Results Roundup - DBS Bank Market Focus Results Roundup Page 2 Mixed set of results in 4Q15 Despite...

ed: JS / sa: WMT

KLCIKLCIKLCIKLCI :::: 1,670.821,670.821,670.821,670.82

Analyst Bernard CHING +603 2604 3918 [email protected] Malaysian Research Team +603 2604 3333 [email protected]

Market Key Data

(%)(%)(%)(%) EPS GthEPS GthEPS GthEPS Gth Div YieldDiv YieldDiv YieldDiv Yield

2015E 0.2 3.0

2016F 8.8 3.3

2017F 8.8 3.5

(x)(x)(x)(x) PERPERPERPER PBPBPBPB

2015E 16.8 1.8

2016F 15.4 1.7

2017F 14.2 1.6

Source: AllianceDBS Research STOCKS

Source: AllianceDBS Research (Price date: 29 Feb 2016)

DBS Group Research . Equity DBS Group Research . Equity DBS Group Research . Equity DBS Group Research . Equity

2 Mar 2016

Malaysia Market Focus

Results Roundup Refer to important disclosures at the end of this report

Rough ride continues

• 4Q15 results were mixed; 2016 earnings cut by 2.6%

• Valuation remains unattractive given muted growth prospects

• Maintain end-2016 KLCI target at 1,740

• Top buys: TNB, PBK, HLBK, MISC, GAM, MUHI, KICB, GTB, SKP

Mixed 4Q15 results. Although only 26% of our coverage universe reported negative surprises, we have cut 2016 earnings estimates for FBMKLCI by 2.6% largely driven by banks and telcos, which has more than offset the higher earnings of plantation stocks following our recent CPO price forecast upgrade. Earnings risk lingers. Despite recent underperformance of the FBMKLCI vs MSCI South East Asia, the PE valuation of FBMKLCI is still unattractive at 15.4x and 14.2x for 2016 and 2017 respectively, compared to historical mean of 15.3x. Earnings growth remains the Achilles’ heel of Malaysian equities with FBMKLCI earnings growth estimates for 2016 cut from 11.8% to 8.8%. This is also the second lowest earnings growth within ASEAN and PE spread of Malaysian equities over other South East Asian markets has widened to above +1SD. Maintain KLCI target. In view of lingering earnings risks, we continue to take a cautious stance on the market and maintain our end-2016 FBMKLCI target of 1,740 (implies 14.9x 2017 PE). The banking sector is a dark horse but much depends on signs that its earnings downgrade cycle is finally over after kitchen sinking exercises in 2015. Key themes. Amid weakness in the domestic market, we continue to focus on three key themes for our stock selections : (1) resilient domestic earnings; (2) transport related infrastructure spending; and (3) exporters with resilient external demand. Our top picks are Tenaga, Public Bank, Hong Leong Bank, MISC, Gamuda, Muhibbah, Kimlun, Globetronics and SKP Resources (new addition).

Price Price Price Price Mkt CapMkt CapMkt CapMkt Cap Target PriceTarget PriceTarget PriceTarget Price Performance (%)Performance (%)Performance (%)Performance (%)

RMRMRMRM US$mUS$mUS$mUS$m RMRMRMRM 3 mth3 mth3 mth3 mth 12 mth12 mth12 mth12 mth RatingRatingRatingRating

Tenaga Nasional 13.12 17,602 15.00 (1.8) (10.9) BUY Public Bank 18.48 16,964 21.95 0.5 0.9 BUY Hong Leong Bank 13.14 6,410 14.70 (3.1) (5.3) BUY MISC 8.75 9,285 10.80 (5.3) 3.9 BUY Gamuda 4.44 2,539 5.60 (2.2) (15.6) BUY Muhibbah Engineering

2.28 254 2.90 2.2 (0.4) BUY Kimlun Corp 1.53 109 2.26 15.9 18.6 BUY Globetronics Technology Bhd

5.50 368 7.10 (13.8) 13.4 BUY SKP Resources Bhd 1.36 362 1.78 3.0 76.6 BUY

Market Focus

Results Roundup

Mixed set of results in 4Q15

Despite earnings cuts in earlier quarters, 4Q15 results turned

out to be rather mixed. Within our coverage universe, 53% of

stocks met our expectations, 21% exceeded expectations and

26% fell short.

4Q15 summary of financial performance

PerformancePerformancePerformancePerformance vs AllianceDBS (%)vs AllianceDBS (%)vs AllianceDBS (%)vs AllianceDBS (%) vs Consensus (%)vs Consensus (%)vs Consensus (%)vs Consensus (%)

Above 21% 24% In line 53% 40% Below 26% 36%

Source: AllianceDBS

Automotive (lower volume, unfavourable FX), building

materials (intense competition) and oil & gas (slower work

progress and capex cutbacks) sectors continued on their

disappointing run, while aviation (yield improvement) and

property (accelerated recognition of unbilled sales) sectors

surprised on the upside.

Among FBMKLCI component stocks, Public Bank (lower

provisions), PPB (stronger contribution from Wilmar), and KLK

(stronger oleochemicals contribution) beat expectations while

notable disappointments came from AMMB (NIM

compression), RHB ( lower non-interest income), Sime Darby

(lower FFB yield, replanting expenses and slowdown in

property), FGV (lower FFB yield), DiGi (intense price

competition), and UMW Holdings (lower contribution from

auto segment and losses from oil & gas division).

Sector performance

SectorSectorSectorSector 4Q154Q154Q154Q15 (RM m)(RM m)(RM m)(RM m)

4Q144Q144Q144Q14 (RM m)(RM m)(RM m)(RM m)

YYYY----oooo----y y y y change %change %change %change %

vs vs vs vs expectexpectexpectexpectationationationation

CommentsCommentsCommentsComments

AutomotiveAutomotiveAutomotiveAutomotive (37.25) 260.63 (114.3%) Below UMW’s earnings declined due to losses from the oil & gas segment; MBM's earnings were dragged by lower associates’ contribution and provisioning from slow-moving stocks and receivables.

AviationAviationAviationAviation 16.18 64.94 (75.1%) Above Sector earnings were dragged by heavy core losses at MAHB, but airline stocks AIRA and AAX outperformed on stronger-than-expected yields and lower fuel costs.

BankingBankingBankingBanking 5,294.51 5,395.47 (1.9%) In line Results were largely in line with our expectation but missed consensus expectation. The key disappointment was the higher-than-expected provisions. Sporadically, there were also disappointments due to higher-than-expected NIM compression (AMMB) and lower-than- expected non-interest income (RHB). While MAY’s results were in line with expectations, disappointing trends were noted as loan loss coverage and dividend trended lower.

Building MaterialsBuilding MaterialsBuilding MaterialsBuilding Materials 121.37 93.88 29.3% Below Further erosion in ASP and margins as competition in Peninsular Malaysia cement market intensified due to new incoming supply.

ChemicalsChemicalsChemicalsChemicals 791.00 500.00 58.2% In line Weak quarter as expected. Improved plant utilisation and availability were offset by declining petrochemical prices.

ConglomerateConglomerateConglomerateConglomerate 46.45 199.15 (76.7%) In line The group recorded decent performance attributed by its ports division which continued to register steady growth. However, construction earnings momentum is slowing from additional provisions.

ConstructionConstructionConstructionConstruction 394.44 373.28 5.7% In line Results were largely in line barring lumpy items, though construction earnings were relatively soft. However, our top picks like Gamuda, Muhibbah and Kimlun continue to secure orders.

Market Focus

Results Roundup

Sector performance (cont’d)

SectorSectorSectorSector 4Q154Q154Q154Q15 (RM m)(RM m)(RM m)(RM m)

4Q144Q144Q144Q14 (RM m)(RM m)(RM m)(RM m)

yyyy----oooo----y y y y change %change %change %change %

vs vs vs vs expectationexpectationexpectationexpectation

CommentsCommentsCommentsComments

ConsumerConsumerConsumerConsumer 486.94 358.80 35.7% In line Despite the continued soft consumer sentiment, the results reported were mainly within expectations as weak consumer spending was largely priced in by the market.

Financial nonFinancial nonFinancial nonFinancial non----bankbankbankbank 210.93 288.00 (26.8%) In line Largely in line, with the exception of TAE which reported fair value adjustment losses during the quarter.

GamingGamingGamingGaming 958.09 1,053.59 (9.1%) In line Genting counters benefitted from foreign exchange gains, but NFOs and gaming operations felt the adverse impact of weaker consumer sentiment.

GloveGloveGloveGlove 299.16 152.00 96.8% In line Glove makers recorded higher unit profitability this quarter from higher sales volume and efficiency gains, as well as the strengthening of USD. Capacity expansion is the core theme for this sector in 2016.

HeHeHeHealthcarealthcarealthcarealthcare 440.41 267.66 64.5% In line Earnings (excluding exceptional items) from both KPJ and IHH reported a decline during this results season. This is due to (i) slower revenue growth arising from lower inpatients admission given the macroeconomic uncertainties; (ii) higher operating costs, predominantly staff and pre-operating expenses, particularly in the lead-up to the opening of new hospitals; and (iii) higher interest expenses arising from loans undertaken.

MediaMediaMediaMedia 282.86 233.68 21.0% In line Despite weak adex sales amid the poor consumer sentiment, earnings have remained stable due to prudent cost measures.

Oil & GasOil & GasOil & GasOil & Gas (232.07) 532.77 (143.6%) Below Generally weak results due to slower work progress and cutbacks in workflow from the likes of PETRONAS.

PlantationPlantationPlantationPlantation 1,443.42 844.80 70.9% In line Results were mixed across planters as while CPO spot prices only improved marginally, production issues still impacted selective areas.

PortPortPortPort 8.30 9.88 (16.0%) In line Suria's FY15 core earnings came in within expectations. We are still awaiting the launch of the Jesselton Quay project as its re-rating catalyst.

PropertyPropertyPropertyProperty 564.04 464.43 21.4% Above Profit recognition driven by progressive milestone completions of unbilled sales.

REITREITREITREIT 447.72 427.02 4.8% In line Rental reversions were still positive at retail assets, though flattish for office due to oversupply conditions.

ShippingShippingShippingShipping 849.26 723.87 17.3% In line MISC was boosted by stronger petroleum shipping rates, while WPRTS saw steady container throughput growth.

TechnologyTechnologyTechnologyTechnology 150.52 105.79 42.3% In line Tailwinds from the stronger USD were offset by slower sales following production cut by a leading smartphone manufacturer since Dec-15.

TelecommunicationTelecommunicationTelecommunicationTelecommunication 1,563.50 1,836.92 (14.9%) In line Mobile operators suffered from weaker margins amid tepid industry growth. Fixed-line operators fared better due to internet and data services.

UtilitiesUtilitiesUtilitiesUtilities 2,614.98 2,546.71 2.7% In line Lifted by TNB's strong earnings due to strong electricity demand growth of 3.2% in 1QFY16.

Source: AllianceDBS

Market Focus

Results Roundup

Earnings estimates cut

Following 4Q15 results season, we cut our FBMKLCI earnings

(free float adjusted) for CY16F by 2.6% from a month ago.

Key contributors to CY16F earnings cut include Maybank,

Sime, CIMB, DiGi, UMW, and AMMB mainly due to

challenging operating environment for both banking and telco

sectors. The earnings cut has more than negated the positive

earnings revision for plantation counters following our regional

plantation analyst’s upgrade of the CPO price forecast.

Following our earnings cut, earnings growth estimates for

CY16F have been adjusted to 8.8% from 11.8% when our

2016 strategy report was published on 15 Dec 2015.

FBMKLCI earnings change (calendarised)

29292929----FebFebFebFeb----16161616

29292929----JanJanJanJan----16161616

ChangeChangeChangeChange

% Change% Change% Change% Change

CY15CY15CY15CY15 CY16CY16CY16CY16




RM m RM m

RM m RM m

RM m RM m

AMMB Holdings Bhd 937.98 849.59 971.21 923.31 -33.2 -73.7 -3.4% -8.0% Astro Malaysia Holdings Bhd 244.72 294.33 244.72 294.33 0.0 0.0 0.0% 0.0% Axiata Group Bhd 1,026.57 1,274.34 1,074.15 1,237.43 -47.6 36.9 -4.4% 3.0% British American Tobacco Malaysia 449.30 432.45 455.12 486.84 -5.8 -54.4 -1.3% -11.2% CIMB Group Holdings Bhd 1,794.19 2,273.28 1,784.48 2,373.35 9.7 -100.1 0.5% -4.2% DiGi.Com Bhd 824.16 844.63 887.16 936.47 -63.0 -91.8 -7.1% -9.8% Genting Bhd 1,055.06 1,080.62 986.90 1,166.90 68.2 -86.3 6.9% -7.4% Genting Malaysia Bhd 704.87 790.32 705.01 809.38 -0.1 -19.1 0.0% -2.4% Hong Leong Bank Bhd 636.75 664.98 628.58 657.69 8.2 7.3 1.3% 1.1% Hong Leong Financial Group Bhd 293.29 315.38 301.86 323.53 -8.6 -8.1 -2.8% -2.5% IHH Healthcare Bhd 316.15 343.88 271.95 372.62 44.2 -28.7 16.3% -7.7% IOI Corp Bhd 298.04 598.17 260.27 525.31 37.8 72.9 14.5% 13.9% KLCC Property Holdings Bhd 181.13 183.52 177.58 183.52 3.6 0.0 2.0% 0.0% Kuala Lumpur Kepong Bhd 471.02 597.98 451.69 512.35 19.3 85.6 4.3% 16.7% Malayan Banking Bhd 3,576.73 3,669.19 3,568.56 3,973.76 8.2 -304.6 0.2% -7.7% Maxis Bhd 679.34 697.34 708.05 758.49 -28.7 -61.1 -4.1% -8.1% MISC Bhd 885.40 977.21 880.57 977.21 4.8 0.0 0.5% 0.0% Petronas Chemicals Group Bhd 1,000.93 1,059.35 1,000.93 1,059.35 0.0 0.0 0.0% 0.0% Petronas Dagangan Bhd 235.72 252.74 254.54 252.74 -18.8 0.0 -7.4% 0.0% Petronas Gas Bhd 709.29 731.50 712.07 733.68 -2.8 -2.2 -0.4% -0.3% PPB Group Bhd 492.18 542.94 492.18 542.94 0.0 0.0 0.0% 0.0% Public Bank Bhd 4,059.19 4,338.30 3,899.11 4,221.54 160.1 116.8 4.1% 2.8% RHB Capital Bhd 355.98 457.82 392.65 524.68 -36.7 -66.9 -9.3% -12.7% Sapurakencana Petroleum Bhd 723.55 808.58 723.55 808.58 0.0 0.0 0.0% 0.0% Sime Darby Bhd 1,099.68 1,152.11 1,196.14 1,269.89 -96.5 -117.8 -8.1% -9.3% Telekom Malaysia Bhd 521.11 622.18 521.11 634.05 0.0 -11.9 0.0% -1.9% Tenaga Nasional Bhd 3,946.14 4,139.61 3,946.14 4,139.61 0.0 0.0 0.0% 0.0% UMW Holdings Bhd 325.63 198.80 227.62 293.91 98.0 -95.1 43.1% -32.4% Westports Holdings 156.71 174.75 154.16 176.52 2.5 -1.8 1.7% -1.0% YTL Corp Bhd * 496.51 632.44 589.82 661.32 -93.3 -28.9 -15.8% -4.4% FBMKLCI (free float weighted)FBMKLCI (free float weighted)FBMKLCI (free float weighted)FBMKLCI (free float weighted) 28,497.33 28,497.33 28,497.33 28,497.33 30,998.38 30,998.38 30,998.38 30,998.38 28,467.90 28,467.90 28,467.90 28,467.90 31,831.29 31,831.29 31,831.29 31,831.29 29.429.429.429.4 ----832.9832.9832.9832.9 0.1%0.1%0.1%0.1% ----2.6%2.6%2.6%2.6%

* Earnings for stocks not under coverage are based on consensus estimates Source: AllianceDBS, Bloomberg Finance L.P

Market Focus

Results Roundup

FBMKLCI earnings growth (calendarised)

Estimated Estimated Estimated Estimated % % % % wwwweight eight eight eight in Indexin Indexin Indexin Index Market CapMarket CapMarket CapMarket Cap

FreeFreeFreeFree Float Float Float Float Weighted Weighted Weighted Weighted Mkt CapMkt CapMkt CapMkt Cap

Under Under Under Under CoverageCoverageCoverageCoverage

Free Float Weighted NPFree Float Weighted NPFree Float Weighted NPFree Float Weighted NP

Company NameCompany NameCompany NameCompany Name

2012012012015555 2012012012016666 2012012012017777

RM m RM m

RM m RM m RM m

AMMB Holdings Bhd 2.38 13,051.4 8,323.5 Yes

938.0 849.6 916.9

Astro Malaysia Holdings Bhd 1.22 14,209.7 5,504.4 Yes

244.7 294.3 328.0

Axiata Group Bhd 5.62 52,198.5 25,871.5 Yes

1,026.6 1,274.3 1,437.1

British American Tobacco Malaysia 1.70 15,995.4 7,969.6 Yes

449.3 432.5 444.3

CIMB Group Holdings Bhd 5.76 38,543.2 24,278.4 Yes

1,794.2 2,273.3 2,535.9

DiGi.Com Bhd 4.16 38,330.8 18,339.4 Yes

824.2 844.6 849.5

Genting Bhd 0.93 13,742.3 4,265.5 Yes

156.7 174.7 183.1

Genting Malaysia Bhd 3.68 29,289.8 17,391.0 Yes

1,055.1 1,080.6 1,311.7

Hong Leong Bank Bhd 2.50 23,414.8 12,194.3 Yes

704.9 790.3 811.4

Hong Leong Financial Group Bhd 1.67 26,965.4 7,962.8 Yes

636.8 665.0 757.1

IHH Healthcare Bhd 0.64 16,010.5 2,924.6 Yes

293.3 315.4 356.4

IOI Corp Bhd 3.28 52,631.0 17,817.1 Yes

316.2 343.9 438.3

KLCC Property Holdings Bhd 2.99 29,614.5 17,420.0 Yes

298.0 598.2 720.2

Kuala Lumpur Kepong Bhd 0.63 12,637.3 3,159.3 Yes

181.1 183.5 189.3

Malayan Banking Bhd 2.28 25,346.2 12,638.8 Yes

471.0 598.0 641.6

Maxis Bhd 9.32 83,072.5 43,465.5 Yes

3,576.7 3,669.2 3,994.9

MISC Bhd 3.45 45,962.1 15,995.8 Yes

679.3 697.3 792.0

Petronas Chemicals Group Bhd 2.45 39,058.2 12,810.4 Yes

885.4 977.2 1,031.1

Petronas Dagangan Bhd 3.55 54,000.0 19,354.2 Yes

1,000.9 1,059.3 1,065.2

Petronas Gas Bhd 1.21 24,538.3 7,322.1 Yes

235.7 252.7 264.0

PPB Group Bhd 3.40 43,611.3 17,372.8 Yes

709.3 731.5 753.8

Public Bank Bhd 1.80 18,968.0 9,426.2 Yes

492.2 542.9 572.4

RHB Capital Bhd 11.60 71,360.4 57,221.7 Yes

4,059.2 4,338.3 4,727.0

Sapurakencana Petroleum Bhd 1.06 16,295.8 3,838.1 Yes

356.0 457.8 572.7

Sime Darby Bhd 1.98 11,385.1 7,273.7 Yes

723.6 808.6 815.3

Telekom Malaysia Bhd 5.51 47,263.2 24,022.5 Yes

1,099.7 1,152.1 1,325.7

Tenaga Nasional Bhd 2.96 24,802.4 14,578.7 Yes

521.1 622.2 716.1

UMW Holdings Bhd 9.28 74,044.2 46,049.8 Yes

3,946.1 4,139.6 4,244.7

Westports Holdings 1.37 8,271.5 4,661.4 Yes

325.6 198.8 241.8

YTL Corp Bhd 1.63 16,357.3 8,375.9 No

496.5 632.4 684.6

TotalTotalTotalTotal

980,971.1980,971.1980,971.1980,971.1 477,829.4477,829.4477,829.4477,829.4

28,497.328,497.328,497.328,497.3 30,998.430,998.430,998.430,998.4 33,722.033,722.033,722.033,722.0

% coverage / earnings growth

98.33 98.25

0.2 8.8 8.8

Current implied P/E

16.8 15.4 14.2

Source: AllianceDBS

Market Focus

Results Roundup

Tough times ahead

The benchmark FBMKLCI lost 2.2% in the first two months of

2016 and has trailed behind the MSCI South East Asia Index

which posted a meagre 0.2% gain. Foreign net equity flow

turned positive again in Feb (+RM0.5bn) as expectations of

more dovish monetary policies in advanced economies

provided some reprieve to emerging markets. That said,

domestic issues have been a drag on market performance.

Intensifying competition in the mobile telco space and

continued challenges in the domestic banking sector have led

to earnings cuts. While expectations of higher CPO prices is a

bright spot for the Malaysian market, which has heavy

representation of plantation counters, rich valuation vis-à-vis

regional peers has capped upside potential for Malaysian

planters. Other issues continuing to plague Malaysian equities

include rising cost of doing business (subsidy cuts, imported

inflation, minimum wage hikes), and dampened consumer

sentiment.

As such, despite the recent underperformance, the PE

valuation of FBMKLCI is still unattractive at 15.4x and 14.2x for

2016 and 2017 respectively, when compared to historical

mean PE of 15.3x. Earnings growth remains the Achilles’ heel

of Malaysian equities with 2016 earnings growth estimate cut

from 11.8% (as of last strategy report on 15 Dec 2015) to

8.8% now. This is also the second lowest earnings growth

among ASEAN-5 economies but PE spread of Malaysian

equities over South East Asian markets has widened to above

+1SD.

Despite further earnings cuts post 4Q15 results, we are still

expecting an earnings growth rebound after two years of flat

growth. Earnings growth in 2016 will still largely be driven by

banks (36.6%), which has disappointed for seven consecutive

quarters. That said, banks will start 2016 on a cleaner slate

following kitchen sinking exercises in 2015. At -2SD of its

mean PB valuation, banks could be a dark horse in 2016 when

signs emerge that earnings downgrade cycle has ended.

In view of lingering earnings risks, we continue to take a

cautious stance on the market and maintain our end-2016

FBMKLCI target of 1,740 (implies 14.9x 2017 PE). Downside

risks could be capped by (1) buying support by domestic

institutional funds, (2) stabilisation of crude oil price and MYR,

and (3) accommodative monetary policies (both domestic and

global). Amid weakness in the domestic market, we continue

to focus on three key themes for our stock selections : (1)

resilient domestic earnings, (2) transport related infrastructure

spending, and (3) exporters with resilient external demand. For

domestic earners, we like Tenaga, Public Bank, and Hong

Leong Bank which are more resilient, in our view.

Award of transport related infrastructure contracts is expected

to pick up steam in the months ahead. We believe Gamuda,

Muhibbah and Kimlun are the best proxies for this theme.

There has been some selling pressure on exporters in recent

weeks as MYR regained some lost ground vs USD. That said,

MYR is highly correlated to crude oil price. With our

expectation that Brent crude oil price will average just USD35-

40/barrel in 2016 due to supply glut, MYR is unlikely to sustain

its recent gain. Therefore, we remain confident on the export

theme and view the recent selldown as an accumulation

opportunity. Our picks for this theme are MISC, Globetronics

and SKP Resources (new addition).

In terms of sector outlook, we upgrade aviation from

Underweight to Neutral as signs of yield improvements are

emerging. Construction, shipping, technology and utilities

remain Overweight while automotive is now the only

Underweight sector.

Equity fund flow

-2.4

-0.4 -0.5

0.2

-2.5-3.1 -2.9

-4.0

-2.3

0.6

-0.8-1.2

-0.9

0.5

2.7

1.0 1.00.6

2.93.4 3.4

4.5

2.2

-0.3

0.81.4 1.2

-0.4

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

Jan

-15

Feb

-15

Ma

r-1

5

Ap

r-1

5

Ma

y-1

5

Jun

-15

Jul-

15

Au

g-1

5

Sep

-15

Oct

-15

No

v-1

5

De

c-1

5

Jan

-16

Feb

-16

Foreign Institutional Local InstitutionalInflow/(Outflow)

RM bn

Source: Bursa Malaysia

FBMKLCI P/E trend

9

11

13

15

17

19

Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

FBMKLCI Index PE (x)

Mean:

15.3x

- 1 s.d.:

13.7x

+ 1 s.d.:

16.9x

Source: Bloomberg Finance L.P

Market Focus

Results Roundup

MSCI Malaysia - SEA PE Spread

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

Jan

-10

Ap

r-1

0

Jul-

10

Oct

-10

Jan

-11

Ap

r-1

1

Jul-

11

Oct

-11

Jan

-12

Ap

r-1

2

Jul-

12

Oct

-12

Jan

-13

Ap

r-1

3

Jul-

13

Oct

-13

Jan

-14

Ap

r-1

4

Jul-

14

Oct

-14

Jan

-15

Ap

r-1

5

Jul-

15

Oct

-15

Jan

-16

MSCI MY - SEA spread

Mean:

1.1x

+ 1 s.d.:

1.7x

- 1 s.d.:

0.5x


ASEAN 5 CY15 earnings growth comparison

5.8%

8.8%

9.5%

9.5%

13.4%

14.0%

0% 5% 10% 15% 20%

Singapore

Malaysia

South East Asia

Philippines

Thailand

Indonesia


FBMKLCI CY16F earnings growth contributors by sector

36.6%

2.0%

15.5%

2.0%

19.2%

3.4%

14.1%

7.3%

0%

10%

20%

30%

40%

50%

Banking Media Telco Consumer Plantation Oil & Gas Utilities Others

KLCI CY16 Earnings Growth Contributors


MYR / USD

3.00

3.20

3.40

3.60

3.80

4.00

4.20

4.40

4.60

MYR / USDMYR / USD


Brent crude oil price

20

25

30

35

40

45

50

55

60

65

70

Jan

-15

Fe

b-1

5

Ma

r-1

5

Ap

r-1

5

Ma

y-1

5

Jun

-15

Jul-

15

Au

g-1

5

Se

p-1

5

Oct

-15

No

v-1

5

De

c-1

5

Jan

-16

Fe

b-1

6

USD/bbl


Sector Views

OverweightOverweightOverweightOverweight

Construction Shipping Technology Utilities

NeutralNeutralNeutralNeutral

Aviation (↑) Banks Consumer Gaming Gloves Healthcare Oil & Gas Plantation Property REITs Telecommunication

UnderweightUnderweightUnderweightUnderweight Automotive

Source: AllianceDBS

Market Focus

Results Roundup

Top stock picks

Tenaga NasionalTenaga NasionalTenaga NasionalTenaga Nasional (TP: RM15.00) will benefit from sustainable

demand growth backed by GDP growth and the

implementation of major infrastructure projects. In addition,

there will be an estimated 25% increase in TNB’s generation

capacity over the next two years. Major overhang from sale of

1MDB's power assets is now lifted and full implementation of

fuel cost pass-through mechanism will provide clear earnings

visibility going forward.

Public BankPublic BankPublic BankPublic Bank (TP: RM21.95) is a safe bet in the beaten down

banking sector given its resilient asset quality and track record

in consistently defying headwinds to grow above industry

average.

MISCMISCMISCMISC (TP: RM10.80) is a beneficiary of a strong USD due to it

being MISC’s functional currency, which is translated into

Ringgit for reporting. Long-term charters for its LNG tankers

buffer it against weak spot rates, and petroleum shipping rates

are expected to remain steady.

Hong Leong BankHong Leong BankHong Leong BankHong Leong Bank (TP: RM14.70) should start to re-rate now

that capital-raising issues are a thing of the past. Its other

strong attribute is its strong liquidity position with the lowest

loan-to-deposit ratio among peers. With the capital-raising

overhang over, HLB can now focus on business growth. The

gradual build-up of non-interest income would be a key

catalyst.

GamudaGamudaGamudaGamuda (TP: RM5.60) is the best transportation infrastructure

proxy play. We expect Gamuda to solidify its position for MRT

Line 2 with the eventual award of tunnelling works by mid-

2016, adding another RM6bn of high-margin projects to its

orderbook on top of the RM8bn recognised as PDP fees. The

company could also be more aggressive in other transport-

related tenders like LRT 3, Pan Borneo Highway, Southern

Double tracking and eventually the High Speed Rail.

GlobetronicsGlobetronicsGlobetronicsGlobetronics (TP: RM7.10) will see another breakthrough year in 2016 as its end-customer is likely to introduce a major upgrade involving 3D imaging sensor for its next-gen smartphone camera. Despite near-term headwinds due to production cut by its end-customer in 1H16, we remain upbeat about its 3D imaging sensor that should boost FY16-17F revenue significantly and drive 3-year earnings CAGR of 27%. Share price has corrected by 16% YTD in line with the cautious market sentiment, which we believe provides a good entry point to accumulate at the current level.

MuhibbahMuhibbahMuhibbahMuhibbah (TP: RM2.90) is the most complete 11MP proxy

given its ability to focus on a more varied set of works (civil

engineering, marine-based construction and also onshore and

offshore fabrication). Its infrastructure orderbook has seen

significant replenishment and now stands at RM1.7bn (1.4x

FY16F revenue). Its Cambodian airport concession continues to

grow following the doubling up of passenger capacity at Siem

Reap and Phnom Penh airports.

KimlunKimlunKimlunKimlun (TP: RM2.26) is the most direct MRT proxy as it has

secured c.50% market share of segmental box girders (SBG)

and tunnelling lining segment (TLS) for MRT Line 1. 2016 will

likely be a busy year for this division with potential wins for

MRT Line 2 and Eastern Region Line (in Singapore).

SKP ResourcesSKP ResourcesSKP ResourcesSKP Resources (TP: RM1.78) is expected to register a record

earnings growth of 104% y-o-y in FY17F (March 2017),

boosted by the inclusion of two sizeable contracts from Dyson

totalling RM1bn p.a. over five years. Taking into account the

projects on hand, only c.25% of the capacity at SKPRES’s new

plant in Senai, Johor has been utilised. With ample spare

capacity, we believe the group is well prepared to take on

more contracts, which can come from both Dyson and non-

Dyson related parties.

Please refer to pages 16 to 18 for detailed key investment

merits of these stock picks.

Top stocks picks

FY2016/2017

Recommen

dation

Target

Price

Current

Price

Market

CapCY2016 CY2017 CY2016 CY2017 CY2016 CY2017 CY2016 CY2017 CY2016 CY2017

Tenaga BUY 15.00 13.12 74,044.2 11.1x 10.8x 5% 3% 2.3% 2.4% 1.4x 1.3x 13% 12%

Public Bank BUY 21.95 18.48 71,360.4 13.3x 12.2x 7% 9% 3.1% 3.4% 2.1x 1.9x 16% 16%

Hong Leong Bank BUY 14.70 13.14 26,965.4 12.6x 11.1x (3%) 14% 2.7% 3.0% 1.3x 1.2x 11% 11%

MISC BUY 10.80 8.75 39,058.2 13.1x 12.4x 10% 6% 2.3% 2.9% 1.2x 1.2x 10% 10%

Gamuda BUY 5.60 4.44 10,682.2 16.4x 15.2x (1%) 8% 2.0% 2.0% 1.5x 1.4x 10% 10%

Muhibbah Engineering BUY 2.90 2.28 1,069.1 9.1x 8.0x 24% 14% 2.2% 2.5% 1.0x 0.9x 12% 12%

Kimlun Corporation BUY 2.26 1.53 459.8 7.5x 6.6x (13%) 14% 2.1% 2.4% 0.9x 0.8x 13% 13%

Globetronics BUY 7.10 5.50 1,550.1 15.1x 11.6x 43% 29% 6.2% 7.6% 5.0x 4.8x 34% 42%

SKP Resources BUY 1.78 1.36 1,521.0 12.3x 10.1x 62% 22% 4.1% 5.0% 4.8x 3.9x 45% 43%

ROAEP/E EPS Growth (YoY) Dividend Yield Price/ BVPS

Source: AllianceDBS Price date: 29 Feb 2016

Market Focus

Results Roundup

Sector Outlook

SectorSectorSectorSector OutlookOutlookOutlookOutlook Top Stock PicksTop Stock PicksTop Stock PicksTop Stock Picks

AutomotiveAutomotiveAutomotiveAutomotive

Underweight

• Dampened growth. Dampened growth. Dampened growth. Dampened growth. The weak consumer sentiment and economic headwinds will

likely weigh on industry volume growth in 2016. Although selected brands will

increase prices arising from higher cost, principals will be constrained by challenging

macro conditions and demands to maintain market share.

• Facing cost pressure. Facing cost pressure. Facing cost pressure. Facing cost pressure. The increase in car prices will help manufacturers cover part of

the increase in imported cost (arising from the Ringgit’s depreciation), aggressive

promotions and sales campaigns – and ease the pressure on margins for now. Further

weakening of the Ringgit would be a risk for the manufacturers.

None

AviationAviationAviationAviation

Neutral (↑)

• Jet fuel spot prices tumbled again in 2016 alongside the fall in crude oil prices.

Currently below the USD45/bbl level, this is already >30% lower than average 2016

price of c.USD65/bbl. Airlines will see lower operating costs if these prices persist as

fuel costs makes up 20-40% of operating costs. However there will be some offset

from the weaker Ringgit as key costs like operating leases, maintenance and fuel are

USD-denominated.

• Yields (fares/RPK) had picked up in 2015 after two years of successive declines caused

by severe competition (now eased with Malaysia Airlines’ capacity rationalisation) plus

the phasing out of fuel surcharges. While yields may continue on its recovery

upswing, we expect growth to be mild as 1) the lower fuel price environment gives

airlines more freedom in pricing and promotion; and 2) travel demand may be softer

on the weaker Ringgit and economic slowdown. There also may be further

downtrading, like in 2015 where Malaysia Airports (MAHB) posted a 0.5% decline in

international passengers while domestic passengers increased 1.5%.

• AirAsia is our top pick as we believe its valuation will re-rate after the easing of its

associate-related concerns – which will be helped by low fuel prices.

AirAsia

BanksBanksBanksBanks

Neutral

• Earnings recovery in 2016 largely driven by lower expenses (due to staff

rationalisation in 2015). No fundamental improvement in trends noted. Top-line

growth is limited with NIM compression still a feature, while loan growth is expected

to moderate to 6-7% in 2016.

• Capital-raising issues largely addressed. After the slew of rights issues in 2015, the

sector’s average (fully loaded) CET1 ratio is estimated at 11%, while the ‘new-

normal’ ROEs hover around 10% from 13% previously.

• All eyes on asset quality. Banks have largely accelerated provisions in 2015 but

concerns still linger on how asset quality will pan out this year. Exposure to the oil &

gas sector is less than 5% of total loans, based on what the banks have disclosed

during the recent analyst briefings. We remain cautious on asset quality and expect

credit costs to remain high y-o-y.

• Stay safe; PBK and HLB remain our top picks. Both have strong asset quality attributes

and both are expected to see loan growth driven by mortgages from strong pipelines

built up in the past few quarters. HLB’s additional feature would be the removal of

the capital raising overhang and its strong liquidity position, providing it more room

for growth.

Public Bank, Hong Leong

Bank

Market Focus

Results Roundup

Sector Outlook (cont’d)


BuildinBuildinBuildinBuilding materialsg materialsg materialsg materials

Neutral

• We believe competition among cement players is unlikely to improve in 2016 given

the slower construction activities (MRT Line 1 mostly completed) amid further

capacity expansion by industry players.

• The saving grace for the industry is the prevailing low coal prices. Nonetheless, this

will be offset by the continued weakness in Ringgit.

• CMS is on a better footing as the Sarawak-based company will not be impacted by

price competition, unlike its Peninsular peers. The company is also expected to

benefit from the increased infrastructure spending leading up to the Sarawak state

election in 2016.

None

ConstructionConstructionConstructionConstruction

Overweight

• The higher development expenditure for the 11MP (RM260bn over the next five

years) together with the commitment given by the Prime Minister at the recent

Budget revision should provide assurance that key projects are intact. Among the

large mega projects which have little risk in terms of deferment are MRT Line 2, LRT

3, RAPID, High Speed Rail and Pan Borneo highway. Other highway projects such as

WCE, DASH and SUKE will also continue.

• We think the market will focus on the timely execution of tenders and awards. For

MRT Line 2, three above-ground viaduct packages have opened for tender and

awards are expected in April/May 2016. The tunneling portion has also closed for

tender and we understand three other foreign contractors put in bids. Our view

remains that MMC-Gamuda will return as the tunneling contractor for MRT Line 2

given its expertise gained from Line 1 and also the cost advantage it has with the

depreciated tunneling boring machines. We also expect some awards for Pan Borneo

in 2Q16.

• Our top picks remain Gamuda, Muhibbah and Kimlun. We continue to like Gamuda

for its position as the best transportation proxy with two visible projects, MRT Line 2

and Penang Transport. Muhibbah remains an all-round proxy to infrastructure flows

as it is able to perform civil engineering works, marine and also offshore fabrication

works. Kimlun remains an alternative proxy to MRT Line 2 where earnings delivery

has been very strong.

Gamuda, Muhibbah,

Kimlun

ConsumerConsumerConsumerConsumer

Neutral

• Our cautious stance with regards to consumer spending since the implementation of

GST has been largely vindicated. Our recent channel checks show that consumer

spending and visits to shopping malls have yet to recover to pre-GST levels. Our

observations are also being supported by recent statistics released, by MIER Malaysia

where the 4Q15 consumer sentiment index fell to a record low of 63.8 (3Q15: 70.2),

attributed to growing concerns of: (1) higher inflation, (2) expectations of a

challenging labour market, and (3) deteriorating household finances.

• At present, we have a Neutral recommendation on the sector. We do expect

consumer spending to recover in the coming quarters, supported by: (1) recent

government stimulus such as 3% cut in employees’ contribution to EPF and hike in

minimum wage, and (2) Ringgit stabilisation. Nonetheless, we believe that the

recovery will be gradual. Based on our studies of the impact of GST implementation

in other economies, we noticed that the adverse impact on inflation and GDP may

take up to four quarters to normalise. Given that Malaysia implemented the GST in

Apr 2015, consumer spending may take up to 2Q16 to normalise.

• Despite our concerns over weak consumer sentiment, we believe this has been largely

priced given that the recent results reported mainly came in within expectations.

Oldtown is our pick for the sector.

OldTown

Market Focus

Results Roundup



GamingGamingGamingGaming

Neutral

• There are no major re-rating catalysts in the near term. Weakening domestic

consumer sentiment could slow down discretionary spending, which may in turn drag

Genting Malaysia’s domestic leisure & hospitality operations and ticket sales of NFOs.

We expect the weak RM to attract more foreign tourist visits and encourage more

local travelling among Malaysians, which could benefit Genting Malaysia.

None

GlovesGlovesGlovesGloves

Neutral

• We have revised our capacity growth forecasts for the top four Malaysian-listed

glovemakers to 12%/12% in 2016/17, vs our previous forecasts of 11%/12%. The

projected capacity in absolute terms, remains relatively unchanged for 2017, but is

now 3%/2% lower for 2015/16 due to the delays in commissioning some of the

major glove projects.

• At first glance, the forecast capacity growth of the Malaysian glovemakers will

seemingly outpace the forecast global glove consumption growth of 6-8% p.a., but

we think the additional output will be readily absorbed, because: (1) the new capacity

are mainly for nitrile gloves where demand growth remains strong (i.e. the 6-8%

global glove consumption growth are mainly driven by this product segment), and (2)

increasing trend for outsourcing to Malaysian shores. Meanwhile, potential delays in

the completion and commissioning of the glove factories, could pose downside risks

to the capacity growth forecasts, which will help to further limit the supply growth.

• But that being said, we think competition would likely still heat up among the

glovemakers, especially in the nitrile glove segment. Increasing nitrile glove supply

and the diversification of supply source (away from the traditional nitrile glovemakers

such as Hartalega and YTY) could shift the bargaining power in favour of the

customers. Meanwhile, Hartalega, with its best-in-class operating structure (i.e. high

unit profits, low breakeven utilisation levels), could choose to be more aggressive in

its pricing to: (1) grab market share, (2) maximise utilisation and profits, and (3) derail

competitors’ expansion plans by depressing IRRs for future projects – once its NGC

plants are fully operational. Hartalega managed to register a 12% y-o-y increase in

EBIT/k gloves in 12MCY15.

• However, the favourable currency tailwind from the stronger USD should limit the

pressure on margins from the increased competition. Kossan has managed to sustain

its EBIT/k gloves at above RM15.00 (+20% y-o-y in 4Q15). Supermax did not disclose

any operational stats, however it managed to record better operating margins at

15.2% (+2.8ppts y-o-y, -0.2ppts q-o-q). Top Glove has been the biggest beneficiary

from this currency tailwind, which together with the productivity gains, saw its EBIT/k

gloves rise 131% y-o-y to RM17.21 in 1QFY16 (end-Nov).

• Our top pick for the sector is Top Glove with a BUY rating and a TP of RM7.10, based

on 20x CY16F PE. Top Glove is best positioned among its peers to retain the currency

gains, given its exposure to the natural rubber glove segment, where competition is

less intense due to modest incoming supply. Valuation (in terms of PE and dividend

yields) remains cheap when compared to the more expensive peers (i.e. Hartalega).

Top Glove

Market Focus

Results Roundup



HealthcareHealthcareHealthcareHealthcare

Neutral

• We remain optimistic of the growth prospects for private hospital operators due to

increasing demand for quality healthcare amid rising disposable income. Capacity

constraints at government healthcare facilities are also expected to drive affluent

patients to private hospitals. The constraints are expected to worsen with the cut in

public healthcare development expenditure from RM3.7bn in fiscal year 2010 to

RM1.6bn in fiscal year 2016.

• Generic pharmaceutical players are expected to enter a new growth phase with the

approach of the patent cliff, providing an opportunity for them to launch new

products and improve sales. However, the ratification of the proposed Trans-Pacific

Partnership Agreement could lead to a prolonged patent protection period for some

of the drugs, which would reduce the opportunity for the generic players.

None

MediaMediaMediaMedia

Neutral

• With the challenging market environment and rising cost of living, there is generally a

lack of feel good factors to spur a recovery in consumer sentiments and for

advertisers to lift adex spending. Even though adex-friendly sporting events such as

Olympics Games and Euro Championship will be held in 2016, we believe it could be

a repeat of 2014 where the FIFA World Cup failed to drive adex spending due to the

weak consumer sentiment.

• Low newsprint cost is a blessing for newspaper publishers, though this will be offset

by the continued weakness in Ringgit.

• Downside risks are limited given low valuation and decent dividend yields for the

sector.

None

Oil & GasOil & GasOil & GasOil & Gas

Neutral

• Crude oil prices struggle to recover as the OPEC continues to power ahead with

production. At the same time, US production continues relatively unscathed by the

low price environment while inventories are still climbing. It has been more than 12

months of the same, and we expect this to persist into 2016. Given the supply, we

project crude oil price to average USD35-40/barrel (Brent) in 2016.

• FY15 saw Malaysian oil & gas companies bear the brunt of declining capex and opex

by production companies. PETRONAS, Exxon and Shell have slowed activities

significantly in Malaysia and multiple earnings downgrades have been made to reflect

the slow activity. All companies, even the relatively resilient brownfield service

companies, have been affected.

• With new tenders and contract awards flowing at an extremely sluggish pace over

FY15, FY16 earnings across the board are slated to be lower y-o-y. Except for rare

exceptions like Bumi Armada, which continues to see progress in its FPSO business.

We expect some earnings downgrades to continue in 1H16. Perhaps, by 2H16 or

closer to FY17, some activity might come back on stream, especially those related to

production and offshore maintenance activities.

• We advise investors to keep an eye on service providers like SapuraKencana which

are still solid in terms of earnings delivery and in a prime position to recover quickly

when the market improves. We also see it fit to keep an eye on Bumi Armada which

could be an M&A target. Furthermore, its earnings are resilient from ongoing FPSO

contracts but in the near term, the OSV division offsets some FPSO earnings. Besides

that, a safe stock to consider is Dialog which is seeing earnings come through from

Phase 1 in Pengerang.

SapuraKencana, Dialog.

Market Focus

Results Roundup



PlantPlantPlantPlantationationationation

Neutral

• Palm oil demand will outstrip supply this year and the next due to El Nino and skips in

fertiliser application on some smallholder estates in Indonesia last year. But global

palm oil demand should pick up sizeably – as Indonesia blends more biodiesel. From a

supply-demand perspective, the palm oil stockpile is expected to shrink over the next

two years. We understand there is limited spare crushing capacity in Argentina

(58.9m MT vs. 44.8m MT forecast crushing) to substitute c.2m MT palm oil deficit –

despite the huge soybean inventory.

• We expect palm oil stock/usage ratio to drop from 19.9% at the end of CY15 to

15.7% at end of this year and to 13.3% by end of CY17F. Spot palm oil prices and

some plantation counters have only partly reflected this prospective drop. We expect

the gap between futures and spot prices to narrow further.

• We also raised CY16F/17F CPO price forecasts (US$/MT) by 12%/16% to

US$600/US$649 – reflecting lower expected global CPO output and expansion in

biodiesel usage in Indonesia – through deployment of CPO funds collected since Jul-

15.

• Despite what we believe is a two-year upcycle for palm oil prices, select plantation

counters still trade at between -1SD and mean forward PE. While planters’ share

prices have historically moved parallel to CPO prices; we caution that age profiles

(e.g. El Nino affects prime-aged yields more than younger trees), changes in export/import tax policies, currency movements, and rising share in downstream

businesses now have different impacts on earnings.

• While CPO has reacted positively to lower prospective FFB yields, RBD Olein, RBD

Stearin and PFAD have not reacted in the same scale. Consequently, palm oil refining

margins have narrowed significantly, and are estimated to register losses in Jan-16.

As refining margins collapse, processors will push further downstream – chasing

higher-margin products, and export demand will need to switch from CPO to refined

products, which should favour Indonesian processors.

• Malaysian plantation counters’ current valuations have already largely reflected the

favourable outlook. Our sole BUY call is on TSH Resources, an upstream planter

which will benefit from higher CPO prices and is backed by a pipeline of rising

maturities from its young planted area.

TSH Resources

PropertyPropertyPropertyProperty

Neutral

• We expect slower property sales volumes in 2016 although prices should hold up due

to cost-push factors. Sentiment should remain poor given the tightening measures

and inflationary pressures, but mass-market products at strategic locations will

continue to enjoy healthy sales as affordability remains an important factor among

purchasers.

• Developers' margins could be affected by rising development cost as selling price

hikes would be capped by relatively more subdued demand. However, there is no

property bubble for now but we fear an oversupply of KL office space, hybrid high-

rise units and Iskandar Malaysia high-end condos.

• We like Matrix for its sustainable township development in Seremban which has been

growing from strength to strength given its value-for-money product offerings. MKH

is also our pick for the sector given its large exposure to affordable housing and

landed properties in the Kajang-Semenyih growth corridor.

MKH, Matrix

Market Focus

Results Roundup


SectorSectorSectorSector OutloOutloOutloOutlookokokok Top Stock PicksTop Stock PicksTop Stock PicksTop Stock Picks

REITREITREITREIT

Neutral

• Rental reversion growth is expected to be moderate-to-low for all subsectors. Retail

rents and occupancy should remain resilient at prime locations, but weak consumer

sentiment and spending will cap rental hikes. Office spaces will focus on maintaining

occupancy as oversupply conditions persist, while softer business conditions (weaker

general economy, depreciated Ringgit, minimum wage hike) will pressure rents for

both office and industrial spaces.

• Inorganic growth via acquisitions will be a running theme in the face of weak organic

growth. Among those with recent acquisition news flows are PavREIT (da:men and

Intermark Mall), CMMT (Tropicana City Property), SunREIT (Sunway Putra) and MRCB-

Quill REIT (Platinum Sentral). However, the key point remains whether the REITs will

manage to inject assets at a value that will be DPU-accretive to unitholders.

• Fundamentally, REIT performance looks to be neutral in 2016 with an average 6.3%

earnings growth forecasted across our coverage. In terms of valuation, we are a little

cautious on the negative implication for yield/fixed income instruments if the US Fed

rate hike(s) are faster or more severe than expected. Nonetheless, that is somewhat

counterbalanced by easing efforts from the rest of the world (notably in China and

EU); plus from a localised perspective, the average yield spread of larger-cap REITs

against the 10-year Malaysian Government of Security in the 1.5-1.7% range has

partially priced in the eventuality of the Fed hike.

• Our top pick continues to be Sunway REIT, predicated on strong DPU growth from

the resumed contributions following the completion of Sunway Putra refurbishments,

plus its visible pipeline of potential asset injections from sponsor Sunway Bhd.

Sunway REIT

SSSShippinghippinghippinghipping

Overweight

• LNG spot rates are expected to remain low in 2016 after almost halving in 2015. The

pertinent vessel oversupply issue is unlikely to abate as its orderbook is still strong at

147 vessels. As such, long-term charters would be a boon.

• Crude tanker rates are expected to remain firm. While rates in Baltic Dirty Tanker

Index have been trending down since the start of 2016, it was mainly on the back of

seasonality and frontloading in anticipation of a cold snap. Furthermore, possibilities

of a widening contango in crude oil (large spot-to-futures discount) may make crude

tankers attractive as storage for arbitrage purposes.

• Our top pick for the sector is MISC, with a BUY rating and a TP of RM10.80. We like

the group’s resilient cash flow, backed by long-term LNG charters and offshore oil &

gas assets. As its functional currency is the USD, reported earnings may also be

boosted by further Ringgit weakening.

MISC

TechnologyTechnologyTechnologyTechnology

Overweight

• After few years of high double-digit growth, the global smartphone market is

expected to slow down to low-teen growth in 2016, indicating that the smartphone

cycle might be peaking out. Nonetheless, there are still growth areas for the supply

chain given the upgrade in camera modules (dual camera) and rising RF content,

which play to the strength of Malaysian semi companies.

• RF contents in smartphone are getting higher due to rising adoption of 4G LTE and

introduction of more advanced technology (e.g. carrier aggregation). This will benefit

key RF players such as Avago, Skyworks, and Qorvo. In turn, Malaysian semi

companies which provide outsourced assembly and test services for these RF players

are Inari (>50% sales from Avago RF), Unisem (~30% sales from Skyworks and

Qorvo) and MPI (10-15% sales from Skyworks).

• By 2Q16, Globetronics is expected to ramp up production for the new 3D imaging

sensor that will be supplied to a leading smartphone OEM. This is a new content gain

for the company and will be one of the main growth drivers in 2016.

Globetronics, Inari

Market Focus

Results Roundup



TelecommunicationTelecommunicationTelecommunicationTelecommunication

Neutral

• The intense competition which started in April 2015 is not showing any signs of

abating soon as mobile players are still offering promotions from time to time in a bid

to gain market share amid the weak consumer environment. We believe a persistent

fall in data pricing is a key threat to mobile operators’ data monetisation strategy to

offset declines in voice and SMS.

• Two key developments to watch for the sector in 2016 are: 1) Re-allocation of 2G

spectrums; and 2) TM’s entry into the mobile space.

• We are optimistic on the eventual rollout of HSBB2, SUBB, and wireless services that

would drive further growth for TM as it expands the coverage of its high-speed

broadband network to more areas.

None

UtilitiesUtilitiesUtilitiesUtilities

Overweight

• Energy demand is expected to grow in tandem with the relatively healthy economic

outlook in Malaysia which will continue to underpin the growing recurring income

for utility players.

• The government remains committed to the power sector reform with the

implementation of incentive-based regulation framework which will offer strong

earnings clarity for utility players as well.

• Our top pick is TNB for its more attractive valuation and improving earnings visibility

from the implementation of the IBR framework.

TNB

Market Focus

Results Roundup

Top Stock Picks

StocksStocksStocksStocks Key Investment MeritsKey Investment MeritsKey Investment MeritsKey Investment Merits

Tenaga Tenaga Tenaga Tenaga

NasionalNasionalNasionalNasional

• Sustainable growth.Sustainable growth.Sustainable growth.Sustainable growth. TNB will enjoy sustainable demand growth backed by GDP growth and the implementation of major

infrastructure projects. In addition, there will be an estimated 25% increase in TNB’s generation capacity (excluding

60%-owned Kapar Energy Ventures) over the next two years from new plants under construction – unit 5 at

Janamanjung (coal-fired plants), two hydro power plants and a new gas plant at Prai.

• Clear earnings visibility. Clear earnings visibility. Clear earnings visibility. Clear earnings visibility. The full implementation of fuel cost pass-through mechanism will be a strong re-rating catalyst

for TNB as the national utility company will no longer bear the burden of volatile fuel cost. Potential upside from a tariff

hike under the subsidy rationalisation plan will be a catalyst for TNB as well.

• Maintain BUY. Maintain BUY. Maintain BUY. Maintain BUY. We expect a further re-rating given TNB’s promising demand outlook and improving earnings visibility

with the implementation of fuel cost pass-through mechanism. Also, the overhang from 1MDB issue has now been

resolved as TNB’s bid for Edra Global Energy’s power generation assets has fallen through.

Public BankPublic BankPublic BankPublic Bank • Champion of growth and asset quality. Champion of growth and asset quality. Champion of growth and asset quality. Champion of growth and asset quality. We expect PBK to consistently defy headwinds and grow above industry average.

Its asset quality track record has remained resilient over the cycles.

• Visible and resilient earnings growth.Visible and resilient earnings growth.Visible and resilient earnings growth.Visible and resilient earnings growth. Little needs to be said on PBK’s solid attributes as its deliveries speak for

themselves. Its cost-to-income ratio which ranks way below industry average is admirable. Despite challenging times

ahead, we believe PBK will continue to deliver sustainable earnings growth of c.10%.

• BUY, premium valuations justified. BUY, premium valuations justified. BUY, premium valuations justified. BUY, premium valuations justified. Our RM21.95 target price is derived from the Gordon Growth Model and assumes

9% cost of equity, 4% long-term growth and 16% ROE, implying 2.5x FY16F P/BV. PBK’s premium valuation vs peers is

justified as it continues to depict solid growth and quality trends, contrary to peers.

MISCMISCMISCMISC • Strong USD to lift earnings. Strong USD to lift earnings. Strong USD to lift earnings. Strong USD to lift earnings. MISC’s businesses are generally transacted in USD, but its financials are reported in Ringgit.

As such, a stronger USD would lift the group’s reported earnings.

• Shipping operations remain healthy. Shipping operations remain healthy. Shipping operations remain healthy. Shipping operations remain healthy. As MISC’s LNG tankers are largely fixed on long-term charters, the prevailing low

spot rates will have a limited impact on them. Petroleum tanker rates are expected to remain relatively steady, as the YTD

easing in the Baltic Dirty Tanker Index is mainly due to seasonality. MISC’s minimal gearing after the VTTI stake disposal

also gives it freedom to acquire earnings-accretive assets – such as the recently proposed 50% remaining stake in

Gumusut Kakap Semi-FPS.

• BUY, RM10.80 TP. BUY, RM10.80 TP. BUY, RM10.80 TP. BUY, RM10.80 TP. Our TP is based on SOP-valuation, and implies FY16F PE of 16x.

Hong Leong Hong Leong Hong Leong Hong Leong

BankBankBankBank

• ReReReRe----rating onrating onrating onrating on the cards. the cards. the cards. the cards. HLB should start to re-rate now that capital-raising issues are a thing of the past. HLB’s other

strong attribute is its strong liquidity position with the lowest loan-to-deposit ratio among peers. With the capital-raising

overhang over, HLB can now focus on business growth. The gradual build-up of non-interest income would be a key

catalyst.

• Revised 11% ROE target for FY16F. Revised 11% ROE target for FY16F. Revised 11% ROE target for FY16F. Revised 11% ROE target for FY16F. After taking into account the enlarged equity base, post rights issue, higher cost

base from the MSS exercise and slower contribution from Bank of Chengdu, FY16F ROE target is guided at c.11%. Bank

of Chengdu saw a slower FY16 due to higher provisions and the impact of rate cuts carried out by the Chinese banking

regulator. We understand that its NPLs have since stabilised. Recovery is expected to be underway by 2HCY16.

• BUY, capital overhang removed. BUY, capital overhang removed. BUY, capital overhang removed. BUY, capital overhang removed. HLB is a BUY with TP of RM14.70 derived from the Gordon Growth Model, implying

1.5x CY16 P/BV, and assuming 12% ROE, 10% cost of equity and 5% long-term growth rate.

• Key risk Key risk Key risk Key risk to HLB’s earnings would be the contribution from its associate Bank of Chengdu, which stands at 15% of FY15

pre-tax profit.

Market Focus

Results Roundup

Top Stock Picks (cont’d)


GamudaGamudaGamudaGamuda • Best transportation proxyBest transportation proxyBest transportation proxyBest transportation proxy. We expect Gamuda to solidify its position for MRT Line 2 with the eventual award of

tunnelling works by mid-2016, adding another RM6bn of high-margin projects to its orderbook. Tenders for the above-

ground works for MRT Line 2 have also kicked off but the majority will also be in mid-2016. Gamuda’s PDP role will see

another RM8bn of orderbook with a PDP fee of 6%. We also sense that the company will be more aggressive in other

transport-related tenders like LRT 3, Pan Borneo Highway, Southern Double tracking and eventually the High Speed Rail.

• SplSplSplSplash resolution to mitigate potential rights issueash resolution to mitigate potential rights issueash resolution to mitigate potential rights issueash resolution to mitigate potential rights issue. The resolution of Splash, where negotiations are ongoing, is expected

to be resolved by 3Q-4QCY16. While we do not expect a special dividend, the monies will be vital for ensuring the timely

rollout of its Penang Transport Master Plan project. We expect finer details on this project to surface only in early 2016

when the PDP agreement is officially signed. The key hurdle for this project is obtaining federal government approval for

land reclamation and for the LRT. This is expected to only happen at end-2016, implying that physical works should start

in 2HCY17. Gamuda is hoping to have two bites of the cherry – being PDP, and also turnkey contractor for some key

components, but that is still uncertain at this stage.

• BUY, TP RM5.60BUY, TP RM5.60BUY, TP RM5.60BUY, TP RM5.60. Gamuda remains the best large-cap infrastructure proxy in Malaysia. In our view, the market has

already priced in the expected decline in FY16F earnings given there will be a timing gap before MRT Line 2 starts to

contribute.

GlGlGlGlobetronicsobetronicsobetronicsobetronics • 2016 will be another breakthrough year2016 will be another breakthrough year2016 will be another breakthrough year2016 will be another breakthrough year for Globetronics’ sensor division as its end-customer is likely to introduce a

major upgrade involving 3D imaging sensor to its next-gen smartphone camera. This will be a new content gain for

Globetronics besides the proximity sensor that it produces currently.

• A year of two halvesA year of two halvesA year of two halvesA year of two halves. We expect earnings to blip in 1Q16 before growth resumes from 3Q16 onwards with the 3D

imaging sensor going into mass production. Even after adjusting for the recent production cut by its end-customer, y-o-y

earnings growth for GTB is still a respectable 29-43% in FY16-17F, albeit from a lower base.

• Maintain BUY and RM7.10 TP Maintain BUY and RM7.10 TP Maintain BUY and RM7.10 TP Maintain BUY and RM7.10 TP pegged to 15x FY17 EPS, which is below +1SD of its 5-year historical PE band. We believe

GTB stands to benefit from the proliferation of sensor content in smart devices amid the strong relationship with both its

Swiss customer and end-customer.

MuhibbahMuhibbahMuhibbahMuhibbah • Good start for 2016. Good start for 2016. Good start for 2016. Good start for 2016. Muhibbah has won two contracts so far in 2016, one each for its infrastructure and shipyard

division. For its infrastructure division, it won a RM137m building contract from PETRONAS Carigali, in which it has a

70% stake, implying a contract value of RM96m. For its shipyard division, it clinched a RM92m contact win from the

Ministry of Transport to undertake the design and construction of Multi-Purpose Vessel for the Malaysia Marine

Department. Its total outstanding orderbook is now RM2.5bn, of which RM1.7bn comes from infrastructure.

• Cambodian airport concession continues to grow.Cambodian airport concession continues to grow.Cambodian airport concession continues to grow.Cambodian airport concession continues to grow. For 4Q15, its Cambodian airport concession pretax profit grew to

RM16.1m (+3.9% y-o-y, +8.2% q-o-q). Similarly, 12M15 pretax profit was also higher by 22% y-o-y to RM60m. This

was driven by strong traffic volume growth of +13% y-o-y to 6.5m passengers, which was also lifted by an appreciating

USD. The expansion plans for its Siem Reap and Phnom Penh airports have been largely completed with capacity now

double at 12m passengers.

• BUY, most complete 11MP proxy.BUY, most complete 11MP proxy.BUY, most complete 11MP proxy.BUY, most complete 11MP proxy. Muhibbah is our top pick for exposure to the mid-cap construction space. It is also a

more complete 11MP proxy given its ability to focus on a more varied set of works (civil engineering, marine-based

construction and also onshore and offshore fabrication). Our TP of RM2.90 is based on SOP.

Market Focus

Results Roundup

Top Stock Picks (cont’d)


KimlunKimlunKimlunKimlun • Impressive yearImpressive yearImpressive yearImpressive year----end record profit. end record profit. end record profit. end record profit. 4Q15 results were strong where 12M15 recorded an impressive core earnings of

RM71m (vs. RM45m in FY14). This was also on the back of strong margins where 4Q15 gross margin was stronger at

14.9% (vs. 12.8% in 3Q15 and 9.5% in 4Q14), largely because of higher margins derived by the construction and

manufacturing segments.

• Strong proxy to MRT networks in Singapore and Malaysia. Strong proxy to MRT networks in Singapore and Malaysia. Strong proxy to MRT networks in Singapore and Malaysia. Strong proxy to MRT networks in Singapore and Malaysia. Kimlun’s manufacturing division is to record higher growth in

2016 anchored by stronger order flows of major public transport-related projects such as MRT2 and LRT3 in Malaysia,

and Eastern Region Line (ERL) in Singapore. Given its strong track record with MRT1 previously, of which it had secured

c.50% market share of segmental box girders (SBG) worth RM223m and tunnelling lining segment (TLS) at RM49m, we

believe its manufacturing division will be the front runner to bag MRT2’s SBG and TLS orders. Its outstanding orderbook

in total was RM1.1bn as at 31 Dec (RM0.94bn construction, RM0.17bn manufacturing). We believe its orderbook would

grow and hold up stronger, underpinned by potential wins of several key transport-related projects in 2016.

• BUY, TP raised to RM2.26. BUY, TP raised to RM2.26. BUY, TP raised to RM2.26. BUY, TP raised to RM2.26. Kimlun is the most direct small-cap proxy to MRT, apart from Gamuda, as we expect the

company to win its fair share of TLS and SBG works. Our target price is based on 11x FY16F PE, rolling our base year

one-year forward which is a tad below +1SD of its historical mean of 11.5x and 15% discount to the sector average.

SKP ResourcesSKP ResourcesSKP ResourcesSKP Resources • Proxy to Dyson’s aggressive expansion plans.Proxy to Dyson’s aggressive expansion plans.Proxy to Dyson’s aggressive expansion plans.Proxy to Dyson’s aggressive expansion plans. Dyson announced in 2014 that it was allocating GBP1.5bn (RM9bn)

towards its R&D budget, and this will eventually culminate into 100 new products that will be launched worldwide in the

next four years. We are positive on SKPRES’s long-term prospects as it is starting to see some spillover effect from

Dyson’s aggressive expansion plan. It has secured two sizeable contracts from Dyson last year for the manufacturing of

cordless vacuum cleaners totalling RM5bn - the first contract was announced in May 2015 (contract value of RM400m

p.a. over five years) and the second contract was announced in Sep 2015 (contract value of RM600m p.a. over five

years).

• Well positioned for further Well positioned for further Well positioned for further Well positioned for further contract awards.contract awards.contract awards.contract awards. Taking into account the projects on hand, only c.25% of the capacity at

SKPRES’s new plant in Senai, Johor has been utilised. With ample spare capacity, we believe the group is well prepared

to take on more contracts, which can come from both Dyson and non-Dyson related parties.

• Expanding clientele base.Expanding clientele base.Expanding clientele base.Expanding clientele base. Growth is also supported by SKPRES’s initiative to expand its clientele base and management

has targeted 8% annual growth for non-Dyson contracts. Among the areas management is looking into is the F&B

packaging segment, with plans to supply more plastic packaging to existing customers such as Unilever, Nestle, Suntori,

and Shell. The recent acquisition of Tecnic has not only increased SKPRES’s production capacity but also enable the group

to leverage on Tecnic’s existing clientele to grow its customer base.

• BUY, TP BUY, TP BUY, TP BUY, TP of of of of RM 1.78.RM 1.78.RM 1.78.RM 1.78. Our TP is based on 14.6x fully diluted FY17F EPS, which is the sector’s weighted average PE

valuation excluding SKPRES. The stock is currently trading at an undemanding 11x FY17F PE. Moreover, given its strong

earnings growth potential, it is currently trading at an attractive PEG of c.0.25x.

Market Focus

Results Roundup

Appendix: 4Q15 Earnings Summary

FinancialFinancialFinancialFinancial EPSEPSEPSEPS vs AllianceDBSvs AllianceDBSvs AllianceDBSvs AllianceDBS vs consensusvs consensusvs consensusvs consensus

CompanyCompanyCompanyCompany SectorSectorSectorSector quartersquartersquartersquarters ChangeChangeChangeChange estimatesestimatesestimatesestimates estimaestimaestimaestimatestestestes

UMW Holdings Automotive 4QFY15 ▼ Below Below

MBM Resources Automotive 4QFY15 ▼ Below Below

AirAsia Aviation 4QFY15 ▲ Above Above

AirAsia X Aviation 4QFY15 ▲ Above Above

MAHB Aviation 4QFY15 ▲ Below Below

Affin Holdings Banking 4QFY15 ▼ In line Below

AMMB Banking 3QFY16 ▼ Below Below

CIMB Group Banking 4QFY15 ▼ In line Below

Hong Leong Bank Banking 2QFY16 ▼ In line Below

Hong Leong Financial Group Banking 2QFY16 ▼ In line In line

Maybank Banking 4QFY15 ▼ In line In line

Public Bank Banking 4QFY15 ◄► Above Above

RHB Capital Bhd Banking 4QFY15 ▼ Below Below

Cahya Mata Sarawak Building Materials 4QFY15 ◄► Above Above

Lafarge Building Materials 4QFY15 ▼ Below Below

Petronas Chemical Chemicals 4QFY15 ◄► In line In line

MMC Conglomerate 4QFY15 ◄► In line In line

PPB Group Conglomerate 4QFY15 ◄► Above Above

Gamuda Construction 1QFY16 ▼ In line In line

IJM Corp Construction 3QFY16 ◄► In line In line

Muhibbah Engineering Construction 4QFY15 ◄► In line In line

Kimlun Corporation Construction 4QFY15 ◄► Above Above

WCT Holdings Construction 4QFY15 ◄► In line Below

BAT Consumer 4QFY15 ▼ In line In line

MSM Malaysia Consumer 3QFY15 ◄► In line In line

Oldtown Consumer 3QFY16 ▲ In line Below

Padini Consumer 2QFY16 ◄► In line Above

Petronas Dagangan Consumer 4QFY15 ◄► Below Below

Sasbadi Holdings Consumer 1QFY16 ◄► In line Inline

SKP Resources Consumer 3QFY16 ◄► In line Below

QL Resources Consumer 3QFY16 ◄► In line Below

AEON Credit Finance non-bank 3QFY16 ◄► In line In line

Bursa Malaysia Finance non-bank 4QFY15 ◄► In line In line

BIMB Holdings Finance non-bank 4QFY15 ◄► In line In line

TA Enterprise Finance non-bank 4QFY15 ▼ Below Below

Berjaya Sports Toto Gaming 2QFY16 ▼ Below Below

Genting Gaming 4QFY15 ▼ In line In line

Genting Malaysia Gaming 4QFY15 ▼ In line In line

Magnum Gaming 4QFY15 ◄► Below Below

Hartalega Glove 3QFY16 ◄► In line In line

Kossan Glove 4QFY15 ◄► In line In line

Supermax Glove 4QFY16 ◄► Above Above

Top Glove Glove 1QFY16 ▲ Above Above

IHH Healthcare Healthcare 4QFY15 ◄► In line In line

KPJ Healthcare Healthcare 4QFY15 ▼ Below Below

Astro Media 3QFY16 ◄► In line In line

Media Chinese Media 3QFY16 ◄► In line In line

Media Prima Media 4QFY15 ◄► In line In line

Star Media 4QFY15 ◄► Above Above

Bumi Armada Oil & Gas 4QFY15 ◄► In line In line

Market Focus

Results Roundup

FinancialFinancialFinancialFinancial EPSEPSEPSEPS vs AllianceDBSvs AllianceDBSvs AllianceDBSvs AllianceDBS vs consensusvs consensusvs consensusvs consensus

CompanyCompanyCompanyCompany SectorSectorSectorSector quartersquartersquartersquarters ChangeChangeChangeChange estimatesestimatesestimatesestimates estimaestimaestimaestimatestestestes

Coastal Contracts Oil & Gas 4QFY16 ◄► Below Below

Dayang Enterprises Oil & Gas 4QFY15 ◄► Above Above

Deleum Oil & Gas 4QFY15 ◄► Below Below

Dialog Group Bhd Oil & Gas 2QFY16 ◄► Below Below

MMHE Oil & Gas 4QFY15 ◄► Below Below

Pantech Group Oil & Gas 3QFY16 ◄► Below Below

SapuraKencana Oil & Gas 3QFY16 ◄► In line In line

UMW Oil & Gas Oil & Gas 3QFY15 ◄► Below Below

CB Industrial Product Plantation 4QFY15 ▲ Above Above

Genting Plantation Plantation 4QFY15 ▲ In line Below

IJM Plantations Plantation 3QFY16 ▼ Below In line

IOI Corporation Plantation 2QFY16 ▲ In line In line

KL Kepong Plantation 1QFY16 ◄► Above Above

Sime Darby Plantation 2QFY16 ▼ Below Below

Felda Global Ventures Plantation 4QFY15 ▼ Below Below

TSH Resources Plantation 4QFY15 ▲ In line In line

Suria Port 4QFY15 ◄► In line In line

Eastern & Oriental Property 3QFY16 ▼ Below Below

MKH Property 1QFY16 ▲ Above Above

SP Setia Property 4QFY15 ◄► Above Above

UEM Sunrise Property 4QFY15 ◄► In line Below

Eco World Development Property 4QFY15 ◄► Above Above

Matrix Concepts Property 4QFY15 ◄► In line In line

Sunway Property 4QFY15 ◄► Above Above

Axis REIT REIT 4QFY15 ◄► In line Below

CapitaMall Malaysia Trust REIT 4QFY15 ▲ In line In line

KLCC Stapled REIT 4QFY15 ◄► In line In line

IGB REIT REIT 4QFY15 ◄► In line In line

Pavilion REIT REIT 4QFY15 ◄► In line In line

MRCB-Quill REIT REIT 4QFY15 ◄► In line In line

Sunway REIT REIT 2QFY16 ◄► In line In line

MISC Shipping 4QFY15 ◄► In line Above

Westports Holdings Shipping 4QFY15 ▼ In line In line

Malaysian Pacific Industries Technology 2QFY16 ▼ Below Below

Globetronics Technology 4QFY15 ◄► In line In line

Inari Amertron Technology 2QFY16 ▼ Below Below

Unisem Technology 4QFY15 ▲ Above Above

Axiata Telecommunication 4QFY15 ▲ In line Below

Digi Telecommunication 4QFY15 ▼ Below Below

Maxis Telecommunication 4QFY15 ▼ In line Above

TIME dotCom Telecommunication 4QFY15 ◄► In line In line

TM Telecommunication 4QFY15 ◄► In line In line

Gas Malaysia Utilities 4QFY15 ◄► Below Below

Petronas Gas Utilities 4QFY15 ◄► In line In line

Tenaga Utilities 1QFY16 ◄► In line In line

YTL Power Utilities 2QFY16 ◄► In line In line

Source: AllianceDBS

Market Focus

Results Roundup

AllianceDBS Research recommendations are based an Absolute Total Return* Rating system, defined as follows:

STRONG BUYSTRONG BUYSTRONG BUYSTRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)

BUY BUY BUY BUY (>15% total return over the next 12 months for small caps, >10% for large caps)

HOLDHOLDHOLDHOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)

FULLY VALUEDFULLY VALUEDFULLY VALUEDFULLY VALUED (negative total return i.e. > -10% over the next 12 months)

SELL SELL SELL SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

Share price appreciation + dividends

GENERAL DISCLOSURE/DISCLAIMER GENERAL DISCLOSURE/DISCLAIMER GENERAL DISCLOSURE/DISCLAIMER GENERAL DISCLOSURE/DISCLAIMER This report is prepared by This report is prepared by This report is prepared by This report is prepared by AllianceDBS Research Sdn BhdAllianceDBS Research Sdn BhdAllianceDBS Research Sdn BhdAllianceDBS Research Sdn Bhd This report is solely intended for the clients of DBS Bank Ltd and DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations and affiliates (collectively, the “DBS Vickers Group”) only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of AllianceDBS Research Sdn Bhd. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd., its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”)) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that: (a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk

assessments stated therein. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making. ANALYST CERTIFICATIONANALYST CERTIFICATIONANALYST CERTIFICATIONANALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of 2 Mar 2016, the analyst(s) and his/her spouse and/or relatives who are financially dependent on the analyst(s), do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities). COMPANYCOMPANYCOMPANYCOMPANY----SPECIFIC / REGULATORY DISCLOSURES SPECIFIC / REGULATORY DISCLOSURES SPECIFIC / REGULATORY DISCLOSURES SPECIFIC / REGULATORY DISCLOSURES 1.1.1.1. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates do not have a proprietary

position in the securities recommended in this report as of 31 Jan 2016

2.2.2.2. Compensation for investment banking services: Compensation for investment banking services: Compensation for investment banking services: Compensation for investment banking services:

DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

Market Focus

Results Roundup

RESTRICTIONS ON DISTRIBUTION RESTRICTIONS ON DISTRIBUTION RESTRICTIONS ON DISTRIBUTION RESTRICTIONS ON DISTRIBUTION

GeneralGeneralGeneralGeneral This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

AustraliaAustraliaAustraliaAustralia This report is being distributed in Australia by DBS Bank Ltd. (“DBS”) or DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”), both of which are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, which differ from Australian laws. Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

Hong KongHong KongHong KongHong Kong This report is being distributed in Hong Kong by DBS Vickers (Hong Kong) Limited which is licensed and regulated by the Hong Kong Securities and Futures Commission.

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MalaysiaMalaysiaMalaysiaMalaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR

SingaporeSingaporeSingaporeSingapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.

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DubaiDubaiDubaiDubai

This research report is being distributed in The Dubai International Financial Centre (“DIFC”) by DBS Bank Ltd., (DIFC Branch) having its office at PO Box 506538, 3rd Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it.

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Other jurisdictionsOther jurisdictionsOther jurisdictionsOther jurisdictions In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

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(128540 U)

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