FGV confirmed a press report that it has voluntarily suspended its RSPO certification in Malaysia.

COMPANY RESEARCH Hartalega | Vulnerable to competition Yen Ling Lee Felda Global Ventures | Withdraws RSPO certification Chee Ting Ong Kimlun Bhd | More job wins Li Shin Chai

MACRO RESEARCH Malaysia | Index will test 1,600 very soon Lee Cheng Hooi

NEWS Outside Malaysia Other News

COMPANY RESEARCH

Malaysia Results Review Hartalega (HART MK) by Yen Ling Lee Share Price: MYR4.14 Target Price: MYR3.80 Recommendation: Sell Vulnerable to competition Sequentially weaker 4QFY3/16 earnings was within our expectation but below street’s as earnings was affected by greater-than-expected ASP competition. In our view, Hartalega is most susceptible to the intense competition due to its product and customer-concentration profile. We advocate investors to avoid the stock until the competition subsides. Maintain SELL and TP of MYR3.80 (21x 2017 PER). FYE Mar (MYR m) FY15A FY16A FY17E FY18E Revenue 1,146.0 1,489.3 1,666.2 1,809.7 EBITDA 321.6 387.1 431.8 472.8 Core net profit 209.7 258.0 277.4 301.4 Core FDEPS (sen) 13.4 15.6 16.7 18.2 Core FDEPS growth(%) (15.1) 16.5 7.5 8.6 Net DPS (sen) 6.5 9.0 8.5 9.2 Core FD P/E (x) 31.0 26.6 24.7 22.8 P/BV (x) 5.1 4.5 4.2 3.8 Net dividend yield (%) 1.6 2.2 2.0 2.2 ROAE (%) 19.0 18.6 17.7 17.7 ROAA (%) 16.4 15.1 13.2 12.8 EV/EBITDA (x) 20.7 21.0 16.5 15.2 Net debt/equity (%) net cash 10.9 19.4 21.4 Yen Ling Lee    (603) 2297 8691    lee.yl@maybank-ib.com

Malaysia Company Update Felda Global Ventures (FGV MK) by Chee Ting Ong Share Price: MYR1.46 Target Price: MYR1.33 Recommendation: Sell Withdraws RSPO certification FGV confirmed a press report that it has voluntarily suspended its RSPO certification in Malaysia. Although FGV is a big supplier of certificated sustainable palm oil (CSPO), the CSPO premium received is small relative to its revenue base. But against its small earnings base, the foregone CSPO premium could be material. Pending details, we are keeping our forecasts unchanged. Maintain SELL & MYR1.33 TP on 1x historical PNTA. FYE Dec (MYR m) FY14A FY15A FY16E FY17E Revenue 16,434.3 15,669.7 15,737.5 16,369.9 EBITDA 1,293.9 957.4 990.7 1,194.2 Core net profit 95.7 (171.8) 141.4 252.2 Core EPS (sen) 2.6 (4.7) 3.9 6.9 Core EPS growth (%) 545.6 nm nm 78.3 Net DPS (sen) 10.0 4.0 2.3 4.1 Core P/E (x) 55.6 (31.0) 37.7 21.1 P/BV (x) 0.8 0.8 0.8 0.8 Net dividend yield (%) 6.8 2.7 1.6 2.8 ROAE (%) 1.5 (2.7) 2.2 3.8 ROAA (%) 0.5 (0.8) 0.7 1.2 EV/EBITDA (x) 9.0 12.4 11.3 9.7 Net debt/equity (%) 18.8 47.8 50.2 53.2 Chee Ting Ong    (603) 2297 8678    ct.ong@maybank-ib.com

Malaysia Company Update Kimlun Bhd (KICB MK) by Li Shin Chai Share Price: MYR1.73 Target Price: MYR1.70 Recommendation: Hold More job wins Kimlun has won two additional building contracts with a total worth of MYR264m, lifting its orderbook by 17% to MYR1.86b. Further job wins could come from other Klang Valley highways while precast orders could be lifted by rail projects. Our earnings forecasts are unchanged as these have been imputed into our forecasts. Maintain HOLD with an unchanged MYR1.70 TP (based on 11x 2017 PER). FYE Dec (MYR m) FY14A FY15A FY16E FY17E Revenue 1,206.4 1,053.6 1,095.3 1,079.8 EBITDA 90.7 114.5 92.5 92.8 Core net profit 33.8 64.4 49.4 45.6 Core EPS (sen) 11.3 21.4 16.4 15.2 Core EPS growth (%) (5.3) 90.5 (23.3) (7.7) Net DPS (sen) 3.5 6.4 4.4 4.1 Core P/E (x) 15.4 8.1 10.5 11.4 P/BV (x) 1.3 1.1 1.0 1.0 Net dividend yield (%) 2.0 3.7 2.6 2.4 ROAE (%) 9.7 15.0 10.3 8.9 ROAA (%) 3.8 6.8 5.0 4.4 EV/EBITDA (x) 5.0 4.2 6.3 6.0 Net debt/equity (%) 23.2 14.7 12.2 7.8 Li Shin Chai    (603) 2297 8684    lishin.c@maybank-ib.com

MACRO RESEARCH MY: Technicals Technical Research by Lee Cheng Hooi Index will test 1,600 very soon The FBMKLCI tumbled 21.28 points to close at 1,651.44 yesterday, while the FBMEMAS and FBM100 plunged 133.03 and 129.71 points respectively. In terms of market breadth, the gainer-to-loser ratio was 221-to-624, while 324 counters were unchanged. A total of 1.69b shares were traded valued at MYR1.73b. Lee Cheng Hooi    (603) 2297 8694    chenghooi.lee@maybank-ib.com

NEWS Outside Malaysia: U.S: Two Fed officials signal markets may be wrong to doubt June hike. Atlanta Fed chief Dennis Lockhart and San Francisco’s John Williams both signaled that the U.S. economy could warrant a rate hike when the policy-setting Federal Open Market Committee gathers on June 14-15. Investors currently only see a 12% chance of such a move, according to pricing in interest rate futures contracts. (Source: Bloomberg) U.S: Auto sales’ record April doesn’t do much to contain unease. The U.S. industry sold 1.51 million cars and light trucks in April, according to researcher Autodata Corp. That broke an 11-year-old record, according to Edmunds.com. Sales skewed toward more expensive sport utility vehicles and pickups, a sign that consumers are confident enough to make big purchases. April’s results show a rebound from the first quarter, when sales were at historically high levels but showed slowing growth. The next few months of auto sales will show whether the U.S. economy has staying power, especially if consumers maintain buying momentum. (Source: Bloomberg) E.U: Expects Italy to miss debt-reducing goal on slower growth. Italy’s debt ratio will remain at 132.7% of gross domestic product in 2016, the same level as last year, the European Union’s executive branch said in its spring economic forecasts. The government last month predicted the debt ratio would fall to 132.4% this year. Italy’s debt-to-GDP ratio is the second-highest in the euro area after Greece. In April, Finance Minister Pier Carlo Padoan said the reduction planned for this year “remains a top-priority goal for the government and is key to maintain market confidence.” (Source: Bloomberg) U.K: Manufacturing unexpectedly shrank for the first time in three years in April, dealing a shock blow to the economy after growth slowed in the first quarter. Markit Economics said its factory Purchasing Managers Index dropped to 49.2 from 50.7 in March, below the key 50 level that divides expansion from contraction. Markit also said manufacturing output is falling at a quarterly pace of about 1% and it estimates that about 20,000 jobs were lost in the industry over the past three months. (Source: Bloomberg) Australia: Economy received a double shot of stimulus as the government handed down an expansionary budget hours after the central bank eased policy for the first time in a year. Treasurer Scott Morrison unveiled a plan to cut company taxes, boost infrastructure spending and provide income-tax relief, as he forecast a AUD 37.1b (USD 28.1b) deficit in the 12 months through June 2017. Policies announced included creating jobs and investment by kick-starting an east coast rail link between Brisbane and Melbourne as well as providing funds to build dams, pipelines and roads. The government will also lower the tax rate for small businesses to 27.5% and pledged a 25% rate for all companies within a decade. For workers, a 37% income tax rate will kick in at AUD 87,000 instead of the current AUD 80,000. (Source: Bloomberg) Other News: AMMB: ANZ writes down AMMB stake. Australia and New Zealand Banking Group Ltd (ANZ) has provided AUD260m (MYR773.07m) as impairment losses on its stake in AMMB Holdings in its latest result, sending another clear signal of its intentions to dispose of the stake. The banking group has been under increasing pressure from its shareholders to improve returns from its underperforming Asian assets. (Source: The Star) Boustead Holdings: Agrees to time extension for MYR174m payment. Boustead Holdings wholly-owned subsidiary Bakti Wira Development Sdn Bhd has agreed to an extension time for the payment of MYR174.6m from Cascara Sdn Bhd, for its 30% stake in property developer Jendela Hikmat Sdn Bhd. The share sale agreement shall be completed upon full settlement of the balance sale consideration by Cascara to Bakti Wira. (Source: The Sun Daily) Hibiscus Petroleum: Cancels proposed acquisition on Hydra Energy. Hibiscus Petroleum has terminated its proposed acquisition of Australia-based Hydra Energy Holdings Pty Ltd (HEH) due to the non-fulfillment of certain conditions precedents. HEH could not meet the term sheet conditions which included parties agreeing and entering into the sale and purchase agreement and the approval of the shareholders of HEH to proceed with the proposed acquisition before April 30, 2016. Thus, the breaking fee of USD3.5m (MYR 13.65m) is not payable by Hibiscus as the approval of HEH’s shareholders was not obtained. (Source: The Edge Financial Daily) Kulim: To be delisted by Q3. Kulim expects its delisting from the main market of Bursa Malaysia to be completed by the third quarter of this year. The privatization scheme would give Kulim the flexibility to decide and act as the company recalibrates its business transformation. (Source: The Star)