CIMB Group Holdings | Distributing Niaga shares

FEATURE CALLS Malaysia | Top Glove Convergence of negativities Yen Ling Lee

COMPANY RESEARCH CIMB Group Holdings | Distributing Niaga shares Desmond Ch'ng Glomac | Weak set of results Wei Sum Wong

MACRO RESEARCH Malaysia | Unimpressive positive close Lee Cheng Hooi

NEWS Outside Malaysia Other News

COMPANY RESEARCH

Malaysia Rating Change Top Glove (TOPG MK) by Yen Ling Lee Share Price: MYR4.91 Target Price: MYR4.35 Recommendation: Sell Convergence of negativities 3QFY8/16 was exceptionally weak and below expectations on a convergence of negative factors. We lower our already street-low FY8/16-18 EPS forecasts further by 5% p.a. on lower ASP assumptions. Our new TP is MYR4.35 (-5%; unchanged 15x 2017 PER – mean valuations) and the stock is now a SELL. As we expect Top Glove’s earnings to normalise ahead, we see downside risk to street’s earnings projections and hence, pressure on Top Glove’s share price. FYE Aug (MYR m) FY14A FY15A FY16E FY17E Revenue 2,275.4 2,510.5 3,016.6 3,086.7 EBITDA 298.5 454.3 596.1 559.8 Core net profit 180.5 279.8 378.4 348.5 Core EPS (sen) 14.6 22.6 30.5 28.1 Core EPS growth (%) (8.2) 55.0 35.3 (7.9) Net DPS (sen) 8.0 11.5 15.3 14.0 Core P/E (x) 33.7 21.8 16.1 17.5 P/BV (x) 4.4 3.8 3.4 3.1 Net dividend yield (%) 1.6 2.3 3.1 2.9 ROAE (%) 13.3 18.6 22.2 18.5 ROAA (%) 9.8 12.1 13.4 11.5 EV/EBITDA (x) 9.4 10.1 9.8 10.2 Net debt/equity (%) net cash net cash net cash net cash Yen Ling Lee    (603) 2297 8691    lee.yl@maybank-ib.com

Malaysia Company Update CIMB Group Holdings (CIMB MK) by Desmond Ch'ng Share Price: MYR4.34 Target Price: MYR4.10 Recommendation: Sell Distributing Niaga shares The proposed dividend-in-specie distribution of CIMB Niaga (Niaga) shares to CIMB Group’s shareholders translates to about 2sen per CIMB Group share or a 0.5% yield, which is in addition to the 4.1% that we are projecting for FY16. We estimate a marginal 1.2% reduction in FY17 group earnings stemming from the 5.4-ppt decline in the group’s shareholding in Niaga to 92.5%. We maintain our SELL call with an unchanged TP of MYR4.10 (FY17 P/BV of 0.8x, 8.9% ROE). FYE Dec (MYR m) FY14A FY15A FY16E FY17E Operating income 14,145.9 15,395.8 15,869.0 16,763.4 Pre-provision profit 5,854.0 6,146.8 6,669.3 7,192.2 Core net profit 3,159.0 3,411.2 3,647.7 3,884.4 Core EPS (MYR) 0.38 0.40 0.43 0.46 Core EPS growth (%) (31.1) 5.6 6.3 6.5 Net DPS (MYR) 0.15 0.14 0.18 0.19 Core P/E (x) 11.4 10.8 10.1 9.5 P/BV (x) 1.0 0.9 0.9 0.8 Net dividend yield (%) 3.5 3.2 4.1 4.4 Book value (MYR) 4.53 4.87 4.98 5.25 ROAE (%) 9.3 8.7 8.8 8.9 ROAA (%) 0.8 0.8 0.8 0.8 Desmond Ch'ng    (603) 2297 8680    desmond.chng@maybank-ib.com

Malaysia Results Review Glomac (GLMC MK) by Wei Sum Wong Share Price: MYR0.76 Target Price: MYR0.76 Recommendation: Hold Weak set of results Glomac’s FY4/16 core net profit (+28% YoY) came in as per our expectations but below consensus. Property sales (-40% YoY) were also in-line. Despite a weak property market outlook, management sets a higher sales target of c.MYR630m for FY17 (2x YoY) supported by MYR982m new launches (excluding Centro V). We revise up our earnings forecasts by 2.3-13% post actual FY16 results. We maintain our MYR0.76 RNAV-TP (on an unchanged 60% discount to RNAV) and HOLD rating. FYE Apr (MYR m) FY15A FY16A FY17E FY18E Revenue 473.3 598.9 628.4 765.1 EBITDA 172.0 157.0 244.8 205.7 Core net profit 54.8 70.2 85.6 122.7 Core EPS (sen) 7.6 9.7 11.9 17.0 Core EPS growth (%) (41.2) 28.7 22.0 43.3 Net DPS (sen) 4.3 4.0 3.6 5.1 Core P/E (x) 10.0 7.8 6.4 4.4 P/BV (x) 0.6 0.5 0.5 0.4 Net dividend yield (%) 5.6 5.3 4.7 6.8 ROAE (%) 6.0 7.3 8.1 10.4 ROAA (%) 3.1 3.6 4.0 5.2 EV/EBITDA (x) 6.8 6.2 3.5 4.3 Net debt/equity (%) 44.7 32.1 22.0 22.7 Wei Sum Wong    (603) 2297 8679    weisum@maybank-ib.com

MACRO RESEARCH MY: Technicals Technical Research by Lee Cheng Hooi Unimpressive positive close The FBMKLCI inched up by 1.85 points to close at 1,628.96 yesterday, while the FBMEMAS gained 5.59 points but the FBM100 declined 1.54 points. In terms of market breadth, the gainer-to-loser ratio was 314-to-406 while 373 counters were unchanged. A total of 1.53b shares were traded valued at MYR1.45b. Lee Cheng Hooi    (603) 2297 8694    chenghooi.lee@maybank-ib.com

NEWS Outside Malaysia: U.S: Yellen says Brexit vote influenced fed call to hold rates steady. Federal Reserve Chair Janet Yellen said next week’s referendum in the U.K. on whether to remain in the European Union was a factor in the U.S. central bank’s decision to hold interest rates steady at its meeting in Washington. “It is a decision that could have consequences for economic and financial conditions in global financial markets,” Yellen said during a press conference following the meeting. A vote on June 23 by Britons to leave the EU “could have consequences in turn for the U.S. economic outlook,” she said. (Source: Bloomberg) U.S. Factory production in May falls more than forecast on auto output. The 0.4% decrease in output followed a revised 0.2% advance in April, data from the Federal Reserve showed. Total industrial production also fell 0.4%. American producers are still battling the fallout from the plunge in energy prices that has sapped the appetite for investment, while a strong dollar and lackluster global growth have weighed on exports. Manufacturers could find some relief as companies have trimmed stockpiles, leaving them with fewer goods on hand should consumer spending continue to climb. (Source: Bloomberg) China: Dumping more than treasuries as US stocks join fire sale. The People’s Bank of China, owner of the world’s biggest foreign-exchange reserves, burnt through 20% of its war chest since 2014, dumping about USD 250b of U.S. government debt and using the funds to support the yuan and stem capital outflows. While China’s sales of Treasuries have slowed, its holdings of U.S. equities are now showing steep declines. The nation’s stash of American stocks sank about USD 126b, or 38%, from the end of July through March, to USD 201b, Treasury Department data show. That far outpaces selling by investors globally in that span - total foreign ownership fell just 9%. Meanwhile, China’s U.S. government-bond stockpile was relatively stable, dropping roughly USD 26b, or just 2%. (Source: Bloomberg) India: Eases rules to lift world’s fastest-growing airline market. After more than a decade of deliberations, India unveiled an aviation policy to open up the world’s fastest growing major air-travel market. Prime Minister Narendra Modi’s government decided to permit domestic airlines to fly overseas provided they deploy 20 planes or 20% of capacity, whichever is higher, on local routes. Earlier, carriers needed to have a minimum of 20 aircraft in their fleet and five years of domestic services. (Source: Bloomberg) Other News: Construction: Prasarana Malaysia to award LRT3 packages in two to three months time. The company is to announce the award of the first few packages for works on staff quarters, advance work and some work for the depot in Johan Setia. Subsequent to that will be other packages that the company will start to announce. The value of the packages to be awarded can only be ascertained after the completion of the detailed design and tender process. (Source: The Sun Daily) IPO: Lotte to shelve Malaysian IPO. South Korea’s Lotte Group plans to list its Malaysian petrochemical business, Lotte Chemical Titan. The IPO was initially scheduled for the second half of this year with amount to be raised of more than USD500m (MYR2.05b). (Source: The Edge Financial Daily) Hap Seng: Acquires Kuala Selangor land. The company is buying 36 parcels of freehold agricultural land with an aggregate land size of 1,449.52 acres in Kuala Selangor for MYR228.75m. The land will be used to develop a mixed development with an estimated gross development value of MYR9.3b over a 15-year development period. (Source: The Edge Financial Daily)