KL Market Outlook 1H2019 PDF

Asia Macro 2019:
Praying for Pause &

Peace
February 2019
Dr Chua Hak Bin

Senior Economist
+65 6231 5830
chuahb@maybank-ke.com.sg
SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS
2019 Macro – Praying for Pause and Peace
• Global & Asia Growth: US-China Trade War & Tighter Global Monetary Conditions
Threatens Growth Outlook; Trade War Will Broaden to NTBs (eg. export controls)
– [1] US-China Trade “Peace” Deal- Bullish China, Singapore & Thailand
– [2] Fed “Pause”- Bullish Indonesia, Philippines & India
• Theme #1: Cold War - Trade Disruption & Diversion: China “Eye of the Storm”;
Disruption to Supply Chain; Winners from Diversion – Vietnam, Thailand & Malaysia
• Theme #2: Fed Pauses Late 2019: 2 More Hikes in 2019, No Hike in 2020; Yield Curve
(10Y - 3M) Invert by End-2019 Signaling Recession in 2020; IDR & PHP Will Remain
Under Pressure as US Rates Rise, SGD & THB More Resilient
• Theme #3: Deflation Pressure in Asia: Trade War Deflationary for Third Countries –
[1] Weak RMB; [2] Divert Excess Capacity; [3] Weaker Capex & Commodity Prices (Oil)
• Wildcard #1: China Hard Landing (export collapse, shadow financing crackdown,
high system leverage, limited “Xi put”)
• Wildcard #2: Tech Backlash Intensifies (data privacy, tax, cyber-security, tech war)
25/02/2019 2
2019 Macro – Praying for Pause and Peace
• Trade War Disruption & Reconfiguration of Global Supply Chain

– Positive Vietnam, Thailand, Cambodia, Malaysia / Maybe Philippines, Indonesia
– Negative China & Northeast Asia
• Fed Pause Late 2019 & “Twin” Deficits

– Long Indonesia, Philippines in Second Half when Fed Pauses
– Hide Singapore, Thailand in First Half on More Resilient Currencies
• “Trade War” - Deflationary in Third Countries (RMB Weakens, Dumping & Commodity Price
Falls)
– Ease Inflation Pressures, Favours Fixed Income
– Pricing & Margin Pressure on Competing Suppliers (eg. Steel, Solar Panels)
• Inverted Yield Curve (10Y-3m) : US “Recession” in 2020

– Emerging Markets Most Vulnerable (Turkey, South Africa, Latin America)
– Contagion to Emerging Asia
• “Wild Cards”
[1] China Hard Landing (negative NE Asia, ASEAN “collateral damage”);
[2] Tech Backlash (negative Asia electronics, tech, capital goods, tech private equity)
25/02/2019 3
ASEAN-6: GDP Growth Forecast – Slowing in 2019
GDP Growth (%)
2016 2017 2018 2019F 2020F
Indonesia 5.0 5.1 5.2 5.1 5.3
Malaysia 4.2 5.9 4.7 4.9 4.9
Philippines 6.9 6.7 6.2 6.5 6.5
Singapore 2.0 3.6 3.2 2.2 2.1
Thailand 3.3 3.9 4.1 3.8 3.6
Vietnam 6.2 6.8 7.1 6.8 6.5
Note: Numbers in red refer to Maybank’s estimates.

Source: CEIC, Maybank KE
4
ASEAN-6: CPI Forecast – Inflation Not an Issue in
2019
CPI Inflation (%)
2016 2017 2018 2019F 2020F
Indonesia 3.5 3.8 3.2 3.4 3.6
Malaysia 2.1 3.7 1.0 2.1 2.4
Philippines 1.8 2.9 5.2 3.0 2.8
Singapore -0.5 0.6 0.4 1.2 1.0
Thailand 0.2 0.7 1.1 1.1 1.0
Vietnam 2.6 3.5 3.5 2.7 4.1
5
Global Growth Slowing: PMI in Most Countries
Rolling Over
Markit Global Manufacturing PMI Has PMI in Asian Countries Are Starting to
Peaked and Rolling Over Soften on Trade War Fears
Source: Markit, CEIC, Maybank KE Note: Singapore’s PMI number refers to SIPMM’s numbers.
Source: Markit, CEIC, SIPMM, Maybank KE
25/02/2019 6
Singapore’s SIPMM Manufacturing PMI and Nikkei PMI
Falling, Electronics Contracting
Singapore’s Whole Economy PMI Falls Electronics PMI Dipped Below 50 for the
Back to 50 Handle in Jan 2019 Third Consecutive Month in Jan 2019
Source: CEIC, Markit, Maybank KE Source: CEIC, SIPMM, Maybank KE
25/02/2019 7
Wild Card in 2019: #1 China Hard Landing
China’s Leverage Building Up, Driven by Crackdown on Shadow Banking Led to

Corporate and Household Debt Decline in Financing Starting June 2018
Source: Bloomberg, Maybank KE Source: Bloomberg, Maybank KE
25/02/2019 8
China’s PMI Numbers Falling, and Weak New Export
Orders Imply that Exports Will Start to Slow
Both Caixin & Official Manufacturing PMI China’s Exports Declined in Dec-18 as
Falling Frontloading Ends
Source: CEIC, National Bureau of Statistics, Maybank KE Source: CEIC, Maybank KE
25/02/2019 9
China - Consumer Sentiments Deteriorating Amid
Trade War
China’s Passenger Car Sales Fell by -6% in Online Retail Sales Slowed in 4Q,
2018, the First Decline in Two Decades Weighed Down by Services
Source: CEIC, Maybank KE Source: CEIC, Maybank KE
25/02/2019 10
ASEAN Bank Loans – Rising in 2018 But Will US-China
Trade War Puncture Recovery in 2019?
11
Asia ex-Japan: GDP Components by Exports and
Domestic Demand
Gross Fixed Exports of Imports of

Real GDP Household Government
Capital Goods & Goods &
(as % of GDP) Consumption Consumption
Formation Services Services
Singapore 35% 10% 25% 201% 172%
Hong Kong 67% 10% 21% 190% 189%
Vietnam 68% 6% 31% 120% 128%
Thailand 51% 15% 24% 77% 69%
Taiwan 55% 14% 22% 76% 68%
Malaysia 55% 13% 25% 71% 63%
Philippines 69% 11% 31% 60% 70%
Korea 48% 15% 30% 55% 51%
Indonesia 54% 8% 33% 22% 21%
India 56% 11% 31% 20% 22%
China 39% 15% 43% 19% 15%
Note: China’s GDP data by expenditure is only available in current prices. Goods and services trade numbers are derived
from the Current Account Balance.
Source: CEIC, Maybank Kim Eng estimates
12
ASEAN Capex Recovery: GFCF Rose by +6% in 9M18
(vs. +4.7% in 2017)
Investment in Construction Picking Up in Investment in Machinery & Equipment

Phil & Thai But Continues Decline in Sing Eased in Indo & Phil in 4Q18
25/02/2019 13
US-China Trade War:
Ceasefire or Broadening?
25/02/2019
A Chronology of the US-China Trade War –
Raising the Stakes
Source: ADB Asian Development Outlook 2018 Update, September 2018
15
Phase 2 & Potential Phase 3 of US Tariffs on China
Targeting Higher Share of Consumer Goods
Source: Peterson Institute for International Economics, Maybank KE
16
Trade War: US Exports to China Collapsing, Weighed
Down by Top Export Items Hit by China Tariffs
US-China Trade Deficit Widening Further US Top Export Items to China

in 2018 as US Exports to China Collapse
% of total
US Exports to %YoY Growth
exports
China
11M18 1Q18 2Q18 3Q18 Oct-18Nov-18
Total Exports 100 8.9 8.9 -7.5 -30 -32
Other Transport
Equipment 14.4 60 -5.3 5.4 65 19
(Aircraft)
Road Vehicles 8.1 -9.2 -17 -34 -40 -40
Oil Seeds and
Oleaginous Fruits 2.9 -27 -14 -92 -96 -99
(Soybeans)
Electrical
Machinery,
9.7 11 10.5 8.3 7.7 12.1
Apparatus &
Appliances
Professional
5.9 12 17 23 -1.4 5.3
Instruments
Petroleum,
Petroleum 5.6 100 112 9.0 -91 -94
Products
Source: CEIC, US Census Bureau, Maybank KE Source: CEIC, US Census Bureau, Maybank KE
25/02/2019 17
President Trump’s Approval Ratings Falling Since Dec
2018 on “Shutdown” Pain
Note: Net approval refers to approval minus disapproval. Last datapoint as of 30 Jan 2019.
Source: FiveThirtyEight, Maybank KE
18
President Trump’s Net Approval Rating Has Turned
Negative in Most Republican States
Note: Net approval refers to approval minus disapproval.

Source: Morning Consult, Maybank KE
19
IMF Scenario Analysis –Full Blown Trade War Will Hit
Both US and China Hard in 2019 & 2020
Real GDP in Trade Tensions Scenario (% deviation from control)
Source: IMF World Economic Outlook, Oct 2018
20
China Accounts for Almost Half of US Goods Trade
Deficit, But a Lower Share on a Value-Added Basis
Decomposition of US Goods Trade Deficit, Decomposition of US Goods Trade Deficit,

2017 Value-Added Basis, 2015
*refers to U.S. trade surplus with “Others”. Source: AMRO, based on data from China Customs, IMF and
Source: US Census Bureau, AMRO WIND
25/02/2019 21
ADB: Trade War Could Cut 0.5%-1% of China’s GDP,
But May Be Positive for ASEAN-5
A) Current Scenario B) US-China Escalation Scenario
(all trade measures implemented as (all goods traded between US & China
of Sep 2018, at 25% tariff rate) are imposed 25% tariff rate)
Note: Numbers in parenthesis refer to the impact in US$bn. ASEAN-5 includes Indonesia, Malaysia, Philippines, Thailand and Vietnam.
Source: ADB Asian Development Outlook 2018 Update, September 2018
22
CNY Likely Allowed to Depreciate Further, Setting
Off a Round of Depreciation of Asian Currencies
CNY has Rebounded by +3.4% from Its ASEAN Currencies Weaker on Trade War
Trough in Oct-18 Fears
25/02/2019 23
Trade Diversion - China’s Top Source of Imports
(2016) for Selected Products
Pork ($3.2bn) Wine ($2.4bn) Aluminium, waste or scrap ($2.2bn)
Share of Share of Share of

Country Country Country
imports imports imports
1 Germany 21% 1 France 42% 1 United States 31%
2 Spain 16% 2 Australia 24% 2 Hong Kong 18%
3 United States 13% 3 Chile 11% 3 Malaysia 15%
4 Denmark 10% 4 Spain 6.7% 4 Australia 15%
5 Canada 10% 5 Italy 5.6% 5 United Kingdom 7.1%
6 Netherlands 7.4% 6 United States 2.5% 6 Netherlands 2.9%
Cars ($44bn) Soybeans ($34bn) Planes, Helicopters, Spacecraft ($20.4bn)

1 Germany 27% 1 Brazil 46% 1 United States 62%
2 United States 27% 2 United States 41% 2 France 17%
3 Japan 17% 3 Argentina 9.5% 3 Germany 16%
4 United Kingdom 14% 4 Uruguay 2.0% 4 Brazil 1.8%
5 Slovakia 3.5% 5 Canada 1.8% 5 Canda 1.7%
Source: Observatory of Economic Complexity, Maybank KE
24
Trade Diversion to ASEAN? US Top Source of
Imports for Selected Products in Tariffs on China
Computers ($86.5bn) Integrated Circuits ($30.3bn) Semiconductor Devices ($13.6bn)

1 China 60.0% 1 Malaysia 36% 1 China 23%
2 Mexico 21.0% 2 Ireland 8.6% 2 Malaysia 22%
3 Thailand 5.8% 3 China 7.7% 3 South Korea 11%
4 Vietnam 1.7% 4 Vietnam 7.4% 4 Mexico 8.8%
5 Malaysia 1.4% 5 South Korea 5.3% 5 Japan 8.0%
6 Japan 1.2% 6 Philippines 4.8% 6 Thailand 4.8%
7 Philippines 1.0% 7 Japan 4.5% 7 Vietnam 4.0%
8 South Korea 0.8% 8 Israel 2.7% 8 Singapore 3.3%
9 Singapore 0.7% 9 Canada 2.5% 9 Germany 2.7%
10 Germany 0.6% 10 Thailand 2.5% 10 Philippines 2.2%
25
Trade Diversion to ASEAN? US Top Source of
Imports for Selected Products in Tariffs on China
Seats ($23bn) Other Furniture ($21.8bn) Rubber Tires ($13.1bn)

1 China 42% 1 China 45% 1 China 14%
2 Mexico 31% 2 Vietnam 15% 2 Canada 12%
3 Canada 6.7% 3 Canada 12% 3 Korea 11%
4 Vietnam 5.1% 4 Mexico 5.0% 4 Thailand 11%
5 United Kingdom 2.6% 5 Malaysia 3.3% 5 Japan 9.2%
6 Italy 1.5% 6 Italy 3.3% 6 Indonesia 6.5%
7 Germany 1.1% 7 Indonesia 2.3% 7 Mexico 5.6%
8 Indonesia 1.0% 8 India 1.6% 8 Germany 3.0%
9 Japan 1.0% 9 Germany 1.3% 9 Chile 2.3%
10 France 0.9% 10 Poland 1.2% 10 Brazil 2.2%
26
Trade Diversion to ASEAN? China’s Top Source of
Imports for Selected Products in Tariffs List on US
Petroleum Gas ($22.7bn) Ethylene Polymers ($13.4bn) Coal Briquettes ($11.4bn)

1 Turkmenistan 22% 1 Iran 15% 1 Australia 49%
2 Australia 15% 2 Saudi Arabia 13% 2 Indonesia 17%
3 Qatar 14% 3 South Korea 13% 3 North Korea 9.2%
4 Myanmar 11% 4 United Arab Emirates 9.5% 4 Mongolia 8.5%
5 United Arab Emirates 9.4% 5 Singapore 9.2% 5 Russia 7.2%
6 United States 5.2% 6 Thailand 8.5% 6 Canada 4.7%
7 Indonesia 3.9% 7 United States 5.0% 7 Philippines 2.6%
8 Malaysia 3.6% 8 Qatar 4.3% 8 United States 0.6%
9 Uzbekistan 2.7% 9 Japan 3.2% 9 New Zealand 0.3%
10 Kuwait 1.9% 10 Kuwait 2.3% 10 Vietnam 0.2%
27
Almost a Fifth of US Firms in China Surveyed Plans
to Relocate Manufacturing Facilities to ASEAN
If you have relocated or are considering to relocate China-based manufacturing facilities to other
countries because of the tariffs and/or concerns over the future of U.S.-China trade relations,
where are you relocating to? (Check all that apply)
Relocating China-based Manufacturing by Industry
Consumer products Southeast Asia 33.3%
Other industrial Southeast Asia 33.3%
Retail & distribution Elsewhere 30.8%
Aerospace Indian Subcontinent 27.3%
Technology &
Southeast Asia 26.7%
telecom hardware
Automotive Southeast Asia 25.0%
Chemicals Southeast Asia 23.1%
Note: Indian subcontinent refers to India, Bangladesh, Pakistan, Sri Lanka.

Source: ‘Impact of US and Chinese Tariffs on American Companies in China’ survey by AmCham China & AmCham Shanghai
28
Examples of Firms that Have Plans to Relocate or
Increase Production Facilities in ASEAN
Company Sector Note Beneficiary
Announced plans in late Nov 2018 to set up a plant in Batu Kawan, Penang
Micron Technology Semiconductors with an initial investment of RM1.5bn. Expected to break ground in first half Malaysia
of 2019
Announced plans in Oct to build a plant for manufacturing electric cars in
Dyson Electronics Singapore
Singapore, which will be ready by 2020
Manufacturer of Apple’s Invested up to $213.5m in a subsidiary in India since September and acquired
Hon Hai/Foxconn India/Vietnam
iPhone land use rights (250,000sqm) in Vietnam.
Manufacturer of Apple’s Announced that it has shifted parts of production for networking gear to Indonesia/
Pegatron Corp
iPhone Indonesia, and also exploring bases in Vietnam and India Vietnam
Manufacturer of earbuds Announced intention to shift production from China to Vietnam to evade
GoerTek Vietnam
for AirPods tariffs and political tensions
Manufacturer of
Thailand/
Cheng Uei chargers and connectors Announced intentions to shift production to ASEAN countries such as
Vietnam/
Precision Industry for iPhones and Android Thailand, Vietnam and the Philippines due to the trade war
Philippines
smartphones
Closed its US plant in early 2017 and switched to consignment production
Panasonic Electronics Malaysia
and exports from Malaysia
Internet of Things Has two Chinese factories but plans to set up production lines in Kuala
Kayamatics Malaysia
devices Lumpur and Penang in Malaysia
Supplies power Made a US$2.1bn offer in July to purchase a Thai affiliate in order to expand
Delta Electronics Thailand
components to Apple production
Makes headphones for
Merry Electronics Intends to move some of its production to Thailand from southern China Thailand
firms like Bose
Already produces in Thailand and the Philippines; has indicated growing Thailand/
New Kinpo Group Electronics
interest in its services since trade war Philippines
Source: Compiled by Maybank KE
29
Examples of Firms that Have Plans to Relocate or
Increase Production Facilities in ASEAN
Company Sector Note Beneficiary
Harley Davidson Motorcycles Shifted part of its processes to Thailand Thailand
Man Wah Holdings Furniture maker Purchased a sofa manuracturing and export firm in Vietnam for US$68mn Vietnam
Planning a 30% increase in exports in 2018 and 2019, and will invest about
Phu Thai Corp Furniture maker Vietnam
$10mn to expand its production lines.
Hung Hing Printing Printing Expanding to Hanoi, Vietnam with a new printing and packaging facility Vietnam
Brooks Running Sports shoe Announced in Oct 2018 that they are considering moving some operations to
Vietnam
Company manufacturer Vietnam
Produces shoes and Announced that it has been shifting production of handbags to Cambodia
Steven Madden Cambodia
accessories from China, with 15% of its handbags sourced from Cambodia this year
Announced to investors in Aug 2018 that productions are being moved to

H1 Corp Bike parts maker Vietnam
Vietnam due to the tariffs
Boosted its production base in Vietnam, and reducing its production in China
Tapestry Produces luxury goods Vietnam
to less than 5%
Consumer goods maker

Considering to shift manufacturing operations from China to Cambodia & Cambodia/
Vera Bradley (e.g. handbags &
Vietnam Vietnam
luggage)
30
Thailand – FDI into Manufacturing Cluster Firming
and Expectations for Purchasing Orders Rising
Net FDI in Manufacturing in 9M18 Purchasing Order Expectations for the

Already Double the Total Amount in 2017 Next 3 Months Remain High
Source: CEIC, Bank of Thailand, Maybank KE Source: CEIC, Federation of Thai Industries, Maybank KE
25/02/2019 31
FDI into Manufacturing in Vietnam, Malaysia and
Philippines Recovering; FDI Skipping Indonesia
32
A “Tech War”: USTR Accuses China of Violating US
Intellectual Property
Findings Details
A) China's Unfair Technology Transfer Regime
New energy vehicle sector: US firms cannot enter China unless they partner in a JV with foreign
Foreign ownership restrictions ownership capped at 50%
(JV requirements and foreign
equity limitations ) Aviation sector: China pressures JVs and technology transfer in exchange for sales of aircraft &
aircraft components to Chinese SOEs that dominate the market
Often unclear language in Chinese licensing and business registration forms
Administrative licensing and
review processes Require the discolosure of sensitive technical information in exchange for necessary administrative
approvals
B) China's Discriminatory Licensing Restrictions
Legal framework mandates that all indemnity risks be borne by the foreign technology transferor, and
Foreign licensing restrictions
all rights in technology improvements belong to the party making the improvements
C) China's Outbound Investment Regime
Includes policies that encourage outbound investment to support the development of strategic
"Made in China 2025" programme
industries (IT, integrated circuits, AI)
Impact on Chinese investment in China's active investment in US technology centers such as Silicon Valley, which are directed at
the US obtaining access to cutting-edge technology and recruiting talent in to China
China unfairly targets US technology with the target of achieving dominance in strategic sectors
Non-reciprocal treatment of US firms/investments in Chna - US faces restrictive requirements and
China's "unreasonable" outbound
barriers while Chinese firms invest in the US easily
investment regime
Enables Chinese firms to see higher market share in these industries at the expense of US firms;
undermine US firms' ability to sustain innovation; distort pricing in IP-intensive sectors
D) China's Theft of Intellectual Property and Sensitive Commercial Information
Unauthorized intrusions into US
Evidence that Chinese state-sponsored cyber operators support Beijing's strategic development goals
commercial computer networks
such as S&T advancement, military modernization, and economic development
and cyber theft of IP
Source: United States Trade Representative, Maybank KE
33
US-China “Cold War”: US Foreign Investment Risk
Provisions Under National Defence Authoritization Act
Implementation
Item Details
Timeline
CFIUS' jurisdiction expanded to any nonpassive foreign investment in US
business that deal with "critical technology", "critical infrastructure" or Up to 18 months
personal data of US citizens
CFIUS will also review real estate transactions (including leases, sales and
CFIUS scope of power Rulemaking
concessions) involving air or maritime ports or areas close to sensitive US
required
government facilities
Gives CFIUS authority to initiate its own investigations, rather than waiting for
a buyer to seek approval
CFIUS extended formal Committee's review period extended from 30 to 45 days, and authorizes CFIUS
Immediate effect
timeline for review to extend further by 15 days "in extraordinary circumstances"
Indirect investments by foreign persons through investment funds will not be
CFIUS clarification for
subject to CFIUS' jurisdiction on the condition that the foreign person is a Up to 18 months
investment funds
limited partner and the fund is "managed exclusively" by US persons
Revamp export controls to govern the types of US technologies that are sent
Export controls
overseas
Requires annual report on China to gather information on Chinese government
efforts to influence US "media, cultural institutions, business, and academic & Up to 18 months
Countering Chinese policy communities"
influence Limits funds by the Department of Defense for Chinese language programmes
at US universities that host Confucius Institutes
Bolster defense ties with India and Taiwan
Senate had voted in June to reinstate the initial Commerce penalty on ZTE
Weaker stance on ZTE (banning US firms from selling to ZTE), but the bill was watered down to allow
ZTE to buy US parts and sell to US consumers (but not to US government)
Source: Various sources, compiled by Maybank KE
34
Wild Card in 2019: #2 Big Tech Backlash Intensifies
Events Details
The EU slapped Google with a record US$5bn antitrust fine in July 2018 for abuse of its Android dominance by requiring
handset manufacturers to install its Google Search and Chrome apps.
The EU is planning to impose a “link tax” on Google. This would grant publishers copyright over content shared online
via Facebook, YouTube and sites that aggregate articles such as Google News. Google would have to compensate
publishers if the legislation is passed, and has warned it may have to shut down Google News in EU countries.
EU regulations
on tech firms The EU launched a probe of Amazon's business model in Sep 2018, investigating its dual role as competitor and host to
third-party merchants that sell via its websites. The probe was launched even before a complaint was filed.
Facebook may face a fine of up to $1.6bn for breaching the General Data Protection Regulation (GDPR) in the EU, after
discovering a security bug that allowed hackers to access information to around 50 million accounts. The Irish Data
Protection Commission is looking into whether to open a formal investigation following the discovery in Sep 2018.
In Oct 2018, the US banned exports to Chinese semiconductor firm Fujian Jinhua, citing "significant risks" that the
Chinese firm's new memory chip capacity will threaten US' national interests. The US Department of Justice also issued
indictments against Fujian Jinhua and Taiwan-based United Microelectronics for stealing the trade secrets of Micron.
Starting 10 Nov, the US Committee on Foreign Investment (CFIUS) subjected foreign investment (including non-
controlling ones) in 27 industries - mainly tech such as semiconductors, telecommunications, missile technology, aircraft
and batteries - to stricter reviews and vetting.
The Trump administration is looking to impose stricter export-control rules on high-tech items, publishing a list of new
US-China digital technologies that includes artificial intelligence and robotics for public comment in Nov 2018.
cold war
China's ZTE Corp, a telecommunications equipment maker, was slapped with a 7-year components ban by the US earlier
this year. It was allowed to resume purchases of US products after a revised settlement of a $1bn fine.
USTR's latest report published on 20 Nov accused China of:
1) Increasing frequency of Chinese cyber-enabled theft of IP and sensitive commercial information
2) Unfair technology transfer regime for US firms in China
3) Using outbound investment to obtain cutting-edge technologies and IP and generate large-scale technology transfers
35
China’s Investment to US Collapsing, While
Investment to ASEAN Sliding on Belt & Road
Backlash
China’s Investment to US vs. ASEAN ASEAN May Benefit from the Diversion in
Investment
Source: China Global Investment Tracker, Maybank KE Source: China Global Investment Tracker, Maybank KE
25/02/2019 36
Restricting Services Trade – Curbs on Chinese
Researchers/Students/Travel May Reduce US Surplus
Largest US Services Trade Surplus is with Rising Service Trade Surplus with China
China
25/02/2019 37
Diversion in Tourism – Chinese Visitor Arrivals
Rising in ASEAN But Falling in US
Top Ten Destinations for Chinese Tourists – US Chinese Tourists in US Declining Since 4Q17,
Ranks Seventh But Rising Strongly in ASEAN in 5M2018
Visitor Arrivals from China
Country CAGR (2011 to
Person th (2018)
2018)
Hong Kong 51,038 +8.9
Thailand 10,536 +30
Japan 8,380 +35

Vietnam 4,966 +20
South Korea 4,790 +12
*Singapore 3,228 +13
*United States 3,174 +20
Taiwan 2,696 +6.1

*Malaysia 2,282 +11
*Indonesia 2,093 +24
Philippines 1,255 +26

*Refers to 2017 numbers, and CAGR between 2011 and 2017. Source: CEIC, Maybank KE
25/02/2019 38
China Tourism Boom: Losing Altitude
ASEAN’s China Visitor Arrivals Slumping China Visitor Arrivals Across ASEAN
in Late 2018 (%YoY)
Philippi
Thailand Vietnam Singapore Cambodia Malaysia
nes
2016 +10.3 +51.4 +36.0 +19.5 +37.7 +26.7
2017 +12.0 +48.6 +12.7 +45.9 +43.3 +7.4
1Q18 +30.2 +42.9 +9.7 +85.3 +54.5 +40.3
2Q18 +21.3 +29.2 +13.6 +65.7 +27.5 +31.3
3Q18 -8.8 +18.3 +5.0 +63.5 +23.1 +31.2
4Q18 -10.5 +7.9 +14.2
Oct-18 -19.8 +20.0 +0.8 +73.4 -3.0
Nov-18 -14.6 +9.0 -12.4 +53.4 +23.0
Dec-18 +2.8 -2.0 +25.1
Jan-19 -10.7
Note: Data up to Nov-18. Malaysia excluded as latest data available Source: CEIC, Maybank KE
is Sep-18.
25/02/2019 39
Number of Chinese Students Heading to US Slowing
and Stay Rate for Graduates Falling
Growth of Chinese College and University Stay Rate of Chinese Temporary Visa Holders
Students in US Slowing with Doctorates Declining Since 2013
Source: Open Doors, Statista, Maybank KE Source: National Science Foundation Survey of Earned Doctorates,
Maybank KE
25/02/2019 40
Australia and Japan Seeing Surge in Chinese Students
Australia Seeing Double-Digit Growth in Chinese Students in Japan Grew by +9% in

Chinese Students 2017, Following Declines in 2014/15
Source: Hurun Research Institute, Statista, Maybank KE Source: Japan Student Services Organization, Maybank KE
25/02/2019 41
Trade War is Deflationary for Third Countries –
Inflation Contained Except for the Philippines
Headline CPI,
May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19
%YoY
Indonesia 3.2 3.1 3.2 3.2 2.9 3.2 3.2 3.1 +2.8
Malaysia 1.8 0.8 0.9 0.2 0.3 0.6 0.2 0.2
^Philippines 4.6 5.2 5.7 6.4 6.7 6.7 6.0 5.1 +4.4
Singapore 0.4 0.6 0.6 0.7 0.7 0.7 0.3 0.5
Thailand 1.5 1.4 1.5 1.6 1.3 1.2 0.9 0.4 +0.3
Vietnam 3.9 4.7 4.5 4.0 4.0 3.9 3.5 3.0 +2.6
Korea 1.5 1.5 1.1 1.4 2.1 2.0 2.0 1.3 +0.8
China 1.8 1.9 2.1 2.3 2.5 2.5 2.2 1.9
India 4.9 4.9 4.2 3.7 3.7 3.4 2.3 2.2
*Hong Kong 2.1 2.4 2.4 2.3 2.7 2.7 2.6 2.5
Taiwan 1.8 1.4 1.8 1.5 1.7 1.2 0.3 0.0
^Philippines rebased its CPI numbers to 2012=100 starting Mar 2018.

*Hong Kong numbers refer to Composite CPI.
42
Fed Rate Hikes & “Twin Deficits”
25/02/2019
A Possible Fed “Pause” in Late 2019 Would be
Bullish for Twin Deficit Countries (Indo & Phil)
FOMC Dot Plot in Sep Meeting (2 in 2019, 1 in Current Account Deficit Widening in Indonesia
2020) vs. Maybank View (2 in 2019, 0 in 2020) and the Philippines
Source: Bloomberg, Maybank KE estimates Source: CEIC, Maybank KE
25/02/2019 44
“Twin Deficits” Philippines & Indonesia Under
Pressure But Recovered on Fed “Pause” Hopes
More Discriminating Currency Sell-off– PHP & “Tantrums” Yet Again for Indo & Phil
IDR Weaker; SGD & THB Resilient
25/02/2019 45
“Inverted” US Yield Curves Often Accurate
Predictor of Recessions: Next Recession 2020?
Note: Last datapoint is as of 6 Feb 2019.

Source: Bloomberg, Maybank KE
46
Policy Rate Forecast – Smaller Rate Hikes in 2019
(Indo +50bps, Thai +25bps)
Policy Rate (%)
2016 2017 2018 2019F 2020F
Indonesia 4.75 4.25 6.00 6.50 6.50
Malaysia 3.00 3.00 3.25 3.25 3.25
Philippines 3.00 3.00 4.75 4.75 4.00
Singapore 0.97 1.50 1.89 2.20 2.20
Thailand 1.50 1.50 1.75 2.00 2.00
Vietnam 6.50 6.25 6.25 6.25 6.25
*BSP used new policy interest rate in Jun-16.

47
Foreigners Turn Positive on ASEAN Equities in
2019, Still Negative on Bonds (Except Indonesia)
Net Foreign Investment Flows in Equities (USD mn)
2012 2013 2014 2015 2016 2017 2018 YTD2019

Indonesia 1,712 -1,806 3,766 -1,580 1,259 -2,960 -3,656 1,013
Malaysia 4,432 1,136 -2,011 -5,068 -637 2,455 -2,885 261
Philippines 2,548 678 1,256 -1,194 83 1,095 -1,080 425
Thailand 2,504 -6,211 -1,091 -4,372 2,240 -796 -8,913 263
Vietnam 160 263 135 95 -345 1,163 1,887 65
India 24,548 19,754 16,162 3,274 2,903 8,014 -4,557 222
Net Foreign Investment Flows in Bonds (USD mn)

2012 2013 2014 2015 2016 2017 2018 YTD2019
Indonesia 4,852 4,583 10,633 7,621 7,653 12,062 3,463 1,838
Malaysia 8,796 2,475 2,564 4,597 1,851 -621 -4,539
Philippines -285 1,218 -372 1,553 812 440 4,620*
Thailand 29,281 14,078 6,492 -644 9,455 10,621 8,855 -136
India 6,862 -8,489 26,252 7,560 -6,459 22,970 -6,745 -672
Note: Numbers last updated on 7 Feb 2019. *Philippines data is as of end September.
Source: Bloomberg, Maybank KE
48
Singapore: Bear Markets & Recessions – Current
Economic Cycle
Singapore’s GDP and STI Index Trend STI Trending Down in Second Half of
Closely 2018 as Growth Slows
Source: Bloomberg, CEIC, Maybank KE Source: CEIC, Maybank KE
25/02/2019 49
STI vs. GDP Growth in Past Recessions
50
The Revenge of “Original Sin” – Rise of Foreign
Currency Borrowings in Indonesia & Philippines
Indo and Phil Have Seen an Increase in Indonesia – “Original Sin” Index Climbing
“Original Sin”; No Rise in Thai, Mal or India Since 2014
Source: Bloomberg, Maybank KE estimates Source: Bloomberg, Maybank KE estimates
25/02/2019 51
“Original Sin” Index - No Meaningful Increase in
Thailand, Malaysia and India
Source: Bloomberg, Maybank KE estimates
52
Thailand and Indonesia Have Shown Strongest
Improvement Since the 2013 Taper Tantrums
Divergent Current Accounts – Ballooning Indo’s Foreign Reserves Recovered to US$120bn

Surplus in Thai, Deteriorating in Phil & Indo in Feb-19 from Low of $115bn in Sep-18
25/02/2019 53
Foreign Ownership of Malaysia Fell Sharply After
Ban on Trading of Non-Deliverable Forwards (NDFs)
Foreign Ownership of Outstanding Government FX Reserves Cover to Imports & Short-Term

Bonds Still High in Malaysia & Indonesia External Debt in GFC, Tantrums and Current
Short-term External Debt
Import Cover
Cover
Taper Taper
GFC – GFC -
tantrum - Current tantrum Current
2009 2009
2Q13 - 2Q13
Indonesia 8.2 6.2 7.7 2.7 2.2 2.4
Malaysia 9.4 8.1 5.6 2.0 1.4 1.0
Philippines 12.3 16.0 8.3 11.1 5.3 5.6
Singapore 9.2 8.4 9.3 0.3 0.3 0.3*
Thailand 12.4 8.0 9.9 4.2 2.7 3.1
Vietnam 2.7 2.4 3.1 0.5 0.4 0.4
India 12.1 6.2 8.7 1.0 0.6 0.7
Note: Short term external debt series for Philippines was revised
starting from 2013. *Ratio for Singapore may not be meaningful given
Source: CEIC, Maybank KE its role as an international financial center.
Source: CEIC, Maybank Kim Eng estimates
25/02/2019 54
Indonesia - Current Deficit and Trade Deficit
Worsening
Current Account Deficit Widened to 3.6% Trade Deficit Widened to a Historical

of GDP in 4Q18 High (2% of GDP) in 4Q18
25/02/2019 55
Indonesia - Fuel Subsidies and Rising Oil Prices is
Widening the Trade Deficit
Subsidized Diesel and Gasoline Prices Oil & Gas Trade Deficit Widening as Imports
Unchanged Despite Rising Global Oil Prices Outpace Exports
25/02/2019 56
Indonesia - Booming E-Commerce Sector May Also
be Widening the Trade Deficit
Imports of Consumer Goods Continue to Retail Sales Index Rose by +3.7% in 2018,
Accelerate at Double-Digit Pace Slower than Imports of Consumer Goods
25/02/2019 57
Indonesia: Popular Online Items Such as Clothing,
Footwear and Cosmetics Surging by Double-Digits
^Photographic
*Essential Oils and
Apparatus,
Perfumery Clothing Footwear Furniture Traveling Goods
Equipments &
Materials
Optics
USD mn USD mn USD mn USD mn USD mn USD mn
2013 1,439 702 435 379 394 203
2014 1,383 667 408 346 367 162
2015 1,275 582 418 330 347 149
2016 1,342 567 489 341 345 210
2017 1,404 738 611 467 443 322
8M18 1,155 665 486 366 354 268
%YoY %YoY %YoY %YoY %YoY %YoY
2013 +20.5 +14.0 +12.4 +3.5 +0.8 +12.2
2014 -3.9 -5.0 -6.1 -8.7 -6.9 -20.1
2015 -7.8 -12.8 2.4 -4.8 -5.2 -8.3
2016 +5.3 -2.6 +17.0 +3.3 -0.8 +41.2
2017 +4.6 +30.1 +24.8 +37.0 +28.4 +53.5
11M18 +23.6 +36.2 +23.2 +20.4 +26.9 +32.2
*Includes essential oils, perfumery, cosmetics, toilet preparations and soap.

^Includes cameras, photographic equipment, optical goods, watches & clocks, etc.
58
Balance Sheet & Leverage Ratios in ASEAN-5 (Asian
Crisis, Global Financial Crisis & Current)
Indonesia Malaysia Philippines Singapore Thailand

As % of GDP
2Q97 4Q07 Latest 2Q97 4Q07 Latest 2Q97 4Q07 Latest 2Q97 4Q07 Latest 2Q97 4Q07 Latest
Public Debt 72.5* 34.1 28.8 31.4 41.0 51.8 52.4 66.9 43.5 69.1 89.3 114 40.5^ 37.4 41.7
Govt debt – Foreign 26.3 14.4 11.3 3.1 2.9 1.5 23.3 30.8 16.3 - - - 8.8 3.0 0.9
External Debt 56.1 32.7 34.5 43.6 28.8 66.1 44.2 36.9 22.4 - 508 446 - 26.4 31.4
Household Debt - 10.9 16.3 - 63.6 84.2 - 2.0 9.5 68.0 63.5 70.8 - 51.7 77.5
Domestic Credit - 39.4 38.8 156 113 137 - 53.5 65.5 66.6 71.3 137 - 104.5 120
Foreign Bank
26.2 15.5 15.0 35.3 56.9 51.1 21.0 20.7 11.6 241 139 147 42.9 19.5 33.9
Claims
Corporate Debt - 14.7 21.9 - 58.2 68.4 - 36.8 42.9 - 103 117 99.8 46.4 47.5
Current Account -2.7 2.4 -2.7 -6.5 15.4 2.6 -3.5 5.4 -3.0 16.3 26 18.5 -6.2 5.5 7.6
Note: *Indonesia public/govt debt as at end 1997. **Indonesia foreign govt debt as at end 1996. ^ Thailand public debt as of 3Q97.
Malaysia household debt figures as at end of respective year. Indonesia and Philippines household debt estimated using
outstanding consumer loans. Thailand household debt includes loans from commercial and state banks, credit card companies,
saving corporations and other non-bank institutions.
International claims as of 2Q18 and corporate debt as of 1Q18.
Source: BIS, CEIC, World Bank, Maybank KE estimates
59
Balance Sheet & Leverage Ratios in Rest of AxJ
(Asian Crisis, Global Financial Crisis & Current)
China Hong Kong India Korea Taiwan

As % of GDP
2Q97 4Q07 Latest 2Q97 4Q07 Latest 2Q97 4Q07 Latest 2Q97 4Q07 Latest 2Q97 4Q07 Latest
Public Debt 20.9 29.3 46.3 - 1.2 0.1 66.3^ 71.4 67.4 8.0 27.7 38.2 24.9 32.1 36.2
Govt debt – Foreign 0.4 1.0 0.2 - - - 10.9^ 4.4 2.8 1.1 1.1 0.4 0.0 0.0 0.0
External Debt 13.7 11.1 14.0 - 343 459 23.7 17.7 20.1 29.8 31.8 27.3 - 23.1 31.8
Household Debt 0.2 19.3 51.3 48.3 50.5 71.0 2.2 9.7 10.2 56.0 76.2 100 52.0 82.7 87.1**
Domestic Credit 96.1 130 218 165 123 245 - 73.0 79.2 - 141 165 160 156 186
Foreign Bank
6.5 7.8 9.6 209 177 280 7.0 17.0 10.7 19.4 33.4 19.5 12.3 25.8 39.2
Claims
Corporate Debt 102 96.8 164 130 132 235 - - - 102 88.6 99.1 48.3 51.5 61.5
Current Account 4.9* 8.8 0.4 3.4* 11.5 3.5 -1.4 -1.0 -2.3 -1.9 1.9 4.6 1.5 11.1 12.8
Note: *China and Hong Kong CA balance as at 1Q98. **Taiwan household debt as of 4Q16. ^ India debt data as of 1Q97.
All international claims and corporate debt as of 4Q17.
Taiwan’s household debt includes non-profit institutions serving households.
Source: BIS, CEIC, World Bank, Maybank KE estimates
60
Country Slides
25/02/2019
Vietnam – Rising Export Powerhouse and FDI
Destination, Beneficiary from “Diversion”
Exports of Goods Recorded USD244bn in Largest Foreign Investors Include Japan,

2018, Nearly Equal to the Country’s GDP South Korea and Singapore
25/02/2019 62
Singapore – Manufacturing & Trade-Related Services
Weakening, Expect Supportive Budget 2019 (Feb)
Singapore’s Growth Slowed to +2.2% in 4Q Net Employment Outlook for 1Q19 Dips
as Services Lost Momentum After 3 Quarters of Upbeat Expectations
Source: CEIC, Maybank KE Source: CEIC, Manpower Group, Maybank KE
25/02/2019 63
Thailand – Private Consumption Robust as Retail
Sales Accelerate, But Visitor Arrivals Slowing
Retail Sales Surging, Boosted by Auto Sales Chinese Tourists Declining Following Phuket
and Online Sales Boat Accident in July 2018
25/02/2019 64
Thai Elections: Nomination of Princess as PM for Thai
Raksa Dramatically Changes the Political Equation
Prayut First Choice for PM in Latest Jan Poll Pheu Thai Party the Top Choice, But Thai Raksa
Chart May be Boosted by Royal PM Candidate
Name Party Share

Gen Prayut Chan-o- Palang Pracharath Party’s
1 26.2%
cha PM candidate
Pheu Thai (Chief, election
2 Khunying Sudarat 22.4%
strategy committee)
3 Abhisit Vejjajiva Democrat (Leader) 11.6%
Thanathorn
4 Future Forward (Leader) 9.6%
Juangroongruangkit
Gen Sereepisuth
5 Seri Ruam Thai (Leader) 7.3%
Temiyavej
6 Chadchart Sittipunt Pheu Thai 7.3%
7 Chuan Leekpai Democrat (Former PM) 3.3%
Pol Lt Gen Viroj
8 Pheu Thai (Leader) 2.3%
Pao-in
9 Anuthin Chanvirakul Bhumjaithai Party leader 1.2%
Deputy Prime
10 Minister Wissanu - 0.7%
Krea-ngam
Source: National Institute for Development Administration (Nida) poll (2-15 Jan), Bangkok Post, Maybank KE
25/02/2019 65
Malaysia – Fiscal Deficit to Narrow from 3.7% of GDP
in 2018 to 3.4% of GDP, But Oil Support May Wane
Malaysia’s Oil Trade Surplus Diminishing in Return of Dependence on Oil Prices with
Oct/Nov as Oil Prices Fall MYR30bn Special Dividend from PETRONAS
Source: CEIC, Bloomberg, Maybank KE * Excluding MYR30bn special dividend

Source: MOF Budget 2019, Maybank KE
25/02/2019 66
Philippines – Widening Current Account Deficit &
Falling FDI May Pressure Peso, Even as Inflation Cools
PHP Depreciation Seen During Periods of Philippines FDI Approvals Remain Weak, But
Current Account Deficit (’00 - ‘03) Net FDI Improving
25/02/2019 67
Philippines – Dampening Consumer Sentiments Amid
Weaker OFW Remittances
Consumer Expectation Survey Point to OFW Remittances Slumped to +3.1% in 11M18

Deteriorating Sentiments as Remittances from Middle East Plunged
Source: CEIC, BSP, Maybank KE Source: CEIC, Maybank KE
25/02/2019 68
Indonesia: Polls Suggest Jokowi Leading in All Regions;
PDIP & Golkar Ahead of Gerindra & Demokrat
Survei Network’s Latest Polls (14-22 Sep) Indikator Politik Survey: Party
Shows Widodo Leading in All Regions Preference
Party %
Widodo- Prabowo- Don't
PDI-P 23
Region Base* Ma’ruf Sandiaga Know/
Amin Uno Undecided Golkar 11
Gerindra 11
Jawa 57 53 26 22 Demokrat 7
PKB 6
Sumatra 21 45 44 11
PKS 4
Kalimantan 6 61 30 9 PPP 4
Nasdem 3
Sulawesi 8 59 27 14
Perindo 3
Maluku & Pan 2
4 76 12 12
Papua
Hanura 1
Bali & Nusa PBB 0
5 50 35 15
Tenggara PKPI 0
PSI 0
Total 100 53 30 17
Don’t know 25
Note: Region’s respondents as % of nationwide respondents. Note: Parties in red font represent nominating parties for Jokowi-
Amin, parties in blue for Prabowo-Uno.
Source: Survei Network, Reformasi, Maybank KE
Source: Indikator Politik, Reformasi, Maybank KE
25/02/2019 69
MSCI Country Valuation for Asia ex-Japan Countries
PE (x) EPS growth YoY (%) PB (x) DY (%)
2018 2019F 2020F 2018 2019F 2020F 2018 2019F 2020F 2018 2019F 2020F
India 22.1 18.5 15.5 6 20 19 2.9 2.7 2.4 1.4 1.6 1.8
Philippines 17.8 15.9 14.0 13 12 13 2.2 2 1.8 1.5 1.6 1.7
Indonesia 17.4 15.7 14.2 11 11 11 2.8 2.5 2.3 2.4 2.7 3.0
Malaysia 17 16.3 15.2 5 4 7 1.6 1.5 1.5 3.3 3.3 3.5
Hong Kong 16.3 15.0 13.8 1 8 9 1.3 1.2 1.1 3.0 3.2 3.5
Thailand 15.2 14.9 13.8 4 2 8 2 1.8 1.7 2.9 3.0 3.2
Taiwan 13.5 14.0 12.6 -2 -3 12 1.7 1.6 1.5 4.4 4.5 4.9
Asia ex-Japan 13.2 12.6 11.2 4 5 13 1.5 1.4 1.3 2.7 2.9 3.1
China 12.8 11.4 10.0 7 13 14 1.6 1.5 1.3 2.3 2.5 2.8
Singapore 12.5 12.0 11.2 14 4 7 1.2 1.2 1.1 4.5 4.5 4.8
Korea 9.1 10.0 8.9 -1 -9 13 1.0 0.9 0.8 2.4 2.5 2.7
Source: MSCI, Factset, Bloomberg, Maybank KE
70
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25/02/2019 71
Darkest Just Before The Dawn
MARKET OUTLOOK: MALAYSIA
Analyst
Nik Ihsan Raja Abdullah | Chartist | nikmohdihsan.ra@maybank-ib.com
MALAYSIA RESEARCH TEAM
President, Malaysian Association of Technical Analysts (MATA)

Board of Directors, International Federation of Technical Analysts (IFTA)
Full Members, United Kingdom Society of Technical Analysts (UK STA)
Summary
• Global growth to ease on tighter monetary
and financing conditions, plus the fallout
from the US-China
• Malaysian economy is going through

adjustments post-GE14.
• KLCI – 2019 is expected to be another

volatile year, we retain our defensive core
equity strategy.
Global Composite PMI is easing
Global Real GDP (% YoY) vs Global Composite PMI (Index)
54.5 4.3
54.0 4.1
53.5 3.9
53.0 3.7
52.5 3.5
52.0 3.3
51.5 3.1
51.0 2.9
Oct-Nov 2018
1Q 2015
2Q 2015
3Q 2015
4Q 2015
1Q 2016
2Q 2016
3Q 2016
4Q 2016
1Q 2017
2Q 2017
3Q 2017
4Q 2017
1Q 2018
2Q 2018
3Q 2018
Global GDP (% YoY, RHS) Global Composite PMI
Source: Bloomberg, MKE Economics Research

Tighter monetary and financing
Global Central Banks’ Monetary Policy Bias
15
"Tightening" Bias
10
(5)
"Easing" Bias
(10)
(15)
(20)
(25)
Feb-11
Feb-18
Jul-10
Jul-17
Mar-08
Mar-15
Oct-08
Oct-15
Aug-07
Jun-13
Aug-14
Dec-09
Nov-12
Dec-16
May-09
Sep-11
Apr-12
May-16
Sep-18
Jan-07
Jan-14
Source: Bloomberg, CEIC, MKE Economics Research

120
140
160
180
200
220
240
260
280
300
100
4Q 2001
2Q 2002
4Q 2002
2Q 2003
4Q 2003
2Q 2004
4Q 2004
Global Debt-to-GDP Ratio (%)
2Q 2005
4Q 2005
2Q 2006
4Q 2006
Source: BIS (latest data up to 1Q 2018)

2Q 2007
Advanced Economies
4Q 2007
2Q 2008
4Q 2008
2Q 2009
4Q 2009
2Q 2010
4Q 2010
2Q 2011
4Q 2011
2Q 2012
4Q 2012
2Q 2013
4Q 2013
EM Economies
2Q 2014
4Q 2014
2Q 2015
4Q 2015
2Q 2016
4Q 2016
2Q 2017
4Q 2017
Post-GFC: Build-up of global leverage
Debt refinancing will be on the rise
Emerging Markets High Yield Corporate Debt Maturities (USDb)
140
120
100
80
60
40
20
0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Brazil China Turkey Russia Argentina S. Africa Other
Source: Bloomberg
Rising financial market & currency
volatility
S&P500 Cyclically-Adjusted PE Ratio, US 10-Year Treasury Yield
50 18
45 16
40
14
35
12
30
10
25
8
20
6
15
4
10
5 2
0 0
Jan-11
Jan-18
Jan-20
Jan-27
Jan-34
Jan-41
Jan-48
Jan-55
Jan-62
Jan-69
Jan-76
Jan-83
Jan-90
Jan-97
Jan-04
S&P500 Cyclically-Adjusted PE Ratio (x) US Treasury 10-Year Yield (% p.a., RHS)
Source: Bloomberg, http://www.econ.yale.edu/~shiller/data.htm

Dow Jones Industrial Average Weekly Candlestick
Fallout from trade war
Global Trade Volume Index vs Global Composite PMI for New Exports Orders
7 56
6 55
5 54
4 53
3 52
2 51
1 50
0 49
(1) 48
Mar-15
Mar-16
Mar-17
Mar-18
Nov-15
Nov-16
Nov-17
Nov-18
May-15
Jul-15
Sep-15
May-16
Jul-16
Sep-16
May-17
Jul-17
Sep-17
May-18
Jul-18
Sep-18
Jan-15
Jan-16
Jan-17
Jan-18
Global Merchandise Trade Volume Index (% YoY) Global Manufacturing PMI - New Export Orders (RHS)
Source: Bloomberg, CEIC

Trade war impact Change in 2019 Real GDP Growth
(ppt)
(0.1) WORLD
• US tariffs on imported (0.2) US
washing machines,
(0.6) China
solar panel
components, steel, 0.0 Eurozone
aluminum &
Tariffs retaliatory tariffs by 0.0 Japan
already key trading partners India

0.1
(EU, Canada, Mexico,
implemented China) Korea
(0.1)
• “Tit-for-Tat” tariffs
0.1 Malaysia
between US & China
involving USD250b 0.2 Thailand
China products and
USD110b US products 0.1 Indonesia
0.2 Philippines
(0.6) (0.5) (0.4) (0.3) (0.2) (0.1) 0.0 0.1 0.2 0.3
Source: IMF World Economic Outlook (Oct 2018)

Trade war impact Change in 2019 Real GDP Growth
(ppt)
• US tariffs on imported washing machines,
solar panel components, steel, aluminum
& retaliatory tariffs by key trading (0.8) WORLD
Tariffs already partners (EU, Canada, Mexico, China)
implemented • “Tit-for-Tat” tariffs between US & China (0.9) US
involving USD250b China products and
USD110b US products (1.4) China
(0.3) Eurozone
(0.5) Japan
• Hike in US tariff on USD200b imports
from China to 25% in Mar 2019 from 10%
(0.6) India
in Sep 2018
Potential tariffs to • US tariffs on additional USD267b imports
be implemented from China (0.9) Korea
• US tariffs of 25% on all imported autos &

(0.2) Malaysia
auto parts; retaliation by affected trading
partners
(0.2) Thailand
Market sentiment; (0.8) Indonesia

investors, business • Economic & earnings growth outlook
& consumer • Business capex; consumer spending (0.4) Philippines
confidence (1.6) (1.4) (1.2) (1.0) (0.8) (0.6) (0.4) (0.2) 0.0
Source: IMF World Economic Outlook (Oct 2018)

Risk of oil glut?
40 2.0
30 MKE’s 2019 target: 1.5
20 USD65/bbl 1.0
10 0.5
0 0.0
(10) (0.5)
(20) (1.0)
(30) (1.5)
(40) (2.0)
(50) (2.5)
2001
2016
2018YTD
1996
1997
1998
1999
2000
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2017
World Crude Oil Supply-Demand Balance (mbpd) % Chg in Avg Crude Oil Price (Brent, USD/bbl, LHS)
Brent Crude Oil Weekly Candlestick Chart
Political and socio-economic
uncertainties in Europe
Downside to China’s previously
debt-driven growth
120 25
100
80 20
60
40 15
20
0 10
(20)
(40) 5
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
YTD
Total Amount of Social Financing Real GDP Growth (RHS)

Hang Seng Index Weekly Chart
Malaysia – A year of transition
Real GDP sub

5%
Domestic Diminishing net

demand is external
slowing down demand
Source: Various (including Budget 2019 Speech & MoF Economic Report 2018/2019)
Deceleration in net external
demand growth
Moderation in
global
economic and
trade growth
Factors
affecting
external
trade growth
Subdued
outlook on
the prices of
key export
commodities
Federal Government’s Oil-Related
Revenues
90 45
39.7 40.3 Include MYR30b
80 PETRONAS 40
36.8 37.0
35.4 35.8 special dividend
33.7
70 35
31.2 30.9*
29.1
30.0
60 30
50 25
20.9 21.7
40 20
15.7 19.5**
14.6
30 15
20 10
10 5
31.0
45.5
51.7
63.4
64.0
56.4
66.3
70.1
66.6
66.1
45.8
31.0
34.6
51.2
81.0
0 2013 0
2018E
2019E
2005
2006
2007
2008
2009
2010
2011
2012
2014
2015
2016
2017
MYRb (LHS) % of Total Revenues
* Include MYR30b PETRONAS Special Dividend

** Exclude MYR30b PETRONAS Special Dividend
Source: Ministry of Finance, Budget 2019
Malaysia - Long-Term Foreign
Currency Debt Rating
Moody's Standard & Poor's Fitch
Date Ratings Outlook Date Ratings Outlook Date Ratings Outlook
07-Dec-18 A3 Stable
11-Jan-16 A3 Stable 27-Jul-15 A- Stable 30-Jun-15 A- Stable
20-Nov-13 A3 Positive 24-Jul-11 A- Stable 30-Jul-13 A- Negative
24-May-06 A3 Stable 15-May-08 A- Stable 10-Nov-08 A- Stable
16-Dec-04 A3 Stable 31-Jul-07 A- Positive 20-Nov-06 A- Positive
29-Sep-04 Baa1 Positive 08-Oct-03 A- Stable 08-Nov-04 A- Stable
25-Sep-02 Baa1 Stable 20-Aug-02 BBB+ Stable 07-Aug-02 BBB+ Stable
24-Jun-02 Baa2 Positive 04-Mar-02 BBB Positive 07-Dec-99 BBB Positive
17-Oct-00 Baa2 Stable 04-Apr-01 BBB Stable 09-Sep-99 BBB- Positive
12-Jul-00 Baa3 Positive 01-Sep-00 BBB Positive 26-Apr-99 BBB- Neutral
03-Dec-98 Baa3 Stable 10-Nov-99 BBB Stable 09-Sep-98 BB Negative
14-Sep-98 Baa3 Negative 15-Sep-98 BBB- Negative 13-Aug-98 BBB- Neutral
23-Jul-98 Baa2 Stable 24-Jul-98 BBB+ Negative
04-Jun-98 A2 Negative 17-Apr-98 A- Stable
21-Dec-97 A2 Stable 23-Dec-97 A Stable
15-Mar-95 A1 Stable 29-Dec-94 A+ Stable
20-Jan-95 A2 Positive 13-Sep-90 A- Stable
15-Mar-93 A2
12-Mar-90 A3
18-Nov-86 Baa1
Sources: International Rating Agencies, Bloomberg

Malaysian equities: Yearly and cumulative
foreign net buy/ (sell) (MYR b)
40
33.8
31.4
30 26.9
20 15.9 17.7
15.9 13.7 14.7
10.6
10 7.2
4.1 3.4
1.8 2.4
0
(3.1)
(10) (6.9)
(19.7) (11.9)
Yearly Cumm
(20)
2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD
MYR b
Strategy
EQUITY
Equity: Trade the volatility
2018:
KLCI -6%
(MYR), -
Hence, 8% (USD)
defensive Challengi
strategy, ng global
& trade outlook
volatility
2019 YE
Target:
1,760
Commodit Domestic
y price politics
fluctuatio and
n policies
Rating
agencies
review
KLCI vs. region in local currencies
India 6%
Indonesia -3%
Malaysia -6%
Taiwan -9%
Singapore -10%
Thailand -11%
Japan -12%
Hong Kong -14%
Korea -17%
Shanghai -25%
ShenZhen -33%
-40% -35% -30% -25% -20% -15% -10% -5% 0% 5% 10%

KLCI vs. region in USD terms
India -3%
Malaysia -8%
Indonesia -9%
Japan -10%
Thailand -11%
Taiwan -11%
Singapore -12%
Hong Kong -14%
Korea -21%
Shanghai -29%
ShenZhen -37%
-40% -35% -30% -25% -20% -15% -10% -5% 0%

Thematics
Revisiting More
M&A and
trough enforcement
privatisations
valuations on illegals
Khazanah &
Interest rate Construction
LTH’s
cut? looks east
divestments
“Beneficiaries”
MYR volatility
of trade war
Revisiting Large caps’ P/B
trough
valuations P/B @ 4 Jan 2019 P/B @ GFC low (29 Oct 2008)
1.8
1.6
1.4
27 stocks under
1.2
our coverage
where their P/B 1.0
are already at, or 0.8

have fallen below 0.6
their GFC lows.
0.4
0.2
0.0
AMMB CIMB Gamuda Genting Genting SP Setia AirAsia MISC YTL Power
Holdings Malaysia
Source: Bloomberg (data), Maybank KE (compilation)

Impact of 25bps cut in interest
Interest rate rates on banks’ earnings
cut?
AFG AMMB BIMB CIMB HLBK MAY PBK RHBC
Base case: No CASA as at end-

37.3% 21.8% 30.4% 33.3% 25.3% 33.3% 25.5% 26.9%
3Q18
change in OPR at
3.25%.
Floating rate
90.0% 73.9% 90.5% 83.7% 80.0% 71.0% 76.4% 85.3%
loans/total loans *
Any changes will
impact banks. Loan/deposit ratio
95.5% 99.0% 91.0% 95.1% 81.7% 94.6% 93.9% 95.9%
*
REITs and high

yield stocks may Impact of 25 bps
cut in i/r on (3.9%) (1.3%) (3.4%) (2.4%) (0.7%) (2.1%) (2.0%) (1.8%)
benefit. earnings
Source: Maybank KE’s estimates (base data from banks, companies)

MKE Universe: Yield >5%
US Dollar Index Monthly Chart
USDMYR Monthly Chart
Earnings sensitivity analysis
MYR
volatility to changes in USD/MYR
Base
Impact to NP
Revenue in # COGS in USD assumption
Company from 1% chg in
USD (%) (%) for FY19
USD/MYR (%)
(USD/MYR)
Weak MYR is Gloves
“+ve” for Gloves Top Glove 98 35 4.10 4.8
and Technology. Kossan 97 45 4.10 3.2
Hartalega 98 55 4.10 2.1
Technology
ViTrox Corp 85 30 4.15 1.5
MMS Ventures 40 10 4.15 0.5
Inari Amertron 95 70 4.15 1.8
Globetronics 65 70 4.15 0.7
V.S. Industry 30 50 4.15 0.4
Earnings sensitivity analysis
MYR
volatility to changes in USD/MYR
Base Impact to NP
Revenue in # COGS in assumption from 1% chg
Company
USD (%) USD (%) for FY19 in USD/MYR
(USD/MYR) (%)
Strong MYR is Automotive
“+ve” for Auto and UMW Holdings - 20-25 4.15 3.0
Media. Tan Chong - 20-25 4.15 7.0
Berjaya Auto - - - -
MBM Resources - 10 4.15 2.0
Pecca Group - 60 4.15 3.0
Perodua - 5 4.15 0.5
Media
Astro - 30-35 4.10 4.9
Media Prima - 5-10 4.00 0.7
Star Media - 15-20 4.00 1.1
MCIL - 15-20 4.00 2.1
FBM100 Index companies
M&A and
privatisation with enlarged net
debt/EBITDA of <5x
Company Enlarged net Company Enlarged net Company Enlarged net
debt/EBITDA (x) debt/EBITDA (x) debt/EBITDA (x)
Lotte Chemical Titan
(1.5) Cahya Mata Sarawak 2.1 IHH Healthcare 3.1
Holding
GD Express Carrier (0.9) Axiata Group 2.2 VS Industry 3.2
Malaysian Pacific Industries 0.2 Boustead Plantations 2.2 Tenaga Nasional 3.5
Sunway Construction Group 0.2 Hibiscus Petroleum 2.4 Unisem (M) 3.6
SKP Resources 0.3 AEON Co (M) 2.5 TIME dotCom 3.6
Kerjaya Prospek Group 0.3 Astro Malaysia Holdings 2.5 Sime Darby 3.8
Matrix Concepts
UOA Development 0.3 2.5 Serba Dinamik Holdings 4.2
Holdings
Petron Malaysia Refining &
0.4 MISC 2.6 AirAsia Group 4.3
Marketing
Pos Malaysia 0.8 Telekom Malaysia 2.6 Genting Malaysia 4.3
Fraser & Neave
Hengyuan Refining Co 0.9 Maxis 2.7 4.3
Holdings
Petronas Chemicals Group 1.0 Petronas Gas 2.7 Malakoff Corp 4.4
Petronas Dagangan 1.4 SP Setia 2.8 FGV Holdings 4.8
DRB-Hicom 1.4 DiGi.Com 2.9 Scientex 4.9
Padini Holdings 1.8 Westports Holdings 3.1
Bursa Malaysia Property
M&A and
privatisation Index with P/NTA of <1x and
net cash over market cap
Property Net cash Mkt cap Net cash/mkt Property Net cash Mkt cap Net cash/mkt
P/NTA (X) P/NTA (X)
company (MYRm) (MYRm) cap company (MYRm) (MYRm) cap
A B C=A/B A B C=A/B
Sapura Resources 0.2 149.1 90.7 1.6 Ayer Holdings 93.1 344.3 0.3
0.7
Farlim Group 87.1 63.1 1.4 Amverton 74.8 321.3 0.2
0.4 0.6
Plenitude 378.9 534.1 0.7 Acme Holdings 15.3 66.7 0.2
0.3 0.9
SHL Consolidated 355.3 532.7 0.7 Tambun Indah Land 72.1 325.0 0.2
0.7 0.5
Daiman
Land & General 181.1 401.4 0.5 124.4 623.3 0.2
0.4 Development 0.5
Amcorp Properties 132.4 301.5 0.4 Mah Sing Group 281.9 2,197.1 0.1
0.3 0.5
MUI Properties 69.8 166.7 0.4 KEN Holdings 12.7 114.8 0.1
0.7 0.4
Selangor Properties 730.1 1,962.1 0.4 Damansara Realty 8.0 73.2 0.1
0.8 0.5
KSL Holdings 251.4 707.0 0.4 UOA Development 341.9 3,871.8 0.1
0.3 0.9
Ivory Properties
32.5 102.9 0.3 Y&G Corp 15.6 185.4 0.1
Group 0.2 0.7
Karambunai Corp 34.0 491.0 0.1
0.6
Khazanah’s holdings in listed
GLIC Malaysian stocks
restructuring
Listed GLCs Khazanah's Market cap Khazanah's
stake holding
04-Jan-19 04-Jan-19 worth
Restructuring of (%) (MYR'm) (MYR'm)
GLIC – Khazanah Astro Malaysia 20.67% 7,091 1,466
Axiata 36.22% 34,470 12,485
CIMB Group 26.80% 53,848 14,431
IHH Healthcare 42.05% 47,705 20,060
Malaysia Airports 33.21% 13,307 4,419
Telekom 26.21% 9,695 2,541
Tenaga Nasional 28.76% 76,546 22,014
TimedotCom 11.19% 4,891 547
UEM Sunrise 66.06% 3,131 2,068
UEM Edgenta 69.14% 2,279 1,575
Bioalpha Holdings 12.46% 176 22
Total 255,650 82,985
LTH has divested MYR2.6b
GLIC equities to Urusharta Jamaah
restructuring
LTH to transfer
underperforming
assets to a SPV
Source: The Edge Daily, 3 jan 2019

Beneficiaries Trade diversion is happening
of trade war
Trade diversion is
happening.
Currently only
lower-end
production.
Beneficiaries More active enforcement
of against illegal ‘sin’ operators
enforcement
Amended Customs
Act 1967 and
Excise Act 1976
hiked fines and jail
terms.
Legal ‘sin’
industries: NFO,
tobacco, alcohol to
gain.
Sarawak State Budget
Construction
looks east Allocations (2015-2019)
Development Expenditure
(MYR b)
Operating Expenditure
14.0
Record 2019 12.0

budget for 2.8
10.0
Sarawak with
MYR11.9b 8.0
allocation (+45% 2.1 2.2 2.5
YoY). 6.0
1.8
9.1
4.0
6.0 5.9 5.7
2.0 4.6
0.0
2015 2016 2017 2018 2019
Sectors - Overweight
Automotive
•New mass-market models will likely push demand into 1H19.
•National Automotive Policy likely to be unveiled by end-1Q19.
Glove producers
•Healthy global glove demand.
•A balanced demand-supply environment.
•Project glove sector’s net profit to grow 13% and 10% in CY19 and CY20
respectively.
O&G
• OPEC+’s decision to cut output in 2019 for six months.
• PETRONAS’ Activity Outlook for 2019-21 shows activities are picking up.
Sectors - Overweight
Property developers (Tactical call)
•Should see improvement in property sales in 1H19.
•The launch of P2P house financing platforms.
•Concerns on record-high unsold stocks and a slower GDP have been
largely priced in.
Technology
•A transition year before 5G network rollout.
•Potential beneficiaries of trade wars.
Current Price: Target Price: % Returns
CONSTRUCTION 3.00 4.10 36%

Stock Name:
Cahya Mata Why Should We Invest?

Sarawak
• Beneficiary of acceleration in Pan
Borneo Sarawak Highway.
• Coastal & Second Link Road and State
Water Grid Supply may replenish order
book.
• More upside in store from Sacofa and
high ferrosilicon prices.
25/02/2019 14:28
CONSTRUCTION 3.91 4.20 8%

Stock Name:
Mega First Why Should We Invest?

Corporation
• Lao hydro power plant on track for
completion by end-2019.
• More upside from electricity sales
during testing period.
• Net profit to nearly double on
commissioning of power plant.
25/02/2019 14:28
REITS 1.28 1.55 21%

Stock Name:
YTL REIT Why Should We Invest?

• Resilient rental income from MY and JP,
contributing ½ to NPI.
• Earnings growth potential from AU
hotels post-refurbishment.
• More upside from strong pipeline of
assets from sponsor.
25/02/2019 14:28
AUTOMOTIVE 5.85 7.50 28%

Stock Name:
UMW Holdings Why Should We Invest?

• Toyota’s 2019 sales and margin
recovery not priced in.
• Mass market new launches to account
for 2/3 of sales in 2019.
• New models could lift margins.
25/02/2019 14:28
MEDIA 1.60 1.95 22%

Stock Name:
Astro Why Should We Invest?

• Valuations are cheap, way below global
Pay-TV average.
• Dividend yield high at >8% p.a. May
even rise to 10% p.a.
• AK buying ASTRO shares and a
potential privatization target.
25/02/2019 14:28
FINANCIALS 5.70 6.70 17%

Stock Name:
CIMB Why Should We Invest?

• MY loans growth above average and
NIMs to stabilize.
• Improving outlook for Niaga (NIMs,
credit costs, IDR/MYR).
• Trading at about -1SD to historical PER
of 10.5x.
25/02/2019 14:28
FINANCIALS 4.16 4.60 10%

Stock Name:
Alliance Why Should We Invest?

• Increasing demand for new product
• Refocus on SME to drive loans growth
and margins.
• Recent MSS and branch rationalization
to save cost.
25/02/2019 14:28
UTILITY 13.04 15.50 19%

Stock Name:
TNB Why Should We Invest?

• Resilient business
• Earnings to revert to
growth
• Attractive dividend yield
25/02/2019 14:28
GAMING 7.10 9.50 34%

Stock Name:
Genting Why Should We Invest?

• Trading at 50% discount to
SOP/sh (20-year mean: -22%) .
• Despite GENM’s woes, forecast
3-year earnings CAGR of 8%.
• More upside in store if GENS
wins Japanese casino license.
25/02/2019 14:28
KLCI: Valuation
Our end-2019 KLCI target is
Market Valuation:
1,760
25/02/2019 14:28
KLCI: Market valuations
20
Philippines
18
Malaysia
Indonesia
16 Australia
14 Thailand
Japan China
12
Taiwan
Hong Kong
10
8 Korea
25/02/2019 14:28
FBMKLCI Point & Figure Charting
FBMKLCI Index Major & Long term Trend
FBM Small Cap Index Long Term Chart
Construction 0.67 N/A N/A

Stock Name:
AWC Why Should We Invest?

• Growth driven by three key division.
• Recurring income concession
business.
• Healthy balance sheet
25/02/2019 14:28
Financials 1.25 N/A N/A

Stock Name:
ELK Desa Why Should We Invest?

• Niche market in used car financing.
• Lucrative business.
• Decent dividend yield.
25/02/2019 14:28
Health Supplement 0.24 N/A N/A

Stock Name:
Bioalpha Why Should We Invest?

• Ride on fast growing China market.
• On expansion mode.
• Compelling valuation.
25/02/2019 14:28
Construction 0.88 N/A N/A

Stock Name:
Crest Builder Why Should We Invest?

• Strong construction order book.
• Strong property pipeline.
• Steady concession income.
25/02/2019 14:28
Disclaimer
This presentation is for information purposes only and is not intended to provide personal investment advice and does not take into account
the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this presentation.
Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment
strategies mentioned in this presentation.
The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently
verified by Maybank Investment Bank Bhd and consequently no representation is made as to the accuracy or completeness of this presentation
by Maybank Investment Bank Bhd and it should not be relied upon as such. Accordingly, no liability can be accepted for any direct, indirect or
consequential losses or damages that may arise from the use or reliance of this presentation.
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“can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on
assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual
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FCPO Weekly Chart
Global Real GDP
Global Real GDP
% chg % Share of 1Q 2018 2Q 2018 3Q 2018 4Q 2018 2017 2018E 2019E 2020E
World World GDP 4.0 4.1 3.7 3.8 3.8 3.6 3.3
Major Advanced Econom ies 60.4% 2.3 2.4 2.1 2.2 2.3 2.0 1.7
US 24.3% 2.6 2.9 3.0 2.2 2.9 2.5 2.0
Eurozone 15.8% 2.4 2.2 1.6 2.4 2.0 1.7 1.5
Japan 6.1% 1.2 1.4 0.0 1.9 1.0 1.1 1.1
UK 3.3% 1.3 1.4 1.5 1.8 1.3 1.5 1.4
BRIC 22.8% 5.8 5.8 5.6 5.7 5.7 5.6 5.4

Brazil 2.6% 1.2 0.9 1.3 1.1 1.3 2.3 2.4
Russia 2.0% 1.3 1.9 1.5 1.5 1.7 1.5 1.7
India 3.3% 7.7 8.2 7.1 6.7 7.4 7.4 7.5
China 15.0% 6.8 6.7 6.5 6.4 6.9 6.6 6.3 6.0
Asian NIEs 3.5% 3.3 3.1 2.2 3.2 2.9 2.6 2.5
South Korea 1.9% 2.8 2.8 2.0 3.1 2.8 2.7 2.7
Taiw an 0.7% 3.2 3.3 2.3 2.9 2.8 2.4 2.2
Hong Kong 0.4% 4.6 3.5 2.9 3.8 3.7 2.8 2.7
Singapore 0.4% 4.5 4.1 2.3 2.2 3.6 3.2 2.2 2.1
ASEAN-6 (incl. Singapore) 3.3% 5.4 5.2 4.7 5.1 5.0 4.8 4.8
ASEAN-5 2.9% 5.5 5.3 5.0 5.3 5.2 5.1 5.2
Indonesia 1.3% 5.1 5.3 5.2 5.1 5.2 5.1 5.3
Thailand 0.6% 4.8 4.6 3.3 3.9 4.1 3.8 3.6
Malaysia 0.4% 5.4 4.5 4.4 5.9 4.7 4.9 4.9
Philippines 0.4% 6.6 6.2 6.1 6.7 6.3 6.5 6.5
Vietnam 0.3% 7.5 6.8 6.9 7.3 6.8 6.9 6.5 6.5
Source: MKE Economics Research (World quarterly GDP growth; 2018-2019 annual GDP growth forecasts for World, China & ASEAN); IMF &
Bloomberg (actual annual and quarterly 2017-2018 GDP growth); Consensus (2018-2019 annual GDP growth forecasts for others)
Malaysia - Real GDP
% chg % Share MAYBANK OFFICIAL
of GDP
2017 1Q 2018 2Q 2018 3Q 2018 Jan-Sep 2018E 2019E 2018E 2019E
2018
Real GDP 100.0 5.9 5.4 4.5 4.4 4.7 4.7 4.9 4.8 4.9
Services 56.1 6.2 6.5 6.5 7.2 6.8 6.7 6.3 6.3 5.9
Manufacturing 23.4 6.0 5.3 4.9 5.0 5.1 5.0 4.9 4.9 4.7
Agriculture 7.8 7.2 2.8 (2.5) (1.4) (0.4) (0.5) 1.0 (0.2) 3.1
Mining 8.0 1.0 0.1 (2.2) (4.6) (2.2) (2.0) 1.8 (0.6) 0.7
Construction 4.7 6.7 4.9 4.7 4.6 4.8 4.5 4.3 4.5 4.7
Domestic Demand 91.8 6.5 4.1 5.6 6.9 5.6 5.5 4.8 5.0 4.8
Private Consumption 55.1 7.0 6.9 8.0 9.0 8.0 8.1 6.5 7.2 6.8
Public Consumption 11.7 5.4 0.4 3.1 5.2 3.0 2.7 2.0 1.0 1.8
Gross Fixed Capital Formation 25.0 6.2 0.1 2.2 3.2 1.8 1.5 2.4 2.6 1.9
Private Investment 18.6 9.3 0.5 6.1 6.9 4.5 4.5 5.3 4.5 5.0
Public Investment 6.4 0.1 (1.0) (9.8) (5.5) (5.3) (5.0) (4.5) (1.5) (5.4)
Net External Demand 8.2 (1.9) 62.4 1.7 (7.5) 14.8 14.6 6.6 7.7 0.7
Exports of Goods & Services 69.8 9.4 3.7 2.0 (0.8) 1.6 1.4 2.0 2.0 1.6
Imports of Goods & Services 61.6 10.9 (2.0) 2.1 0.1 0.1 (0.2) 1.4 1.4 1.8
Sources: Dept. of Statistics, MOF Economic Report 2018/2019, MKE Economics Research
Malaysia: Other Indicators
ACTUAL MAYBANK OFFICIAL
2017 2018 / 2018 YTD 2018E 2019E 2018E 2019E
Gross Exports (% chg) 18.9 6.9 (Jan-Nov) 5.8 5.3 4.4 3.9
Gross Imports (% chg) 19.9 5.3 (Jan-Nov) 4.0 4.5 4.0 4.1
Trade Balance (MYRb) 97.2 109.6 (Jan-Nov) 118.4 127.7 106.6 109.4
Current Account Balance (MYRb) 40.3 22.7 (Jan-Sep) 33.8 36.5 38.6 34.0
Current Account Balance (% of GDP) 3.0 2.5 (Jan-Sep) 2.4 2.4 2.7 2.2
Fiscal Balance (% of GDP) (3.0) (3.3) (Jan-Sep) (3.7) (3.4) (3.7) (3.4)
Inflation Rate (CPI, %) 3.7 1.1 (Jan-Nov) 1.0 2.1 1.5-2.5 2.5-3.5
Overnight Policy Rate (% p.a., end-period) 3.00 3.25 3.25 3.25 - -
Exchange Rate (MYR/USD, end-period) 4.05 4.13 4.18 4.10 - -
Unemployment Rate (%) 3.4 3.3 (Jan-Oct) 3.3 3.4 3.3 3.3
Crude Oil (USD/bbl, Brent average) 54 71.2 73 65 70 60-70 *
Crude Palm Oil (MYR/tonne, average) 2,792 2,235 2,250 2,350 2,300 2,400
* Based on Medium Term Fiscal Framework (2019-2021) assumption
Sources: Bloomberg, Dept. of Statistics, BNM Annual Report 2017, MoF Economic Report 2018/2019, MKE
Economics Research
Global: Benchmark Interest Rates
(% p.a.)
Global: Benchmark Interest Rates (% p.a.)
Country Benchmark Interest Rate Current end 1Q19E end 2Q19E end 3Q19E end 4Q19E Chg in 2018 Chg in 2019E
Major
US Fed Funds Target Rate 2.375 2.375 2.375-2.625 2.625-2.875 2.875 1.00 0.50
Eurozone ECB Deposit Facility Rate (0.40) (0.40) (0.35) (0.30) (0.15) 0.00 0.25
Japan BOJ Policy Rate Balance (0.10) (0.10) (0.10) (0.10) (0.10) 0.00 0.00
UK BOE Bank Rate 0.75 0.75 1.00 1.00 1.25 0.25 0.50
Asia Pacific
Australia Cash Rate Target 1.50 1.50 1.50 1.50 1.50 0.00 0.00
China PBOC 7-Daye Repo Rate 2.55 2.55 2.55 2.55 2.55 0.05 0.00
India Repo Rate 6.25 6.25 6.25 6.25 6.25 0.50 0.00
S. Korea Target Overnight Rate 1.75 1.75 1.75 1.75 2.00 0.25 0.25
HK 3-Mth HIBOR 1.83 2.63 2.80 2.90 3.00 1.15 0.67
Taiw an Discount Rate 1.375 1.375 1.375 1.375 1.375 0.00 0.00
Singapore 3-Mth SIBOR 1.88 1.95 2.03 2.10 2.20 0.69 0.31
Indonesia 7-Day Reverse Repo 6.00 6.25 6.50 6.50 6.50 1.75 0.50
Malaysia Overnight Policy Rate 3.25 3.25 3.25 3.25 3.25 0.25 0.00
Thailand Repurchase Rate 1.75 1.75 1.75 2.00 2.00 0.25 0.25
Philippines Overnight Rate 4.75 4.75 4.75 4.75 4.75 1.75 0.00
Vietnam Refinancing Rate 6.25 6.25 6.25 6.25 6.25 0.00 0.00
Source: Bloomberg, US Federal Reserve “dots plot” (forecasts for US), Maybank KE (forecasts for ASEAN), Consensus (forecasts for others)
USD Index and Currencies vs USD
End-2018 15-Jan-19 End-1Q End-2Q End-3Q End-4Q
2019E 2019E 2019E 2019E
DXY (Dollar Index) 96 96 99 96 95 95
Japanese Yen 110 109 113 108 106 105
Euro 1.15 1.14 1.11 1.14 1.16 1.14
Pounds Sterling 1.28 1.29 1.28 1.32 1.34 1.36
Australian Dollar 0.70 0.72 0.71 0.73 0.74 0.73
Renminbi 6.88 6.76 7.05 6.95 6.92 7.00

Indian Rupee 69.77 71.02 67.00 66.00 66.00 68.00
HK Dollar 7.83 7.84 7.80 7.79 7.78 7.78
Taiw an Dollar 30.55 30.82 31.00 30.80 30.60 30.80
Korean Won 1,111 1,121 1,140 1,120 1,110 1,130
Singapore Dollar 1.363 1.357 1.400 1.390 1.380 1.390

Malaysian Ringgit 4.13 4.11 4.20 4.12 4.12 4.10
Indonesian Rupiah 14,390 14,090 13,400 12,900 12,700 12,900
Thai Baht 32.33 31.92 33.80 33.50 33.00 33.50
Philippines Peso 52.56 52.03 54.20 54.00 53.80 54.00
Vietnamese Dong 23,175 23,190 23,500 23,200 23,100 23,300
Source: Bloomberg, Maybank FX Research
Malaysia Oil & Gas
The State Of Oil In 2019
LIAW THONG JUNG I +603 2297 8688 I tjliaw@maybank-ib.com
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EXECUTIVE SUMMARY
! The BIG Picture
! Malaysia Oil & Gas Services In Perspective
! Stock Picks
Strictly Private & Confidential

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The BIG Picture

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The State Of Oil in 2019
Offshore global capex

(USD'b)
300
Ultra deepwater (125-1500m)
250 33
30 Deepwater (125-1500m)
60
200 23 Shelf (up to 125m) 52 ! On course for a cyclical recovery
33 46
93 ! The market cycle is entering a new growth cycle
16 86 35
150 10 75 30 32 83 87
77 26 26 74 ! Capex growth from 2019
62 23 23 63
56 58 56
100 46 40 44 52
113 125 133 104

50 87 96 84 76 69 70 77 84 87 97 105 107
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Bull/ bear oil index Crude oil price (USD/bbl – LHS) vs. currency
80 95 Brent USDMYR (Avg, RHS) USDMYR (RHS)
140 2.90
60 85 3.10
120
40 75 3.30
20 65 100 3.50
0 55 3.70
80
(20) 45 3.90
60 4.10
(40) 35
4.30
(60) 25 40
4.50
3-Nov-17
9-Sep-16
18-Nov-16
14-Oct-16
6-Jul-18
23-Dec-16
27-Jan-17
3-Mar-17
7-Apr-17
16-Jun-17
21-Jul-17
25-Aug-17
29-Sep-17
12-May-17
8-Dec-17
12-Jan-18
16-Feb-18
23-Mar-18
27-Apr-18
1-Jun-18
10-Aug-18
23-Nov-18
14-Sep-18
19-Oct-18
28-Dec-18
1-Feb-19
20 4.70
Jan-…
Jan-…
Jan-…
Jan-…
Jan-…
Jan-…
Jan-…
Jan-…
Jan-…
Jan-…
Jul-09
Jul-10
Jul-11
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Jul-18
Bull-Bear Index Brent (USD/bbl, RHS)
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Break-even price by basin
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Sensitivity To Crude Oil Price
Construction , Installation Decommissioning

Exploration Production
and Field Development & Abandonment
(1-2 yrs) (5 - 30+ yrs)
(3-5 yrs) (1 yr)
Capex Opex
• Field asset owners • AHTS/ AHT • AHTS/ AHTS/ PSV • AHTS
• Drilling barge • PSV/ MPSV • AWB/SSAV • AHT
• Jackups/ semi subs • Pipelay • Liftboats • AWB
• Seismic survey • Heavy lift • FPSO/ FSO/ MOPU • Heavy lift
• AHTS/ AHT/ PSV • Fabricators • Tank terminals • MPSV
• Pipe coats • Maintenance ops • DSV
• T&I • Supply base ops • Liftboat/service
• Tender rigs rig
Scale of
sensitivity
to crude oil
price
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Crude Oil price Outlook For 2019
! Expects crude oil price (dated Brent) of USD65/bbl for 2019

! While oil market is improving, volatility would continue to persist
! USD26/bbl spread for 2018 – a big gap
Crude oil price (USD/bb) Volatility index

120 WTI Brent 12.0 160
Volatility Index (Crude Oil)
110 Crude Oil (USD/bbl, RHS) 140
10.0 14 per. Mov. Avg. (Volatility Index (Crude Oil))
100
120
90 8.0
100
80
70 6.0 80
60 60
4.0
50
40
40
2.0
20
30
20 0.0 0
Jan-14
Apr-14
Oct-14
Jan-15
Apr-15
Oct-15
Jan-16
Apr-16
Oct-16
Jan-17
Apr-17
Oct-17
Jan-18
Apr-18
Oct-18
Jan-19
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jul-14
Jul-15
Jul-16
Jul-17
Jul-18
Jul-07
Jul-08
Jul-09
Jul-10
Jul-11
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Jul-18
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3 Key Factors Shaping 2019’s oil price direction
Crude oil price (USD/bbl – LHS) vs. currency

120
110
! 1# Policy direction and compliance/ execution from OPEC+
100 - A continuation of the supply cut policy since 2017 (-1.8m bpd)
90 - Commitment to cut output by 1.2m bpd from Jan-Jun 2019
80 - 0.8m bpd from OPEC to 31.7m bpd, 0.4m bpd from Russia
70
- 3 countries exempted (Libya, Venezuela, Iran) from cut
60
50 - DISCIPLINE & Compliance is KEY
40
30
20
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Apr-14
Jul-14
Oct-14
Apr-15
Jul-15
Oct-15
Apr-16
Jul-16
Oct-16
Apr-17
Jul-17
Oct-17
Apr-18
Jul-18
Oct-18
WTI Brent
OPEC’s output adjustment by country for 2017 and 2019
OPEC’s compliance rate
(000' bpd) (%)
33,500 106
33,000 105
32,500 104
103
32,000
102
31,500
101
31,000
100
30,500 99
30,000 98
29,500 97
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! 2# Geopolitical risk Crude oil price reaction to the risk

140 "Arab Iran-Western
- Venezuela, Libya Springs" Nuclear Conflict
130 Iran Oil
- Iran sanction Trade Sanction
120
110
100
90
Armed Conflicts
80 in MENA
(Syria, Iraq, Libya)
70 Eurozone Eurozone
Crisis Crisis Relapse;
60 US Fiscal Cliff
50
40
30 China Slowdown
USD Rally; Global Oil Supply Glut
20
Dec-10
Mar-11
Jun-11
Dec-11
Mar-12
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Jun-18
Sep-11
Sep-12
Dec-12
Mar-13
Sep-13
Dec-13
Mar-14
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Sep-16
Dec-16
Mar-17
Sep-17
Dec-17
Mar-18
Sep-18
Dec-18
WTI Spot Brent Spot
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! 3# Global demand growth
Global demand-supply Global demand-supply net

100 97 97 97 99
94 7
96 92 92 99100 6
91 97 5
92 89 96
87 87 93 93 4
88 85 85 91
83 84 90 3
84 89 2
79 85 86 86 85 1
80 76 77 76 83 84 0
74 75 74
76 72 79 (1)
70 76 77 77 (2)
72 70 72 74 74 75 (3)
68 (4)
Jan-Oct 2018
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
(5)
Jan-Oct 2018
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Demand (mbpd) Supply (mbpd)
Demand (% chg) Supply (% chg)
Russia & US’s crude oil production (m bpd) US crude oil inventory
20.00 11.60 600,000
575,000
19.00 550,000
11.40 525,000
US Russia 500,000
18.00 475,000
11.20 450,000
17.00 425,000
11.00 400,000
16.00 375,000
350,000
10.80 325,000
15.00 300,000
275,000
14.00 10.60 250,000
Mar-16
Jul-16
Jan-17
Jan-18
Jan-19
Sep-16
Nov-16
Mar-17
Jul-17
Sep-17
Nov-17
Mar-18
Jul-18
Sep-18
Nov-18
May-16
May-17
May-18
Nov-83
Nov-86
Nov-89
Nov-92
Nov-95
Nov-98
Nov-01
Nov-04
Nov-07
Nov-10
Nov-13
Nov-16
May-85
May-88
May-91
May-94
May-97
May-00
May-03
May-06
May-09
May-12
May-15
May-18
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Malaysia Oil & Gas
Services In Perspective

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Malaysia’s Oil & Gas Activities On the Rise
PETRONAS’ yearly capex

(MYR'b) Overseas (LHS) Malaysia (LHS) Growth (RHS) (%)
75 80.00
60 60.00
30
24 40.00
45 25
10
18 13 14 20.00
39 40
30 35 37
PETRONAS Activity Outlook (PAO) 2019-21 indicates this: 14
28
11
11 31 32
8
-
10
15 14 8 20 22
4 18 17.8 (20.00)
15
! Encouraged that majority of domestic O&G activities across the 10 10 12
0 Breakdown of oil-related Govt revenue (40.00)
service value chain, will be on the rise
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
9M18
! This is premised on the PAO 2019-21 vs. 2018-20 issue a year ago
PAO 2019-21 vs. 2018-20: What has changed?
! PETRONAS’ (i) drilling (JUs, TADRs, HWUs) and (ii) OSVs (AHTS, Breakdown of oil-related Government revenues
SSVs & PSVs) activities offshore Malaysia reflect a rise in asset Petronas Dividend Petroleum Income Tax (PIT) Petroleum Royalty Crude Oil Export Duty Income From Exploration Of Oil & Gas in MTJA
utilization across the board
MYR b
90
80
! The respective: (i) offshore fabrication (i.e. units, size and 70
tonnage), (ii) linepipes (i.e. length in km), (iii) offshore 60 18.1
installation (i.e. no. of campaigns) and (iv) HUC/MCMs (i.e. no. of 50
man-hours) segments will also see increase workflows in 2019-21. 40 24.2 27.2 18.7 27.7 33.9 29.8 27.0
20.5 11.6 16.8
30 20.7 54.0 11.4
PETRONAS’ outlook and commitment 20 14.6 8.4 11.8
30.0 30.0 30.0 30.0 26.3 27.0 29.0 26.0 26.0
10 24.0 19.0
18.0 16.0 16.0
11.0
! Dividends: MYR54b (inclusive of one-off MYR30b; 2018: MYR26b) 0
Budge…
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018E
2019E
! Capex: Dividend commitment will not affect capex plans
! Renewable energy: A new set-up
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Offshore Fabrication
Our views:
! 2017-18 was a year of order intake disappointment –

on depleting backlog, weak replenishment and lower
values
! For 2019, the offshore fabrication market is seeing a

progressive rise in projects. This is also partly due to
the delay in the execution of several projects that
would be carried forward to 2019-21
! On a deduction basis, MMHE will likely be the key

winner in this space over Sapura Energy due to the
latter’s high order backlog. SAPE’s fabrication yard is
at 80% capacity vs. MMHE’s 35%
! The capacity to take up more jobs favours MMHE over

SAPE, on the domestic front. Also, MMHE leads in
securing: (i) PETRONAS’ multi-billion MYR Kasawari
CPP job amd (ii) the Limbayong FPSO conversion
works
! Overseas opportunities are also on the rise. Both are

qualified and signed on for Saudi Aramco’s Long-Term
Offshore Agreement (LTOA) works. It offers USD3b
p.a. tender opportunity.
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Offshore Drilling
Our views:
! The JUs market has bottomed and is entering a new

cycle – recovering, albeit protracted and phased
! Market consolidation has taken shape – re-capitalised,

re-based costs and opex
! Enquiries and tenders have improved. Utilization level

is rising
! While utilisation is set to rise, DCRs are unlikely to

change much over the next 2 years due to over-
capacity issues globally
! PETRONAS raised the prospect for drilling activities

for the:
i. jack-up (JUs) rigs segment to Positive (from
Steady previously) and
ii. hydraulic work-over (HWUs) rigs segment to
Steady (from Modest previously) for its 2019-
21 outlook
! PETRONAS will use 16-19 JUs p.a. over the next 2

years (vs. 9-10 units in 2018). That denotes a 100%
rise in requirement, a positive
! PETRONAS will use 2-6 HWUs p.a. over the next 2

years (vs. 1-2 units in 2018). That too denotes a >100%
rise in requirement, a positive
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Offshore Support Vessel (OSV)
Our views:
! Cost cutbacks have taken place. OSV players are

operationally lean now to compete at USD40-50/bbl
oil price level
! The OSVs daily charter rates (DCRs) and utilization

have bottomed. While the latter has risen, the former
is still unchanged due to the oversupply situation
! DCR will stay around USD0.70-1.00/bhp over the next

2 years
! Under the PAO, the rise in utilisation for: (i) AHTS

(+59%-61%), (ii) PSVs & SSVs (+71%-81%) and (iii) FCBs
(+32%-33%) vessels is not unexpected, for it runs in
tangent with PETRONAS’ recent roll-out of its
Integrated Logistics Control Tower (ILCT) project
! OSV players are currently in the CDRC scheme. The

need to restructure/ refinance their debts will take
the shine off the improving prospect in this space
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Floating offshore facilities (Floaters)
Our views:
! Booming! No. of awards are rising. 10-13 new awards

up for grabs for 2019.
! Capex size of USD400-1.5b each. Majority of tenders

will come from Brazil (Marlim 1 & 2, Buzious, Parque,
Mero, Buzios V and Neon/ Kangaroo)
! Companies with strong balance sheet will benefit –

Global FPSO orders (historical & prospects Yinson is our KEY pick for this
! The invitation to bid (ITB) for the Limbayong FPSO has

started. PETRONAS is in the market for an FPSO
capable of handling 180mmscfd of gas and 60k bpd of
liquids (including 40k bpd of oil).
The vessel with nameplate storage of capacity of

600k barrels of crude would also be able to handle
75k bpd of water
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Others
Linepipes Offshore installation (by no. of campaign)
Underwater services (by no. of campaign) HUCs & MCMs (by no. of man-hours: m)
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Stock Picks

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Maybank-IB: Top 5 O&G BUYs (by alphabetical orders)
DIALOG MMHE SAPURA ENERGY VELESTO ENERGY YINSON

(DLG MK) (MMHE MK) (SAPE MK) (VEB MK) (YNS MK)
POSITIVE on the Malaysia O&G sector:

• Positioning for a new cycle
• Selective on stock picks
• Balance sheet strength is a KEY criteria
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Dialog Group (DLG MK; TP: MYR3.58; SP: MYR3.25)
A Pengerang growth story
! Solid business model with strong foundation. We like Dialog for its secular growth story with the Company Description
scalability aspects of its terminal operations via its Pengerang/ Langsat and potential overseas The largest tank terminal operators in Malaysia with
EPCC works
ventures. It has a very much focused management, well run with strong financials to boot.
! Pengerang operations offer scalability multiplier effect. Its Pengerang operations are a disrupter
to its regional peers, in terms of capacity, demand and pricing and will grow in influence. Dialog’s Statistics
52w high/low (MYR) 3.56/2.56
midterm growth will be fuelled by the operational commencement of its: (i) SPV2 (PETRONAS’
3m avg turnover (USDm) 7.2
dedicated tank terminal; 2.1m cu m capacity) and (ii) SPV4 Phase 1A (independent terminal; 1m cu
Free float (%) 67.0
m capacity) operations in 2HFY19. Issued shares (m) 5,642
Market capitalisation MYR18.3B
! More to come post-RAPID. It is also planning beyond FY20, for it is reclaiming land (300 acres; USD4.5B
MYR2.5b investment) for its next project (SPV5). Dialog has the potential to quadruple the capacity Major shareholders:
of its tank terminal ops, based on its remaining untapped land bank (500 acres). Azam Utama Sdn. Bhd. 8.3%
Employees Provident Fund 7.9%
Wide Synergy Sdn. Bhd. 7.8%
! Prudent financials to match its aspirations. Dialog is FCF positive, reflective of its cash-generating
business with a relatively low net gearing level. Our 3-year (FY18-20) core net profit CAGR forecast 3.60 300
of 12% is realisable, based on its development pipeline. Our MYR3.58 TP only captures ¼ of 3.40 280
3.20 260
Pengerang’s potential. 3.00 240
2.80 220
FYE Jun (MYR m) FY17A FY18A FY19E FY20E FY21E
2.60 200
Revenue 3,393 3,111 3,669 3,787 3,812 2.40 180
EBITDA 415 570 577 620 632 2.20 160
Core net profit 328 426 476 549 578 2.00 140
Core EPS (sen) 6.1 7.6 8.4 9.7 10.3 1.80 120
Core EPS growth (%) 20.8 24.0 11.8 15.2 5.4 1.60 100
Net DPS (sen) 2.7 3.2 3.6 4.2 4.4 1.40 80
Feb-17 May-17 Aug-17 Nov-17 Feb-18 May-18 Aug-18 Nov-18
Core P/E (x) 31.5 40.9 38.5 33.4 31.7
Dialog Group - (LHS, MYR)
P/BV (x) 3.3 5.0 4.8 4.4 4.1
Dialog Group / Kuala Lumpur Composite Index - (RHS, %)
Net dividend yield (%) 1.4 1.0 1.1 1.3 1.4
ROAE (%) 13.4 15.4 13.0 13.8 13.4 -1M -3M -12M
ROAA (%) 6.6 7.0 7.4 8.3 8.3
Absolute (%) 4 1 21
EV/EBITDA (x) 25.1 31.3 33.6 31.1 30.5
Net gearing (%) (incl perps) net cash 9.6 24.1 20.7 18.3 Relative to index (%) 3 1 32
Consensus net profit - - 473 542 592 Source: FactSet
MKE vs. Consensus (%) - - 0.7 1.2 (2.2)
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Malaysia Marine & Heavy Engineering (MMHE; TP: MYR1.00; SP: MYR0.75)
A value stock under the radar
Company Description
! Securing big orders a major re-rating catalyst. The market, in our view has yet to fully appreciate
MMHE is involved in the offshore fabrication and
MMHE’s intrinsic qualities; debt-free, cash-rich (MYR0.34/shr) and undervalued (0.5x PBV) with
marine repair services operations
improving prospects.
! A rise in PETRONAS jobs over the next three years. Set to capitalize on the cyclical recovery in
Statistics
the fabrication, marine repairs and conversion works. The multi-billion MYR CPP Kasawari (>7.5k
52w high/low (MYR) 0.84/0.50
MT) and Limbayong FPSO jobs are touted to be awarded this year, with MMHE in the lead on these.
Free float (%) 24.2
! Embarking on its global footprint. The recent signing of the Long-Term Offshore Agreement (LTOA) Issued shares (m) 1,600
with Saudi Aramco for 6+6 years is a significant breakthrough to advancing its regional aspiration Market capitalisation MYR1.2B
and moderating its heavy reliance on domestic exposure. This single-handedly offers an exposure to USD295M
a constant USD3b p.a tenders opportunity. Major shareholders:
MISC Bhd. 66.5%
Technip SA 8.5%
! BUY with a MYR1.00 TP. Our TP is based on 0.9x EV/ 5-year order backlog of MYR1.1b. It has Lembaga Tabung Haji 6.3%
proven to have steadfastly withstood the cyclical downturn, emerging to be resilient. Positively too,
MMHE could surprise with a prospective dividend payment 1.10 120
1.00 110
0.90 100
FYE Dec (MYR m) FY17A FY18A FY19E FY20E FY21E
Revenue 956 974 1,130 1,387 1,614 0.80 90
EBITDA (1) 5 80 112 132
0.70 80
Core net profit (61) (69) 1 31 50
Core EPS (sen) (3.8) (4.3) 0.1 2.0 3.1 0.60 70
Core EPS growth (%) nm nm nm 3,787.3 60.2
0.50 60
Net DPS (sen) 3.0 0.0 0.0 0.0 0.0
Core P/E (x) nm nm nm 38.4 24.0 0.40 50
P/BV (x) 0.5 0.4 0.5 0.5 0.5
MMHE - (LHS, MYR) MMHE / Kuala Lumpur Composite Index - (RHS, %)
ROAE (%) 1.3 (4.9) 0.0 1.3 2.0
ROAA (%) (1.8) (2.1) 0.0 0.9 1.4 -1M -3M -12M
EV/EBITDA (x) nm 67.8 7.9 5.1 3.7
Absolute (%) 9 18 (12)
Net gearing (%) (incl perps) net cash net cash net cash net cash net cash
Consensus net profit - - 15 36 53 Relative to index (%) 8 18 (5)
MKE vs. Consensus (%) - - (94.5) (12.0) (4.7) Source: FactSet
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Sapura Energy (SAPE; TP: MYR0.55; SP: MYR0.75)
A cyclical recovery play
! Risk-reward is turning for the better. Business is recovering. Orders are rising. Financials are Company Description
improving. The sale of its 50% energy biz to OMV is a done deal and together with its rights issues, Sapura Energy operates as an investment holding
company, which provides integrated oil and gas
SAPE has de-geared, de-risked and has strategic shareholders (OMV & PNB) at the same time.
services and solutions.
! Business is picking up, financials are improving. SAPE’s operations across the segments are
showing signs of recovery. New jobs secured in FY19 have increased by 3.3x YoY from a year ago. Its Statistics
52w high/low (MYR) 0.85/0.27
overall tenders and prospects are also on the rise, up 30% YoY, reflective of the growing
opportunities. That put SAPE in a stronger position to leverage on the cyclical recovery come FY20. Free float (%) 71.1
Issued shares (m) 15,979
! Focus is on FY21. We expect SAPE to break-even in FY20. Focus should be on the turnaround in Market capitalisation MYR5.2B
FY21. Operationally, expect the E&C division to lead earnings recovery, on higher revenue/ margins USD1.3B
in FY20-21. As for the drilling division, we expect a turnaround in FY21 with reduced YoY losses in Major shareholders:
FY20. Do not rule out a corporate exercise relating to this business. Sapura Holdings Sdn. Bhd. 16.7%
Permodalan Nasional Bhd. 11.3%
! BUY with a MYR0.55 TP. Our TP is SOP-based. Our earnings forecasts and TP have reflected: (i) the
sale of 50% of its energy operations and (ii) its rights issue exercise. From a risk-reward perspective, 2.20 110
SAPE is turning for the better, an opportune time to leverage on the sector recovery. 2.00 100
1.80 90
FYE Jan (MYR m) FY17A FY18A FY19E FY20E FY21E 1.60 80
Revenue 7,651 5,895 5,778 5,789 7,419 1.40 70
EBITDA 3,913 1,443 1,019 1,180 1,418 1.20 60
Core net profit 447 (381) (619) 3 346 1.00 50

Core EPS (sen) 7.5 (6.4) (10.3) 0.0 2.2 0.80 40
Core EPS growth (%) (55.5) nm nm nm 11,979.9 0.60 30
Net DPS (sen) 0.0 1.0 0.0 0.0 0.0 0.40 20
Core P/E (x) 22.9 nm nm nm 15.0 0.20 10
P/BV (x) 0.8 0.5 0.2 0.3 0.3
Sapura Energy - (LHS, MYR)
Sapura Energy / Kuala Lumpur Composite Index - (RHS, %)
ROAE (%) 1.6 (22.2) 19.4 0.0 1.9
ROAA (%) 1.2 (1.1) (2.0) 0.0 1.1 -1M -3M -12M
EV/EBITDA (x) 6.5 13.3 14.6 9.7 7.8 Absolute (%) 14 (10) (53)
Net gearing (%) (incl perps) 115.7 155.5 112.8 35.6 32.5
Relative to index (%) 13 (10) (49)
Consensus net profit - - (398) 166 346
MKE vs. Consensus (%) - - 608.5 (98.3) 0.0 Source: FactSet
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Velesto Energy (VEB; TP: MYR0.33; SP: MYR0.26)
Drilling for growth
! A better 2019, on higher drilling utilisation. We remain positive on Velesto; for its secular growth Company Description
off its trough, leaner financials and undemanding valuations. Velesto, in our view, is most adept to Velesto is Malaysia's largest JU drilling rig operator
by fleet size.
benefit from PETRONAS’ increasing offshore drilling activities in Malaysia.
! PETRONAS requires 16-18 JUs in 2019. PETRONAS has revised up its jack-up rigs (JUs) requirement
for 2019. It will use 16-18 JUs p.a. in 2019 (vs. 7-10 units earlier on). That denotes a 129% YoY Statistics
52w high/low (MYR) 0.34/0.18
increase in requirement, a positive. Velesto is one of the 2 Malaysia owned/ flagged operators.
Free float (%) 82.4
! Return to profitability in 2019. We expect Velesto to average an 82% utilisation in 2019 vs. e.71% Issued shares (m) 8,216
in 2018. We expect Velesto to return to the black, at the core earnings level. We posit its P&L Market capitalisation MYR2.1B
break-even to be at an estimated 77% utilisation. While this denotes positivity, DCRs are likely to be USD525M
unchanged, at USD68k-70k. Major shareholders:
Bumiputra Investment Foundation 14.7%
Lembaga Tabung Haji 4.6%
! BUY with a MYR0.33 TP. Our TP is based on 1x EV/ replacement value. Velesto’s plan to pre-pay Permodalan Nasional Bhd. 3.3%
part of its debts in FY19 could see some cost savings. With an improving outlook over the next 12-
months, any short-term weakness in share price is an opportunity to accumulate.
0.700 140
0.600 120

0.500 100
Revenue 321 586 563 642 664
EBITDA 79 234 248 303 319 0.400 80
Core net profit (310) (140) (27) 25 44
Core EPS (sen) (14.3) (1.7) (0.3) 0.3 0.5 0.300 60
Core EPS growth (%) nm nm nm nm 74.7

0.200 40
Net DPS (sen) 0.0 0.0 0.0 0.0 0.0
Core P/E (x) nm nm nm 84.5 48.3 0.100 20
P/BV (x) 0.8 0.9 0.8 0.8 0.8 Feb-17 May-17 Aug-17 Nov-17 Feb-18 May-18 Aug-18 Nov-18
Net dividend yield (%) 0.0 0.0 0.0 0.0 0.0 Velesto Energy - (LHS, MYR)
ROAE (%) (42.1) (45.7) (1.0) 0.9 1.6 Velesto Energy / Kuala Lumpur Composite Index - (RHS, %)
ROAA (%) (4.4) (2.5) (0.6) 0.6 1.0 -1M -3M -12M
EV/EBITDA (x) 64.2 15.7 11.8 8.8 7.6
Absolute (%) 18 (2) (21)
Consensus net profit - - (32) na 36 Relative to index (%) 17 (2) (14)
MKE vs. Consensus (%) - - 15.1 na 24.5 Source: FactSet
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Yinson Holdings (YNS; TP: MYR4.60; SP: MYR4.21)
Well entrenched to ride on the FPSO boom
! Top 6 FPSO independent operators in the world, in terms of fleet size. Arguably one of the most Company Description
profitable, in terms of ROE. Has an experienced, lean management team with strong execution Yinson is the Top 6 FPSO operator in the world by
fleet size. OSV and non-O&G (transport & trading)
capabilities – proven track record in consistently delivering projects on time, on budget.
operations are complementary businesses.
! Securing contractual closure on FPSO FEP is an immediate catalyst. The delays has not gone
unnoticed, for the Heads of Terms (HOT) agreement was announced back in Jun 2018. Based on our Statistics
52w high/low (MYR) 4.91/3.69
scenario analysis, this job alone would single-handedly contribute 30-52sen/ MYR1.00-1.28/shr in TP
on a firm/ extended charter basis. Free float (%) 53.1
Issued shares (m) 1,093
! Prospecting for job wins in 2019. The tender pipeline for FPSOs globally remain strong over the Market capitalisation MYR4.6B
next 12 month, with Yinson prospecting for: (i) 5 key bids (three in Brazil and one each in Ghana USD1.1B
and Malaysia with capex size of USD1b-USD1.5b each). Winning any of these will be a major catalyst Major shareholders:
to its long term development, growth and credibility. LIM HAN WENG 16.0%
Kumpulan Wang Persaraan 12.7%
! Maintain BUY with a MYR4.60 TP. Our SOP-based TP is conservative. It excludes the FPSO FEP and
new job wins prospects.
5.00 190
4.80 180
FYE Jan (MYR m) FY17A FY18A FY19E FY20E FY21E 4.60 170
Revenue 764 910 1,113 907 1,207 4.40 160
EBITDA 284 645 771 693 836 4.20 150
Core net profit 219 342 265 193 243 4.00 140
Core EPS (sen) 20.6 31.4 24.3 17.6 22.3 3.80 130
Core EPS growth (%) 26.8 52.6 (22.7) (27.4) 26.4 3.60 120
Net DPS (sen) 16.8 10.0 10.0 10.0 10.0 3.40 110
Core P/E (x) 15.1 13.4 17.4 23.9 18.9 3.20 100
P/BV (x) 1.4 1.7 1.7 1.6 1.5 3.00 90
Yinson Holdings - (LHS, MYR)
ROAE (%) 8.5 11.6 9.8 6.8 8.3
Yinson Holdings / Kuala Lumpur Composite Index - (RHS, %)
ROAA (%) 3.9 5.3 4.0 2.8 3.2
-1M -3M -12M
EV/EBITDA (x) 21.4 10.8 8.7 9.4 7.4
Net gearing (%) (incl perps) 114.7 90.1 74.0 62.7 47.7 Absolute (%) 4 (5) 0
Consensus net profit - - 270 243 372 Relative to index (%) 3 (5) 9
MKE vs. Consensus (%) - - (1.7) (20.9) (34.6)
Source: FactSet
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Maybank-IB: Oil & Gas Equity Research coverage
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THANK YOU

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DISCLAIMER
DISCLAIMER
This presentation is for information purposes only and is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial
situation and the particular needs of persons who may receive or read this presentation. Investors should therefore seek financial, legal and other advice regarding the appropriateness of
investing in any securities or the investment strategies mentioned in this presentation.
The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Bhd and
consequently no representation is made as to the accuracy or completeness of this presentation by Maybank Investment Bank Bhd and it should not be relied upon as such. Accordingly, no
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This presentation may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”,
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Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results
to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. Maybank Investment
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to reflect the occurrence of unanticipated events.
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where such distribution, publication, availability or use would be contrary to law or regulation.
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2019 Malaysia Automotive vs Technology
- The battle of MYR beneficiaries
Analyst
Ivan Yap| +603 2297 8612 | ivan.yap@maybank-ib.com
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What happened in 2018?

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KLCI -5.9% in 2018
And, -7.6% in USD terms … ended near year-low
1/6: GST 2/7: Zeti 7/10: GOM 2/11: Budget
1,900 19/4: 1,895.2, Akhtar Aziz 2019
zero-rated terminates
all-time high takes over as KVMRT2 U/G 7/12:
1/9: SST
13/6: US Fed PNB 14/8: Fitch 8/11: Moody's Moody's
returns
ups FF by Chairman affirms "A-" 9/10: GOM lowers retains "A3",
25bps to rating for Conf PETRONAS' stable
1,850 5/9: BNM
1.75%-2.00% 2/7: Full M'sia outlook to outlook
holds OPR at
Cabinet of 28 13/10: DSAI NEGATIVE rating for
3.25%
14/6: ECB ministers, 24 wins PD by- M'sia
says to end deputies election 16/11: M'sia
QE bond sworn in 3Q18 GDP 24/12: Brent
1,800 7/3: BNM at a year
maintains purchases in 15/10: +4.4% YoY
9/5: M'sia Dec 2018 5/7: MoF low of
OPR 2/4: Parliament
5/2: Ex-PM GE14 - suspends 27/11: GENM USD49.73/
USDMYR at a Change in convenes
Najib ECRL, MPP & 17 -21/8: PM sues Fox and bbl
announces 21/3: US Fed year low of Govt TSGP Mahathir's Disney
26/9: US Fed 18/10: 11MP
1,750 new cap mkt ups FF by 3.862 trip to China
25/1: BNM 25bps to ups FF by Mid-Term
measures 10/5: BNM 16/7:
raises OPR 1.50%-1.75% 7/4: M'sian 22/6: Nor 25bps to Review
maintains Shamsiah Parliament 17/8: M'sia
25bps to 2.00%-2.25%
14/2: M'sia range Parliament OPR convenes 2Q18 GDP
3.25% dissolves Mohd Yunus range 26/10: GOM
4Q17 GDP (for 20 days) +4.5% YoY
28/3: BNM to be new re-awards
1,700 +5.9% YoY 17/5: M'sia
Annual BNM 21-30/9: PM KVMRT2 U/G
1Q18 GDP Governor
Report 2017 Mahathir's to MMC-
+5.4% YoY from 1 Jul 28/11:
visit to UK & Gamuda
US USDMYR at a
29/6: S&P year high of
1,650 reaffirms 4.201
M'sia's rating,
stable 6/7: 1,663.9 18/12: 1,635.3,
outlook low year low
1,600
Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18
Note: KLCI -5.7% in 2014, -3.9% in 2015, -3.0% in 2016, +9.4% in 2017; -5.9% in 2018; KLCI’s record high close was 1,895.2 on 19 Apr 2018 Source: Maybank KE
Source: Maybank KE
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Share price performance - Automotive and parts players
(as at end 20 Feb 2019)
2017 2018 YTD 2019

70% 2018: Among the dealers &
59%
60% distributors, it was rather
50% uninspiring with exception
40% to C&C Bintang and Sime
30% 23% 20%
Darby Bhd.
20%
20% 9%
9% 8% 10%
10% 2% 5% 3% 5% 8% 3% 4% YTD 2019: Faster than
2%
0% expected recovery in sales
-10% -6%
-2%
-6%
-2%
-5% -4% -2%
-7%
post GST zero rating period
-20%
-10% (Jun-Aug 2018), alongside
-30% -21% MYR strength and sales
-27%
-40%
-30% boost from recent mass
KLCI USDMYR JPY100/MYR C&C Bintang UMWH Sime Darby TCM Bermaz MBMR DRBH market launches lifted most
Assembler, distributor & dealers auto players (including
parts).
2017 2018 YTD 2019
100%
76%
80%
60%
40% 28%
20% 9% 8% 4%
4% 10% 6%
0% 2% 0% 2%
0%
-1% -3%
-20% -8%-13% -11% -12% -12%
-25% -20% -20%
-40%
-37%
-60% -53%
APM Auto EP Manufacturing Sapura Inds ABM Fujiya GPA Holdings Oceancash Solid Auto PECCA Group
Automotive parts
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Share price performance – Technology (hardware)
2017 2018 YTD 2019

2018: After a strong year in
120% 105% 2017, share prices of OSATs
98%
100% 90% retraced on poorer earnings
80% 70% outlook marred by (i) trade
55% tension between US and
60%
40% China and (ii) weak sales of
21%
20% 9% 11% 17% smart devices, especially
2% 2% 2%
0% Apple.
-6% -2%
-20% -10% -10% -6%
-40%
-21% YTD 2019: Halt in trade
-34% -38% tension amid negotiation
-60%
-61% between US and China
-80%
KLCI USD/MYR Inari Globetronics Unisem MPI KESM lifted valuation
(Outsourced assembly and test)
2018: Most automation
2017 2018 YTD 2019 equipment player were able
450% to hold on to their 2017
385%
400% gains except MMSV, Aemulus
350% and Visdynamics which
300%
235% reported poor results.
250% 225% 212%
200% 155% YTD 2019: Confidence in
150%
100%
90% equipment players were
58%
50% 11% 24% 33% 22% 11% 16% 9%
41% 36%
21% likely boosted by sentiment
1% 0% 6%
0% of 5G network deployment.
-50% -3% -9% -20% Typically, equipment
-50% -58%
-100% players are leading
ViTrox Mi Equipment Elsoft MMSV Pentamaster Aemulus QES Visdynamics Genetec
indicator for OSAT and EMS
(Automation equipment)
players.
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Share price performance – Technology (hardware)
2017 2018 YTD 2019
300% 2018: Key EMS players were

252% hit by steep increase in
250%
foreign worker levy,
200% impacting profits margins
150% 113% significantly.
99%
100% 77% 86%
37% 30%
YTD 2019: General gains
50% 15% 16% 15%
11% 8% 11% 5% 9% were fuelled by the halt in
0%
-1% -2%
trade war and rebound in
-5%
-50% -22%-26% -23% -24% -22%
-38% consumer sentiment for
-54%
-100% -70% -72% electronic goods in the
VSI SKP ATA IMS EG Industries Uchi Tech Salutica PIE Industrial IQ Group Formosa region.
Prosonic
(Electronics Manufacturing Services)
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Outlook & Lookouts

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Key lookouts for the Automotive sector
2019 could be a year of TIV growth
•Standardization of EEV incentives for all manufacturers?

2019 National Automotive Policy •Further duty reduction on higher production localization?
•End-of-life vehicle policy?
MYR direction •Further boost supported by inflows?
•Boost to related supply chain?

Third National Car Project •Change in tax and duty structure?
•Policies to ensure demand sustainability?
•Possible upside to our and consensus TIV forecast for 2019; our current
Monthly sales and production trends projection is 590k unit (-1% YoY) vs Jan 2019 sales which grew 9% YoY.
•Sales trend of key launches (i.e. Proton X70, Perodua Aruz, Toyota Vios
and the upcoming Toyota Yaris)
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2019 National Automotive Policy (by end 1Q19)
Standardization of EEV incentives for all manufacturers?
• 2014 NAP introduced a customized incentive for manufacturers of Energy Efficient Vehicles (EEVs), defined by fuel
efficiency. Standardization of this incentive for all EEV manufacturers will level the playing field for all.
Further duty reduction on higher production localization?

• Higher localization of components in Malaysia promotes employment and activities in the local supply chain. Staggered
duty reduction based on a proper component localization tiering system could lower car prices and boost demand in the
near-term. Loss of government revenue from duties could be compensated with higher volumes
End-of-life vehicle policy?

• Out of ~14m passenger cars on the road, we estimate that about a quarter is more than 10 years of age. Announcement of
a ELV policy with implementation at a later period (3-5 years from now) will boost sentiment of the sector with ensured
sustainability of demand.
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MYR direction
MYR expected path USDMYR vs. USDMYR 30D implied volatility
Forecast End-1Q19E End-2Q19E End-3Q19E End-4Q19E 20 4.800
USDMYR 30D volatility (LHS)
USDMYR 4.05 4.00 3.98 4.06 USDMYR (LHS)
15 4.300
EURMYR 4.62 4.60 4.62 4.71
JPYMYR 3.68 3.70 3.75 3.79 10 3.800
MYRCNY 1.67 1.68 1.67 1.65

5 3.300
GBPMYR 5.27 5.28 5.33 5.52
SGDMYR 2.98 2.99 2.99 3.01 0 2.800
Jul-10
Jul-11
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Jul-18
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
DXY Index 96.87 95.88 94.64 94.86
Source: Maybank FX Research Source: Bloomberg (data), Maybank KE (compilation)
Mildly constructive on MYR
Our FX Research Team sees increasing risks to USD strength in 2019.
Slowdown in US economy, expectation for pause in US Fed tightening, and rising focus on US’ twin deficits to soften the USD in 1H19.
USDMYR to remain at 4.20 levels if the US-CN trade war, EM concerns, and domestic factors get enhanced in 2019.
Post-2019, maintain our lower USDMYR forecast on new government’s improved governance, transparency and accounting.
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MYR direction
MYRUSD vs. Brent crude oil price Daily foreign net buy/sell flows
0.330 120 Daily foreign net buy/(sell) (MYR m, LHS)
MYRUSD (pts, LHS) Cumulative foreign net buy/(sell) (MYR m, RHS)
0.315 105 400 1200
Brent (USD/bbl, RHS)
0.300 90
300 900
0.285 75
0.270 60 200 600
0.255 45
100 300
0.240 30
0.225 15 0 0
0.210 0
(100) (300)
Sep-14
Sep-15
Sep-16
Sep-17
Sep-18
May-14
Jul-14
May-15
Jul-15
May-16
Jul-16
May-17
Jul-17
May-18
Jul-18
Jan-14
Mar-14
Nov-14
Jan-15
Mar-15
Nov-15
Jan-16
Mar-16
Nov-16
Jan-17
Mar-17
Nov-17
Jan-18
Mar-18
Nov-18
Jan-19
6-Feb
16-Jan
23-Jan
30-Jan
13-Feb
2-Jan
9-Jan
Source: Bloomberg, Maybank KE (chart) Source: Bursa Malaysia, Maybank KE (chart)
Other possible factors to further boost MYR’s strength
• Stabilising to improving crude oil outlook

• Further foreign inflow on equities
• Possible repatriation by Petronas and Khazanah
• Petronas has announced a special dividend of MYR30b under the 2019 budget, bringing total dividend commitment to MYR54b.
(Source: https://www.nst.com.my/business/2018/11/427728/petronas-pay-additional-rm30-billion-special-dividend-govt)
• Khazanah’s reported move to reduce its global presence may boost the MYR.
(Source: https://www.nst.com.my/business/2019/02/460408/khazanah-boost-local-market)
• Samurai bond subscription of up to JPY200b (~MYR7.3b) to be announced in Mar 2019.
(Source: https://www.nst.com.my/business/2018/11/427728/petronas-pay-additional-rm30-billion-special-dividend-govt)
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MAA monthly statistics
Auto sales, January 2019 Auto production (TIP), January 2019
Jan 19 % chg % chg YTD % chg Production (units) Market share (%)
(Units) MoM YoY (Units) YoY
Jan 19 % chg % chg YTD % chg Jan 19 ppt chg ppt chg YTD ppt chg
TIV 48,450 0.5 8.7 48,450 8.7
(Units) MoM YoY (Units) YoY (%) MoM YoY (%) YoY
Passenger 44,264 4.3 10.7 44,264 10.7
Commercial 4,186 (27.4) (8.9) 4,186 (8.9)
TIP 54,818 29.3 (19.6) 54,818 (19.6)
Passenger 51,137 33.1 (20.8) 51,137 (20.8) 93.3 2.7 (1.3) 93.3 (1.3)
National 26,986 12.4 20.1 26,986 20.1 Commercial 3,681 (7.5) 0.3 3,681 0.3 6.7 (10.6) 1.3 6.7 1.3
Non-national 21,464 (11.3) (2.9) 21,464 (2.9)
National 27,925 21.6 (33.0) 27,925 (33.0) 50.9 (3.2) (10.2) 50.9 (10.2)
Marque Non-national 26,893 38.3 1.4 26,893 1.4 49.1 3.2 10.2 49.1 10.2
Proton 6,862 22.6 43.5 6,862 43.5
Perodua 20,124 9.4 13.7 20,124 13.7
Marque
Toyota* 3,184 (27.3) (11.2) 3,184 (11.2)
Proton 6,143 51.0 26.5 6,143 26.5 11.2 1.6 4.1 11.2 4.1
Honda 7,515 (6.3) (7.6) 7,515 (7.6)
Perodua 21,782 15.3 (40.9) 21,782 (40.9) 39.7 (4.8) (14.3) 39.7 (14.3)
Nissan 2,008 (30.0) 0.0 2,008 0.0
Toyota 4,259 337.3 (16.6) 4,259 (16.6) 7.8 5.5 0.3 7.8 0.3
Mazda 1,605 10.6 23.5 1,605 23.5
Honda 9,746 44.4 (4.1) 9,746 (4.1) 17.8 1.9 2.9 17.8 2.9
Hyundai 270 45.9 (23.9) 270 (23.9)
Mercedes 1,063 (5.6) (12.7) 1,063 (12.7) Nissan 1,835 (3.0) 50.3 1,835 50.3 3.3 (1.1) 1.6 3.3 1.6
BMW 800 (21.3) (4.8) 800 (4.8) Mazda 2,164 41.2 (29.3) 2,164 (29.3) 3.9 0.3 (0.5) 3.9 (0.5)
Volkswagen 586 143.2 37.6 586 37.6 Hyundai 229 38.8 231.9 229 231.9 0.4 0.0 0.3 0.4 0.3
Mercedes Benz 1,146 45.2 16.5 1,146 16.5 2.1 0.2 0.6 2.1 0.6
Mkt share Jan 19 ppt ppt YTD ppt BMW 2,722 339.7 8.8 2,722 8.8 5.0 3.5 1.3 5.0 1.3
(%) chg chg (%) chg
Volkswagen 383 (2.0) (13.2) 383 (13.2) 0.7 (0.2) 0.1 0.7 0.1
MoM YoY YoY
Passenger 91.4 3.3 1.7 91.4 1.7 Hino 504 (1.2) 13.5 504 13.5 0.9 (0.3) 0.3 0.9 0.3
Commercial 8.6 (3.3) (1.7) 8.6 (1.7) Isuzu 924 (4.4) (17.5) 924 (13.2) 1.7 (0.6) 0.0 1.7 0.0
Source: MAA, Maybank Kim Eng
National 55.7 5.9 5.3 55.7 5.3
Non-national 44.3 (5.9) (5.3) 44.3 (5.3)
Upside bias to our 2019 TIV forecast. Jan 2019 kick-started the year on a strong note, as TIV
Marque grew 9% YoY to 48.5k units even without a full month contribution from the newly launched
Proton 14.2 2.5 3.4 14.2 3.4
Perodua
Perodua Aruz and Toyota Vios. Sustained YoY growth in the next two months will present
41.5 3.3 1.8 41.5 1.8
Toyota* 6.6 (2.5) (1.5) 6.6 (1.5) opportunities for us to lift our 2019 TIV forecast – unchanged for now at 590k units (-1% YoY).
Honda 15.5 (1.1) (2.7) 15.5 (2.7)
Nissan 4.1 (1.8) (0.4) 4.1 (0.4) National marques in the limelight. Leading the pack in terms of TIV growth were the national
Mazda 3.3 0.3 0.4 3.3 0.4
Hyundai 0.6 0.2 (0.2) 0.6 (0.2)
marques, Proton (+1.3k units MoM) and Perodua (+1.7k units MoM), benefitting from their
Mercedes 2.2 (0.1) (0.5) 2.2 (0.5) respective new SUV launches, X70 and Aruz. On the flipside, Toyota lost most grounds in the
BMW 1.7 (0.5) (0.2) 1.7 (0.2) month. Deliveries of its new B-segment Vios in the second half of Jan 2019 were still not at
Volkswagen 1.2 0.7 0.3 1.2 0.3 optimal level.
Source: MAA
Note: *Including Lexus sales
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Key lookouts for the Technology (hardware) sector
2019 could be a year of TIV growth
•Resistance by key European markets to adopt Huawei’s 5G

infrastructure and protocol hinders mass adoption; Asian markets are
News on 5G deployment more receptive.
•Samsung’s recent 5G S10 model is exclusive only to Verizon for now.
Limited deployment ties in with insufficient telco infrastructure.
•Unrest caused by the trade tension between US and China has

dampened investment/consumer sentiment; demand for big-ticket item
Trade tension has slowed in recent times.
•Resolution between US and China could revive the sentiment for the
electronics sector.
•Further strength in MYR against USD supported by inflows will

MYR direction negatively hit Tech hardware players in Malaysia who are mainly net
USD exporters.
Global semiconductor sales and •Semiconductor equipment billing trends are leading indicator to
semiconductor sales outlook.
equipment billing trend
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Global semiconductor sales (GSS) monthly statistics
Semiconductor equipment billing
In 2018, GSS hit a high of USD470b with
USD m China and US leading the pack in terms of
3,000.0 market share gain. We believe that part
2,500.0 of this ramp up is related to capex
spending related to mass deploy 5G
2,000.0
network in the next two years.
1,500.0
1,000.0
Snapshot of monthly GSS
500.0 Dec 18 % chg % chg YTD % chg
0.0 (USD m) MoM YoY (USD m) YoY

GSS 38,219 (7.0) 0.6 470,344 16.1
Jan-17
Jan-15
Jan-16
Jan-18
Oct-14
Apr-16
Apr-15
Oct-15
Oct-16
Apr-17
Oct-17
Apr-18
Oct-18
Jul-15
Jul-14
Jul-16
Jul-17
Jul-18
Region
Source: SEMI
America 8,396 (12.4) (6.2) 104,268 21.6
Europe 3,466 (4.9) 2.8 42,893 13.7
GSS forecast by segment China 12,707 (8.1) 5.8 158,526 22.2
Integrated Circuits Sensors Japan 3,315 (2.2) 2.3 39,940 10.5
Optoelectronics Discrete Semiconductors Asia Pacific 10,335 (3.1) (0.7) 124,716 7.8
USD b
500.0
Market Dec 18 ppt chg ppt chg YTD ppt chg
450.0
share (%) MoM YoY (%) YoY
400.0
Region
350.0
America 22.0 (1.3) (1.6) 22.2 1.0
300.0
Europe 9.1 0.2 0.2 9.1 (0.2)
250.0 China 33.2 (0.4) 1.6 33.7 1.7
200.0 Japan 8.7 0.4 0.1 8.5 (0.4)
150.0 Asia Pacific 27.0 1.1 (0.4) 26.5 (2.0)
100.0 Source: CEIC
2015A 2016A 2017A 2018E 2019E
Source: WSTS
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Outlook & Lookouts
- Market earnings

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+6.5% 2019E core earnings growth for our universe
And, +5.6% for the KLCI Maybank KE Research Universe core earnings growth
(YoY %)
Key risks to our earnings growth forecasts for the market are: 20
i. negative government policies,
ii. lower-than-expected crude oil and CPO prices, 15
iii. margins pressure (from higher minimum wage, fuel and

10
utility costs).
5
(5)
2011 2012 2013 2014 2015 2016 2017 2018E 2019E
KLCI: Earnings breakdown by sector – CY19 Research Universe: Earnings breakdown by sector – CY19
Utilities Gloves Building materialsOil & Gas Transport Telcos Utilities

Transport REITs
15% 2% 1% 1% 5% 7% 11% Petrochem
Telcos 3% 3%
6% 7%
Automobiles
2%
Property Property - Developer
1% 3%
Banking & Finance
Plantation 38%
Plantations
6% 4%
Petrochemical Oil & Gas

5% 1% Media
Gaming Consumer
Banking & Financials 1% Gloves Healthcare 3%
6% Consumer 49% 2% Gaming Construction, Infra Automotive 1%
3%
7% 3% 3%
Source: Maybank KE
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+6.5% 2019E core earnings growth for our universe
Big-cap sectors supporting Maybank KE Research Universe core earnings growth, PERs, P/B, ROE (13 Feb 2019)
market earnings growth :
Earnings Growth (%) PE (x) P/B (x) ROE (%)
Banks (+6.4%)
Sector CY17A CY18E CY19E CY17A CY18E CY19E CY17A CY18E CY17A CY18E
Healthcare (+6.2%) Banking & Finance 14.4 6.6 6.4 14.5 13.6 12.8 1.6 1.5 11.0 11.0
Plantation (+14.1%). Non-banking Finance 10.7 5.7 1.3 14.0 13.3 13.1 2.1 2.2 14.9 16.6
Building material NM NM NM NM NM 84.5 0.6 0.6 (0.4) (4.7)
Consumer (8.2) 4.6 5.7 35.2 33.7 31.9 8.7 8.5 24.6 25.2
Gaming – Casino to retrace Healthcare (23.6) 39.4 6.2 70.6 50.7 47.7 2.3 2.3 3.2 4.5
(-12.2%) due to the casino Automotive (8.2) 29.7 14.3 19.1 14.8 12.9 0.6 0.8 3.1 5.3
duty rate hike from 1 Jan Construction, Infra 3.7 3.9 4.1 11.6 11.2 10.7 1.1 1.0 9.1 9.0
2019 (amongst others). Gaming – NFO 0.1 5.7 (2.3) 13.3 12.6 12.8 1.9 1.9 14.5 15.1
Gaming – Casino 16.1 11.1 (12.2) 13.0 11.7 13.3 0.8 0.9 6.6 7.4
Gloves 19.3 19.9 12.6 37.4 31.2 27.7 7.7 6.8 20.6 21.8
Utilities to see a small
Media (25.6) (13.3) 35.6 15.0 17.3 12.8 2.4 3.1 15.8 18.1
recovery (+4.0%) after (47.7) (15.0) 405.6 137.3 161.6 32.0 1.0 1.1 0.7 0.7
Oil & Gas
retracing in 2018. Petrochemical 15.4 4.1 4.1 14.8 14.2 13.6 2.2 2.0 15.1 14.0
Plantation 36.3 (32.0) 14.1 25.0 36.8 32.2 2.4 2.1 9.5 5.7
Telco to see another year Property – Developer (0.1) (7.9) (1.1) 13.0 14.1 14.2 1.0 0.8 7.4 5.7
Property – REIT 4.2 2.8 3.0 19.1 18.6 18.1 1.2 1.2 6.2 6.2
of core earnings decline
Technology 31.7 6.4 10.7 20.2 19.0 17.1 5.0 4.1 24.9 21.4
(-4.3%).
Telcos (4.1) (4.7) (4.3) 22.4 23.5 24.6 3.4 3.1 15.0 13.1
Transport – Aviation 22.7 (14.5) 23.9 15.0 17.6 14.2 1.5 1.5 10.0 8.7
Transport – Shipping 4.8 (33.4) 26.2 14.9 22.4 17.7 0.8 0.9 5.4 3.9
Transport – Ports 9.6 (21.0) 13.5 19.4 24.6 21.7 6.3 5.8 32.7 23.5
Utilities (5.4) (16.1) 4.0 12.6 15.0 14.4 1.5 1.4 11.6 9.2
Diversified 1.2 (19.0) (5.3) 12.3 15.2 16.1 1.0 1.0 8.4 6.3
Stocks under cvrg 6.4 (1.9) 6.5 17.5 17.9 16.8 1.7 1.6 9.6 9.1
Source: Maybank KE
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Strategy & Thematics

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Impact from MYR’s volatility
MYRUSD vs. Brent crude oil price Weak MYR is “+ve” for Gloves and Technology
0.330 120
Maybank FX Research estimates every 1% change in crude oil price could
MYRUSD (pts, LHS)
0.315 105 impact USDMYR by 0.2%.
Brent (USD/bbl, RHS)
0.300 90
0.285 75 Sectors most sensitive:
0.270 60 Gloves & Technology POSITIVE in a WEAK-er MYR environment
0.255 45 Auto & Media POSITIVE in a STRONG-er MYR environment.
0.240 30
0.225 15
0.210 0
Sep-14
Sep-15
Sep-16
Sep-17
Sep-18
May-14
Jul-14
May-15
Jul-15
May-16
Jul-16
May-17
Jul-17
May-18
Jul-18
Jan-14
Mar-14
Nov-14
Jan-15
Mar-15
Nov-15
Jan-16
Mar-16
Nov-16
Jan-17
Mar-17
Nov-17
Jan-18
Mar-18
Nov-18
Jan-19
Source: Bloomberg, Maybank KE (chart)
Earnings sensitivity analysis to changes in USD/MYR Earnings sensitivity analysis to changes in USD/MYR
Base assumption Impact to NP from Base assumption Impact to NP from
Revenue in USD # COGS in USD Revenue in USD # COGS in USD
Company for FY19 1% chg in Company for FY19 1% chg in
(%) (%) (%) (%)
(USD/MYR) USD/MYR (%) (USD/MYR) USD/MYR (%)
Gloves Automotive
Top Glove 98 35 4.10 4.8 UMW Holdings - 20-25 4.15 3.0
Kossan 97 45 4.10 3.2 Tan Chong - 20-25 4.15 7.0
Hartalega 98 55 4.10 2.1 Berjaya Auto - - - -
MBM Resources - 10 4.15 2.0
Technology Pecca Group - 60 4.15 3.0
ViTrox Corp 85 30 4.15 1.5 Perodua - 5 4.15 0.5
MMS Ventures 40 10 4.15 0.5
Inari Amertron 95 70 4.15 1.8 Media
Globetronics 65 70 4.15 0.7 Astro - 30-35 4.10 4.9
V.S. Industry 30 50 4.15 0.4 Media Prima - 5-10 4.00 0.7
Star Media - 15-20 4.00 1.1
MCIL - 15-20 4.00 2.1
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“Beneficiaries” of trade war
Technology sector with capacity
The first wave of trade diversion has already occurred but only for lower-end semiconductor components production.
If US-CN trade war escalates, expect larger waves of higher-end semiconductor components production to be diverted.
This may trigger a surge in capex and benefit local equipment suppliers, OSATs and EMS players.
We could also see more activities in the M&A space in transition to mass 5G deployment. Eg. joint takeover of Unisem (UNI MK, Not
Rated) by Unisem’s Chairman and Huatian Electronics.
Within our coverage, likely beneficiaries are:

VITRO, MMSV (automation equipment)
INRI, GTB (OSAT players)
VSI (EMS player).
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Sectors summary & Top BUYs

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Automotive (POSITIVE)
Annual TIV vs GDP growth TIV breakdown by marques USDMYR and JPYMYR
Yearly TIV (LHS) GDP Growth % (RHS) Others Nissan Honda
units units USD/MYR forex JPY100/MYR forex
('000) Toyota Perodua Proton
700,000 8.0% 4.7
7.0% 700 4.5
600,000 6.0% 600 4.3
5.0%
4.1
500 3.9
500,000 4.0% 44 33 35 52 77 95
32 39 3.7
3.0% 400 92 89 107 93 92 110 102
91 102 82 104 96 3.5
400,000 2.0% 300 40 52 80 82 65 70 67
3.3
140 189 180 189 196
1.0% 124 122 167 167 196 213 3.1
200 155 162 207 205 227
300,000 0.0% 2.9
-1.0% 100 157 167 167 116 118 142 148 157 159 141 139 116 2.7
102 72 71 65
200,000 -2.0% 0 2.5
Jan-12
Apr-12
Oct-12
Apr-13
Jan-13
Oct-13
Jan-14
Apr-14
Oct-14
Jan-15
Apr-15
Oct-15
Jan-16
Apr-16
Oct-16
Jan-17
Apr-17
Oct-17
Jan-18
Apr-18
Oct-18
Jan-19
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Jul-18
2013
2017
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2014
2015
2016
2018
2019E
2010
2017
2003
2004
2005
2006
2007
2008
2009
2011
2012
2013
2014
2015
2016
2018
Total Industry Volume (TIV): Sales breakdown: Auto players are net USD & JPY importers:
Dominated by passenger vehicles (89% of 2018 TIV). New attractive launches (i.e. Proton X70, Perodua MYR’s recent strength against USD will benefit
SUV segment (12% of 2018 TIV) registered strong Aruz, Toyota Vios) will drive market share gain Toyota (51% owned by UMWH), Nissan (TCM), Honda
growth of 15% YoY in 2018 even without Proton X70 amid modest TIV growth. environment. UMWH is (34% owned by DRB Hicom).
and Perodua Aruz. the best proxy being the beneficiary of both
Perodua and Toyota.
MYR’s recent weakness against JPY will impact
TIV in Jan 2019 is ~48.5k units (+9% YoY vs our -1% Mazda (Bermaz), Hino (42% owned by MBM
YoY expectation for 2019); we see upside for Proton, Recent news: Resources).
Perodua (Jan 2019 sales: +14% YoY) and Toyota sales. (i) Perodua delivered 1,025 units of Aruz in one
day (31 Jan 2019), with 8k order backlog. Perodua (largest marque in Malaysia with 38%
2019 TIV may see 3-5% YoY growth, supported by (ii) Proton delivered 1k units of X70 in one day market share in 2018), 38% owned by UMWH and
attractive new launches and possibly lower excise before CNY. 22.6% owned by MBM Resources, has localisation
duty for CKD models from the upcoming National (iii) Toyota expected to sell >30k units of Vios in rates of 90-95% for all its models. Imported
Automotive Policy, as per recent news flow. 2019. components are mainly in USD.
End-of-life vehicle policy will be a huge boost to Honda (34% owned by DRB Hicom) and Nissan (under
sentiment, if announced. ~25% of 14m passenger cars TCM) lacks new model launches in 2019 and will
on-the-road are >10 years old. likely lose market share.
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UMW Holdings (BUY; TP: MYR7.50; SP: MYR5.87)
Company Description
Toyota cycle is here!
UMW Holdings operates 3 core division: Auto (Toyota
franchise in Msia), Industrial & Heavy Equipment and
Fresh new Toyota offerings (i.e. Camry, Vios, Yaris) against its competitors’ aging model line-up Manufacturing & Engineering.
will grow topline while margins are set to expand on (i) cost savings from UMWT’s dealership
rationalisation, (ii) better cost efficiencies from new Toyota plant and (iii) USD/MYR forex reset for
Statistics
its new Toyota models (expected to account for 60% of 2019 sales).
52w high/low (MYR) 6.69/4.20
Higher Perodua volume in 2019, lifted by newly launched SUV, Aruz, will boost UMWH’s auto
Free float (%) 81.2
earnings. Meanwhile, turnaround in UMWH’s aerospace engineering ops (parked under M&E division) Issued shares (m) 1,168
will see the overall group reporting a 34% earnings growth. Market capitalisation MYR6.9B
USD1.7B
Earnings consistency will see UMWH resuming dividends; prior to its lossmaking years (FY15-16), Major shareholders:
UMWH’s DPR averaged ~70% despite a 50% dividend policy. With PNB as its largest shareholder, we Permodalan Nasional Bhd. 50.4%
believe that UMWH will likely resume its dividend policy; a first interim dividend of 5sen was Employees Provident Fund 11.6%
Bumiputra Investment Foundation 7.3%
declared in Jun 2018. At 50% DPR, we expect yields to be at 4% in 2019.
At 12x CY19 PER currently, valuations are relatively undemanding vs Sime Darby Bhd (SIME MK, Price Performance
HOLD), its closest local peer automotive conglomerate, at 16x CY19 PER. Our MYR7.50 TP implies a 7.00 140
CY19 PER of 16.2x. 6.50 130
6.00 120
Revenue 10,437 11,067 11,724 13,073 14,457 5.50 110
EBITDA 85 536 963 1,259 1,370
Core net profit 404 297 429 572 645 5.00 100
Core EPS (sen) 34.6 25.4 36.7 49.0 55.2
Core EPS growth (%) (2.0) (26.6) 44.6 33.5 12.6 4.50 90
Net DPS (sen) 0.0 0.0 18.4 24.5 27.6

4.00 80
Core P/E (x) 12.2 20.5 16.0 12.0 10.6 Feb-17 May-17 Aug-17 Nov-17 Feb-18 May-18 Aug-18 Nov-18
P/BV (x) 1.0 2.0 2.1 1.9 1.7
Net dividend yield (%) 0.0 0.0 3.1 4.2 4.7 UMW - (LHS, MYR) UMW / Kuala Lumpur Composite Index - (RHS, %)
ROAE (%) (9.3) 1.1 13.5 16.5 16.7

ROAA (%) 2.3 2.2 4.1 5.1 5.3 -1M -3M -12M
EV/EBITDA (x) 136.3 16.4 10.5 8.0 7.3 Absolute (%) 2 19 (12)
Relative to index (%) (0) 17 (5)
Consensus net profit - - 429 492 563
MKE vs. Consensus (%) - - (0.0) 16.3 14.5 Source: FactSet
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Technology - Hardware (NEUTRAL)
Monthly semiconductor equipment billing trend GSS breakdown by region USDMYR trend
USD m Asia Pacific Japan China Europe America USD/MYR forex
USD m
3,000.0 500,000 4.6
2,500.0 450,000
400,000 4.2
2,000.0 350,000
3.8
300,000
1,500.0
250,000
3.4
1,000.0 200,000
150,000 3.0
500.0
100,000
0.0 50,000 2.6
0
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Apr-12
Oct-12
Apr-13
Oct-13
Apr-14
Oct-14
Apr-15
Oct-15
Apr-16
Oct-16
Apr-17
Oct-17
Apr-18
Oct-18
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Jul-18
Jan-17
Jan-15
Jan-16
Jan-18
Oct-14
Apr-16
Apr-15
Oct-15
Oct-16
Apr-17
Oct-17
Apr-18
Oct-18
Jul-14
Jul-15
Jul-16
Jul-17
Jul-18
1987
2009
1977
1979
1981
1983
1985
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2011
2013
2015
2017
Monthly semiconductor equipment billing: Global semiconductor sales (GSS): Tech – Hardware players are net USD exporters:
Despite strong double-digit YoY growth in 1H18 2018 GSS closed 16% higher YoY, driven by 30+% YoY MYR’s recent strength against USD negatively impact
equipment billing, 2018 closed only with a 9% YoY growth in memory IC segment. Leading the pack, is most tech hardware players in 2 ways: ASPs and net
gain due to a slower 2H18. Nonetheless, after 6 China (+22% YoY; 34% market share) and America cash holdings in USD.
consecutive months of MoM decline, billing has (+22% YoY; 22% market share).
finally rebounded 8% MoM in Dec 2018. Our sensitivity analysis suggest that Inari and ViTrox
Into 2019, WSTS projects a mild 2.6% YoY growth in are most sensitive; 1% change in USDMYR will
On the ground, our checks suggest that >50% of local GSS, led by the Asia Pacific region. Key segments of impact earnings by 1.5-1.8% on an annual basis.
semiconductor equipment players are receiving more growth is expected to be seen in Optoelectronics
enquiries and purchase order, compared to the same (+7% YoY) and Sensor (+5% YoY) products.
Alongside seasonally weaker earnings, USD/MYR
time last year. volatility ties with our belief that 1H19 will offer
On the ground, local listed OSATs are seeing softer many trading opportunities in tech names.
To position for 5G telco infrastructure, Vitrox offers sentiment since end-4Q18, driven mainly by poor
the biggest exposure in Malaysia space; ~13-15% of smartphone sales – especially those related to
revenue. Apple.
The Philippines and Thailand has announced that

they will work with Huawei in 5G deployment.
Huawei targets Thailand next.
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Inari Amertron (BUY; TP: MYR1.88; SP: MYR1.61)
Company Description
A year of consolidation
Inari Amertron is the biggest semiconductor player in
M’sia and one of Broadcom’s top OSAT providers in
Despite optimism from the upcoming 5G deployment, Inari is going through a transition period the thriving wireless division.
whereby quarterly earnings trend will not follow the norm.
Statistics
Earnings weakness in 1H19 due to (i) weak RF volumes from key clients and (ii) consolidation cost in 52w high/low (MYR) 2.53/1.23
Inari’s Philippines ops resulted in a double-digit contraction to the tune of 28% YoY in 1H19 3m avg turnover (USDm) 4.7
earnings. Nonetheless, we expect YoY recovery in 2H19, fuelled by new components outsourcing Free float (%) 68.3
from OSRAM (i.e. 2D/3D FR, mini LED), to narrow down overall 2019 weakness. Issued shares (m) 3,167
Market capitalisation MYR5.1B
USD1.3B
Looking ahead, with the introduction of 5G smartphones, we believe that RF content will expand
Major shareholders:
multi-fold. We expect Apple to introduce 5G iPhones only in Sep 2020. Meanwhile, Samsung and
Insas Bhd. 19.0%
Huawei could possibly introduce 5G smartphones in their upcoming launches. Also, earnings Kumpulan Wang Persaraan 13.4%
weakness at OSRAM may push it to employ further outsourcing of high volume manufacturing to Employees Provident Fund 7.0%
OSATs such as Inari.

Price Performance
Trading opportunities in share price in 1H19 could offer windows for longer-term exposure for the 2.60 230
5G upcycle. At 15x FY20 earnings currently, we still see a 17% upside to our MYR1.88 TP, pegged at 2.40 210
17x CY20 PER. 2.20 190
2.00 170
FYE Jun (MYR m) FY17A FY18A FY19E FY20E FY21E
1.80 150
Revenue 1,177 1,376 1,387 1,769 2,217
EBITDA 304 371 351 466 559 1.60 130
Core net profit 218 281 239 334 411
1.40 110
Core EPS (sen) 7.0 8.4 7.1 9.9 12.2
Core EPS growth (%) 34.6 20.0 (15.0) 39.9 23.0 1.20 90
Net DPS (sen) 5.5 6.8 6.0 8.4 10.4
Inari Amertron - (LHS, MYR)
Core P/E (x) 20.2 27.1 22.7 16.2 13.2
Inari Amertron / Kuala Lumpur Composite Index - (RHS, %)
P/BV (x) 5.0 7.2 4.9 4.6 4.3
Net dividend yield (%) 3.9 3.0 3.7 5.2 6.4 -1M -3M -12M
ROAE (%) 29.2 25.7 22.0 29.2 33.7 Absolute (%) 16 (7) (30)
ROAA (%) 21.0 22.2 17.6 23.5 27.0
Relative to index (%) 14 (9) (25)
EV/EBITDA (x) 13.2 19.1 14.1 10.7 8.9
Net gearing (%) (incl perps) net cash net cash net cash net cash net cash Source: FactSet
Consensus net profit - - 254 301 363
MKE vs. Consensus (%) - - (5.9) 10.9 13.2
RESTRICTED Page 24
MKE Top BUYs
CIMB MK GENT MK ASTRO MK UMWH MK

TNB MK
MY loans growth above average Toyota’s 2019 sales and margin
Stronger 4Q18 earnings. Trading at 50% discount to Valuations are cheap, way below
and NIMs to stabilize. recovery not priced in.
Pass-through mechanism is now SOP/sh (20-year mean: -22%) . global Pay-TV average.
Improving outlook for Niaga Mass market new launches to
semi-automatic. Despite GENM’s woes, forecast 3- Dividend yield high at >7% p.a.
(NIMs, credit costs, IDR/MYR). account for 2/3 of sales in 2019.
Regulatory concerns potentially year earnings CAGR of 8%. with upside potential
Trading at about -1SD to New models could lift margins.
overblown. More upside in store if GENS wins AK buying ASTRO shares and a
historical PER of 10.5x.
Japanese casino license. potential privatization target.
CMS MK
ABMB MK YTLREIT MK MFCB MK
Beneficiary of acceleration in
Growing demand for Alliance Resilient rental income from MY Lao hydro power plant on track
Pan Borneo Sarawak Highway.
One Account and Alliance@Work. and JP, contributing ½ to NPI. for completion by end-2019.
Coastal & Second Link Road and
Focus on SMEs to drive loans Earnings growth potential from More upside from electricity
State Water Grid Supply may
growth and margins. AU hotels post-refurbishment. sales during testing period.
replenish order book.
Recent MSS and branch More upside from strong pipeline Net profit to nearly double on
More upside in store from Sacofa
rationalization to save cost. of assets from sponsor. commissioning of power plant.
and high ferrosilicon prices.
Price TP EPS (sen) PE (x) EPS Growth (%) Net yield ROE P/B Px chg
(%) (%) (x) (%)
13 Feb MYR CY18E CY19E CY18E CY19E CY18E CY19E CY19E CY19E CY19E YTD
Tenaga 13.06 15.50 94.6 98.7 13.8 13.2 (23.4) 4.3 3.8 8.9 1.2 (4.0)
CIMB 5.78 6.70 50.1 55.6 11.5 10.4 3.7 11.0 5.4 9.7 1.0 1.2
Genting 7.06 9.50 57.4 55.1 12.3 12.8 4.0 (4.0) 2.3 6.4 0.7 15.7
Astro Malaysia 1.58 1.95 10.9 13.7 14.5 11.5 (16.1) 26.0 7.8 97.5 10.0 21.5
UMW Hldgs 5.85 7.50 36.7 49.0 15.9 11.9 44.5 33.5 4.2 15.7 2.0 6.9
Alliance Bank 4.18 4.60 35.5 38.1 11.8 11.0 3.5 7.3 4.1 9.9 1.1 4.0
CMS 3.01 4.10 26.3 28.8 11.4 10.5 7.3 9.5 3.8 11.4 1.2 11.9
YTL REIT 1.28 1.55 9.3 9.9 13.8 12.9 9.4 6.5 6.1 6.3 0.8 8.5
Mega First Corp 3.86 4.20 35.0 26.5 11.0 14.6 2.0 (24.3) 0.5 7.0 1.0 24.5
RESTRICTED Page 25
Sector peer comparison

RESTRICTED Page 26
Our coverage in Automotive and Technology (Hardware)
RESTRICTED Page 27
DISCLAIMER
DISCLAIMER
This presentation is for information purposes only and is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial
situation and the particular needs of persons who may receive or read this presentation. Investors should therefore seek financial, legal and other advice regarding the appropriateness of
investing in any securities or the investment strategies mentioned in this presentation.
The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Bhd and
consequently no representation is made as to the accuracy or completeness of this presentation by Maybank Investment Bank Bhd and it should not be relied upon as such. Accordingly, no
liability can be accepted for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this presentation.
This presentation may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”,
“expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions.
Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results
to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. Maybank Investment
Bank Bhd expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or
to reflect the occurrence of unanticipated events.
This presentation copy may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express
written consent of Maybank Investment Bank Bhd and Maybank Investment Bank Bhd accepts no liability whatsoever for the actions of third parties in this respect.
This presentation 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.
RESTRICTED Page 28
Your “Futures” Lies Here
KL Market Outlook 1H2019
Terence Ho
Head, Retail Futures Sales, Futures, Retail Brokerage
23 February 2019
Disclaimer
WARNING: TRADING IN FUTURES IS HIGHLY LEVERAGED AND CARRIES A HIGH

DEGREE OF RISK WHICH MIGHT NOT BE SUITABLE FOR THE GENERAL PUBLIC.
INVESTORS SHOULD CONSIDER WHETHER SUCH TRADING IS APPRORIATE IN
LIGHT OF THEIR EXPERIENCE, OBJECTIVES, FINANCIAL RESOURCES AND
OTHER RELEVANT FACTORS BEFORE COMMENCEMENT.
Disclaimer: The materials, information and functions provided in this report

shall not under any circumstances be considered or constitute offer or
solicitation to sell, buy, give, take, issue, allot or transfer, or as the giving of
any advice in respect of shares, stocks, bonds, notes, interests, unit trusts,
mutual funds or other securities, investments, loans, advances, credits or
deposits in any jurisdiction
2
Futures Market 101
• What is Markets
The areas of economic activity in which buyer and sellers come together and the forces of supply
and demand affects prices.
• and Why Futures Markets?

Futures offer a standardized, fast, cost-effective way to trade financial and commodity markets.
Traders worldwide use futures to easily reduce risk or seek profits on changing market environment.
Economics and Markets
Traditional – Goods and services are traded without money aka Barter System
Command – Government controlled production and pricing
Market – Supply and demand, market economy
Mixed - Combination of command and market
Hence:
The need of having a Futures Market
Are We Impacted By The Big Boys?
Quick Glance of Financial Markets
Markets Products
Bond Derivatives Securitization, Hybrid Security, Credit
Market Market derivative, Futures Exchange
Bond Fixed Income,
Derivatives Stock Market Corporate/Government/Municipal
Market Market
Bond, Bond valuation, High-yield debt
Financial Stock Stock, Preferred Stocks, Common
Markets Market Stocks, Registered Share, Stock
Overview Exchange
Foreign Foreign Exchange Rate, Currency

OTC Exchange
Exchange
Other Money market, Reinsurance Market,
Other Markets Commodity Market
Markets
OTC Spot market, Forwards, Swaps, Options
Dojima Rice Market 1730 & CBOT 1848
Futures Evolution
Recognized Exchange and Standardized Specifications

Segregated Account guaranteed by Clearing House
Have an Underlying Product – Fundamental backed
Availability of Technical Tools
Ease of entry and exit
Controllable Risk Appetite
Leverage power
Derivatives Type and Purpose
Our own Futures Exchange since 1980
Your Futures is Here
How To Trade
Fundamental Analysis Technical Analysis
Understands pattern in company’s financial Understands patterns in the particular asset

performance. class trading price.
Tries to predict future performance using Assume historical patterns in the particular
financial statements asset class would repeat itself.
Predictive Methodologies
Is predominantly for long-term investment. Generally used for short-term trading.
Depends on financial statements, brokerage Depends only on the instruments price charts
analysis and news reporting and market volumes
Strategy Rule Based or Risk Based
Define your strategy from a start

No Idea caused Traders to be in Limbo state at all times
Failing to pull trigger on trade
Analysis Paralysis
No Diagnosis No Prognosis No Profit
Forecasting Market Trend (TREX OHLC)
OPEN HIGH LOW LAST / CLOSE STATUS
BULLISH
BEARISH
SIDEWAYS
CONSOLIDATION
EXPANSION
TREX Concepts
Trading Psychology aka Money in The Pocket Strategies
Trading key – adapting from Wise Sun Tzu 5,000 years ago famous quote
“Know your-self and know your markets (enemies), “100 trades (battles) =
100 victories.”
It simply means you must know the markets well. As in any games “Practice
Makes Perfect.
Identify your trading style – Speculator, Spreader, Day-Trader and etc.
Capital allocation – Never use with scarce money.
Always have a trading game plan, execute the plan diligently.
What is right Keep it (Let the Profit Run), what is wrong Cut-Loss (Reduce
The Pain). Do not 2nd guess with emotions.
The Acid Test-Are You Ready
Keep your own Trader Journal

Painstakingly update daily OHLC to develop Trader Sense
Define your character to incorporate into your trading methods i.e. Hope,
Fear and Greed
Set aside trading capital and do not mixed with daily expenses.
Cast aside emotions during trading. Only follow your trading plan. No trading
plan means you are gambling even for 1 minute.
Trade with a Stop Order at all times and trail it for emotional control.
Fundamental or Technical it works IF YOU KNOW HOW TO USE IT.
Remember NO MARGIN CALLS !
Follow Through (The Basic TREX Plan)
Typical daily routine before market opens:
a) Have your PIVOT Points Ready
b) Identified the Short, Medium and Long Term Trend
c) Run a game plan in the mind a day before next market day
During Market Opens

a) Setup Trades -> Area of your attack
b) Trade -> See if the trade Follow-Through as plan
c) Put in Stop Order to prevent emotional shakeup during market hours.
d) OCO Orders -> if trading conditions changed.
e) Maintain composure irregardless market in favor or against. Remember No Margin Calls !
After Market Closed

a) Review your trades against the charts / Emotions / Fundamental
b) Review your trading capital on R2R (Risk To Ruin)
Traders Daily Regime
1. Preparation
Update Pivot Indicators to Pre-Simulation
Calculator determine Key on Market
(Download from Action Conditions
Apps Store)
2. Action Time
Actual Market Trading In Progress
Exit Strategies
(Setting-up (This will
(Time Frames)
Trades) determine P&L)
3. Recap to become expert

Trade Journal to
Review Actual Am I emotional ? avoid repetition
Trades of same mistake
Reading FBMKLCI Daily
Reading FBMKLCI Weekly
FBMKLCI Weekly (Gridline)
FBMKLCI Weekly (Zoom)
FCPO Weekly
Promo Code: MIB KLMO 8.8
• Special • Set-up and
Promotion fund your
Rate until trading
31 March accounts
2019 now
Local &
RM 5,000 to
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activate
Futures
2 weeks
free Live
Demo Experienced
account Dealers
upon funds
• Live Demo sighted • 24 hours
Account desk support
Q&A
Futures Dealing Team
+603-2288 1135
futures@maybank-ib.com
THANK YOU

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Asia Macro 2019:

Praying for Pause &

Dr Chua Hak Bin

• Trade War Disruption & Reconfiguration of Global Supply Chain

• Fed Pause Late 2019 & “Twin” Deficits

• Inverted Yield Curve (10Y-3m) : US “Recession” in 2020

GDP Growth (%)

2016 2017 2018 2019F 2020F

Indonesia 5.0 5.1 5.2 5.1 5.3

Malaysia 4.2 5.9 4.7 4.9 4.9

Philippines 6.9 6.7 6.2 6.5 6.5

Singapore 2.0 3.6 3.2 2.2 2.1

Thailand 3.3 3.9 4.1 3.8 3.6

Vietnam 6.2 6.8 7.1 6.8 6.5

Note: Numbers in red refer to Maybank’s estimates.

CPI Inflation (%)

2016 2017 2018 2019F 2020F

Indonesia 3.5 3.8 3.2 3.4 3.6

Malaysia 2.1 3.7 1.0 2.1 2.4

Philippines 1.8 2.9 5.2 3.0 2.8

Singapore -0.5 0.6 0.4 1.2 1.0

Thailand 0.2 0.7 1.1 1.1 1.0

Vietnam 2.6 3.5 3.5 2.7 4.1

Source: CEIC, Maybank KE

Source: CEIC, Markit, Maybank KE Source: CEIC, SIPMM, Maybank KE

China’s Leverage Building Up, Driven by Crackdown on Shadow Banking Led to

Source: Bloomberg, Maybank KE Source: Bloomberg, Maybank KE

Source: CEIC, National Bureau of Statistics, Maybank KE Source: CEIC, Maybank KE

Source: CEIC, Maybank KE Source: CEIC, Maybank KE

Source: CEIC, Maybank KE

Gross Fixed Exports of Imports of

Singapore 35% 10% 25% 201% 172%

Hong Kong 67% 10% 21% 190% 189%

Vietnam 68% 6% 31% 120% 128%

Thailand 51% 15% 24% 77% 69%

Taiwan 55% 14% 22% 76% 68%

Malaysia 55% 13% 25% 71% 63%

Philippines 69% 11% 31% 60% 70%

Korea 48% 15% 30% 55% 51%

Indonesia 54% 8% 33% 22% 21%

India 56% 11% 31% 20% 22%

China 39% 15% 43% 19% 15%

Investment in Construction Picking Up in Investment in Machinery & Equipment

Source: CEIC, Maybank KE Source: CEIC, Maybank KE

Source: ADB Asian Development Outlook 2018 Update, September 2018

Source: Peterson Institute for International Economics, Maybank KE

US-China Trade Deficit Widening Further US Top Export Items to China

Note: Net approval refers to approval minus disapproval.

Source: IMF World Economic Outlook, Oct 2018

Decomposition of US Goods Trade Deficit, Decomposition of US Goods Trade Deficit,

Source: Bloomberg, Maybank KE Source: Bloomberg, Maybank KE

Pork ($3.2bn) Wine ($2.4bn) Aluminium, waste or scrap ($2.2bn)

Share of Share of Share of

2 Spain 16% 2 Australia 24% 2 Hong Kong 18%

3 United States 13% 3 Chile 11% 3 Malaysia 15%

4 Denmark 10% 4 Spain 6.7% 4 Australia 15%

5 Canada 10% 5 Italy 5.6% 5 United Kingdom 7.1%

6 Netherlands 7.4% 6 United States 2.5% 6 Netherlands 2.9%

Cars ($44bn) Soybeans ($34bn) Planes, Helicopters, Spacecraft ($20.4bn)

Share of Share of Share of

2 United States 27% 2 United States 41% 2 France 17%

3 Japan 17% 3 Argentina 9.5% 3 Germany 16%

4 United Kingdom 14% 4 Uruguay 2.0% 4 Brazil 1.8%