Malaysia | September 2, 2021 Key Metrics Malaysia Daybreak | 2 September 2021 FBMKLCI Index 1,700 ▌What’s on the Table… 1,650 ———————————————————————————————————————————————————————————————————————————————————————— 1,600 1,550 Strategy-Landscape – It’s a wrap for August; what’s next? 1,500 The KLCI rose 7.1% mom in Aug to close at 1,601 points due to foreign buying 1,450 on optimism that political concerns will subside following the appointment of 1,400 Datuk Ismail Sabri as the 9th Prime Minister of Malaysia on 21 Aug. The monthly Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 average trading value for the market continued to decline in Aug, by 11%/62% ——————————————————————————— mom/yoy to RM2.7bn. KLCI historically posted -1%/-0.8% mom returns over the FBMKLCI past 10/43 years in Sep. For the rally to sustain, we think investors will want to 1,586.89 -14.49pts -0.90% see evidence of a recovery in economic activity, higher Covid-19 vaccination SEP Future OCT Future 1576 - (-0.79%) 1575 - (-0.85%) rates in states facing increased new Covid-19 cases, and more states moving to ——————————————————————————— Phase 3-5 of the NRP. Key events to watch out for in Sep: Monetary Policy Gainers Losers Unchanged Committee (MPC) meeting on 9 Sep, tabling of the 12th Malaysia Plan on 27 Sep, 523 550 426 ——————————————————————————— FOMC meeting on 21-22 Sep, takeaways from the Parliament sitting (13 Sep to Turnover 12 Oct), and 2Q results season. 4910.59m shares / RM3390.736m 3m avg volume traded 4944.96m shares Malaysian Pacific Industries – Making Vision 2027 come to life 3m avg value traded RM2938.37m ——————————————————————————— MPI announced its Vision 2027 with a US$1.4bn sales target in FY6/27F (6-year Regional Indices CAGR: 20%), driven by new expansions in Malaysia, China and US. We are FBMKLCI FSSTI JCI SET HSI excited about MPI’s long-term prospects, riding on the proliferation of SiC 1,587 3,088 6,091 1,634 26,028 applications in EVs and 5G network infrastructure development in China. ———————————————————————————————— Reiterate Add with RM51.50 TP, still based on 31x CY22F P/E. Market Indices Close % chg YTD % chg Lotte Chemical Titan – US MEG plant may benefit from hurricane FBMKLCI 1,586.89 (0.9) (2.5) FBM100 11,265.04 (0.7) (2.1) About 10% of MEG and 6-9% of PE/PP capacities in the US were directly FBMSC 16,061.84 0.7 3.2 FBMMES 7,216.02 (0.4) (32.8) affected by Hurricane Ida; several weeks are needed to resume operations. Dow Jones 35,312.53 (0.1) 15.4 LCT’s US facilities did not sustain any damage from the hurricane and is in a NASDAQ 15,309.38 0.3 18.8 FSSTI 3,087.84 1.1 8.6 position to benefit from higher MEG selling prices. Reiterate Add with unchanged FTSE-100 7,149.84 0.4 10.7 TP of RM2.92 (5x CY22F EV/EBITDA). SENSEX 57,338.21 (0.4) 20.1 Hang Seng 26,028.29 0.6 (4.4) BIMB Holdings – Factoring in the modification loss JCI 6,090.93 (1.0) 1.9 KOSPI 3,207.02 0.2 11.6 Nikkei 225 28,451.02 1.3 3.7 We cut our projected FY21F net profit by 6.1% to factor in the assumed PCOMP 6,785.94 (1.0) (5.0) modification loss of RM55m. For FY21F, BIMB is guiding for: 1) net income SET 1,634.48 (0.3) 12.8 Shanghai 3,567.10 0.7 2.7 margin of 2.2-2.4%, 2) credit charge-off rate of 30-35bp, and 3) cost-to-income Taiwan 17,473.99 (0.1) 18.6 ratio of 55%. We reiterate our Add call on BIMB as we believe that its internal ———————————————————————————————— reorganisation would unlock Bank Islam’s value. Top Actives Close % chg Vol. (m) Wellcall Holdings – Riding on positive export recovery KNM GROUP 0.280 9.8 322.4 BORNEO OIL 0.035 16.7 319.9 BINTAI KINDEN 0.565 17.7 179.4 On the back of recovery in the global economy, Wellcall is witnessing a surge in AVILLION 0.125 (13.8) 165.5 demand for its products, led by customers in the US and Asia regions. Wellcall KANGER 0.060 33.3 139.2 PA RESOURCES 0.460 12.2 80.2 aims to offset the recent rise in raw material prices by increasing efficiency and HIAP TECK VENTURE 0.595 2.6 55.3 having better overall cost control. Reiterate Add, with an unchanged TP of TANCO HLDGS 0.230 2.2 53.1 ———————————————————————————————— RM1.22 (15x CY22F P/E). Economic Statistics Close % chg Oceancash Pacific Bhd – Recovery likely after near-term disruptions US$/Euro 1.1841 0.00 RM/US$ (Spot) 4.1543 (0.02) RM/US$ (12-mth NDF) 4.1985 (0.48) ▌News of the Day… OPR (%) 1.75 0.00 ———————————————————————————————————————————————————————————————————————————————————————— GOLD ( US$/oz) 1,813.89 (0.00) WTI crude oil US spot (US$/barrel) 68.59 0.13 • Malaysia examines need for booster shots as virus spreads CPO spot price (RM/tonne) 4,523.50 (1.01) • UEM Edgenta to resume paying dividends in FY21, paying out 50-80% of ———————————————————————————————————————— PATANCI Ivy NG Lee Fang, CFA T (60) 3 2261 9073 • SCIB bags RM80m contract to supply medical equipment in JB E [email protected] • Tabung Haji weighing privatisation of TH Plantations, say sources Show Style "View Doc Map" • Johor Corp revisiting plans to relist plantation arm Kulim by 2024 • Paramount buys freehold residential land in Selangor for RM102.7m • Solarvest secures RM175m LSS project IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. IF THIS REPORT IS DISTRIBUTED IN Powered by the THE UNITED STATES IT IS DISTRIBUTED BY CGS-CIMB SECURITIES (USA), INC. AND IS CONSIDERED THIRD-PARTY AFFILIATED RESEARCH. EFA Platform Sources: CIMB. COMPANY REPORTS Sources: CIMB. COMPANY REPORTS Malaysia Daybreak | September 2, 2021 Global Economic News Euro zone manufacturing growth remained strong in Aug but supply chain issues caused by the coronavirus pandemic continued to constrain supplies of the raw materials factories need, driving up prices, a survey showed on 1 Sep. IHS Markit's final manufacturing Purchasing Managers' Index (PMI) fell to 61.4 in Aug from July's 62.8, below an initial 61.5 "flash" estimate. An index measuring output, which feeds into a composite PMI due on Friday and seen as a good guide to economic health, fell from Jul's 61.1 to 59.0. Anything above 50 indicates growth. (Reuters) US manufacturing activity unexpectedly picked up in Aug amid strong order growth, but a measure of factory employment dropped to a nine-month low, likely as workers remained scarce. The survey from the Institute for Supply Management (ISM) continued to highlight persistent problems securing enough raw materials, a situation worsened by disruptions caused by the latest wave of COVID-19 infections, primarily in Southeast Asia, as well as ports congestion in China. The ISM said its index of national factory activity inched up to 59.9 in Aug from a reading of 59.5 in Jul. (Reuters) China’s Central Bank will provide 300bn yuan (US$46.4bn) of low-cost funding to banks to help them offer more support to small and medium-sized companies, as Beijing tries to cushion its economy against a growth slowdown. The funding will be offered to banks via the People’s Bank of China’s re-lending facility this year, State broadcaster CCTV reported, citing a State Council meeting chaired by Premier Li Keqiang. The Cabinet also mentioned using the PBOC’s rediscounting facility as part of the effort to aid smaller firms. (Bloomberg) The Chinese government has said the cost of renting a home in cities should not rise by more than 5% a year - its first move to cap rental prices and part of efforts to provide more affordable housing. The plight of low-income individuals has come to the fore of policymaking as President Xi Jinping pledges to narrow wealth disparities in efforts to reach so-called "common prosperity". (Reuters) Australia’s economy expanded in 2Q21 as strong household and government spending outweighed a drop in export volumes, underscoring the central bank’s view that it entered a renewed lockdown with solid momentum. Gross domestic product rose 0.7% qoq SA in 2Q21 (vs. +1.9% qoq SA in 1Q21), Australian Bureau of statistics data showed on 1 Sep. From the year earlier period, when GDP tumbled in response to Covid lockdowns, the economy expanded 9.6% yoy. (Bloomberg) Asia's factory activity lost momentum in Aug as a resurgence in coronavirus cases disrupted supply chains across the region, raising concerns faltering manufacturing will add to the economic woes caused by slumping consumption. Manufacturing activity in Aug expanded at a slower rate in Japan, South Korea and Taiwan as chip shortages and factory shutdowns disrupted production, in a fresh sign of the lingering impact of the pandemic, surveys showed on 1 Sep. (Reuters) The ASEAN manufacturing sector remained in a downturn during Aug as rising Covid-19 cases and lockdown measures continued to impact the sector. According to the latest data of the IHS Markit Purchasing Managers’ Index (PMI) released on 1 Sep, the headline PMI was registered at 44.5 in Aug, down slightly from 44.6 in Jul, signalling a third straight month of deterioration in the health of the ASEAN manufacturing sector.