%
-500%
ROE (rhs)
Profit & Loss

(RMm)
Total Net Revenues
Gross Profit
Operating EBITDA
Operating EBIT
Exceptional Items
Pre-tax Profit
Taxation
Profit After Tax
Minority Interests
Preferred Dividends
Net Profit
Dec-13A
68.2
41.3
10.9
(7.7)
3.2
0.1
0.0
0.0
3.3
0.0
3.3
1.9
Dec-14A
169.6
71.6
26.3
(11.1)
15.2
(0.9)
0.0
0.0
14.3
(2.9)
11.5
(4.8)
Dec-15F
204.6
78.3
34.1
(14.8)
19.3
(0.5)
0.0
0.0
18.8
0.0
18.8
(3.8)
Dec-16F
250.6
101.5
47.7
(13.3)
34.4
(0.2)
0.0
0.0
34.1
0.0
34.1
(7.8)
Dec-17F
324.7
137.2
72.8
(14.8)
58.0
(0.1)
0.0
0.0
57.8
0.0
57.8
(13.3)
5.2
0.1
6.7
0.1
15.0
0.0
26.3
0.0
44.5
0.0
5.3
5.3
5.3
6.8
9.7
9.7
15.0
15.0
15.0
26.3
26.3
26.3
44.5
44.5
44.5
Cash Flow
(RMm)
EBITDA
Tax Paid
Capex
Shares Repurchased
Dividends Paid
Preferred Dividends
Dec-13A
10.89
Dec-14A
26.34
Dec-15F
34.05
Dec-16F
47.69
Dec-17F
72.76
(16.08)
(37.47)
(14.79)
(19.43)
(31.33)
0.71
0.06
(0.47)
(4.89)
(1.90)
0.07
(2.02)
0.00
(3.85)
0.00
9.48
(3.20)
(0.93)
(2.67)
(17.93)
(1.25)
0.34
(1.40)
19.12
16.81
(5.54)
37.78
0.00
(0.48)
(3.76)
15.02
(10.00)
0.00
0.00
0.00
(10.00)
0.00
0.00
0.00
(0.24)
(7.85)
20.17
(10.00)
0.00
0.00
0.00
(10.00)
0.00
0.00
0.00
(0.12)
(13.30)
28.01
(10.00)
0.00
0.00
0.00
(10.00)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
(2.17)
7.31
(1.43)
(8.74)
(8.59)
(6.55)
25.69
24.57
(6.66)
0.45
0.00
0.00
5.02
5.02
6.50
0.00
0.00
10.17
10.17
11.86
0.00
0.00
18.01
18.01
20.00
96
BY THE NUMBERS
Balance Sheet
(RMm)
Total Debtors
Inventories
Fixed Assets
Total Investments
Intangible Assets
Short-term Debt
Total Creditors
Total Provisions
Total Liabilities
Minority Interests
Total Equity
Dec-13A
14.1
14.2
6.6
0.6
35.5
32.8
0.0
4.2
2.4
39.5
0.0
Dec-14A
38.1
52.2
51.1
7.8
149.3
49.2
0.0
109.5
9.4
168.1
27.4
Dec-15F
43.1
59.6
62.0
7.8
172.6
44.5
0.0
109.5
9.4
163.3
27.4
Dec-16F
53.3
69.4
76.2
7.8
206.8
41.1
0.0
109.5
9.4
160.0
27.4
Dec-17F
71.3
85.3
99.1
7.8
263.5
36.3
0.0
109.5
9.4
155.2
27.4
12.1
2.9
15.0
0.4
51.9
2.2
81.5
11.5
55.4
2.2
85.0
11.5
60.0
2.2
89.6
11.5
67.4
2.2
97.0
11.5
3.5
3.8
0.0
18.9
56.2
(0.1)
56.1
1.2
12.6
0.0
94.1
223.1
0.1
223.2
1.2
12.6
0.0
97.6
238.1
0.1
238.3
1.2
12.6
0.0
102.2
264.4
0.1
264.5
1.2
12.6
0.0
109.6
308.9
0.1
309.1
Dec-13A
26%
20%
16.2%
0.031
0.13
20.69
0.0%
NA
78.13
101.4
210.5
7.2%
6.7%
7.0%
Dec-14A
146%
142%
15.9%
(0.001)
0.35
9.68
41.8%
NA
54.53
107.6
53.4
24.9%
10.0%
5.2%
Dec-15F
21%
29%
17.0%
0.007
0.38
12.97
20.0%
NA
71.02
163.5
52.8
6.4%
7.5%
4.7%
Dec-16F
23%
40%
19.4%
0.023
0.42
20.34
23.0%
NA
70.75
169.6
54.8
11.0%
12.3%
7.5%
Dec-17F
30%
53%
22.7%
0.051
0.49
29.15
23.0%
NA
68.82
170.6
55.1
17.3%
18.4%
11.4%
Dec-13A
N/A
N/A
3
N/A
N/A
N/A
5
N/A
Dec-14A
N/A
N/A
3
N/A
N/A
N/A
5
N/A
Dec-15F
N/A
N/A
3
N/A
N/A
N/A
5
N/A
Dec-16F
N/A
N/A
3
N/A
N/A
N/A
5
N/A
Dec-17F
N/A
N/A
3
N/A
N/A
N/A
5
N/A
Key Ratios
Revenue Growth
BVPS (RM)
Effective Tax Rate
Inventory Days
ROIC (%)
ROCE (%)
Key Drivers
ASP Change (%, Main Product)
Unit sales growth (%, main prod)
No. Of Lines (main Product)
Rev per line (US$, main prod)
ASP chg (%, 2ndary prod)
Unit sales grth (%, 2ndary prod)
No. Of Lines (secondary Product)
Rev per line (US$, 2ndary prod)
97
Rubber GlovesMalaysiaEquity researchOctober 9, 2015
Company Note
Hartalega Holdings
Still the market leader
HOLD (no change)

Current price:
RM4.73
Target price:
RM4.62
Previous target:
RM4.62
Up/downside:
-2.4%
Reuters:
Hartalega is the worlds largest nitrile glove manufacturer.
It plans to raise its installed capacity from 15bn to 42bn p.a. over the next five years
following its expansion drive at NGC.
Hartalega is our long-term pick with 2018 and 2020 target price of RM7.30 and
RM8.30, respectively.
HTHB.KL
Bloomberg:
HART MK
Market cap:
US$1,832m
Success due to visionary leaders and strength in R&D that enables it to improve
production efficiency and stay ahead of peers.
RM7,761m
US$1.67m
RM6.85m
Current shares o/s
1,640m
Free float:
30.2%

No changes.
Vol m
Price Close

159.0
4.60
141.5
4.10
124.0
3.60
106.5
3.10
10
8
6
4
2
89.0
Jan-15
Hartalega was established in 1981 by Mr Kuan Kam Hon and his brother Mr Kuan Kam
Peng as a new venture into the rubber gloves business. Despite the lack of industry
experience, the two entrepreneurs saw the opportunity to sell rubber gloves during the
early years of the AIDS epidemic. The founders successfully built Hartalega into a major
player, partly due to their drive towards efficiency through innovation and R&D.
First to introduce nitrile gloves
5.10
Oct-14
Led by visionary entrepreneurs
Apr-15
Jul-15
Hartalega was the first glove manufacturer to invest heavily into nitrile gloves back in
2002. It invested in the R&D of thin nitrile gloves for potential entry into the healthcare
sector. Following extensive R&D, it introduced the world first 4.7 gram nitrile glove that
emulates the elasticity and softness of natural rubber without the protein allergy risk to
users. We see this as a testament to it strong execution capability and vision for growth.
In the midst of expansion

In order to meet the rising global demand for nitrile gloves, Hartalega is building six
manufacturing plants at its Next Generation Integrated Glove Manufacturing Complex
(NGC) which will house a total capacity of 28.5bn pieces p.a. within the next five years.
Overall, we expect group earnings to grow at a 3-year CAGR of 24%
Source: Bloomberg
Most efficient rubber gloves manufacturer

1M
3M
12M
Absolute (%)
12.4
5.5
37.3
Relative (%)
5.8
5.7
44.6
Price performance
Hartalega has stayed ahead of competition by developing proprietary machinery and

systems such as the double former dipping lines, robotic glove stripping system, and the
glove puller and stacker system. Hartalegas average production line speed is estimated
to be 60% faster than industry average. Overall, its focus on automation helps to reduce
its dependency on labour and improves its production efficiency.

Using its historical mean P/E of 21x, and assuming 1) annual capacity increment of
~22.5% over the next five years, 2) gradual margin decline of 1-2% p.a. following ASP
erosion, and 3) 80% utilisation rate our three-year forward target price rises to
RM7.30. Using similar assumptions plus an additional 8% annual capacity expansion
beyond FY3/20, our five-year forward target price is RM8.30.
Financial Summary
Analyst

T (60) 3 2261 9078
Revenue (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
Mar-14A
1,107
351.2
232.8
0.14
(0.7%)
33.51
0.07
1.40%
21.62
210.8
(17.6%)
8.23
27.1%
Mar-15A
1,146
319.7
209.7
0.13
(10.0%)
37.24
0.06
1.34%
24.07
NA
(5.0%)
6.11
18.8%
Mar-16F
1,458
459.9
282.1
0.17
35.4%
27.50
0.09
1.82%
17.01
67.0
4.4%
5.48
21.0%
0%
1.01
Mar-17F
1,873
565.6
344.9
0.21
22.3%
22.49
0.11
2.22%
13.96
38.4
8.4%
4.88
23.0%
0%
1.01
Mar-18F
2,217
641.6
394.6
0.24
14.4%
19.66
0.11
2.29%
12.15
44.8
2.1%
4.30
23.3%
0%
1.02

Powered by EFA
Figure 1: Hartalegas production capacity

40,000
34,258
35,000
35,307
29,739
30,000
24,993
25,000
18,426
20,000
15,000
11,787
12,522
FY14
FY15
10,000
5,000
FY16
FY17
FY18
FY19
FY20
Figure 2: Average production line speed
Figure 3: Fastest production line speed
(pcs/hr/line)
(pcs/hr/line)
30,000
46,000
28,000
45,000
45,000
25,000
44,000
20,000
43,000
18,000
42,000
15,000
41,000
40,000
10,000
40,000
39,000
5,000
38,000
-
37,000
Industry average
Hartalega average
Industry average
mean production line spped
Hartalega average
Fastetst production line speed
Figure 4: NGC plant 1 & 2
99
BY THE NUMBERS
Share price info

Share px perf. (%)
1M
3M
12M
Relative
5.8
5.7
44.6
Absolute
12.4
5.5
37.3
Major shareholders
Kuan family
% held
55.1
EPF
7.9
BNP Paribas
6.8
P/BV vs ROE
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%

Growth
30.0
40.0%
25.0
30.0%
20.0
20.0%
15.0
10.0%
10.0
0.0%
5.0
-10.0%
0.0
-20.0%
ROE (rhs)
Profit & Loss

(RMm)
Total Net Revenues
Gross Profit
Operating EBITDA
Operating EBIT
Exceptional Items
Pre-tax Profit
Taxation
Profit After Tax
Minority Interests
Preferred Dividends
Net Profit
Mar-14A
1,107
411
351
(45)
306
1
0
0
307
2
309
(76)
0
233
(0)
0
0
233
232
232
Mar-15A
1,146
1,146
320
(46)
274
1
0
0
275
2
277
(67)
0
210
(1)
0
0
210
208
208
Mar-16F
1,458
539
460
(80)
380
(6)
0
0
374
0
374
(92)
0
283
(1)
0
0
282
282
282
Mar-17F
1,873
667
566
(99)
467
(9)
0
0
458
0
458
(112)
0
345
(1)
0
0
345
345
345
Mar-18F
2,217
761
642
(113)
529
(6)
0
0
523
0
523
(128)
0
395
(1)
0
0
395
395
395
Cash Flow
(RMm)
EBITDA
Tax Paid
Capex
Shares Repurchased
Dividends Paid
Preferred Dividends
Mar-14A
351.2
Mar-15A
319.7
Mar-16F
459.9
Mar-17F
565.6
Mar-18F
641.6
(36.6)
(65.3)
56.8
(42.4)
(34.8)
(0.6)
4.9
(70.5)
248.4
(105.9)
0.0
(89.1)
(9.2)
(204.2)
(7.5)
15.6
0.0
(107.6)
19.5
1.3
(69.6)
205.7
(38.6)
0.0
(384.1)
4.9
(417.8)
1.6
31.0
0.0
(105.0)
0.0
(5.9)
(91.7)
419.2
(400.0)
0.0
0.0
0.0
(400.0)
96.6
0.0
0.0
(141.1)
0.0
(9.0)
(112.2)
402.0
(300.0)
0.0
0.0
0.0
(300.0)
100.0
0.0
0.0
(172.5)
0.0
(5.6)
(128.2)
473.0
(200.0)
0.0
0.0
0.0
(200.0)
(100.0)
0.0
0.0
(177.6)
33.9
(65.5)
(21.3)
36.8
44.3
189.0
116.6
(95.5)
(210.5)
(212.1)
0.0
(44.5)
(25.3)
115.8
25.4
0.0
(72.5)
29.5
202.0
111.2
0.0
(277.6)
(4.5)
173.0
279.2
BY THE NUMBERS
Balance Sheet
(RMm)
Total Debtors
Inventories
Fixed Assets
Total Investments
Intangible Assets
Short-term Debt
Total Creditors
Total Provisions
Total Liabilities
Minority Interests
Total Equity
Mar-14A
171
149
98
2
420
634
0
0
57
692
3
Mar-15A
70
199
120
0
389
822
0
0
247
1,069
6
Mar-16F
40
190
120
0
349
1,151
0
0
249
1,400
3
Mar-17F
69
243
157
0
470
1,352
0
0
249
1,601
3
Mar-18F
65
288
189
0
542
1,439
0
0
249
1,688
3
94
12
110
2
109
12
128
0
156
12
172
100
205
12
220
200
248
12
263
100
0
2
57
168
942
1
944
0
0
59
187
1,269
2
1,271
0
100
59
331
1,416
2
1,418
0
200
59
480
1,588
3
1,591
0
100
59
422
1,805
3
1,808
Mar-14A
7.3%
4.6%
31.7%
0.10
0.57
987
24.5%
47.0%
45.89
48.50
50.65
35.7%
33.6%
22.5%
Mar-15A
3.5%
(9.0%)
27.9%
0.04
0.77
2,536
24.1%
50.0%
55.43
N/A
N/A
24.6%
23.5%
16.1%
Mar-16F
27.2%
43.8%
31.5%
(0.04)
0.86
62
24.5%
50.0%
48.73
47.69
52.84
22.5%
26.1%
17.9%
Mar-17F
28.4%
23.0%
30.2%
(0.08)
0.97
51
24.5%
50.0%
42.20
41.81
54.68
22.7%
27.2%
18.4%
Mar-18F
18.4%
13.4%
28.9%
(0.02)
1.10
86
24.5%
45.0%
43.76
43.37
56.72
22.2%
27.7%
18.6%
Mar-14A
-12.1%
15.2%
86.3%
N/A
N/A
N/A
N/A
N/A
Mar-15A
-16.4%
9.6%
87.0%
N/A
N/A
N/A
N/A
N/A
Mar-16F
1.4%
22.5%
84.0%
N/A
N/A
N/A
N/A
N/A
Mar-17F
-0.8%
33.2%
83.0%
N/A
N/A
N/A
N/A
N/A
Mar-18F
-1.1%
19.7%
80.0%
N/A
N/A
N/A
N/A
N/A
Key Ratios
Revenue Growth
BVPS (RM)
Effective Tax Rate
Inventory Days
ROIC (%)
ROCE (%)
Key Drivers
Unit raw mat ASP (%chg,main)
Unit raw mat ASP (%chg,2ndary)
PharmaceuticalsMalaysiaEquity researchOctober 9, 2015
Company Note
Hovid Bhd
Our drug of choice
HOLD (no change)

Current price:
RM0.46
Target price:
RM0.45
Previous target:
RM0.42
Up/downside:
-2.2%
Reuters:
HOVI.KL
Bloomberg:
HOV MK
Market cap:
US$85.54m
Hovid has an ambitious management team and is the only Malaysia-listed pharma
company that holds patents
It is supported by a healthy balance sheet and has strong earnings growth potential,
driven by strong demand for drugs from its export destinations.
We maintain our Hold call, but raise our SOP-based TP to RM0.45 on roll forward.
Hovid is our long-term pick for the healthcare sector. Our prospective target prices
for 2018 and 2020 are RM1.00 and RM1.30, respectively.
RM362.3m
US$0.52m
RM2.08m
Current shares o/s
781.4m
Free float:
62.5%

No changes
Top long-term pick for the healthcare sector

Hovid is our top long-term pick for the healthcare sector, as it scores well in the
management, financials and growth categories of our stock-picking matrix. Hovid has an
ambitious management team, one of the most innovative R&D teams in Malaysia, a
healthy balance sheet and strong earnings growth potential, driven by strong demand
growth from the export markets. Hovid derives more than half of its sales from markets
outside of Malaysia.
Aggressive expansion in production capacity

Price Close
0.600
161.0
0.550
149.3
0.500
137.7
0.450
126.0
0.400
114.3
0.350
102.7
0.300
40
91.0
30
Vol m
20
10
Oct-14
Jan-15
Apr-15
Jul-15
Source: Bloomberg
Price performance
1M
3M
12M
Absolute (%)
3.4
0.0
27.8
Relative (%)
-3.2
0.2
35.1
Hovid has recently commenced the operation of its new tablet and capsule (T&C) plant
and is building another T&C plant that will boost its current T&C capacity by 30% and
70% by 2018 and 2020, respectively. The first plant could be fully utilized by 2018 while
the second could run at full capacity in 2020. These could raise Hovids earnings in 2018
and 2020 by 30% and 100% from 2015s level.
Tocovid Suprabio
Hovid could also be sitting on a gold mine if its clinical trials on Tocovid Suprabio are
successful. Tocovid Suprabio, for which Hovid holds the formulation patent, is a type of
vitamin E that may reduce brain damage caused by strokes. According to the US Center
for Disease Control and Prevention, approximately 49% of its population is exposed to at
least one of the three key risk factors that can lead to stroke. Hovid expects Tocovid to
be approved by the US FDA in three to five years.
Potential value of Tocovid Suprabio

If Tocovid is approved by 2020 and assuming that 1% of the high-risk group spends
US$2 per day (equivalent to 200mg of Tocovid at the current retail price) on Tocovid for
protection of their brain cells, this would translate into annual sales of US$1.1bn in the
US alone. Assuming a 30% profit margin, the potential earnings contribution per year
works out to US$337m, or RM1.5bn at current exchange rate.

Hovid will also have the exclusive rights that will last for at least three years if Tocovid is
approved. A 20% chance of success of the drug being approved and a discount rate of
10% value of Tocovid at RM610m by 2018 and RM740m by 2020. Also, if Hovids
current P/E of 17x for the remaining business remains unchanged over the next few
years, Hovids share price could increase to RM1.00 by 2018 and RM1.30 by 2020.
Financial Summary
Analyst
SAW Xiao Jun, CFA

T (60) 3 2261 9089
E xiaojun.saw@cimb.com
Revenue (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
Jun-14A
183.5
32.64
18.08
0.024
(7.0%)
25.80
0.010
2.17%
10.39
69.8
(10.0%)
2.18
11.6%
Jun-15A
188.4
34.12
21.21
0.027
13.8%
22.88
0.014
2.93%
10.27
89.4
(3.8%)
1.95
12.3%
Jun-16F
230.7
39.78
23.40
0.030
10.3%
20.94
0.010
2.17%
8.94
519.2
(2.7%)
1.86
12.5%
0%
0.95
Jun-17F
257.3
44.48
26.36
0.035
14.0%
18.54
0.010
2.17%
7.90
63.5
(2.7%)
1.69
13.3%
0%
0.91
Jun-18F
273.5
47.13
27.76
0.036
5.3%
17.67
0.010
2.17%
7.35
40.4
(4.7%)
1.54
12.8%
0%
0.96

Powered by EFA

FYE Jun 30
(RM m)
Revenue
Operating costs
EBITDA
EBITDA margin (%)
Depn & amort.
EBIT
Interest expense
Interest & invt inc
Associates' contrib
Exceptionals
Pretax profit
Tax
Tax rate (%)
Minority interests
Net profit
Core net profit
EPS (sen)
Core EPS (sen)
4Q
FY15
42.7
(34.9)
7.8
18.2
(1.5)
6.3
(0.2)
0.2
6.3
(1.4)
22.4
(0.1)
4.8
4.8
0.6
0.6
4Q yoy % qoq % 4QFY15 4QFY14 yoy %

FY14
48.0
(38.4)
9.7
20.1
(2.2)
7.5
(0.3)
0.0
7.2
(2.6)
36.7
0.1
4.6
4.6
0.6
0.6
chg
(11)
(9)
(20)
(10)
(31)
(16)
(50)
>100
0
0
(12)
(47)
(39)
nm
4
4
2
2
chg
(12)
(15)
1
15
(7)
3
nm
nm
0
nm
(16)
(1)
17
>100
(20)
3
(22)
1
Cum
188.4
(155.6)
32.8
17.4
(6.0)
26.8
(0.8)
0.2
1.4
27.5
(6.3)
22.9
0.0
21.2
19.8
2.8
2.6
Cum
183.5
(148.7)
34.8
19.0
(8.6)
26.2
(1.4)
0.0
24.8
(6.6)
26.4
(0.3)
18.0
18.0
2.4
2.4
chg
3
5
(6)
(8)
(30)
2
(39)
>100
0
nm
11
(4)
(13)
nm
18
10
17
10
Prev. Comments
FY15F
197.8
(161.7)
36.1
18.3
(6.5)
29.6
(1.4)
0.0
28.2
(7.1)
25.0
(0.2)
20.9
20.9
2.7
2.7
Weaker revenue in 4Q15 due to implementation of GST

In line with lower revenue
Made up 91% of our forecast
EBITDA margin in 4Q improved qoq
Lower product development cost write-off in FY15
Expect higher interest expense in FY16 as the group gears up for expansion
Refers to gain on disposal of a subsidiary

Accounted for 97% of full year forecast
Effective tax rate close to the the statutory rate
Include gain from disposal of a subsidiary

Made up 95% of our full year forecast
Figure 2: SOP valuations (end-CY16 target price)

Segment
Method
Pharmaceutical business
16.6x CY16 P/E

Assuming all outstanding warrants (359m)
are exercised at RM0.18 per warrant
Proceeds from warrant conversion

Sum-of-parts
RM m
450
64
513
No. of shares after warrant conversions (m)

Target price
1,143
0.45
103
BY THE NUMBERS
Share price info

Share px perf. (%)
Relative
Absolute
1M
-3.2
3.4
3M
0.2
0.0
Major shareholders
Ho Sue San @ David Ho Sue San
12M
P/BV vs ROE

Growth
2.50
16.00%
25.0
4,500%
2.00
12.80%
20.0
3,600%
% held
1.50
9.60%
15.0
2,700%
37.5
1.00
6.40%
10.0
1,800%
0.50
3.20%
5.0
900%
0.00
0.00%
0.0
0%
35.1
27.8
ROE (rhs)
Profit & Loss

(RMm)
Total Net Revenues
Gross Profit
Operating EBITDA
Operating EBIT
Exceptional Items
Pre-tax Profit
Taxation
Profit After Tax
Minority Interests
Preferred Dividends
Net Profit
Jun-14A
183.5
51.3
32.6
(6.0)
26.6
(1.4)
0.0
0.0
25.2
(0.4)
24.8
(6.5)
Jun-15A
196.8
34.1
34.1
(6.0)
28.1
(0.7)
0.0
0.0
27.5
0.0
27.5
(6.3)
Jun-16F
230.7
60.1
39.8
(7.3)
32.4
(1.4)
0.0
0.0
31.1
0.0
31.1
(7.5)
Jun-17F
257.3
67.2
44.5
(8.1)
36.3
(1.4)
0.0
0.0
35.0
0.0
35.0
(8.4)
Jun-18F
273.5
71.3
47.1
(8.9)
38.2
(1.4)
0.0
0.0
36.8
0.0
36.8
(8.8)
18.3
(0.2)
21.2
0.0
23.6
(0.2)
26.6
(0.2)
28.0
(0.2)
18.1
18.4
20.4
21.2
21.2
23.3
23.4
23.4
25.5
26.4
26.4
28.4
27.8
27.8
29.8
Cash Flow
(RMm)
EBITDA
Tax Paid
Capex
Shares Repurchased
Dividends Paid
Preferred Dividends
Jun-14A
32.64
Jun-15A
34.12
Jun-16F
39.78
Jun-17F
44.48
Jun-18F
47.13
(9.17)
1.83
(9.93)
(6.41)
(3.87)
2.97
(2.42)
(4.76)
19.26
(6.28)
0.03
0.00
(2.31)
(8.57)
(3.15)
0.35
(3.92)
(0.66)
(8.54)
22.83
(29.66)
7.89
0.00
(2.26)
(24.03)
7.17
3.16
0.00
(1.37)
(7.46)
21.03
(20.00)
0.00
0.00
0.00
(20.00)
0.00
0.00
0.00
(1.37)
(8.39)
28.31
(20.00)
0.00
0.00
0.00
(20.00)
0.00
0.00
0.00
(1.37)
(8.84)
33.05
(20.00)
0.00
0.00
0.00
(20.00)
0.00
0.00
(11.25)
(7.64)
(7.84)
(7.84)
(7.84)
0.50
(13.55)
(2.87)
7.54
13.11
(1.04)
1.64
0.44
5.97
(0.38)
(5.10)
(12.94)
(11.92)
1.03
2.39
0.00
(7.84)
0.47
8.31
9.67
0.00
(7.84)
5.21
13.05
14.42
104
BY THE NUMBERS
Balance Sheet
(RMm)
Total Debtors
Inventories
Fixed Assets
Total Investments
Intangible Assets
Short-term Debt
Total Creditors
Total Provisions
Total Liabilities
Minority Interests
Total Equity
Jun-14A
22.7
40.5
26.5
0.0
89.6
98.4
2.4
18.0
19.2
138.1
3.9
Jun-15A
23.1
35.3
27.1
15.3
100.7
128.7
2.6
19.4
0.6
151.3
7.3
Jun-16F
11.2
50.9
33.3
0.0
95.4
125.7
2.4
16.8
19.2
164.2
3.9
Jun-17F
11.7
56.7
37.1
0.0
105.5
138.2
2.4
16.2
19.2
176.0
3.9
Jun-18F
16.9
60.3
39.5
0.0
116.7
149.8
2.4
15.6
19.2
187.1
3.9
24.8
4.8
33.4
2.1
11.2
22.4
41.0
8.7
28.1
4.8
36.8
2.1
31.4
4.8
40.1
2.1
33.4
4.8
42.1
2.1
10.8
12.9
15.2
61.6
161.2
5.0
166.2
0.5
9.3
15.5
65.8
183.9
2.3
186.3
10.8
12.9
15.2
64.9
189.3
5.4
194.7
10.8
12.9
15.2
68.2
207.8
5.6
213.4
10.8
12.9
15.2
70.2
227.7
5.9
233.6
Key Ratios
Revenue Growth
BVPS (RM)
Effective Tax Rate
Inventory Days
ROIC (%)
ROCE (%)
Jun-14A
6.4%
(1.9%)
17.8%
0.022
0.21
19.45
26.2%
41.3%
77.71
72.90
71.98
12.1%
14.2%
8.8%
Jun-15A
2.7%
4.5%
18.1%
0.009
0.24
34.07
22.9%
36.8%
73.39
60.09
40.40
12.2%
14.0%
9.0%
Jun-16F
22.5%
16.6%
17.2%
0.007
0.25
23.71
24.0%
32.6%
68.34
64.75
42.21
12.8%
15.0%
9.6%
Jun-17F
11.5%
11.8%
17.3%
0.007
0.27
26.56
24.0%
29.0%
76.35
67.63
57.10
13.0%
16.1%
10.2%
Jun-18F
6.3%
6.0%
17.2%
0.014
0.30
27.91
24.0%
27.5%
78.11
69.16
58.50
12.5%
15.6%
9.9%
Jun-14A
0.0%
N/A
N/A
N/A
N/A
N/A
0.0%
Jun-15A
5.1%
N/A
N/A
N/A
N/A
N/A
0.0%
Jun-16F
8.6%
N/A
N/A
N/A
N/A
N/A
0.0%
Jun-17F
1.4%
N/A
N/A
N/A
N/A
N/A
0.0%
Jun-18F
1.3%
N/A
N/A
N/A
N/A
N/A
0.0%
Key Drivers
R&D Cost/sales (%)
105
AirportsMalaysiaEquity researchOctober 9, 2015
Company Note
Malaysia Airports Holdings

Holding out for a better future
HOLD (no change)

Current price:
RM5.40
Target price:
RM5.43
Previous target:
RM5.43
Up/downside:
0.6%
Reuters:
MAHB.KL
Bloomberg:
MAHB MK
Market cap:
US$2,115m
We maintain our Hold call on MAHB given weak near-term earnings performance,
and an unchanged DCF-based target price.
However, with the share price already reflecting current challenges, there is
potential for medium-term upside if PSC tariffs at KLIA2 are increased.
The biggest uncertainty for the stock is whether the terms of the concession
extension from 2034-2069 will be the same as that of the present concession.
Yet, we believe that MAHB and the government will negotiate a win-win solution.
RM8,960m
US$1.96m
RM8.12m
Current shares o/s
1,639m
Free float:
38.5%
Passenger traffic at MAHBs Malaysian airports grew just 1.9% yoy during 8M15, against
4.7% growth in 2014 and 18.4% growth in 2013. The strong 2013 traffic growth was
driven by the entry of Malindo from March 2013 which triggered a strong capacity
response from incumbents MAS and AirAsia. Demand responded enthusiastically to the
decline in domestic airfares.
7.90
118.0
6.90
106.8
5.90
95.5
4.90
84.3
3.90
15
73.0
Downhill from 2014 onwards

A much slower pace of passenger traffic growth last year was caused by the MH370 and
MH17 incidents which discouraged tourist inflows into Malaysia, coupled with airlines
reigning in capacity growth to limit fare deterioration. This continued into 2015, and MAS
began cutting its capacity earnestly from August onwards. Looking into 2016, the weaker
ringgit will likely discourage Malaysian outbound tourists, leading to weak passenger
traffic growth forecasts of less than 5%.
Vol m
10
5
Oct-14
Jan-15
Apr-15
Jul-15
Source: Bloomberg
1M
3M
12M
Absolute (%)
21.1
-10.3
-20.3
Relative (%)
14.5
-10.1
-13.0
Price performance
MAHBs stock has declined close to 40% since peaking in late-2013 due to a variety of
factors, including capacity cuts and network rationalisation of major airlines in Malaysia,
the step-up in costs after the commissioning of KLIA2 from May 2014, and dilution from
two equity issues in 2014 and 2015.
Traffic growth grinds to a snails pace
No change.
Price Close
Near-term ailments
Jump in operating costs

The opening of KLIA2 from May 2014 caused operating and interest costs to surge from
a quarterly average of RM540m in 2013 to almost RM700m in the past four quarters.
This could not be recouped given the weaker traffic growth, even with government
compensation from Feb 2014 onwards equivalent to about 10% of the current PSC. Our
FY15 core earnings forecasts are 70% lower than the peak in FY12, while our FY15
core EPS forecasts are 77% lower given the two equity issues in 2014 and 2015.
There is hope in the medium term

We expect MAHBs earnings to bottom out in 2015, and recover gradually thereafter with
slow passenger volume expansion. MAHBs share price has probably also hit bottom, as
it is currently being valued at a P/BV of only 1x. The ultimate prize is the eventual raising
of the KLIA2s PSC to close the current gap with the PSCs at the Main Terminal Building
(MTB). This can enhance earnings substantially and lift our target price to above RM7.
Financial Summary
Analyst
Raymond YAP, CFA

T (60) 3 2261 9072
E raymond.yap@cimb.com
Revenue (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
Dec-13A
4,099
692
389.2
0.25
(13.9%)
21.50
0.11
2.06%
15.15
NA
73.7%
1.50
7.17%
Dec-14A
3,344
695
748.6
0.13
(46.4%)
38.35
0.05
1.02%
17.44
10.23
57.7%
1.06
3.20%
Dec-15F
3,885
1,329
(32.4)
0.09
(31.3%)
55.29
0.04
0.82%
9.61
NA
44.7%
1.03
1.89%
0%
(0.37)
Dec-16F
4,238
1,468
(6.6)
0.14
51.5%
38.85
0.04
0.72%
8.43
25.66
40.4%
1.04
2.68%
0%
(0.03)
Dec-17F
4,422
1,622
100.8
0.20
47.2%
26.39
0.05
0.85%
7.32
24.09
34.4%
1.04
3.95%
0%
0.32

Powered by EFA
Figure 1: MAHB's group core net profit (RM m)

160.0
140.0
140.0
120.0
120.0
100.0
100.0
80.0
80.0
60.0
40.0
60.0
20.0
40.0
20.0 1QFY08
(20.0)
1QFY09
1QFY10
1QFY11
1QFY12
1QFY13
1QFY14
1QFY15
(40.0)
1QFY08
2QFY08
3QFY08
4QFY08
1QFY09
2QFY09
3QFY09
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
Figure 2: MAHB's total pax traffic (m) - in Malaysia

30%
9
yoy growth % - LHS
Total pax (m)

y o y g ro wth % - L HS
To ta l p a x (m )
25%
20%
6
15%
5
10%
4
5%
3
0%
-5%
-10%
0
JJFMAMJ
F M AMJ JASJONDJ
AS OFMAMJ
N D J FJM
AS
AM
ONDJ
J JFMAMJ
AS O NJD
ASJONDJ
F M AM
FMAMJ
J J AS
J ASONDJ
O N D JFMAMJ
F M AMJ JASONDJ
J A SOFMAMJ
N D J FJM
ASONDJ
AM J JFMAMJ
A SO NJD
A
09
09
10
10
11
11 12
13
12
14
13
15
107
BY THE NUMBERS
Share price info

Share px perf. (%)
1M
3M
12M
P/BV vs ROE
2.50
12.0%
2.00
9.6%
1.50
7.2%
36.6
1.00
4.8%
13.1
0.50
2.4%
Permodalan Nasional Berhad
11.8
0.00
0.0%
Relative
Absolute
14.5
21.1
Major shareholders
Khazanah Nasional
-10.1
-10.3
-13.0
-20.3
% held


Growth
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
60%
45%
30%
15%
0%
-15%
-30%
-45%
-60%
ROE (rhs)
Profit & Loss

A low level of profits is expected for
the second year running in FY15 as
the impact of capacity cuts by MAS is
felt, on top of the higher cost base
after the commissioning of KLIA2 on 2
May 2014. The P&L consolidates a
100% stake in Istanbul Sabiha
Gokcen from 1 January 2015
onwards.
(RMm)
Total Net Revenues
Gross Profit
Operating EBITDA
Operating EBIT
Exceptional Items
Pre-tax Profit
Taxation
Profit After Tax
Minority Interests
Preferred Dividends
Net Profit
Dec-13A
4,099
692
692
(278)
414
(12)
(39)
119
483
68
551
(162)
Dec-14A
3,344
695
695
(405)
290
(135)
(53)
151
253
581
834
(86)
Dec-15F
3,885
1,329
1,329
(678)
652
(593)
8
187
254
(158)
96
(128)
Dec-16F
4,238
1,468
1,468
(732)
736
(588)
8
187
343
(180)
163
(169)
Dec-17F
4,422
1,622
1,622
(789)
833
(577)
8
187
451
(180)
271
(170)
389
0
0
749
0
0
(32)
0
0
(7)
0
0
101
0
0
389
324
324
749
194
194
(32)
152
152
(7)
230
230
101
338
338
Dec-14A
695
Dec-15F
1,329
Dec-16F
1,468
Dec-17F
1,622
(720)
(220)
166
(7)
56
(24)
(162)
753
(1,918)
6
0
(26)
(1,939)
700
0
0
(53)
682
(161)
(86)
410
(685)
(49)
0
4
(731)
1,048
980
0
(12)
29
(593)
(128)
417
(362)
(1,144)
293
0
(1,213)
(179)
1,316
0
(87)
7
(588)
(169)
883
(412)
0
0
0
(412)
(124)
0
0
(73)
7
(577)
(170)
876
(312)
0
0
0
(312)
(193)
0
0
(64)
647
(538)
(485)
(1,157)
2,016
1,695
727
(169)
1,050
254
(975)
(179)
(197)
274
348
1,084
(258)
306
370
1,167
Cash Flow
Operating cash flow growth will be
driven mainly by Istanbul Sabiha
Gokcen.
(RMm)
EBITDA
Tax Paid
Capex
Shares Repurchased
Dividends Paid
Preferred Dividends
Dec-13A
692
191
BY THE NUMBERS
Balance Sheet
We forecast group net debt-to-equity

ratio to be at a healthy level of 45% by
end-FY15.
(RMm)
Total Debtors
Inventories
Fixed Assets
Total Investments
Intangible Assets
Short-term Debt
Total Creditors
Total Provisions
Total Liabilities
Minority Interests
Total Equity
Dec-13A
345
558
122
0
1,026
324
0
8,262
902
9,487
200
Dec-14A
2,041
717
154
0
2,912
363
0
17,330
1,347
19,039
706
Dec-15F
2,295
833
154
0
3,283
363
0
17,014
2,206
19,583
706
Dec-16F
2,569
909
154
0
3,633
363
0
16,694
2,214
19,271
706
Dec-17F
2,875
948
154
0
3,978
363
0
16,217
2,222
18,802
706
917
48
1,165
3,600
2,976
32
3,714
5,619
2,872
32
3,610
5,441
3,114
32
3,851
5,317
3,147
32
3,884
5,123
1,058
4,658
0
5,823
4,689
0
4,689
5,196
10,816
0
14,529
7,422
0
7,422
5,196
10,637
0
14,247
8,619
0
8,619
5,196
10,513
0
14,365
8,539
0
8,539
5,196
10,320
0
14,204
8,576
0
8,576
Dec-13A
15.5%
(6.6%)
16.9%
(2.65)
3.60
14.61
29%
30.1%
53.35
11.83
92.1
4.30%
5.40%
5.08%
Dec-14A
(18.4%)
0.5%
20.8%
(2.95)
5.11
1.92
10%
34.4%
69.60
19.01
268.3
2.36%
2.75%
2.18%
Dec-15F
16.2%
91.1%
34.2%
(2.33)
5.22
1.05
134%
28.9%
72.83
22.02
417.6
2.89%
4.74%
3.12%
Dec-16F
9.1%
10.4%
34.6%
(2.09)
5.17
1.20
104%
18.8%
75.22
20.36
395.4
3.12%
5.18%
3.43%
Dec-17F
4.3%
10.5%
36.7%
(1.79)
5.19
1.38
63%
16.9%
76.66
20.09
408.1
3.63%
5.93%
3.87%
Dec-13A
16.8%
19.9%
14.1%
14.1%
65.0
9.0
N/A
Dec-14A
4.9%
4.5%
7.3%
7.3%
71.0
9.0
N/A
Dec-15F
2.3%
2.7%
2.0%
2.0%
71.0
10.0
N/A
Dec-16F
4.6%
4.2%
3.5%
3.5%
71.0
10.0
N/A
Dec-17F
5.3%
4.3%
3.8%
3.8%
71.0
10.0
N/A
Key Ratios
Book value per share of RM5.22
forecast for end-FY15 means that
MAHB is currently trading at a P/BV of
1.2x.
Revenue Growth
BVPS (RM)
Effective Tax Rate
Inventory Days
ROIC (%)
ROCE (%)
These are the key drivers for the

Malaysian business only.
(RM)
Int'l Passenger Traffic Growth (%)
Domestic Pax Traffic Growth (%)
International Flight Traffic Growth (%)
Domestic Flight Traffic Growth (%)
Int'l Pax Service Charge
Dom Pax Serv Charge
Unit Meals Produced (% Change)
Key Drivers
Technology - OthersMalaysiaEquity researchOctober 9, 2015
MY E.G. Services
Innovation is the key
ADD (no change)

Current price:
RM2.68
Target price:
RM3.92
Previous target:
RM3.92
Up/downside:
46.3%
Reuters:
MYEG.KL
Bloomberg:
MYEG MK
Market cap:
US$758.5m
RM3,212m
US$3.11m
RM12.67m
Current shares o/s
1,200m
Free float:
Main earnings growth drivers will be the foreign workers working permit renewal
services (FWPR) and the custom service tax monitoring (CSTM) projects.
MyEG is our one of our top picks among small caps and is our top long-term pick.
2018 and 2020 target prices are RM6.65 and RM9.65 respectively.
Led by managing director TS Wong

MyEG is led by its major shareholder and managing director, TS Wong. The company is
Malaysias main e-government services provider. Its strength lies in its innovative and
entrepreneurship ability to offer new e-government services to the public and add
commercial elements to services offered.
Turning point was the road tax renewal services in 2008

An example was in 2008 when MyEG started the government e-service online renewal
for car road tax. The e-government charge was only RM2.75 per transaction but the
company added another RM6-8 per transaction to include courier charges. MyEG also
offered online car insurance renewal services with nearly all the insurance companies.
The average commission was RM40 per insurance renewal.
No change.
Price Close
3.30
178
2.80
153
2.30
128
1.80
103
1.30
30
78
20
Vol m
One of the countrys main e-government services provider. Strength lies in its
innovation and entrepreneurship ability to add commercial elements to services.
52.3%
10
Oct-14
Jan-15
Apr-15
MyEG has applied the same principle in its FWPR services. These permits are renewed
annually and today, MYEG handles all renewals, nationwide. The company gets RM35
per FWPR transaction from the government. MyEG offers employers the option of
buying compulsory foreign workers insurance online and the company gets RM65-70
commission from selling this. Through selling online insurance, MyEG is able to raise
revenue per foreign worker from RM35 to c.RM100.
Jul-15
CSTM project launch in mid-2016
Source: Bloomberg
1M
3M
12M
Absolute (%)
2.3
4.7
54.9
Relative (%)
-4.3
4.9
62.2
Price performance
Innovation in the FWPR services
The company is working to launch the custom service tax monitoring (CSTM) project in
mid-2016. The CSTM involves MyEG placing its own dongle in F&B and retail outlets to
track sales receipts on a live basis.
Long-term price target

If CSTM takes off as scheduled, MyEGs 2018 net profit should be c.RM380m or
31.7sen EPS. Phase 1 involves linking F&B outlets nationwide, i.e. about 50,000 outlets
while Phase 2, which will take-off a year later, will target the retail sector, i.e. 500,000
outlets. Assuming a 21x P/E target in line with its peers, MyEGs target price in 2018
should be RM6.65. With the CSTM linking all F&B and retail outlets, MyEG can compete
with major banks in credit card and debit card services.
To expand commercial service revenue

If MYEG can corner 10% market share in a RM91bn credit card market in three years
and its core earnings rise a conservative 10% p.a. in FY19 and FY20, on top of potential
earnings from the card business, MyEGs 2020 net profit could be c.RM550m or 46sen
EPS. If we continue to assume the 21x P/E target in line with its peers, MyEGs target
price in 2020 could reach RM9.65.
Financial Summary
Analyst
Nigel FOO
T (60) 3 2261 9069
E nigel.foo@cimb.com
Jun-14A
110
62.9
50.1
0.04
43%
64.19
0.010
0.37%
51.07
157.3
(2.2%)
18.21
31.7%
Revenue (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
Jun-15A
142
84.0
68.0
0.06
36%
47.29
0.017
0.63%
37.71
45.4
(21.5%)
14.34
33.9%
Jun-16F
438
211.1
194.2
0.16
186%
16.56
0.040
1.49%
15.11
25.0
(7.4%)
8.93
66.5%
1.12
Jun-17F
541
270.0
252.4
0.21
30%
12.74
0.060
2.24%
11.48
19.2
(21.5%)
5.99
56.3%
1.00
Jun-18F
1,106
434.5
416.2
0.35
65%
7.73
0.090
3.36%
6.77
9.7
(33.3%)
3.88
61.0%
1.20
110

FYE Jun (RM m)
Revenue
Operating costs
EBITDA
EBITDA margin (%)
Depn & amort.
EBIT
Interest expense
Interest & invt inc
Pretax profit
Tax
Tax rate (%)
Net profit
EPS (sen)
4QFY15 4QFY14 yoy % chg qoq % chg

45.1
(18.4)
26.7
59.2
(4.0)
22.7
(0.2)
0.2
22.7
0.2
(0.9)
22.9
1.9
35.4
(14.7)
20.7
58.5
(3.5)
17.2
(0.3)
16.9
(0.3)
1.8
16.6
1.1
27.4
25.2
29.0
1.2
14.3
32.0
(33.3)
#DIV/0!
34.3
166.7
(149.6)
38.0
73.5
15.6
5.1
24.2
7.4
60.0
19.5
(33.3)
18.2
300.0
(269.2)
19.9
19.9
3QFY15 3QFY14
yoy % chg
cum
cum
141.5
109.9
28.8
(57.0)
(45.5)
25.3
84.5
64.4
31.2
59.7
58.6
1.9
(15.3)
(13.2)
15.9
69.2
51.2
35.2
(1.0)
(1.0)
0.0
0.0
0.5
(100.0)
68.2
50.7
34.5
0.2
(0.6)
nm
(0.3)
1.2
nm
68.4
50.1
36.5
5.7
4.2
36.5
Prev.
FY15F
155.0
(67.4)
87.6
56.5
(12.4)
75.2
(0.5)
0.0
74.7
(0.4)
0.5
74.3
6.2
Comments
Below, some delay in the full implementation of FWPR
In line with revenue growth
Below, FWPR only started in May
In line, greater economies of scale
In line, no major new capex
Below, CSTM has not started yet
RM125m net cash as at end-Mar or RM0.10 net cash/share
Limited investment income
Below, took FWPR some time to hit full operations
MSC status, tax free
MSC status
Below, FWPR to play a major role in 2016
Below, but full-year FWPR contribution from FY2016 onwards
Figure 2: MyEG quarterly revenue and net profit (RM m)

60
50
40
30
22.9
19.1
20
16.6
13.7
10
5.8
5.8
6.3
7.9
5.4
6.7
7.2
8.1
6.5
8.1
9.5
10.9
11.2
12
14.1
8.5
2.8
0
4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
Net profit
Revenue
Net profit margin (%)
111
BY THE NUMBERS
Share price info

Share px perf. (%)
1M
3M
12M
Relative
-4.3
4.9
62.2
Absolute
2.3
4.7
54.9
Major shareholders
Wong Thean Soon
Utilico Emerging Markets Limited
% held
40.8
7.0
P/BV vs ROE
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
70.0%
62.2%
54.4%
46.7%
38.9%
31.1%
23.3%
15.6%
7.8%
0.0%

Growth
30.0
200%
25.0
167%
20.0
133%
15.0
100%
10.0
67%
5.0
33%
0.0
0%
ROE (rhs)
Profit & Loss

(RMm)
Total Net Revenues
Gross Profit
Operating EBITDA
Operating EBIT
Exceptional Items
Pre-tax Profit
Taxation
Profit After Tax
Minority Interests
Preferred Dividends
Net Profit
Jun-14A
110
63
63
(12)
51
(1)
0
0
51
Jun-15A
142
84
84
(15)
69
(1)
0
0
68
Jun-16F
438
211
211
(16)
195
(1)
0
0
195
Jun-17F
541
270
270
(17)
253
(1)
0
0
253
Jun-18F
1,106
435
435
(18)
417
(1)
0
0
417
51
(1)
0
50
0
0
68
(0)
0
68
0
0
195
(0)
0
194
0
0
253
(0)
0
252
0
0
417
(0)
0
416
0
0
0
50
50
50
0
68
68
68
0
194
194
194
0
252
252
252
0
416
416
416
Cash Flow
(RMm)
EBITDA
Tax Paid
Capex
Shares Repurchased
Dividends Paid
Preferred Dividends
Jun-14A
62.9
Jun-15A
84.0
Jun-16F
211.1
Jun-17F
270.0
Jun-18F
434.5
(11.8)
(2.3)
(2.3)
(2.3)
(2.3)
0.0
(0.5)
(0.4)
50.2
(30.0)
0.0
0.0
0.2
(29.8)
0.0
0.0
0.0
(10.6)
0.0
(0.5)
(0.4)
80.8
(10.0)
0.0
0.0
0.1
(9.9)
0.0
0.0
0.0
(20.4)
0.0
(0.5)
0.0
208.3
(80.0)
0.0
0.0
0.1
(79.9)
0.0
0.0
0.0
(58.3)
0.0
(0.5)
0.0
267.2
(100.0)
0.0
0.0
0.1
(99.9)
0.0
0.0
0.0
(75.7)
0.0
(0.5)
0.0
431.7
(100.0)
0.0
0.0
0.1
(99.9)
0.0
0.0
0.0
(124.9)
0.0
(10.6)
9.8
20.4
20.9
0.0
(20.4)
50.5
70.9
71.4
0.0
(58.3)
70.1
128.4
128.9
0.0
(75.7)
91.6
167.3
167.8
0.0
(124.9)
206.9
331.8
332.3
112
BY THE NUMBERS
Balance Sheet
(RMm)
Total Debtors
Inventories
Fixed Assets
Total Investments
Intangible Assets
Short-term Debt
Total Creditors
Total Provisions
Total Liabilities
Minority Interests
Total Equity
Jun-14A
21.9
19.1
0.0
93.6
134.6
76.5
0.0
12.0
12.8
101.3
8.9
Jun-15A
60.2
18.4
0.0
93.6
172.2
74.1
0.0
12.0
12.8
98.9
4.4
Jun-16F
151.0
56.9
0.0
93.6
301.5
208.0
0.0
12.0
12.8
232.8
4.4
Jun-17F
269.6
70.4
0.0
93.6
433.6
291.2
0.0
12.0
12.8
316.0
4.4
Jun-18F
429.8
143.8
0.0
93.6
667.2
373.7
0.0
12.0
12.8
398.5
4.4
16.4
24.1
49.4
9.1
7.1
24.1
35.6
7.7
21.9
24.1
50.4
120.0
27.1
24.1
55.6
150.0
55.3
24.1
83.8
150.0
0.8
9.9
0.0
59.3
176.6
0.0
176.6
3.5
11.2
0.0
46.8
224.2
0.0
224.2
4.0
124.0
0.0
174.4
360.1
0.0
360.1
4.0
154.0
0.0
209.6
536.8
0.0
536.8
4.0
154.0
0.0
237.8
828.2
0.0
828.2
Jun-14A
44%
41%
57.2%
0.00
0.15
102.4
1.18%
20.9%
50.89
80.92
35%
28.6%
24.8%
Jun-15A
29%
34%
59.4%
0.04
0.19
137.4
0.29%
29.9%
48.36
74.51
40%
31.9%
27.1%
Jun-16F
210%
151%
48.2%
0.02
0.30
390.0
0.21%
29.9%
31.48
23.37
109%
54.1%
48.4%
Jun-17F
24%
28%
49.9%
0.10
0.45
506.4
0.16%
30.0%
42.92
32.93
75%
43.1%
39.5%
Jun-18F
104%
61%
39.3%
0.23
0.69
834.0
0.10%
30.0%
35.34
22.39
97%
49.8%
46.0%
Jun-14A
0.0%
25.0%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Jun-15A
0.0%
25.0%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Jun-16F
0.0%
25.0%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Jun-17F
0.0%
25.0%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Jun-18F
0.0%
25.0%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Key Ratios
Revenue Growth
BVPS (RM)
Effective Tax Rate
Inventory Days
ROIC (%)
ROCE (%)
Key Drivers
Unit raw mat ASP (%chg,2ndary)
Total Export Sales Growth (%)
Export Sales/total Sales (%)
113
Food & BeveragesMalaysiaEquity researchOctober 9, 2015
Company Note

Potential multi-bagger in the making
ADD (no change)

Current price:
RM2.27
Target price:
RM3.66
Previous target:
RM3.66
Up/downside:
61.4%
Reuters:
We like OWGs captive market business models Genting Highlands and Komtar.
Komtars revitalisation project is likely to be successful due to support from the

Penang state government, feeder traffic from Star Cruises and tourist visitations
OWG is one of our top small-cap picks with the highest absolute upside by
percentage at 280% in 2018 and 550% in 2020.
OWG.KL
Bloomberg:
OWG MK
Market cap:
US$99.15m
The superior long-term economic moat in Genting Highlands is built on minimal

competition, which translates to superior sales per outlet vs. peers
RM420.0m
US$0.19m
RM0.75m
Current shares o/s
185.0m
Free float:
30.9%

None
Captive market business model

OWG operates food service outlets, primarily in Genting Highlands, which is a captive
and monopolistic market. The companys greatest strength is the captive market in
Genting Highlands. We estimate that its Genting food service outlets (FSO) generate
average annual sales per outlet of RM2.8m, which is only 10% lower than KFC Malaysia
but more than 50% higher than Starbucks, at RM1.8m. This demonstrates the superior
long-term economic moat of an almost monopolistic market in Genting Highlands.
Higher margins in Genting Highlands

Price Close
3.10
367
2.60
307
2.10
247
1.60
187
1.10
127
0.60
40
67
30
Vol m
20
10
Dec-14
Mar-15
May-15
Jul-15
Source: Bloomberg
1M
3M
Absolute (%)
-1.7
-11.7
Relative (%)
-8.3
-11.5
Price performance
12M
Compared to other mall-based FSOs, we believe it is unlikely that Genting Malaysia will
raise its rents significantly for two reasons: 1) unlike a shopping mall, Genting Malaysias
business model is not reliant on rental income; it is first and foremost a casino 95% of
its revenues in Genting Highlands are derived from gaming; and 2) increasing visitation
is key to Genting Malaysias success, so the availability of F&B facilities is paramount.
Komtar: the next growth driver

In Dec-12, OWG won a tender to undertake the revitalisation project for the Komtar
Tower (the tallest building in Penang). The crown jewel, in our view, is the potential
tourist receipts from the observation deck, given that Penang is a major tourist
destination. The factors that could underpin Komtars success are 1) support of the
Penang government, 2) feeder traffic from Star Cruises, and 3) stronger tourist
visitations arising from the weaker ringgit.
2018 target price

OWG could be worth RM8.67/share in 2018, based on the following assumptions: 1)
incremental net profit of RM17m from additional space in Sky Plaza, thus replicating the
profits it currently generates in Genting Highlands; 2) 500k visitors per attraction per
year in Komtar at a blended rate of RM20/ticket and pretax margin of 20%; 3) higher
ticket rates for the Komtar observation deck; 4) additional F&B profits from Komtar; 5)
Digiphoto profits; and 6) Escape Rooms earnings from aggressive expansion.
2020 target price

Assuming that EPS growth moderates from 60% p.a. (from our current forecasts for
FY15-17) to 30% per annum in FY19-20, then net profit in FY20 rises to RM120m, which
gives us a 2020 target price of RM14.66 (>500% upside), driven by P/E expansion and
the currently low earnings base, as the twin growth drivers have yet to come onstream.
Financial Summary
Analyst
Marcus CHAN, CFA

T (60) 3 2261 9070
E marcusty.chan@cimb.com
Revenue (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
Jun-14A
83.1
25.47
14.55
0.08
(27.7%)
28.87
0.00%
16.50
NA
(1.3%)
5.05
35.0%
Jun-15A
86.9
25.17
14.23
0.08
(2.2%)
29.52
0.00%
15.81
NA
(16.1%)
2.92
12.5%
Jun-16F
110.4
40.26
23.60
0.13
65.9%
17.80
0.032
1.40%
11.20
NA
17.8%
2.60
15.4%
0%
1.36
Jun-17F
154.5
59.55
36.67
0.20
55.4%
11.45
0.050
2.18%
7.37
24.43
8.4%
2.22
20.9%
0%
1.28
Jun-18F
188.9
71.48
45.49
0.25
24.0%
9.23
0.061
2.71%
5.86
14.88
(2.5%)
1.88
22.1%
0%
0.98

Powered by EFA
Figure 1: OWG's potential TP in 2018-2020

RMm
FY17 net profit
36.67
Add:
GITP
17.00
Komtar
Themed attractions
6.08
Higher ticket rates
1.75
F&B
1.90
Digiphoto
3.04
Escape Room
4.80
Net profit
71.24
EPS
0.39
P/E
22.5
2018 target price
8.67
2020 net profit @ 30% EPS growth p.a
120
EPS
0.65
P/E
22.5
2020 target price
14.66

FYE Jun (RM m)
Revenue
Cost of sales
EBITDA
4QFY15 3QFY15 qoq % 4QFY15 Proforma Prev.

chg
Cum
FY14 FY15F Comments
20.4
22.7
(10.1)
86.9
83.1
(15.8)
(14.5)
9.0
(30.3)
(57.7)
(54.6)
78.9 Down qoq on negative impact of GST on consumer spending and fewer holidays in 2Q
(43.9)
4.6
8.2
25.2
25.4
24.3
EBITDA margin (%)
22.5
36.1
29.0
30.6
30.8
Depreciation
(0.3)
(2.5) (88.0)
(4.9)
(4.8)
(5.0) In line
20.3
20.6
19.3
EBIT
Net interest expense
Pretax profit
4.3
5.7
(24.6)
(0.3)
(0.3)
0.0
(1.3)
(0.5)
(0.4)
4.0
5.4
(25.9)
19.0
20.1
18.9
Tax
(1.1)
(1.3) (15.4)
(4.8)
(5.5)
(4.7)
Tax rate (%)
27.5
24.1
25.3
27.4
24.9
Minority interests
0.0
0.0
(0.1)
0.0
0.0
Net profit
2.9
4.1
(29.3)
14.2
14.6
14.2
Core net profit
2.9
4.1
(29.3)
14.2
14.6
14.2 In line at 100% of full-year forecast
EPS (sen)
1.6
2.2
(29.3)
7.7
7.9
7.7
Core EPS (sen)
1.6
2.2
(29.3)
7.7
7.9
7.7
115
BY THE NUMBERS
Share price info

Share px perf. (%)
Relative
Absolute
1M
-8.3
-1.7
3M
12M
-11.5
-11.7
Major shareholders
Dato Richard Koh and Datin Chew
Lean Hong
% held
69.1
P/BV vs ROE
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
600%
533%
467%
400%
333%
267%
200%
133%
67%
0%

Growth
25.0
80%
20.0
56%
15.0
32%
10.0
8%
5.0
-16%
0.0
Jan-12 Jan-13
-40%
Jan-14
Jan-15 Jan-16 Jan-17
ROE (rhs)
Profit & Loss

(RMm)
Total Net Revenues
Gross Profit
Operating EBITDA
Operating EBIT
Exceptional Items
Pre-tax Profit
Taxation
Profit After Tax
Minority Interests
Preferred Dividends
Net Profit
Jun-14A
83.1
33.5
25.5
(4.8)
20.6
(0.6)
0.0
0.0
20.1
Jun-15A
86.9
38.0
25.2
(4.9)
20.3
(1.3)
0.0
0.0
19.0
Jun-16F
110.4
53.1
40.3
(6.9)
33.4
(1.6)
0.0
0.0
31.8
Jun-17F
154.5
79.8
59.6
(9.0)
50.6
(1.2)
0.0
0.0
49.3
Jun-18F
188.9
95.5
71.5
(9.5)
62.0
(0.8)
0.0
0.0
61.2
20.1
(5.5)
19.0
(4.8)
31.8
(7.6)
49.3
(11.8)
61.2
(14.1)
14.5
14.2
24.2
(0.6)
37.5
(0.8)
47.1
(1.6)
14.5
14.5
14.5
14.2
14.2
14.2
23.6
23.6
23.6
36.7
36.7
36.7
45.5
45.5
45.5
Cash Flow
(RMm)
EBITDA
Tax Paid
Capex
Shares Repurchased
Dividends Paid
Preferred Dividends
Jun-14A
25.47
Jun-15A
25.17
Jun-16F
40.26
Jun-17F
59.55
Jun-18F
71.48
-6.75
-0.46
-2.29
-4.31
-3.34
-0.07
-0.58
-5.40
12.68
-19.20
0.51
-1.31
-4.78
18.62
-43.00
0.00
-1.58
-7.64
28.75
-70.00
0.00
-5.40
0.00
-75.40
25.00
0.00
-1.22
-11.84
42.19
-20.00
0.00
-0.84
-14.07
53.22
-20.00
0.00
0.00
-20.00
-5.00
0.00
0.00
-20.00
-5.00
0.00
-5.90
-9.17
-11.37
0.00
19.10
-27.54
-21.65
-44.31
0.00
-14.17
8.02
17.19
24.28
0.00
-16.37
16.85
28.22
35.06
0.53
-18.17
0.82
-0.02
0.80
-4.69
-4.67
-4.34
0.00
-43.00
-5.00
45.09
1.52
41.60
17.22
-29.38
-23.07
116
BY THE NUMBERS
Balance Sheet
(RMm)
Total Debtors
Inventories
Fixed Assets
Total Investments
Intangible Assets
Short-term Debt
Total Creditors
Total Provisions
Total Liabilities
Minority Interests
Total Equity
Jun-14A
27.9
14.4
1.3
1.2
44.8
77.3
0.0
0.0
0.2
77.5
1.7
Jun-15A
45.1
15.1
1.4
1.2
62.8
115.4
0.0
0.0
0.2
115.6
1.7
Jun-16F
17.6
19.2
1.8
1.2
39.7
184.0
0.0
0.0
0.2
184.2
1.7
Jun-17F
25.6
26.9
2.5
1.2
56.1
195.0
0.0
0.0
0.2
195.2
1.7
Jun-18F
42.5
32.8
3.0
1.2
79.5
205.5
0.0
0.0
0.2
205.7
1.7
7.7
0.4
9.8
25.1
8.0
0.4
10.1
20.1
10.2
0.4
12.3
45.1
14.2
0.4
16.3
40.1
17.4
0.4
19.5
35.1
0.5
25.6
2.5
37.9
83.1
1.3
84.5
0.5
20.6
2.5
33.2
143.9
1.3
145.3
0.5
45.6
2.5
60.4
161.6
1.9
163.6
0.5
40.6
2.5
59.4
189.1
2.8
191.9
0.5
35.6
2.5
57.6
223.3
4.4
227.6
Jun-14A
(6.5%)
(21.2%)
30.7%
0.01
0.45
17.87
27.5%
NA
0.40
4.85
7.72
N/A
37.3%
24.7%
Jun-15A
4.6%
(1.2%)
29.0%
0.13
0.78
15.53
25.1%
NA
0.88
10.06
15.82
23.5%
14.3%
10.3%
Jun-16F
27.0%
60.0%
36.5%
-0.16
0.87
14.28
24.0%
25.0%
0.90
10.00
15.54
26.7%
17.9%
12.8%
Jun-17F
40.0%
47.9%
38.5%
-0.09
1.02
24.20
24.0%
25.0%
0.86
10.26
15.95
25.8%
22.9%
16.3%
Jun-18F
22.2%
20.0%
37.8%
0.03
1.21
33.74
23.0%
25.0%
0.91
10.65
16.56
29.4%
25.1%
17.9%
Jun-14A
N/A
-6.5%
100.0%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Jun-15A
N/A
4.6%
100.0%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Jun-16F
N/A
27.0%
100.0%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Jun-17F
N/A
40.0%
100.0%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Jun-18F
N/A
22.2%
100.0%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Key Ratios
Revenue Growth
BVPS (RM)
Effective Tax Rate
Inventory Days
ROIC (%)
ROCE (%)
Key Drivers
117
Company Note
QL Resources
Uninterrupted growth
ADD (no change)

Current price:
RM4.12
Target price:
RM4.93
Previous target:
RM4.93
Up/downside:
19.8%
Reuters:
QL is one of the best-managed companies in the consumer sector, led by its group
managing director Dr. Chia Song Kun.
It has sustained consistent revenue and earnings growth for the last 27 years.
QL is our top pick for the consumer sector. It is also our long-term pick with 2018
and 2020 target prices of RM5.52 and RM7.58, respectively.
QRES.KL
Bloomberg:
QLG MK
Market cap:
US$1,214m
It is Asias largest surimi producer and is among ASEANs leading poultry egg
producers, with a group production of 4.5m eggs per day.
RM5,142m
US$1.13m
RM4.58m
Current shares o/s
1,248m
Free float:
39.0%

No changes.
Tops in long-term consumer stock picking matrix

QL tops the scoring in our long-term consumer sector stock picking matrix mainly due to
its high scores in the management and growth categories. Its management has
exhibited great ambition and executional capability to bring the group to where it is
today, underscored by consistent revenue and profit growth over the past 27 years since
its inception. Our target price is based on 23x CY16P/E, based on sector average.
Maintain Add, with strong earnings growth from new ventures as potential catalysts.
QL is led by DR. Chia Song Kun
Vol m
Price Close
4.00
126.1
3.50
110.1
3.00
5
4
3
2
1
94.0
Oct-14
Jan-15
Apr-15
Jul-15
Source: Bloomberg
Price performance
1M
3M
12M
Absolute (%)
3.0
5.4
20.8
Relative (%)
-3.6
5.6
28.1
QL is led by Dr. Chia Song Kun, the group managing director, who is the driving figure
that has propelled the company from local feedstuff trader to multinational agro-food
corporation. It is now among Asias largest egg producers and surimi manufacturers and
is building a presence in the sustainable palm oil sector with activities including milling,
plantations and biomass clean energy. Under Dr. Chias leadership, QL has grown to
become a multinational agro-food corporation.
Asias largest surimi producer

QL is Malaysias largest fishmeal manufacturer and producer of surimi products, and
Asias largest surimi producer. It is also one of Malaysias leading operators in animal
feed raw materials and poultry farming, and is among ASEANs leading poultry egg
producers with a group production rate of 4.5m eggs per day. About 40m day old chicks
(DOC) are produced across poultry farms in Malaysia and Indonesia. QL is one of the
biggest distributors of animal feed raw materials in Malaysia.
Expanding into biomass clean energy

From initially milling palm oil and estate ownership, QL has expanded its capabilities into
biomass clean energy. It has two independent crude palm oil (CPO) mills in Sabah, and
its first CPO mill in Eastern Kalimantan, Indonesia, was commissioned in FY13. It also
owns a 1,200 hectare palm oil estate in Sabah, as well as a 15,000 hectare plantation in
Eastern Kalimantan, Indonesia.

Based on our forecast, QLs revenue will hit RM3.8bn in FY3/19 and RM4.2bn in
FY3/20, generating 24.0 sen in EPS in CY19. Based on these figures, and attaching a
23x CY19 P/E, QLs target price would increase to RM5.52 in three years time. For its
five-year target price, if we assume a highly conservative revenue growth forecast of
8.0% for FY3/21 and FY3/22, the EPS for CY21 would be 32.9 sen. If we attach a P/E
multiple of 23x CY21 P/E, QLs target price in 2020 would be RM7.58.
Financial Summary
Analyst
Azman HUSSIN
T (60) 3 2261 9056
Revenue (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
Mar-14A
2,457
299.6
159.9
0.13
21.4%
32.15
0.035
0.85%
18.70
NA
29.8%
4.00
14.7%
Mar-15A
2,708
338.1
191.4
0.15
14.5%
28.09
0.043
1.03%
17.07
89.27
37.1%
3.60
13.5%
Mar-16F
3,024
407.3
219.1
0.18
19.7%
23.47
0.049
1.19%
14.15
31.16
32.2%
3.25
14.6%
0%
1.00
Mar-17F
3,300
463.0
255.4
0.20
16.6%
20.13
0.057
1.39%
12.37
23.66
26.3%
2.91
15.2%
0%
1.05
Mar-18F
3,561
517.7
295.6
0.24
15.8%
17.39
0.066
1.61%
10.88
21.10
18.6%
2.60
15.8%
0%
1.07

Powered by EFA

FYE Mar (RM m)
Revenue
1QFY16
1QFY15
yoy %
qoq %
chg
chg
655.3
653.6
0.3
(1.0)
(574.6)
(585.2)
(1.8)
(0.5)
EBITDA
80.7
68.3
18.1
(4.2)
EBITDA margin (%)
12.3
10.5
1.9
(0.4)
(23.6)
(18.9)
25.1
4.8
EBIT
57.1
49.5
15.4
(7.5)
Interest expense
(9.1)
(5.8)
56.0
(10.4)
Interest & invt inc
1.1
1.6
(32.7)
(27.8)
Associates' contrib
3.7
5.1
Operating costs
Depn & amort.
3,024 Stronger revenue driven by MPM and ILF

(2,374)
407 Lower operating costs
12
(88) PPE of RM1265m as at end-June 2015
304
(27) Total borrowings of RM742.2m as at end-June 2015
3 Total cash of RM206.3m as at end-June 2015
18 Contribution from Boilermech and Lay Hong
Exceptionals
Pretax profit
52.8
50.3
4.9
(10.8)
Tax
Prev.
FY16F Comments
287 18% of our full year estimate
(11.1)
(10.2)
8.9
(7.8)
(48)
Tax rate (%)
21.0
20.2
0.8
0.7
20
Minority interests
(0.8)
0.2
Net profit
40.9
40.4
1.4
(12.4)
219
Core net profit
219 Accounted for 19% of our full-year estimate
(542.0)
73.5
(6)
40.9
40.4
1.4
(12.4)
EPS (sen)
3.3
3.2
1.4
(12.4)
18 Based on shares outstanding of 1248m
Core EPS (sen)
3.3
3.2
1.4
(12.4)
18 Based on shares outstanding of 1248m

Figure 2: QL's revenue and net profit

3,000.0
200.0
180.0
2,500.0
160.0
140.0
2,000.0
120.0
1,500.0
100.0
80.0
1,000.0
60.0
40.0
500.0
20.0
0.0
0.0
2003
2004
2005
2006
2007
2008
Revenue (RM m) LHS
2009
2010
2011
2012
2013
2014
2015
Net profit (RM m) RHS
119
BY THE NUMBERS
Share price info

Share px perf. (%)
Relative
Absolute
Major shareholders
1M
-3.6
3.0
3M
5.6
5.4
12M
28.1
20.8
% held
CBG Holdings
38.7
Farsathy Holdings
11.2
Juw Teck Cheah
0.8
P/BV vs ROE
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
20.00%
17.50%
15.00%
12.50%
10.00%
7.50%
5.00%
2.50%
0.00%

Growth
25.0
25.0%
20.0
20.0%
15.0
15.0%
10.0
10.0%
5.0
5.0%
0.0
0.0%
ROE (rhs)
Profit & Loss

(RMm)
Total Net Revenues
Gross Profit
Operating EBITDA
Operating EBIT
Exceptional Items
Pre-tax Profit
Taxation
Profit After Tax
Minority Interests
Preferred Dividends
Net Profit
Mar-14A
2,457
482
300
(78)
222
(33)
15
0
204
0
204
(37)
Mar-15A
2,708
545
338
(86)
252
(30)
23
0
246
246
(50)
Mar-16F
3,024
602
407
(104)
304
(34)
17
0
287
0
287
(56)
Mar-17F
3,300
679
463
(117)
346
(34)
20
0
331
0
331
(65)
Mar-18F
3,561
749
518
(127)
391
(30)
23
0
383
0
383
(77)
167
(7)
0
0
0
160
160
160
196
(5)
0
0
0
191
183
183
230
(11)
0
0
0
219
219
219
266
(11)
0
0
0
255
255
255
306
(10)
0
0
0
296
296
296
Mar-14A
299.6
0.0
24.3
0.0
0.0
26.8
(8.4)
(30.0)
312.2
(188.3)
31.6
0.0
(23.2)
(179.9)
(217.7)
299.5
0.0
(46.7)
0.0
(1.9)
33.3
165.6
(85.4)
143.3
Mar-15A
338.1
0.0
(67.3)
0.0
0.0
36.3
(4.5)
(36.9)
265.7
(261.9)
17.2
0.0
(32.7)
(277.4)
69.4
0.0
0.0
(47.7)
0.0
(1.6)
20.0
8.3
57.6
(1.4)
Mar-16F
407.3
0.0
88.7
0.0
0.0
90.1
(34.0)
(56.1)
496.0
(300.0)
0.0
0.0
0.0
(300.0)
(31.0)
0.0
0.0
(61.4)
0.0
0.0
(92.3)
103.7
165.0
232.3
Mar-17F
463.0
0.0
(45.7)
0.0
0.0
99.1
(34.0)
(65.1)
417.3
(200.0)
0.0
0.0
0.0
(200.0)
0.0
0.0
0.0
(71.5)
0.0
0.0
(71.5)
145.8
217.3
253.6
Mar-18F
517.7
0.0
(74.0)
0.0
0.0
107.7
(30.5)
(77.2)
443.7
(150.0)
0.0
0.0
0.0
(150.0)
(50.0)
0.0
0.0
(82.8)
0.0
0.0
(132.8)
160.9
243.7
327.5
Cash Flow
(RMm)
EBITDA
Tax Paid
Capex
Shares Repurchased
Dividends Paid
Preferred Dividends
120
BY THE NUMBERS
Balance Sheet
(RMm)
Total Debtors
Inventories
Fixed Assets
Total Investments
Intangible Assets
Short-term Debt
Total Creditors
Total Provisions
Total Liabilities
Minority Interests
Total Equity
Mar-14A
253
272
229
126
881
1,043
135
0
183
1,361
386
0
168
7
561
268
0
1
269
66
896
1,286
60
1,346
Mar-15A
201
307
335
131
973
1,239
29
0
343
1,612
431
0
238
14
683
326
0
2
328
72
1,083
1,427
73
1,499
Mar-16F
189
333
291
131
943
1,436
29
0
343
1,808
400
0
266
14
680
326
0
2
328
72
1,080
1,584
84
1,669
Mar-17F
236
396
314
131
1,077
1,518
29
0
343
1,891
400
0
288
14
702
326
0
2
328
72
1,102
1,768
95
1,863
Mar-18F
289
463
337
131
1,221
1,541
29
0
343
1,914
350
0
281
14
645
326
0
2
328
72
1,045
1,981
106
2,087
Mar-14A
14.5%
16.1%
12.2%
(0.32)
1.03
6.26
18.2%
27.3%
37.29
41.43
22.01
10.9%
11.5%
9.1%
Mar-15A
10.2%
12.9%
12.5%
(0.45)
1.14
7.10
20.3%
27.7%
39.04
47.56
34.28
12.0%
11.8%
9.1%
Mar-16F
11.7%
20.4%
13.5%
(0.43)
1.27
8.36
19.6%
28.0%
38.70
47.25
38.14
11.5%
12.8%
9.7%
Mar-17F
9.1%
13.7%
14.0%
(0.39)
1.42
9.52
19.6%
28.0%
40.29
42.13
38.62
12.3%
13.6%
10.3%
Mar-18F
7.9%
11.8%
14.5%
(0.31)
1.59
11.56
20.1%
28.0%
44.02
42.31
36.96
13.0%
14.3%
10.8%
Mar-14A
-11.7%
N/A
N/A
7.7%
N/A
N/A
6.3%
N/A
N/A
N/A
N/A
N/A
Mar-15A
-11.8%
N/A
N/A
28.6%
N/A
N/A
1.0%
N/A
N/A
N/A
N/A
N/A
Mar-16F
2.0%
N/A
N/A
10.0%
N/A
N/A
-11.8%
N/A
N/A
N/A
N/A
N/A
Mar-17F
2.0%
N/A
N/A
6.0%
N/A
N/A
2.4%
N/A
N/A
N/A
N/A
N/A
Mar-18F
2.0%
N/A
N/A
5.0%
N/A
N/A
2.3%
N/A
N/A
N/A
N/A
N/A
Key Ratios
Revenue Growth
BVPS (RM)
Effective Tax Rate
Inventory Days
ROIC (%)
ROCE (%)
Key Drivers
121
BanksMalaysiaEquity researchOctober 9, 2015
Company Note
RHB Capital Bhd

The best long-term bet for Malaysian banks
ADD (no change)

Current price:
RM6.13
Target price:
RM9.00
Previous target:
RM9.00
Up/downside:
46.8%
Reuters:
RHBC.KL
Bloomberg:
RHBC MK
Market cap:
US$3,746m
RM15,867m
US$1.42m
RM5.83m
Current shares o/s
2,573m
Free float:
37.1%

No change
RHBCap is our long-term pick with a long-term target price of RM13.12 in 2018 and
RM15.28 in 2020.
The group has a comprehensive transformation programme called IGNITE 17.

It still aspires to be a regional banking group in the longer term.
The management is targeting higher ROE of 13% in 2017 and 15% in 2020.
The stock remains an Add and our top pick given the bright earnings outlook and
attractive valuation.
Our long-term pick for Malaysian banks

RHB Capital is our long-term pick as we believe that the group would turn in the
strongest earnings growth among Malaysian banks in the next 3-5 years, via organic
growth and M&As. The earnings catalysts would be the IGNITE 17 transformation
programme and the drive for regional expansion. Also, it is trading at attractive P/E and
P/BV valuations.
Transformation programme laid out until 2017
Vol m
Price Close
9.50
109.0
8.50
100.3
7.50
91.5
6.50
82.8
5.50
10
8
6
4
2
74.0
Oct-14
Jan-15
Apr-15
Jul-15
Source: Bloomberg
The group has a comprehensive transformation programme, dubbed IGNITE 17, in

place until 2017. We are positive on this as it aims to improve the areas that RHB
Capital is traditionally weak in, like Islamic banking. Under the stewardship of the Group
MD, Datuk Khairussaleh Ramli (DKR), we see a good chance of the group extracting
value from IGNITE 17. DKR was the ex-CFO of Maybank who contributed to the
successful transformation of Maybank in 2010-2013.
The next Malaysia-based regional bank

In the past 5-6 years, the group has voiced its ambitions of becoming a regional banking
group. The bank already has a banking operation in Singapore with seven branches and
another two branches in Thailand. The next target market would be Indonesia though its
plan to acquire Bank Mestika was aborted in Jul 14. The group is also eyeing entry into
the Philippines and China in the longer term.
Price performance
1M
3M
12M
Absolute (%)
3.2
-14.5
-29.6
Aiming high for ROE
Relative (%)
-3.4
-14.3
-22.3
We are encouraged that the management is targeting higher ROE of 13% in 2017 and
15% in 2020 (vs. 11.5% in 2014). The management expects to achieve this by boosting
revenue from key growth areas, actively managing its costs and optimising its capital
structure. The 13% ROE target in 2017 exceeds our projection of 11.5% for FY17. If the
group manages to achieve this, there could be 13-15% upside to our FY17 net earnings
forecast.
Our top pick for the sector

Our DDM-based target price (COE of 11.8%; LT growth of 4%) is intact. The stock is our
top pick for the sector, predicated on the re-rating catalysts of (1) the benefits from the
transformation programme, (2) the expansion in investment banking market share, and
(3) the drive for regional expansion in the longer term. Our DDM-based target price is
estimated to be RM13.12 in 2018 and RM15.28 in 2020.
Financial Summary
Analyst
Winson NG, CFA

T (60) 3 2261 9071
E winson.ng@cimb.com
Net Interest Income (RMm)

Total Non-Interest Income (RMm)
Operating Revenue (RMm)
Total Provision Charges (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
BVPS (RM)
P/BV (x)
ROE
Dec-13A
3,275
2,676
5,951
(448.0)
1,831
0.73
(4.36%)
8.44
0.16
2.66%
6.57
0.93
11.5%
Dec-14A
3,291
2,944
6,235
(206.3)
2,038
0.80
9.59%
7.70
0.06
0.98%
7.31
0.84
11.5%
Dec-15F
3,398
3,260
6,658
(329.0)
2,141
0.83
4.22%
7.39
0.25
4.05%
7.55
0.81
11.2%
0%
1.16
Dec-16F
3,580
3,580
7,160
(327.3)
2,325
0.90
8.27%
6.82
0.27
4.40%
8.20
0.75
11.4%
0%
1.22
Dec-17F
3,803
3,915
7,718
(370.1)
2,542
0.98
9.33%
6.24
0.29
4.81%
8.91
0.69
11.5%
0%
1.24

Powered by EFA
The best long-term bet for

Malaysian banks
Figure 1: 17 key initiatives under the IGNITE 17 transformation programme
SOURCES: COMPANY REPORTS
123
BY THE NUMBERS
Share price info

Share px perf. (%)
1M
3M
12M
Relative
-3.4
-14.3
-22.3
Absolute
3.2
-14.5
-29.6
Major shareholders
EPF
Aabar Investments
OSK Holdings
% held
41.0
21.9
9.8
P/BV vs ROE
2.00
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
18.00%
16.20%
14.40%
12.60%
10.80%
9.00%
7.20%
5.40%
3.60%
1.80%
0.00%

Growth
14.00
25.0%
12.00
20.0%
10.00
15.0%
8.00
10.0%
6.00
5.0%
4.00
0.0%
2.00
-5.0%
0.00
-10.0%
ROE (rhs)
Profit & Loss

(RMm)
Net Interest Income
Total Non-Interest Income
Operating Revenue
Total Non-Interest Expenses
Pre-provision Operating Profit
Total Provision Charges
Operating Profit After Provisions
Operating EBIT (incl Associates)
Exceptional Items
Pre-tax Profit
Taxation
Consolidation Adjustments & Others
Profit After Tax
Minority Interests
Pref. & Special Div
FX And Other Adj.
Net Profit
Dec-13A
3,275
2,676
5,951
(3,052)
2,899
(448)
2,451
1
2,452
19
2,471
0
2,471
(627)
Dec-14A
3,291
2,944
6,235
(3,411)
2,824
(206)
2,617
0
2,618
117
2,735
0
2,735
(672)
Dec-15F
3,398
3,260
6,658
(3,456)
3,203
(329)
2,874
1
2,874
14
2,889
0
2,889
(722)
Dec-16F
3,580
3,580
7,160
(3,671)
3,489
(327)
3,162
1
3,162
(28)
3,134
0
3,134
(784)
Dec-17F
3,803
3,915
7,718
(3,905)
3,813
(370)
3,443
1
3,444
(20)
3,424
0
3,424
(856)
0
1,844
(12)
0
0
1,831
1,831
0
2,063
(25)
0
0
2,038
2,038
0
2,167
(25)
0
0
2,141
2,141
0
2,351
(25)
0
0
2,325
2,325
0
2,568
(25)
0
0
2,542
2,542
Dec-13A
88.4%
84.5%
32.1%
34.8%
62.6%
77.0%
15.5%
46.9%
0.255%
0.156%
0.266%
Dec-14A
90.7%
89.6%
28.9%
31.3%
64.1%
78.6%
14.4%
46.7%
(0.021%)
(0.014%)
0.388%
Dec-15F
81.6%
85.7%
30.1%
32.3%
62.0%
74.4%
13.6%
46.8%
0.202%
0.129%
0.144%
Dec-16F
81.6%
81.6%
31.5%
33.6%
62.6%
74.7%
13.4%
46.8%
0.183%
0.116%
0.132%
Dec-17F
81.4%
81.5%
31.2%
33.2%
63.0%
74.7%
13.3%
46.8%
0.183%
0.116%
0.134%
Balance Sheet Employment

Gross Loans/Cust Deposits
Avg Loans/Avg Deposits
Avg Liquid Assets/Avg Assets
Avg Liquid Assets/Avg IEAs
Net Cust Loans/Assets
Net Cust Loans/Broad Deposits
Equity & Provns/Gross Cust Loans
Asset Risk Weighting
Provision Charge/Avg Cust Loans
Provision Charge/Avg Assets
Total Write Offs/Average Assets
124
BY THE NUMBERS
Balance Sheet
(RMm)
Total Gross Loans
Liquid Assets & Invst. (Current)
Other Int. Earning Assets
Total Gross Int. Earning Assets
Total Provisions/Loan Loss Reserve
Total Net Interest Earning Assets
Intangible Assets
Other Non-Interest Earning Assets
Total Non-Interest Earning Assets
Cash And Marketable Securities
Long-term Investments
Total Assets
Customer Interest-Bearing Liabilities
Bank Deposits
Interest Bearing Liabilities: Others
Total Interest-Bearing Liabilities
Bank's Liabilities Under Acceptances
Total Non-Interest Bearing Liabilities
Total Liabilities
Minority Interests
Total Equity
Dec-13A
124,717
43,746
0
168,463
(2,184)
166,280
5,238
9,574
14,812
9,999
0
191,090
137,741
17,597
12,154
167,492
2,269
4,386
174,147
16,739
204
16,943
Dec-14A
145,249
43,003
0
188,252
(1,766)
186,486
5,274
11,358
16,632
16,237
0
219,354
157,134
21,972
14,225
193,331
3,315
3,814
200,460
18,794
100
18,894
Dec-15F
163,019
42,915
0
205,934
(1,901)
204,033
5,274
10,543
15,817
31,574
0
251,424
193,399
16,336
13,928
223,663
3,463
4,660
231,787
19,532
105
19,637
Dec-16F
179,287
45,918
0
225,205
(2,030)
223,174
5,274
11,505
16,779
34,252
0
274,205
212,716
17,191
14,223
244,130
3,810
4,932
252,872
21,224
110
21,334
Dec-17F
196,486
49,415
0
245,900
(2,162)
243,739
5,274
12,108
17,382
37,623
0
298,744
233,927
18,092
14,196
266,216
4,175
5,162
275,553
23,075
116
23,191
Dec-13A
23.2%
14.3%
3.6%
55.0%
2.14%
3.94%
1.79%
2.37%
3.69%
15.5%
1.72%
25.4%
22.1%
1.29%
Dec-14A
4.8%
(2.6%)
10.7%
52.8%
2.28%
3.94%
1.66%
2.23%
3.43%
7.3%
1.60%
24.6%
22.5%
1.32%
Dec-15F
6.8%
13.4%
5.6%
51.0%
2.10%
3.59%
1.48%
1.94%
3.09%
10.3%
1.44%
25.0%
22.4%
1.22%
Dec-16F
7.5%
8.9%
8.5%
50.0%
2.03%
3.41%
1.38%
1.76%
2.91%
9.4%
1.36%
25.0%
22.4%
1.18%
Dec-17F
7.8%
9.3%
9.2%
49.3%
2.02%
3.36%
1.33%
1.70%
2.84%
9.7%
1.33%
25.0%
22.4%
1.19%
Dec-13A
9.2%
1.9%
43.2%
51.3%
2.8%
63.7%
1.1%
13.7%
24.5%
-0.4%
86.8%
2.8%
89.4%
Dec-14A
17.0%
1.7%
10.0%
54.7%
2.0%
61.1%
1.0%
13.0%
25.1%
14.1%
89.5%
2.0%
9.0%
Dec-15F
10.8%
1.6%
10.7%
51.9%
2.3%
53.0%
0.9%
12.3%
22.8%
23.1%
80.6%
2.3%
12.0%
Dec-16F
10.0%
1.5%
9.8%
51.3%
2.4%
49.5%
0.9%
12.3%
22.0%
10.0%
80.7%
2.4%
11.0%
Dec-17F
9.6%
1.4%
9.3%
50.6%
2.4%
47.2%
0.9%
12.3%
21.2%
10.0%
80.4%
2.4%
10.0%
Key Ratios
Total Income Growth
Operating Profit Growth
Pretax Profit Growth
Net Interest To Total Income
Cost Of Funds
Return On Interest Earning Assets
Net Interest Spread
Net Interest Margin (Avg Deposits)
Net Interest Margin (Avg RWA)
Provisions to Pre Prov. Operating Profit
Interest Return On Average Assets
Effective Tax Rate
Key Drivers
Loan Growth (%)
Net Interest Margin (%)
Non Interest Income Growth (%)
Cost-income Ratio (%)
Net NPL Ratio (%)
Loan Loss Reserve (%)
GP Ratio (%)
Tier 1 Ratio (%)
Total CAR (%)
Deposit Growth (%)
Loan-deposit Ratio (%)
Gross NPL Ratio (%)
Fee Income Growth (%)
125
Company Note
Ta Ann
Diversification is the best bet
HOLD (no change)

Current price:
RM3.79
Target price:
RM3.80
Previous target:
RM3.35
Up/downside:
0.3%
Reuters:
Our long-term pick in the timber sector due mainly to its more superior execution
capability and attractive valuations compared to its peers.
One of the earliest timber players in Sarawak to venture into forest plantations.
Maintain Hold but with a higher SOP-based target price of RM3.80 as we roll
valuations forward.
Our long-term target prices are RM5.40 by 2018 and RM6.00 by 2020.
TAAN.KL
Bloomberg:
TAH MK
Market cap:
US$331.6m
RM1,404m
US$0.15m
RM0.61m
Current shares o/s
370.7m
Free float:
43.0%

No changes.
Also diversified into oil palm plantations as part of its strategy to broaden its sources
of earnings.
Top long-term pick for the timber sector

In the long run, all Sarawak timber players need to diversify their earnings base as log
production from the natural forest dwindles. Ta Ann is one of the earliest timber players
to venture into forest and oil palm plantations. It is our top long-term pick for the timber
sector due mainly to its more superior execution capability and attractive valuations
compared to its peers.
Forest plantations for sustainability

We believe Ta Ann is better prepared than its peers to face the structural
Price Close
challenges in the timber industry. It has planted 36,044ha of forest and its
management reckons that that it can maintain its current log production volume
in the foreseeable future by harvesting its planted forest. Timber products that
are sourced from plantation forest could also gain wider acceptance as they are
perceived to be sustainably-produced.
4.10
110.0
3.90
106.4
3.70
102.8
3.50
99.2
3.30
95.6
3.10
2
92.0
Vol m
Diversification into oil palm plantations
1
Oct-14
Jan-15
Apr-15
Jul-15
Source: Bloomberg
Price performance
1M
3M
12M
Absolute (%)
5.9
-0.8
0.0
Relative (%)
-0.7
-0.6
7.3
Ta Ann has also planted 39,500ha of oil palm plantation as part of its strategy to
broaden its sources of earnings. We believe its oil palm estates are better managed than
those of its peers, judging from its FFB yield that is 15% above Sarawaks industry
average. Ta Ann also has the potential to expand its planted area as it has about
60,000ha of unplanted landbank in Sarawak.
Oil palm to drive future earnings growth

Oil palm plantations would have been the biggest earnings contributor for Ta Ann if not
for the downcycle in commodities. We believe that CPO prices should recover in the
next 3-5 years as new supply reduces. Assuming that CPO prices will recover to the 10year average of RM2,500 per tonne in 2018-2020 (current CPO futures indicate that
CPO prices could rebound to RM2,500 by Mar 2016) and its FFB production grows at
about 10% p.a., Ta Ann could deliver an EPS of RM0.45-0.50 in the next 3-5 years.

Ta Anns share price could reach RM5.40 by 2018 and RM6.00 by 2020, based on P/E
of 12x, which is in line with the P/E of planters with limited growth potential. This is
conservative as Ta Ann still has large tracts of unplanted landbank that should allow it to
grow beyond 2020. Despite being conservative, our estimates suggest that the stock still
offers investors 44% upside in 3 years time and 60% upside in 5 years time.
Financial Summary
Analyst
SAW Xiao Jun, CFA

T (60) 3 2261 9089
Revenue (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
Dec-13A
770
136.6
92.5
0.17
9.6%
22.29
0.05
1.32%
12.39
7.67
24.8%
1.39
6.4%
Dec-14A
1,021
243.3
122.5
0.29
71.5%
13.00
0.20
5.28%
6.72
9.25
18.1%
1.33
10.5%
Dec-15F
1,059
235.6
118.6
0.32
9.7%
11.85
0.21
5.49%
6.69
11.03
12.7%
1.27
11.0%
0%
1.08
Dec-16F
1,125
290.6
148.3
0.40
25.1%
9.47
0.26
6.87%
5.14
8.64
4.8%
1.20
13.0%
0%
1.16
Dec-17F
1,234
326.3
164.6
0.44
11.0%
8.54
0.29
7.62%
4.34
7.57
(2.4%)
1.13
13.6%
0%
1.04

Powered by EFA
Figure 1: Results Ccomparison

FYE Dec 31
2Q
2Q yoy % qoq % 2QFY15 2QFY14 yoy % Prev. Comments
(RM m)
FY15 FY14
chg
chg
Cum
Cum
chg FY15F
256.9 245.8
5
16
479
458
5 1,001 Higher timber revenue
Revenue
(187.0) (181.3)
3
13
(352)
(333)
6
(798) In line with higher revenue
Operating costs
69.9
64.5
8
23
127
124
2
203 Above expectation due to strong timber earnings
EBITDA
27.2
26.2
nm
nm
26
27
(3)
20
EBITDA margin (%)
(20.1) (21.1)
(5)
1
(40)
(39)
3
(78) Higher depreciation charges due to commissioning of a new palm oil mill
Depn & amort.
49.8
43.3
15
35
87
86
1
124
EBIT
(6.3)
(5.8)
7
26
(11)
(10)
9
(7) Within expectation
Interest expense
1.9
1.8
4
3
4
3
23
5
Interest & invt inc
nm
nm
nm
Associates' contrib
nm
nm
nm
Exceptionals
45.4
39.3
15
35
79
78
1
122 Boosted by strong timber earnings
Pretax profit
(12.4) (11.0)
13
42
(21)
(21)
(0)
(31) Effective tax rate in 1Q was broadly in line with statutory rate
Tax
27.4
27.9
(2)
6
27
27
(1)
26
Tax rate (%)
0.5
1.4
(67)
(78)
3
1
98
2 Plantations subsidiaries were not profitable in 1Q
Minority interests
33.4
29.8
12
24
61
58
4
92 1H15 net profit made up 65% of our full year forecast
Net profit
33.4
29.8
12
24
61
58
4
92 Expect timber to drive earnings in 2H15
Core net profit
9.0
8.0
12
24
16.3
15.8
4
25
EPS (sen)
9.0
8.0
12
24
16.3
15.8
4
25
Core EPS (sen)
Figure 2: SOP valuations (end-2016 target price)

Segment
Method
RM m
Plantations
11.2x CY16 P/E
701.1
Timber
8.0x CY16 P/E
816.1
Planted forest
Historical cost
Net debt at holding co. level

SOP
91.9
(34.6)
1,574.5
Discount of 10%
(157.4)
Adjusted SOP
1,417.0
No. of shares
370.5m
Target price
3.80
127
BY THE NUMBERS
Share price info

Share px perf. (%)
1M
3M
Relative
-0.7
-0.6
Absolute
5.9
-0.8
Major shareholders
12M
7.3
0.0
% held
Mountex Sdn Bhd
20.8
Employees Provident Fund Board
10.0
P/BV vs ROE
2.00
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
20.0%
18.0%
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
Growth
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
300%
256%
211%
167%
122%
78%
33%
-11%
-56%
-100%
ROE (rhs)
Profit & Loss

(RMm)
Total Net Revenues
Gross Profit
Operating EBITDA
Operating EBIT
Exceptional Items
Pre-tax Profit
Taxation
Profit After Tax
Minority Interests
Preferred Dividends
Net Profit
Dec-13A
784
190
137
(72)
64
(13)
0
0
51
62
113
(20)
Dec-14A
1,021
278
243
(78)
165
(14)
0
0
152
17
169
(44)
93
(0)
125
(2)
93
63
63
122
108
108
Dec-15F
1,079
389
236
(85)
150
(4)
0
0
146
0
146
(31)
Dec-16F
1,142
407
291
(86)
205
(6)
0
0
198
0
198
(47)
Dec-17F
1,254
466
326
(87)
239
(7)
0
0
232
0
232
(57)
115
4
152
(3)
175
(10)
119
119
119
148
148
148
165
165
165
Cash Flow
(RMm)
EBITDA
Tax Paid
Capex
Shares Repurchased
Dividends Paid
Preferred Dividends
Dec-13A
136.6
Dec-14A
243.3
Dec-15F
235.6
Dec-16F
290.6
Dec-17F
326.3
(1.3)
(3.2)
(5.0)
82.4
12.9
75.2
(0.6)
(18.0)
275.7
(127.2)
0.8
(0.3)
0.0
(126.7)
34.3
20.5
4.3
(32.3)
248.6
(95.2)
2.1
0.0
2.7
(90.4)
(6.3)
0.0
(4.0)
(31.4)
198.8
(71.5)
0.0
0.0
0.0
(71.5)
0.0
(0.0)
(6.4)
(46.8)
234.2
(71.5)
0.0
0.0
0.0
(71.5)
0.0
(0.0)
(7.4)
(56.8)
257.0
(71.5)
0.0
0.0
0.0
(71.5)
0.0
(37.5)
(74.3)
(74.1)
(77.1)
(96.4)
(15.1)
(18.3)
130.7
183.3
154.5
(18.7)
(99.3)
59.0
152.0
161.7
11.6
(62.5)
64.8
127.4
140.4
0.0
(77.1)
85.6
162.7
175.8
0.0
(96.4)
89.2
185.6
198.6
128
BY THE NUMBERS
Balance Sheet
(RMm)
Total Debtors
Inventories
Fixed Assets
Total Investments
Intangible Assets
Short-term Debt
Total Creditors
Total Provisions
Total Liabilities
Minority Interests
Total Equity
Dec-13A
261
56
122
16
454
887
0
67
391
1,345
241
Dec-14A
319
61
121
5
505
904
0
19
457
1,380
127
Dec-15F
373
42
119
25
559
856
0
57
446
1,359
139
Dec-16F
459
44
127
25
655
815
0
57
472
1,345
139
Dec-17F
548
49
136
25
757
775
0
57
497
1,329
139
112
11
363
278
116
18
260
390
109
16
264
378
116
16
271
378
125
16
279
378
25
303
94
760
1,009
30
1,039
59
449
87
797
1,056
32
1,088
51
429
94
787
1,103
28
1,131
51
429
94
794
1,174
31
1,205
51
429
94
802
1,242
41
1,284
Dec-13A
(2.5%)
(14.8%)
17.7%
(0.69)
2.72
3.59
18.0%
59.9%
25.34
97.37
64.52
4.4%
4.3%
2.52%
Dec-14A
32.6%
78.1%
23.8%
(0.53)
2.85
7.62
26.1%
70.2%
20.88
59.63
55.99
11.7%
10.4%
6.59%
Dec-15F
3.7%
(3.2%)
22.3%
(0.39)
2.97
11.49
21.5%
65.0%
17.70
63.37
59.54
10.5%
9.3%
6.24%
Dec-16F
6.2%
23.4%
25.8%
(0.16)
3.17
15.67
23.6%
65.0%
13.99
61.23
56.14
14.4%
11.9%
8.07%
Dec-17F
9.7%
12.3%
26.4%
0.08
3.35
18.30
24.5%
65.0%
13.74
60.92
55.86
17.0%
13.2%
8.92%
Dec-13A
37,267
28,209
19.7
4.6%
857
Dec-14A
39,527
30,355
19.2
6.1%
821
Dec-15F
41,527
34,631
18.3
5.8%
670
Dec-16F
43,527
37,267
18.8
13.9%
750
Dec-17F
45,527
39,527
19.7
12.1%
800
Key Ratios
Revenue Growth
BVPS (RM)
Effective Tax Rate
Inventory Days
ROIC (%)
ROCE (%)
Key Drivers
Planted Estates (ha)
Mature Estates (ha)
FFB Yield (tonnes/ha)
FFB Output Growth (%)
CPO Price (US$/tonne)
129
PowerMalaysiaEquity researchOctober 9, 2015
Company Note
Tenaga Nasional
Beneficiary of ongoing sector reform
ADD (no change)

Current price:
RM12.28
Target price:
RM16.38
Previous target:
RM16.38
Up/downside:
33.4%
Reuters:
TENA.KL
Bloomberg:
TNB MK
Market cap:
US$16,363m
Expect IBR teething issues to be resolved gradually and tariff hikes in the future to
be less controversial than in the past.
These could boost investor confidence in Tenagas earnings and result in better
appreciation of its stock value.
Tenagas valuation is attractive as it trades close to its adjusted book value.

Maintain Add. Tenaga is also our sector top pick. Our long-term target prices for
Tenaga are RM16.06 by 2018 and RM18.40 by 2020.
RM69,304m
US$26.71m
RM109.3m
Current shares o/s
5,644m
Free float:
52.7%
Underappreciated value
Tenaga is at the top of our long-term utilities sector stock picks list due to its cheap
valuation. We expect the teething issues faced by the incentive-based regulation (IBR)
governing Tenaga to be resolved in the next few years. This should increase investor
confidence in Tenagas earnings and result in better appreciation of the stocks value.
IBR was a significant earnings booster
No changes.
Price Close
Over the past 10 years, Tenagas net profit has increased at a CAGR of 14%, outpacing
Malaysias average real GDP growth of c.5% during the same period. The key earnings
growth driver was the introduction of IBR in 2014, which regulates the pass-through of
fluctuations in fuel costs to the consumers via tariff revision. This prevents Tenagas
earnings from being affected by any fluctuation in fuel prices.
15.80
124.0
14.80
119.0
13.80
114.0
12.80
109.0
11.80
104.0
10.80
99.0
9.80
80
94.0
Scepticism about IBR

The sceptics pointed out that tariff revision under the IBR still requires the approval of
the Cabinet (just like before the IBR was introduced) and therefore, contains political
elements. In the past, tariff hikes stirred up controversies, as they are perceived to be
avoidable because indigenous natural gas was the key fuel used in power generation. It
was also the perception that the IPPs were the beneficiaries of a tariff hike.
60
Vol m
40
20
Oct-14
Jan-15
Apr-15
Jul-15
Source: Bloomberg
Sector reform will continue

1M
3M
12M
Absolute (%)
11.4
-2.5
-1.9
Relative (%)
4.8
-2.3
5.4
Price performance
While these controversies could surface in the future, we think that resistance will be
milder going forward. Firstly, Malaysia increasingly relies on imported coal and LNG for
power generation. This weakens the argument that tariff hikes are avoidable when
international fuel prices rise. Secondly, all first-generation IPPs will expire in the next 2-3
years and the remaining IPPs are far less profitable than the former. This would remove
the perception that tariff hikes benefit the IPPs.
Expect slight valuation premium

We believe that Tenaga will trade at a slight premium over its book value in the long run.
This is because the IBR will ensure that the earnings from its transmission and
distribution (T&D) assets will stay close to their costs of capital, while competition from
other IPPs cap the return from its generation assets.
Long-term target price

We expect Tenaga to generate at least RM6bn of annual net profit in the next five years.
We estimate that this will raise its adjusted book value to RM82bn by 2018 and RM94bn
by 2020. Based on 1.1x P/BV (similar to the current level based on adjusted book
value), Tenagas share price could rise to RM16.06 by 2018 and RM18.40 by 2020.
Financial Summary
Analyst
SAW Xiao Jun, CFA

T (60) 3 2261 9089
Revenue (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
Aug-13A
35,857
10,446
5,356
0.96
19.9%
12.78
0.25
2.04%
7.81
51.9
35.1%
1.84
14.4%
Aug-14A
40,859
12,054
6,467
1.09
13.0%
11.31
0.29
2.36%
7.17
NA
39.9%
1.60
15.2%
Aug-15F
43,705
13,596
6,647
1.18
8.4%
10.43
0.30
2.48%
6.61
NA
43.3%
1.44
14.5%
1.03
Aug-16F
40,730
15,050
7,142
1.27
7.5%
9.70
0.32
2.60%
6.04
102.5
41.1%
1.30
14.1%
1.08
Aug-17F
43,589
15,817
7,279
1.29
1.9%
9.52
0.34
2.73%
5.76
43.8
37.9%
1.18
13.0%
1.05

Powered by EFA
Figure 1: Tenaga's earnings have been volatile in the past

(Tenaga's reported net profit - RM m)
7,000
6,000
5,000
4,000
3,000
2,000
1,000
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
Figure 2: Tenagas book value

RM m
Target price based on 1.1x P/BV
46,729
9.11
Current
Reported Shareholders' equity
Adjustments:
Overstated pension liability*
Understated tax assets*
10,210
7,457
Adjusted shareholders' equity
64,396
12.55
By 2018**
82,396
16.06
By 2020**
94,396
18.40
*Estimates; **Assuming average annual net profit of RM6bn in the next 5 years
131
BY THE NUMBERS
Share price info

Share px perf. (%)
1M
3M
12M
Relative
4.8
-2.3
5.4
Absolute
11.4
-2.5
-1.9
Major shareholders
Khazanah Nasional Berhad
EPF
Skim Amanah Saham Bumiputera
% held
31.2
13.7
7.3
P/BV vs ROE
2.00
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
15.50%
15.20%
14.90%
14.60%
14.30%
14.00%
13.70%
13.40%
13.10%
12.80%
12.50%

Growth
14.0
25.0%
12.0
21.4%
10.0
17.9%
8.0
14.3%
6.0
10.7%
4.0
7.1%
2.0
3.6%
0.0
0.0%
ROE (rhs)
Profit & Loss

(RMm)
Total Net Revenues
Gross Profit
Operating EBITDA
Operating EBIT
Exceptional Items
Pre-tax Profit
Taxation
Profit After Tax
Minority Interests
Preferred Dividends
Net Profit
Aug-13A
37,754
10,446
10,446
(4,540)
5,907
(669)
85
603
5,925
Aug-14A
43,446
12,054
12,054
(4,873)
7,181
(618)
103
449
7,115
Aug-15F
46,389
13,596
13,596
(5,551)
8,045
(780)
108
0
7,372
Aug-16F
43,548
15,050
15,050
(6,057)
8,993
(1,181)
113
0
7,925
Aug-17F
46,548
15,817
15,817
(6,521)
9,296
(1,311)
119
0
8,104
5,925
(542)
7,115
(688)
7,372
(726)
7,925
(783)
8,104
(825)
5,383
(27)
6,427
40
6,647
0
7,142
0
7,279
0
5,356
5,356
5,356
6,467
6,130
6,130
6,647
6,647
6,647
7,142
7,142
7,142
7,279
7,279
7,279
Cash Flow
(RMm)
EBITDA
Tax Paid
Capex
Shares Repurchased
Dividends Paid
Preferred Dividends
Aug-13A
10,446
Aug-14A
12,054
Aug-15F
13,596
Aug-16F
15,050
Aug-17F
15,817
(154)
(604)
(1,810)
(363)
(216)
243
(478)
(849)
9,209
(8,570)
(321)
(474)
(690)
9,964
(10,007)
(217)
(1,021)
(726)
9,821
(10,653)
(208)
(1,122)
(783)
12,574
(10,854)
(198)
(1,152)
(825)
13,426
(11,086)
111
(8,460)
569
811
(3,429)
(13,435)
3,144
0
0
(10,653)
(653)
0
0
(10,854)
(1,044)
0
0
(11,086)
(756)
0
(1,393)
(1,412)
(1,718)
(1,804)
(1,895)
169
156
906
1,318
1,493
309
2,041
(1,430)
(327)
(2,766)
0
(2,371)
(3,203)
(1,484)
461
0
(2,848)
(1,128)
676
3,024
0
(2,651)
(311)
1,584
3,644
132
BY THE NUMBERS
Balance Sheet
(RMm)
Total Debtors
Inventories
Fixed Assets
Total Investments
Intangible Assets
Short-term Debt
Total Creditors
Total Provisions
Total Liabilities
Minority Interests
Total Equity
Aug-13A
9,543
7,179
617
174
17,512
75,461
567
0
6,459
82,487
1,149
Aug-14A
8,113
7,132
887
3,876
20,008
83,045
612
0
7,000
90,658
2,480
Aug-15F
4,910
7,629
723
3,876
17,137
88,797
720
0
7,000
96,517
2,680
Aug-16F
3,782
7,110
612
3,876
15,380
93,943
833
0
7,000
101,776
2,180
Aug-17F
3,471
7,609
648
3,876
15,603
98,757
952
0
7,000
106,710
1,680
6,613
3,052
10,814
21,740
7,974
3,010
13,464
22,976
6,495
3,010
12,186
23,176
5,503
3,010
10,693
23,676
5,821
3,010
10,511
24,176
0
21,740
29,475
62,029
37,693
278
37,971
0
22,976
30,767
67,206
43,222
237
43,459
0
23,176
29,905
65,267
48,150
237
48,387
0
23,676
29,062
63,431
53,488
237
53,725
0
24,176
28,517
63,204
58,872
237
59,109
Aug-13A
4.0%
(4.6%)
29.1%
(2.36)
6.68
6.61
9.2%
26.0%
71.53
9.42
82.75
8.21%
8.10%
6.39%
Aug-14A
14.0%
15.4%
29.5%
(3.07)
7.66
8.21
9.7%
21.8%
63.92
8.74
84.80
8.95%
9.07%
6.69%
Aug-15F
7.0%
12.8%
31.1%
(3.71)
8.53
8.27
9.8%
25.9%
61.64
8.96
80.52
8.84%
9.30%
6.62%
Aug-16F
(6.8%)
10.7%
37.0%
(3.91)
9.48
7.01
9.9%
25.3%
66.22
8.57
77.05
9.13%
9.69%
7.21%
Aug-17F
7.0%
5.1%
36.3%
(3.97)
10.43
6.72
10.2%
26.0%
61.62
7.48
67.25
8.94%
9.44%
7.17%
Aug-13A
99,924.2
N/A
N/A
N/A
-7.0%
N/A
Aug-14A
102,413.0
N/A
N/A
N/A
15.3%
N/A
Aug-15F
107,361.6
N/A
N/A
N/A
-14.5%
N/A
Aug-16F
105,627.9
N/A
N/A
N/A
-4.2%
N/A
Aug-17F
108,902.4
N/A
N/A
N/A
8.2%
N/A
Key Ratios
Revenue Growth
BVPS (RM)
Effective Tax Rate
Inventory Days
ROIC (%)
ROCE (%)
Key Drivers
Power Despatched (GWh)
Capacity (MW)
Average Capacity Utilisation (%)
Avg tariff/ASP per kwh (% chg)
Fuel Cost Per Kwh (% Change)
Industry Reserve Margin (%)
133
#03
DISCLAIMER
The content of this report (including the views and opinions expressed therein, and the information comprised therein) has been prepared by and
belongs to CIMB and is distributed by CIMB.
This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality,
state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
By accepting this report, the recipient hereof represents and warrants that he is entitled to receive such report in accordance with the restrictions
set forth below and agrees to be bound by the limitations contained herein (including the Restrictions on Distributions set out below). Any failure
to comply with these limitations may constitute a violation of law. This publication is being supplied to you strictly on the basis that it will remain
confidential. No part of this report may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii)
redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB.
The information contained in this research report is prepared from data believed to be correct and reliable at the time of issue of this report. CIMB
may or may not issue regular reports on the subject matter of this report at any frequency and may cease to do so or change the periodicity of
reports at any time. CIMB is under no obligation to update this report in the event of a material change to the information contained in this report.
CIMB has no, and will not accept any, obligation to (i) check or ensure that the contents of this report remain current, reliable or relevant, (ii)
ensure that the content of this report constitutes all the information a prospective investor may require, (iii) ensure the adequacy, accuracy,
completeness, reliability or fairness of any views, opinions and information, and accordingly, CIMB, or any of their respective affiliates, or its
related persons (and their respective directors, associates, connected persons and/or employees) shall not be liable in any manner whatsoever
for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance
thereon or usage thereof. In particular, CIMB disclaims all responsibility and liability for the views and opinions set out in this report.
Unless otherwise specified, this report is based upon sources which CIMB considers to be reasonable. Such sources will, unless otherwise
specified, for market data, be market data and prices available from the main stock exchange or market where the relevant security is listed, or,
where appropriate, any other market. Information on the accounts and business of company(ies) will generally be based on published statements
of the company(ies), information disseminated by regulatory information services, other publicly available information and information resulting
from our research.
Whilst every effort is made to ensure that statements of facts made in this report are accurate, all estimates, projections, forecasts, expressions
of opinion and other subjective judgments contained in this report are based on assumptions considered to be reasonable as of the date of the
document in which they are contained and must not be construed as a representation that the matters referred to therein will occur. Past
performance is not a reliable indicator of future performance. The value of investments may go down as well as up and those investing may,
depending on the investments in question, lose more than the initial investment. No report shall constitute an offer or an invitation by or on behalf
of CIMB or its affiliates to any person to buy or sell any investments.
CIMB, its affiliates and related companies, their directors, associates, connected parties and/or employees may own or have positions in
securities of the company(ies) covered in this research report or any securities related thereto and may from time to time add to or dispose of, or
may be materially interested in, any such securities. Further, CIMB, its affiliates and its related companies do and seek to do business with the
company(ies) covered in this research report and may from time to time act as market maker or have assumed an underwriting commitment in
securities of such company(ies), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform
significant investment banking, advisory, underwriting or placement services for or relating to such company(ies) as well as solicit such
investment, advisory or other services from any entity mentioned in this report.
CIMB or its affiliates may enter into an agreement with the company(ies) covered in this report relating to the production of research reports.
CIMB may disclose the contents of this report to the company(ies) covered by it and may have amended the contents of this report following
such disclosure.
The analyst responsible for the production of this report hereby certifies that the views expressed herein accurately and exclusively reflect his or
her personal views and opinions about any and all of the issuers or securities analysed in this report and were prepared independently and
autonomously. No part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific
recommendations(s) or view(s) in this report. CIMB prohibits the analyst(s) who prepared this research report from receiving any compensation,
incentive or bonus based on specific investment banking transactions or for providing a specific recommendation for, or view of, a particular
company. Information barriers and other arrangements may be established where necessary to prevent conflicts of interests arising. However,
the analyst(s) may receive compensation that is based on his/their coverage of company(ies) in the performance of his/their duties or the
performance of his/their recommendations and the research personnel involved in the preparation of this report may also participate in the
solicitation of the businesses as described above. In reviewing this research report, an investor should be aware that any or all of the foregoing,
among other things, may give rise to real or potential conflicts of interest. Additional information is, subject to the duties of confidentiality,
available on request.
Reports relating to a specific geographical area are produced by the corresponding CIMB entity as listed in the table below. The term CIMB
shall denote, where appropriate, the relevant entity distributing or disseminating the report in the particular jurisdiction referenced below, or, in
every other case, CIMB Group Holdings Berhad ("CIMBGH") and its affiliates, subsidiaries and related companies.
134
Country
Hong Kong
India
Indonesia
Malaysia
Singapore
South Korea
Taiwan
Thailand
CIMB Entity
CIMB Securities Limited
CIMB Securities (India) Private Limited
PT CIMB Securities Indonesia
CIMB Investment Bank Berhad
CIMB Research Pte. Ltd.
CIMB Securities Limited, Korea Branch
CIMB Securities Limited, Taiwan Branch
CIMB Securities (Thailand) Co. Ltd.
Regulated by
Securities and Futures Commission Hong Kong
Securities and Exchange Board of India (SEBI)
Financial Services Authority of Indonesia
Securities Commission Malaysia
Monetary Authority of Singapore
Financial Services Commission and Financial Supervisory Service
Financial Supervisory Commission
Securities and Exchange Commission Thailand
(i) As of October 8, 2015, CIMB has a proprietary position in the securities (which may include but not limited to shares, warrants, call warrants
and/or any other derivatives) in the following company or companies covered or recommended in this report:
(a) Affin Holdings, AirAsia Bhd, Alliance Financial Group, AMMB Holdings, Astro Malaysia, Axiata Group, Berjaya Auto, Berjaya Sports Toto,
BIMB Holdings, Bonia Corporation, British American Tobacco, Bumi Armada, Bursa Malaysia, CIMB Group Holdings Berhad, Dialog Group,
DiGi.com, DRB-Hicom, Evergreen Fibreboard, Felda Global Ventures, Gamuda, Gas Malaysia Berhad, Genting Bhd, Genting Malaysia,
HeveaBoard Bhd, IJM Corp Bhd, IOI Corporation, IOI Properties Group Bhd, KPJ Healthcare, Magnum Bhd, Mah Sing Group, Malakoff
Corporation, Malayan Banking Bhd, Malaysia Airports Holdings, Malaysia Marine & Heavy Eng, Malaysian Resources Corp, Maxis Berhad, MISC
Bhd, MY E.G. Services, Petronas Chemical Group, Petronas Dagangan, Petronas Gas, Pharmaniaga Bhd, Prestariang, Public Bank Bhd, QL
Resources, RHB Capital Bhd, Salcon, SapuraKencana Petroleum, Signature International, Sime Darby Bhd, SP Setia, Star Media Group Bhd,
Supermax Corp, Telekom Malaysia, Tenaga Nasional, Time dotCom, Tomypak Holdings, Tropicana Corporation, Tune Protect Group Bhd, UEM
Sunrise Bhd, UMW Holdings, UMW Oil & Gas, Unisem, Wah Seong Corp, WCT Holdings, Wellcall Holdings, Westports Holdings, YTL
Corporation, YTL Power International
(ii) As of October 9, 2015, the analyst(s) who prepared this report, and the associate(s), has / have an interest in the securities (which may
include but not limited to shares, warrants, call warrants and/or any other derivatives) in the following company or companies covered or
recommended in this report:
(a) This report does not purport to contain all the information that a prospective investor may require. CIMB or any of its affiliates does not make any
guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such
information and opinion contained in this report. Neither CIMB nor any of its affiliates nor its related persons shall be liable in any manner
whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any
reliance thereon or usage thereof.
This report is general in nature and has been prepared for information purposes only. It is intended for circulation amongst CIMB and its affiliates
clients generally and does not have regard to the specific investment objectives, financial situation and the particular needs of any specific
person who may receive this report. The information and opinions in this report are not and should not be construed or considered as an offer,
recommendation or solicitation to buy or sell the subject securities, related investments or other financial instruments or any derivative
instrument, or any rights pertaining thereto.
Investors are advised to make their own independent evaluation of the information contained in this research report, consider their own individual
investment objectives, financial situation and particular needs and consult their own professional and financial advisers as to the legal, business,
financial, tax and other aspects before participating in any transaction in respect of the securities of company(ies) covered in this research report.
The securities of such company(ies) may not be eligible for sale in all jurisdictions or to all categories of investors.
Australia: Despite anything in this report to the contrary, this research is provided in Australia by CIMB Securities (Singapore) Pte. Ltd. and
CIMB Securities Limited. This research is only available in Australia to persons who are wholesale clients (within the meaning of the
Corporations Act 2001 (Cth) and is supplied solely for the use of such wholesale clients and shall not be distributed or passed on to any other
person. You represent and warrant that if you are in Australia, you are a wholesale client. This research is of a general nature only and has
been prepared without taking into account the objectives, financial situation or needs of the individual recipient. CIMB Securities (Singapore) Pte.
Ltd. and CIMB Securities Limited do not hold, and are not required to hold an Australian financial services licence. CIMB Securities (Singapore)
Pte. Ltd. and CIMB Securities Limited rely on passporting exemptions for entities appropriately licensed by the Monetary Authority of Singapore
(under ASIC Class Order 03/1102) and the Securities and Futures Commission in Hong Kong (under ASIC Class Order 03/1103).
China: For the purpose of this report, the Peoples Republic of China (PRC) does not include the Hong Kong Special Administrative Region,
the Macau Special Administrative Region or Taiwan. The distributor of this report has not been approved or licensed by the China Securities
Regulatory Commission or any other relevant regulatory authority or governmental agency in the PRC. This report contains only marketing
information. The distribution of this report is not an offer to buy or sell to any person within or outside PRC or a solicitation to any person within or
outside of PRC to buy or sell any instruments described herein. This report is being issued outside the PRC to a limited number of institutional
investors and may not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose.
France: Only qualified investors within the meaning of French law shall have access to this report. This report shall not be considered as an offer
to subscribe to, or used in connection with, any offer for subscription or sale or marketing or direct or indirect distribution of financial instruments
and it is not intended as a solicitation for the purchase of any financial instrument.
Germany: This report is only directed at persons who are professional investors as defined in sec 31a(2) of the German Securities Trading Act
(WpHG). This publication constitutes research of a non-binding nature on the market situation and the investment instruments cited here at the
time of the publication of the information.
The current prices/yields in this issue are based upon closing prices from Bloomberg as of the day preceding publication. Please note that
neither the German Federal Financial Supervisory Agency (BaFin), nor any other supervisory authority exercises any control over the content of
135
this report.
Hong Kong: This report is issued and distributed in Hong Kong by CIMB Securities Limited (CHK) which is licensed in Hong Kong by the
Securities and Futures Commission for Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance)
activities. Any investors wishing to purchase or otherwise deal in the securities covered in this report should contact the Head of Sales at CIMB
Securities Limited. The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial
Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such
recipient therein are unaffected. CHK has no obligation to update its opinion or the information in this research report.
This publication is strictly confidential and is for private circulation only to clients of CHK.
CIMB Securities Limited does not make a market on the securities mentioned in the report.
India: This report is issued and distributed in India by CIMB Securities (India) Private Limited (CIMB India) which is registered with the National
Stock Exchange of India Limited and BSE Limited as a trading and clearing member under the Securities and Exchange Board of India (Stock
Brokers and Sub-Brokers) Regulations, 1992. In accordance with the provisions of Regulation 4(g) of the Securities and Exchange Board of India
(Investment Advisers) Regulations, 2013, CIMB India is not required to seek registration with the Securities and Exchange Board of India
(SEBI) as an Investment Adviser. CIMB India is registered with SEBI as a Research Analyst pursuant to the SEBI (Research Analysts)
Regulations, 2014 ("Regulations").
This report does not take into account the particular investment objectives, financial situations, or needs of the recipients. It is not intended for
and does not deal with prohibitions on investment due to law/jurisdiction issues etc. which may exist for certain persons/entities. Recipients
should rely on their own investigations and take their own professional advice before investment.
The report is not a prospectus as defined under Indian Law, including the Companies Act, 2013, and is not, and shall not be, approved by, or
filed or registered with, any Indian regulator, including any Registrar of Companies in India, SEBI, any Indian stock exchange, or the Reserve
Bank of India. No offer, or invitation to offer, or solicitation of subscription with respect to any such securities listed or proposed to be listed in
India is being made, or intended to be made, to the public, or to any member or section of the public in India, through or pursuant to this report.
The research analysts, strategists or economists principally responsible for the preparation of this research report are segregated from the other
activities of CIMB India and they have received compensation based upon various factors, including quality, accuracy and value of research, firm
profitability or revenues, client feedback and competitive factors. Research analysts', strategists' or economists' compensation is not linked to
investment banking or capital markets transactions performed or proposed to be performed by CIMB India or its affiliates.
Indonesia: This report is issued and distributed by PT CIMB Securities Indonesia (CIMBI). The views and opinions in this research report are
our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the
Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBI has no obligation to update
its opinion or the information in this research report. Neither this report nor any copy hereof may be distributed in Indonesia or to any Indonesian
citizens wherever they are domiciled or to Indonesian residents except in compliance with applicable Indonesian capital market laws and
regulations.
This research report is not an offer of securities in Indonesia. The securities referred to in this research report have not been registered with the
Financial Services Authority (Otoritas Jasa Keuangan) pursuant to relevant capital market laws and regulations, and may not be offered or sold
within the territory of the Republic of Indonesia or to Indonesian citizens through a public offering or in circumstances which constitute an offer
within the meaning of the Indonesian capital market law and regulations.
Ireland: CIMB is not an investment firm authorised in the Republic of Ireland and no part of this document should be construed as CIMB acting
as, or otherwise claiming or representing to be, an investment firm authorised in the Republic of Ireland.
Malaysia: This report is issued and distributed by CIMB Investment Bank Berhad (CIMB) solely for the benefit of and for the exclusive use of
our clients. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient,
our obligations owed to such recipient therein are unaffected. CIMB has no obligation to update, revise or reaffirm its opinion or the information in
this research reports after the date of this report.
New Zealand: In New Zealand, this report is for distribution only to persons who are wholesale clients pursuant to section 5C of the Financial
Advisers Act 2008.
Singapore: This report is issued and distributed by CIMB Research Pte Ltd (CIMBR). CIMBR is a financial adviser licensed under the Financial
Advisers Act, Cap 110 (FAA) for advising on investment products, by issuing or promulgating research analyses or research reports, whether in
electronic, print or other form. Accordingly CIMBR is a subject to the applicable rules under the FAA unless it is able to avail itself to any
prescribed exemptions.
Recipients of this report are to contact CIMB Research Pte Ltd, 50 Raffles Place, #19-00 Singapore Land Tower, Singapore in respect of any
matters arising from, or in connection with this report. CIMBR has no obligation to update its opinion or the information in this research report.
This publication is strictly confidential and is for private circulation only. If you have not been sent this report by CIMBR directly, you may not rely,
use or disclose to anyone else this report or its contents.
If the recipient of this research report is not an accredited investor, expert investor or institutional investor, CIMBR accepts legal responsibility for
the contents of the report without any disclaimer limiting or otherwise curtailing such legal responsibility. If the recipient is an accredited investor,
expert investor or institutional investor, the recipient is deemed to acknowledge that CIMBR is exempt from certain requirements under the FAA
and its attendant regulations, and as such, is exempt from complying with the following :
(a) Section 25 of the FAA (obligation to disclose product information);
(b) Section 27 (duty not to make recommendation with respect to any investment product without having a reasonable basis where you may be
reasonably expected to rely on the recommendation) of the FAA;
(c) MAS Notice on Information to Clients and Product Information Disclosure [Notice No. FAA-N03];
(d) MAS Notice on Recommendation on Investment Products [Notice No. FAA-N16];
(e) Section 36 (obligation on disclosure of interest in securities), and
136
(f) any other laws, regulations, notices, directive, guidelines, circulars and practice notes which are relates to the above, to the extent permitted
by applicable laws, as may be amended from time to time, and any other laws, regulations, notices, directive, guidelines, circulars, and practice
notes as we may notify you from time to time. In addition, the recipient who is an accredited investor, expert investor or institutional investor
acknowledges that a CIMBR is exempt from Section 27 of the FAA, the recipient will also not be able to file a civil claim against CIMBR for any
loss or damage arising from the recipients reliance on any recommendation made by CIMBR which would otherwise be a right that is available
to the recipient under Section 27 of the FAA, the recipient will also not be able to file a civil claim against CIMBR for any loss or damage arising
from the recipients reliance on any recommendation made by CIMBR which would otherwise be a right that is available to the recipient under
Section 27 of the FAA.
CIMB Research Pte Ltd ("CIMBR"), its affiliates and related companies, their directors, associates, connected parties and/or employees may own
or have positions in securities of the company(ies) covered in this research report or any securities related thereto and may from time to time add
to or dispose of, or may be materially interested in, any such securities. Further, CIMBR, its affiliates and its related companies do and seek to do
business with the company(ies) covered in this research report and may from time to time act as market maker or have assumed an underwriting
commitment in securities of such company(ies), may sell them to or buy them from customers on a principal basis and may also perform or seek
to perform significant investment banking, advisory, underwriting or placement services for or relating to such company(ies) as well as solicit
such investment, advisory or other services from any entity mentioned in this report.
As of October 8, 2015, CIMBR does not have a proprietary position in the recommended securities in this report.
CIMB Securities Singapore Pte Ltd and/or CIMB Bank does not make a market on the securities mentioned in the report.
South Korea: This report is issued and distributed in South Korea by CIMB Securities Limited, Korea Branch (CIMB Korea) which is licensed
as a cash equity broker, and regulated by the Financial Services Commission and Financial Supervisory Service of Korea. In South Korea, this
report is for distribution only to professional investors under Article 9(5) of the Financial Investment Services and Capital Market Act of Korea
(FSCMA).
Spain: This document is a research report and it is addressed to institutional investors only. The research report is of a general nature and not
personalised and does not constitute investment advice so, as the case may be, the recipient must seek proper advice before adopting any
investment decision. This document does not constitute a public offering of securities.
CIMB is not registered with the Spanish Comision Nacional del Mercado de Valores to provide investment services.
Sweden: This report contains only marketing information and has not been approved by the Swedish Financial Supervisory Authority. The
distribution of this report is not an offer to sell to any person in Sweden or a solicitation to any person in Sweden to buy any instruments
described herein and may not be forwarded to the public in Sweden.
Switzerland: This report has not been prepared in accordance with the recognized self-regulatory minimal standards for research reports of
banks issued by the Swiss Bankers Association (Directives on the Independence of Financial Research).
Taiwan: This research report is not an offer or marketing of foreign securities in Taiwan. The securities as referred to in this research report have
not been and will not be registered with the Financial Supervisory Commission of the Republic of China pursuant to relevant securities laws and
regulations and may not be offered or sold within the Republic of China through a public offering or in circumstances which constitutes an offer or
a placement within the meaning of the Securities and Exchange Law of the Republic of China that requires a registration or approval of the
Financial Supervisory Commission of the Republic of China.
Thailand: This report is issued and distributed by CIMB Securities (Thailand) Company Limited (CIMBS) based upon sources believed to be
reliable (but their accuracy, completeness or correctness is not guaranteed). The statements or expressions of opinion herein were arrived at
after due and careful consideration for use as information for investment. Such opinions are subject to change without notice and CIMBS has no
obligation to update its opinion or the information in this research report.
If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our
obligations owed to such recipient are unaffected.
CIMB Securities (Thailand) Co., Ltd. may act or acts as Market Maker and issuer including offering of Derivative Warrants Underlying securities
of the following securities. Investors should carefully read and study the details of the derivative warrants in the prospectus before making
investment decisions.
AAV, ADVANC, AMATA, ANAN, AOT, AP, ASP, BA, BANPU, BBL, BCH, BCP, BDMS, BEAUTY, BEC, BECL, BH, BJCHI, BLAND, BMCL, BTS,
CBG, CENTEL, CK, CPALL, CPF, CPN, DELTA, DEMCO, DTAC, EARTH, EGCO, ERW, GFPT, GLOBAL, GLOW, GUNKUL, HANA, HMPRO,
ICHI, INTUCH, IRPC, ITD, IVL, JAS, KBANK, KCE, KKP, KTB, KTC, LH, LHBANK, LOXLEY, LPN, M, MAJOR, MC, MINT, MONO, NOK, PACE,
PS, PSL, PTT, PTTEP, PTTGC, QH, RATCH, RCL, ROBINS, RS, S, SAMART, SAPPE, SAWAD, SCB, SCC, SF, SGP, SIRI, SOLAR, SPALI,
SPCG, STEC, STPI, SVI, TCAP, THAI, THCOM, TICON, TISCO, TMB, TOP, TPIPL, TRC, TRUE, TTA, TTCL, TTW, TUF, U, UNIQ, UV, VGI,
WHA
Corporate Governance Report:
The disclosure of the survey result of the Thai Institute of Directors Association (IOD) regarding corporate governance is made pursuant to the
policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the
Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public
investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information.
The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may
be changed after that date. CIMBS does not confirm nor certify the accuracy of such survey result.
Score Range:
Description:
90 - 100
Excellent
80 - 89
Very Good
70 - 79
Good
Below 70 or
N/A
No Survey Result
United Arab Emirates: The distributor of this report has not been approved or licensed by the UAE Central Bank or any other relevant licensing
authorities or governmental agencies in the United Arab Emirates. This report is strictly private and confidential and has not been reviewed by,
137
deposited or registered with UAE Central Bank or any other licensing authority or governmental agencies in the United Arab Emirates. This report
is being issued outside the United Arab Emirates to a limited number of institutional investors and must not be provided to any person other than
the original recipient and may not be reproduced or used for any other purpose. Further, the information contained in this report is not intended to
lead to the sale of investments under any subscription agreement or the conclusion of any other contract of whatsoever nature within the territory
of the United Arab Emirates.
United Kingdom: In the United Kingdom and European Economic Area, this report is being disseminated by CIMB Securities (UK) Limited
(CIMB UK). CIMB UK is authorized and regulated by the Financial Conduct Authority and its registered office is at 27 Knightsbridge, London,
SW1X7YB. This report is for distribution only to, and is solely directed at, selected persons on the basis that those persons: (a) are eligible
counterparties and professional clients of CIMB UK; (b) have professional experience in matters relating to investments falling within Article 19(5)
of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the Order), (c) fall within Article 49(2)(a) to (d)
(high net worth companies, unincorporated associations etc) of the Order; (d) are outside the United Kingdom, or (e) are persons to whom an
invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in
connection with any investments to which this report relates may otherwise lawfully be communicated or caused to be communicated (all such
persons together being referred to as relevant persons). This report is directed only at relevant persons and must not be acted on or relied on
by persons who are not relevant persons. Any investment or investment activity to which this report relates is available only to relevant persons
and will be engaged in only with relevant persons.
Where this report is labelled as non-independent, it does not provide an impartial or objective assessment of the subject matter and does not
constitute independent investment research under the applicable rules of the Financial Conduct Authority in the UK. Consequently, any such
non-independent report will not have been prepared in accordance with legal requirements designed to promote the independence of investment
research and will not subject to any prohibition on dealing ahead of the dissemination of investment research. Any such non-independent report
must be considered as a marketing communication.
United States: This research report is distributed in the United States of America by CIMB Securities (USA) Inc, a U.S. registered broker-dealer
and a related company of CIMB Research Pte Ltd, CIMB Investment Bank Berhad, PT CIMB Securities Indonesia, CIMB Securities (Thailand)
Co. Ltd, CIMB Securities Limited, CIMB Securities (India) Private Limited, and is distributed solely to persons who qualify as U.S. Institutional
Investors as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. This communication is only for Institutional Investors whose
ordinary business activities involve investing in shares, bonds, and associated securities and/or derivative securities and who have professional
experience in such investments. Any person who is not a U.S. Institutional Investor or Major Institutional Investor must not rely on this
communication. The delivery of this research report to any person in the United States of America is not a recommendation to effect any
transactions in the securities discussed herein, or an endorsement of any opinion expressed herein. CIMB Securities (USA) Inc, is a FINRA/SIPC
member and takes responsibility for the content of this report. For further information or to place an order in any of the above-mentioned
securities please contact a registered representative of CIMB Securities (USA) Inc.
CIMB Securities (USA) Inc does not make a market on the securities mentioned in the report.
Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to
professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.
Distribution of stock ratings and investment banking clients for quarter ended on 30 September 2015
1528 companies under coverage for quarter ended on 30 September 2015
Rating Distribution (%)
Investment Banking clients (%)
Add
58.1%
6.0%
Hold
30.4%
3.5%
Reduce
10.9%
1.0%
Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (Thai IOD) in 2014.
AAV Very Good, ADVANC Very Good, AEONTS not available, AMATA - Good, ANAN Very Good, AOT Very Good, AP - Good, ASK Very Good,
ASP Very Good, BANPU Very Good , BAY Very Good , BBL Very Good, BCH not available, BCP - Excellent, BEAUTY Good, BEC - Good, BECL
Very Good, BGH - not available, BH - Good, BIGC - Very Good, BJC Good, BLA Very Good, BMCL - Very Good, BTS - Excellent, CCET Good, CENTEL
Very Good, CHG not available, CK Very Good, CPALL not available, CPF Very Good, CPN - Excellent, DELTA - Very Good, DEMCO Good, DTAC
Very Good, EA - Good, ECL not available, EGCO - Excellent, GFPT - Very Good, GLOBAL - Good, GLOW - Good, GRAMMY - Excellent, HANA - Excellent,
HEMRAJ Very Good, HMPRO - Very Good, ICHI - not available, INTUCH - Excellent, ITD Good, IVL - Excellent, JAS not available, JUBILE not
available, KAMART not available, KBANK - Excellent, KCE - Very Good, KGI Good, KKP Excellent, KTB - Excellent, KTC Good, LH - Very Good, LPN
Very Good, M - not available, MAJOR - Good, MAKRO Good, MBKET Good, MC Very Good, MCOT Very Good, MEGA Good, MINT - Excellent,
OFM Very Good, OISHI Good, PS Very Good, PSL - Excellent, PTT - Excellent, PTTEP - Excellent, PTTGC - Excellent, QH Very Good, RATCH Very
Good, ROBINS Very Good, RS Very Good, SAMART - Excellent, SAPPE - not available, SAT Excellent, SAWAD not available, SC Excellent, SCB Excellent, SCBLIF Good, SCC Very Good, SCCC - Good, SIM - Excellent, SIRI - Good, SPALI - Excellent, STA Very Good, STEC - Good, SVI Very
Good, TASCO Good, TCAP Very Good, THAI Very Good, THANI Very Good, THCOM Very Good, THRE not available, THREL Good, TICON
Good, TISCO - Excellent, TK Very Good, TMB - Excellent, TOP - Excellent, TRUE Very Good, TTW Very Good, TUF - Good, VGI Very Good, WORK
not available.
138
CIMB Recommendation Framework

Stock Ratings
Definition:
Add
The stocks total return is expected to exceed 10% over the next 12 months.
Hold
The stocks total return is expected to be between 0% and positive 10% over the next 12 months.
Reduce
The stocks total return is expected to fall below 0% or more over the next 12 months.
The total expected return of a stock is defined as the sum of the: (i) percentage difference between the target price and the current price and (ii) the forward
net dividend yields of the stock. Stock price targets have an investment horizon of 12 months.
Sector Ratings
Overweight
Neutral
Underweight
Definition:
An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a positive absolute recommendation.
A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral absolute recommendation.
An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a negative absolute recommendation.
Country Ratings
Overweight
Neutral
Underweight
Definition:
An Overweight rating means investors should be positioned with an above-market weight in this country relative to benchmark.
A Neutral rating means investors should be positioned with a neutral weight in this country relative to benchmark.
An Underweight rating means investors should be positioned with a below-market weight in this country relative to benchmark.
*Prior to December 2013 CIMB recommendation framework for stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand,
Jakarta Stock Exchange, Australian Securities Exchange, Taiwan Stock Exchange and National Stock Exchange of India/Bombay Stock Exchange were
based on a stocks total return relative to the relevant benchmarks total return. Outperform: expected to exceed by 5% or more over the next 12 months.
Neutral: expected to be within +/-5% over the next 12 months. Underperform: expected to be below by 5% or more over the next 12 months. Trading Buy:
expected to exceed by 3% or more over the next 3 months. Trading Sell: expected to be below by 3% or more over the next 3 months. For stocks listed on
Korea Exchange, Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Outperform: Expected positive total returns of 10% or
more over the next 12 months. Neutral: Expected total returns of between -10% and +10% over the next 12 months. Underperform: Expected negative total
returns of 10% or more over the next 12 months. Trading Buy: Expected positive total returns of 10% or more over the next 3 months. Trading Sell: Expected
negative total returns of 10% or more over the next 3 months.
139

Strategy Note - Must-Own Stocks For Long-Term Investing

Încărcat de

Informații document

Titlu original

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Strategy Note - Must-Own Stocks For Long-Term Investing

Încărcat de

Drepturi de autor:

Formate disponibile

MalaysiaEquity researchOctober 9, 2015

Based on a matrix taking into consideration management, financials, valuation and

Taking a long-term investment approach

What determines share prices in long term?

Smaller caps with ambitious management tops

Long term large cap and smaller cap picks

Figure 1: Long-term stock-picking by sector

Terence WONG, CFA

Only World Group

SOURCES: CIMB, COMPANY REPORTS

MalaysiaEquity researchOctober 9, 2015

MalaysiaEquity researchOctober 9, 2015

Figure 2: Must-own stocks for long-term investing

Market Cap (US$ m)

Core P/E (x)

3-year EPS CAGR

Eco World Development Group Bhd

GHL Systems Bhd

Malaysia Airports Holdings

Only World Group Holdings

SOURCES: CIMB, COMPANY REPORTS

MalaysiaEquity researchOctober 9, 2015

Must-own stocks for long-term

Definition of long term

Stock selection criteria

MalaysiaEquity researchOctober 9, 2015

beat analysts expectations often lead to immediate share price

Which companies come out tops?

MalaysiaEquity researchOctober 9, 2015

SOURCES: CIMB, COMPANY REPORTS

Figure 4: Stocks to invest in for 3-5 year horizon

SOURCES: CIMB, COMPANY REPORTS

MalaysiaEquity researchOctober 9, 2015

Share price upside in long term

Only World Group

SOURCES: CIMB, COMPANY REPORTS

MalaysiaEquity researchOctober 9, 2015

SOURCES: CIMB, COMPANY REPORTS

MalaysiaEquity researchOctober 9, 2015

MalaysiaEquity researchOctober 9, 2015

Figure 7: Total vehicle sales (units) in Malaysia

SOURCES: CIMB, COMPANY REPORTS

Figure 8: Total vehicle sales (units) in the Philippines

SOURCES: CIMB, COMPANY REPORTS

Long-term target price for Berjaya Auto

MalaysiaEquity researchOctober 9, 2015

SOURCES: CIMB, COMPANY REPORTS

RHB Capital is our long-term pick

MalaysiaEquity researchOctober 9, 2015

Transformation programme laid out until 2017

MalaysiaEquity researchOctober 9, 2015

The next Malaysia-based regional bank

Aiming high for ROE

Long-term target price for RHB Capital

MalaysiaEquity researchOctober 9, 2015

MalaysiaEquity researchOctober 9, 2015

SOURCE: CIMB RESEARCH, COMPANY DATA

MalaysiaEquity researchOctober 9, 2015

Long-term target price for Gamuda

MalaysiaEquity researchOctober 9, 2015

SOURCES: CIMB, COMPANY REPORTS

MalaysiaEquity researchOctober 9, 2015

three principal activities are marine product manufacturing, integrated livestock