Market Strategy

Malaysia Strategy
5 July 2024 Market Outlook | Market Strategy
Market Strategy
Stocks Covered 147
Building Momentum For a New Cycle Rating (Buy/Neutral/Sell): 88 / 48 / 11
Last 12m Earnings Revision Trend: Negative
 The stars are aligning. Baseline equity investor sentiment is picking up, Analyst
despite some recent profit-taking. Key fundamental factors are aligning
positively, with the US economy remaining resilient as inflation data crests to Alexander Chia
set the stage for the Federal Reserve (US Fed) to begin the rate cutting cycle. +603 2302 8119
The worst is over for the MYR, which will be supported by the alexander.chia@rhbgroup.com
commencement of the fiscal reform process, improving business sentiment
and more domestic-centric asset allocation priorities by government-linked
asset managers. Geopolitics and the US presidential election are key sources
of volatility. Accumulating positions on weakness is a key investment theme.
 Still rosy. Our global macroeconomic outlook remains constructive. We still
expect both the US and China to achieve above-consensus YoY GDP growth
rates of 2.5% and 5.0% this year, which should boost the climate for global
trade, tourism and investment. However, inflation remains sticky and risks
are rising that the US Fed may maintain the Federal Funds Rate (FFR) in 2024
(RHB’S base case: One cut in December), given the tight US labour market
and resilient consumer. While the macroeconomic picture offers the market
broad positive support, the risk of the US Fed not cutting rates this year is for
the USD to remain robust in the near term, although the house view is for the FBM KLCI – 7-year forward consensus P/E
MYR to strengthen further out (RHB’s end-2024F USD/MYR rate: 4.65, end- (x)
2025F: 4.40). A second coming for Donald Trump in the US election will mean 20.0
significant policy risks, and could further raise geopolitical tensions.

19.0
 Progress on domestic reform. Markets were positively surprised by the 2sd: 18x
recent progress on diesel subsidy rationalisation, given the scepticism on the

18.0
1.5sd: 17.3x
amount of political will available to make unpopular decisions. The focus is 17.0
1sd: 16.5x
now on how the Malaysian Government manages the fallout from the recent 16.0
diesel price hike, and the implications of RON95 subsidy adjustments that 15.0
Average: 15x
may now be pushed back until end-2024. Careful execution of economic

initiatives including the recently announced National Semiconductor 14.0
-1sd: 13.5x
Strategy, economic cooperation with China and Johor-Singapore Special 13.0 -1.5sd: 12.7x
Economic Zone (JSSEZ) are key priorities to position the unity coalition 12.0
-2sd: 11.9x
strongly as it prepares to enter the latter half of its 5-year mandate.

11.0
 Strategy. Corporate earnings have turned the corner. The macroeconomic 2017 2018 2019 2020 2021 2022 2023 2024
big picture is positive, coupled with progress on domestic reform initiatives. Source: Company data, RHB
These are catalysts to attract and develop new sources of FDIs, and news
flow will retain a positive bias as business and investor sentiment improves.
Even as markets seek clarity on US monetary policy, short-term catalysts
could be in short supply. Still, we expect the market to be well-supported by
the pooling of domestic liquidity as the MYR bottoms out to set the stage for
the return of foreign portfolio funds. We are OVERWEIGHT on the property,
construction, technology, healthcare, transport, oil & gas (O&G), utilities and
rubber products sectors. Our end-2024 FBM KLCI target is 1,720pts after
ascribing a 16x target P/E (premium to 15.3x mean) on forward FY25F EPS.
Target % Upside P/E (x) P/B (x) ROAE (%) Yield (%)
Company Name Rating
(MYR) (Downside) Dec-24F Dec-24F Dec-24F Dec-24F
AMMB Buy 5.50 28.2 7.9 0.7 9.3 5.6
Bursa Malaysia Buy 9.85 11.4 25.2 8.4 33.9 3.6
CIMB Buy 7.60 13.8 9.4 1.0 10.9 5.9
Dayang Enterprise Buy 3.58 33.1 12.8 1.7 12.2 1.7
Focus Point Buy 1.12 39.5 9.9 2.7 29.2 5.0
Gamuda Buy 7.69 18.3 17.7 1.5 8.8 2.5
Guan Chong Buy 5.10 40.8 10.7 2.1 21.0 2.3
IHH Healthcare Buy 7.90 25.8 33.8 1.8 5.5 0.9
Kerjaya Prospek Buy 2.15 18.2 14.2 2.0 14.1 5.5
Mah Sing Buy 2.26 28.9 17.6 1.1 6.4 2.6
Malayan Cement Buy 7.18 45.3 11.7 0.9 8.4 -
Malaysian Pacific Industries Buy 44.80 16.1 33.0 3.7 11.5 1.2
Mr DIY Group Buy 2.20 14.7 28.1 8.9 33.8 2.1
Sime Darby Property Buy 2.00 52.3 19.1 0.9 4.6 2.1
Synergy House Buy 2.01 22.0 20.5 6.4 35.0 1.5
Tenaga Nasional Buy 16.10 15.0 20.0 1.3 6.6 3.2
Source: Company data, RHB P/E (x) P/B (x) ROAE (%) Yield (%)
Dec-24F
7.9 Dec-24F
0.7 Dec-24F
0.1 Dec-24F
0.1
See important disclosures at the end of this report
1 25.2 8.4 0.3 0.0
Market Dateline / PP 19489/05/2019 (035080)
9.4 1.0 0.1 0.1
Market Strategy Malaysia Strategy
Table of Contents
Market Review 3
Market Outlook 7
Key Risks 29
Market Strategy 31
Small-Mid Cap: Supported By Various Tailwinds 36
FBM KLCI: From a Technical Perspective 40
Sector Outlook
Auto & Autoparts: Anticipating a Weaker 2H Performance 43
Banks: In Search Of a Rerating Catalyst 44
Basic Materials: Capitalising On The Construction Boom 46
Construction: Still Room To Go Higher 48
Consumer: Subsidy Rationalisation Still a Key Concern 51
Gaming (NFO): Approaching a Softer Season 52
Healthcare: Eyeing Sustainable Growth 54
Media: Still Tough Going Into 2H24 56
M-REITs: Stable Earnings Outlook 59
NBFIs: Mixed Risk-Reward Profiles 61
Oil & Gas: The Upstream Wave Continues 63
Plantation: Watch Out For La Nina In 2H24 65
Property: Focus On DC Real Estate Play 69
Rubber Products: Outlook Remains Buoyant 71
Technology: Recovery Is Gaining Momentum 74
Telecommunications: Warming Up 76
Transport: All Set For a Recovery 79
Utilities: The DC-Led Demand Wave 81
Appendix
Valuations and ratings of individual stocks under coverage 83-88

2
Market Review
Figure 1: Event chart
Source: Bloomberg, RHB
1H24 began with the FBM KLCI opening at 1,453.1pts. The National Central Database Hub
(PADU) was launched to streamline the allocation of subsidies towards a more targeted
approach, and to step away from broad income strategies that were aimed at the B40, M40 or
T20 segments. Following this, the exemption of the Capital Gains Tax (CGT) on unit trusts
was announced on 16 Jan, aimed at encouraging individual investments in these funds, which
make up more than 90% of unit trust holders. This exemption is effective from 1 Jan 2023 to
31 Dec 2028. The positive sentiment continued well into February, despite US retail sales
dropping by 0.8% MoM – which was lower than the expected 0.3% decrease, mainly coming
from miscellaneous stores. This is the biggest decline in 10 months and raised concerns of
persistent and high inflation, which could jeopardise prospects going forward and temper
market expectations on interest rate cuts.
On 20 Mar, the Federal Open Market Committee (FOMC) meeting concluded, and the US Fed
maintained the FFR at 5.25-5.50% for the fifth consecutive meeting, as well as its projection
of three rate cuts in 2024. Additionally, US Fed policymakers also upgraded their US growth
outlook to 2.1% YoY, vs the 1.4% YoY projection made in December. Meanwhile, Bank Negara
Malaysia kept its Overnight Policy Rate (OPR) rate consistent at 3%, which likely resulted in
the moderation of foreign outflow from the market. March ended on a more positive note,
when the Securities Commission (SC) released Malaysia’s yearly capital market performance
– up 5.6% YoY to MYR3.8trn. This was achieved on the back of growth in the bond and sukuk
market, in the midst of heightened economic uncertainties. The SC also noted that investors
have taken interest in firms with higher growth potential, particularly those in the mid- and
small-cap cap segments
April brought challenges as the US’ CPI index for March rose more than expected – by 3.5%
YoY, accelerating the inflationary pressure and halting potential rate cuts by the US Fed. The
YoY uptick, driven by spikes in energy and shelter prices, coupled with March’s solid
employment numbers – the highest in six months, could lead to a stickier-than-expected
inflation, holding down US Fed’s 2% inflation target.

3
On 14 Apr, Iran launched an unprecedented attack on Israel – likely to retaliate against the
latter’s strike on the Iranian consulate in Damascus earlier that month. This brought about
new tensions in the Iran-Israel proxy war that has been going on for almost 40 years, raising
fears of a broader regional conflict, which could result in oil prices skyrocketing further, the
market risk premium ramping up, as well as a global economic meltdown. The KLCI, as such,
was affected – evidenced by foreign investors recording a net sell of around MYR1.6bn.
However, geopolitical tensions relaxed towards the end of April, as Israel had been pressured
by the US to avoid a large-scale counterstrike on Iran. Following this, local institutions started
to absorb the dumped shares, leading to a 6-year-high net purchase of MYR1.79bn.
On April 25, Account 3 was introduced for Employees Provident Fund (EPF) members who
are below 55 years old. From 11 May onwards, they can withdraw funds from this account
anytime for any reason, provided the withdrawal is at least MYR50. Moving forward, EPF’s
member contributions ratio will change from 70:30 into Account 1 and Account 2, to 75:15:10
– with 10% going to Account 3. This change will be automatically implemented, but members
can choose to opt in, with an initial amount based on the balance in the member’s Account 2,
from 11 May until 31 Aug. On further scrutiny, while this is expected to boost domestic
consumption, it may not be as robust as the special MYR10,000 withdrawals in 2022, when
the nation had just started to reopen its borders post-pandemic. As such, members who have
made previous withdrawals may have less in their accounts, and might be wary of their
spending capacity. Note that the EPF estimated a total of MYR25bn to flow out of Account 3
in the first year before moderating to MYR4-5bn annually, vs MYR44.6bn previously (the
amount of Apr 2022 withdrawals). According to media reports, as of 10 Jun, the EPF has
approved MYR6.98bn in withdrawals from Account 3. The EPF also approved applications
from 3.45m members to transfer MYR10.86bn to Account 3 from Account 2.
In May, there were positive developments, starting with the significant 13% proposed
increase in civil servants’ salaries, projected to cost around MYR10bn. This is expected to
support consumption, although it raised questions over how the Government was going to
fund the increased expenditure. We noted the net portfolio inflows to MYR1.06bn in the first
week of May, (vs MYR292.2m prior week) bringing the benchmark index to a YTD high of
1,629pts.
June started off with the subsidy rationalisation on diesel, raising the diesel fuel price to
MYR3.35 per litre, up from MYR2.15 (+56%) – this took effect on 10 Jun. Crucially, this move
is expected to save the Government over MYR4bn by shifting towards a more targeted
approach, through the implementation of Subsidised Diesel Control System (SKDS) on land
public vehicles and logistics vehicles. In addition, the Government has also introduced Budi
Madani, a form of cash aid (MYR200) for eligible groups including farmers, smallholders and
private diesel vehicle owners. However, in spite of these subsidies, consumers remained
concerned as businesses may take advantage of the situation by inflating their prices.
In line with market expectations, the US Fed voted to hold the policy rate steady at 5.25% -
5.50% during its FOMC meeting on 12 Jun. Contrary to March’s FOMC meeting, US Fed has
called for a single rate cut by the end of 2024 and four cuts in 2025. Alongside this decision,
the expectation for core inflation has also increased to 2.8% for the year-end from 2.6%, due
to strong inflationary pressure in 1Q24. On the borrowing front, The People’s Bank of China
maintained its medium-term loans interest rates at 2.50% while BNM is expected to keep its
OPR steady at 3.00%.
The FBM KLCI closed 1H24 at 1,590.09pts (+9.3% YTD).

4
Figure 2: Performance of the FBM KLCI vs other regional markets

2023 2024 2023 2024
Current Index
Country Indices 28 Jun 2024 2Q 3Q 4Q 1Q 2Q YOY YTD
% change
Malaysia KLCI 1,590.1 (3.2) 3.4 2.1 5.6 3.5 (2.7) 9.3
Singapore STI 3,332.8 (1.6) 0.4 0.7 (0.5) 3.4 (0.3) 2.9
Thailand SET 1,301.0 (6.6) (2.1) (3.8) (2.7) (5.6) (15.2) (8.1)
Philippines Pcomp 6,411.9 (0.5) (2.3) 2.0 7.0 (7.1) (1.8) (0.6)
Indonesia JCI 7,063.6 (2.1) 4.2 4.8 0.2 (3.1) 6.2 (2.9)
Hong Kong Hang Seng 17,718.6 (7.3) (5.9) (4.3) (3.0) 7.1 (13.8) 3.9
Taiwan TWSE 23,032.3 6.6 (3.3) 9.6 13.2 13.5 26.8 28.5
Korea Kospi 2,797.8 3.5 (3.9) 7.7 3.4 1.9 18.7 5.4
China Shanghai 2,967.4 (2.2) (2.9) (4.4) 2.2 (2.4) (3.7) (0.3)
China Shenzhen 1,618.1 (3.6) (6.8) (3.8) (4.9) (7.4) (7.0) (12.0)
India Mumbai 79,032.7 9.7 1.7 9.7 2.0 7.3 18.7 9.4
Vietnam VSE 1,245.3 5.2 3.0 (2.1) 13.6 (3.0) 12.2 10.2
Sri Lanka Colombo AMl-Share 12,143.8 1.5 20.0 (6.0) 7.4 6.1 25.5 14.0
US Dow Jones 39,118.9 3.4 (2.6) 12.5 5.6 (1.7) 13.7 3.8
US S&P 500 5,460.5 8.3 (3.6) 11.2 10.2 3.9 24.2 14.5
US Nasdaq 17,732.6 12.8 (4.1) 13.6 9.1 8.3 43.4 18.1
Note: *As at 28 Jun 2024
Source: Bloomberg
Figure 3: Bursa Malaysia’s performance by sector

2023 2024 2023 2024
Current Index
Sector 28 Jun 2024 2Q 3Q 4Q 1Q 2Q YOY YTD
% chg
KLCI 1,590.1 (3.2) 3.4 2.1 5.6 3.5 (2.7) 9.3
FBM Emas 12,216.4 (2.7) 4.3 2.3 6.9 5.6 1.1 12.9
FBM 70 17,841.9 (0.9) 6.0 3.0 11.1 9.9 12.3 22.1
FBM 100 11,798.1 (2.7) 4.1 2.4 7.0 5.2 0.6 12.5
FBM Small Cap 19,289.8 (2.7) 9.0 1.0 5.8 11.5 9.6 18.0
FBM Fledgling 22,371.4 (1.5) 7.2 2.8 1.0 8.5 4.9 9.5
FBM Emas Syariah 12,552.7 (2.8) 4.4 1.1 6.0 7.8 0.5 14.2
FBM ACE 5,773.3 (3.0) 2.1 2.8 (8.0) 17.9 0.3 8.5
FBM Hijrah Syariah 13,051.5 (2.8) 3.4 2.1 3.8 6.7 (1.1) 10.8
Technology 76.4 (2.8) 3.3 0.8 2.0 18.1 (0.1) 20.5
Construction 263.7 1.4 13.8 4.0 16.3 18.2 25.8 37.4
Consumer Products & Services 585.0 (4.1) 0.9 0.2 3.1 2.4 (5.6) 5.6
Financial Services 17,454.7 (2.4) 3.8 2.4 6.0 1.1 (1.2) 7.1
Industrial Products & Services 195.9 (8.3) 9.3 0.9 3.8 9.0 (4.8) 13.2
Plantation 6,982.7 (0.6) 2.7 1.9 4.0 (4.2) (1.1) (0.4)
Property 1,080.9 0.2 26.9 (1.5) 16.9 7.3 34.5 25.4
Energy 955.4 (7.5) 15.5 (8.5) 16.5 0.3 5.4 16.8
Healthcare 2,137.2 (6.2) 0.8 14.2 2.1 10.0 9.3 12.2
REIT 826.3 (2.8) (0.1) 0.8 3.5 2.0 1.2 5.6
Transportation & Logistics 1,107.2 0.8 1.9 0.6 7.1 11.1 7.8 19.0
Utilities 1,779.7 8.1 14.8 17.4 16.9 15.3 51.4 34.9
Telecommunications & Media 595.2 (3.2) (0.8) (0.7) 4.5 0.1 (3.5) 4.6
Note 1: According to Bursa Malaysia's classifications
Note 2: * As at 28 Jun 2024
Source: Bloomberg

5
Figure 4 : Top performers and underperformers under our coverage (YTD)

current current
Gainers 28 Jun 2024 29 Dec 2023 % chg Losers 28 Jun 2024 29 Dec 2023 % chg
(MYR/share) (MYR/share) (MYR/share) (MYR/share)
Synergy House 1.630 0.705 131.2% Petronas Dagangan 17.440 21.840 -20.1%
Sime Darby Property 1.340 0.625 114.4% Astro Malaysia 0.330 0.395 -16.5%
Mah Sing Group 1.730 0.830 108.4% Kotra Industries 4.250 4.830 -12.0%
Guan Chong 3.680 1.830 101.1% Tan Chong Motor 0.870 0.970 -10.3%
Sunway Construction 3.790 1.940 95.4% CelcomDigi 3.680 4.080 -9.8%
YTL Power International 4.820 2.540 89.8% Power Root 1.570 1.740 -9.8%
BM Greentech 1.640 0.905 81.2% Heineken Malaysia 22.040 24.140 -8.7%
Sunway 3.610 2.060 75.2% UEM Edgenta 0.905 0.990 -8.6%
SP Setia 1.380 0.800 72.5% JHM Consolidation 0.660 0.720 -8.3%
Eastern & Oriental 0.985 0.575 71.3% Maxis 3.530 3.850 -8.3%
Dayang Enterprise 2.630 1.600 64.4% Globetronics Technology 1.480 1.608 -8.0%
IJM Corp 3.050 1.874 62.8% RCE Capital 2.820 3.060 -7.8%
Kelington Group 3.420 2.170 57.6% FGV Holdings 1.280 1.380 -7.2%
Ranhill Utilities 1.410 0.896 57.4% Supermax Corp 0.875 0.940 -6.9%
VS Industry 1.270 0.815 55.8% Yinson Holdings 2.330 2.500 -6.8%
GHL Systems 1.070 0.695 54.0% Texchem Resources 0.855 0.915 -6.6%
Econpile 0.455 0.305 49.2% Public Bank 4.020 4.290 -6.3%
SKP Resources 1.150 0.790 45.6% MMHE 0.450 0.480 -6.2%
Gamuda 6.580 4.590 43.4% IOI Corp 3.700 3.930 -5.9%
Malaysian Pacific 39.420 28.200 39.8%
Source: Bloomberg

6
Market Outlook
Equity market continues to build momentum

Investor sentiment within equity markets continue to track positively. The global
macroeconomic outlook is evolving in line with expectations, with US data broadly reflecting
a resilient economy – leading to the US Fed continuing to reserve judgement on its monetary
policy, pending further evidence on inflation and economic growth trends. Markets continue
to expect a soft landing, but sticky inflation and fewer rate cuts than what is priced in could
disappoint investors, keep the USD elevated, and slow the potential return of equity portfolio
funds into ASEAN markets in the near term.
Recent news flow has been positive, with a slew of inbound data centre investments and
progress on the reform front as the fuel subsidy rationalisation process kicked off for diesel.
While the real test will be on the withdrawal of subsidies for RON95 petrol, there were
lingering doubts on whether there was enough political will for the fuel subsidy reform to even
get off the ground, given the risks of inflation and profiteering, the political costs
notwithstanding. These risks will be multiplied exponentially with higher RON95 prices, but
the Government will gain invaluable investor credibility for making politically unpopular but
necessary choices to eliminate a structural misallocation of resources. Other notable recent
positive developments include the establishment of EPF’s Account 3 (ie Flexible Account), the
launch of the National Semiconductor Strategy that showcases the Government’s objectives
to further entrench the country in the global technology supply chain and increase local value
add, and the revision of the Malaysia My Second Home (MM2H) visa programme.
Trading of Bursa Malaysia stocks has been brisk in recent months, with the securities average
daily value (SADV) comfortably exceeding MYR4bn – reflecting improved investor appetite
and improved news flow and liquidity. Trading has been dominated by institutions with a key
source of new liquidity from the government-linked investment companies or GLICs.
Figure 5: Key dates in 2024
Month Date Description
July 5 US Nonfarm Payrolls
10-11 4th Monetary Policy Committee meeting
11 US Inflation Data
30-31 5th US FOMC Meeting
August 2 US Nonfarm Payrolls

16 Release of 2Q24 Malaysia GDP report
September 4-5 5th Monetary Policy Committee meeting

6 US Nonfarm Payrolls
17-18 6th US FOMC meeting
October 4 US Nonfarm Payrolls

11 Tabling of Budget 2025
November 1 US Nonfarm Payrolls

5 US Presidential Election
5-6 6th Monetary Policy Committee meeting
15 Release of 3Q24 Malaysia GDP report
December 6 US Nonfarm Payrolls

Source: Various media

7
Global macroeconomics view: A Cautiously Optimistic Approach May Be Prudent in 3Q24

For more granularity, please refer to the 2Q24 RHB Global Economics & Market Strategy  RHB Economics Team
report: Green Shoots-Turned-Trees Are Seeing Some Maturing
Figure 6: RHB’s real GDP growth forecasts

% YoY 2022 2023 2024F 2025F
US 1.9 2.5 2.5 2.7
Western Europe 3.5 0.5 1.0 1.5
Japan 1.0 1.9 1.0 1.2
China 3.0 5.2 5.0 5.0
ASEAN
Indonesia 5.3 5.1 5.0 5.3
Malaysia 8.7 3.7 4.6 4.7
Singapore 3.9 1.1 2.5 3.0
Thailand 2.5 1.9 2.4 3.0
Vietnam 8.0 5.1 6.0 6.5
Source: RHB Economics & Market Strategy
Figure 7: RHB’s CPI inflation forecasts

% YoY 2022 2023 2024F 2025F
US 8.0 4.1 3.5 2.5
Western Europe 8.1 5.7 2.8 2.4
Japan 2.5 3.3 2.4 1.5
China 2.0 0.2 1.5 2.0
ASEAN
Indonesia 4.2 3.7 3.3 3.0
Malaysia 3.4 2.5 2.6 2.9
Singapore 6.1 4.8 3.5 3.5
Thailand 6.1 1.3 1.0 2.5
Vietnam 3.2 3.3 3.9 3.2
Figure 8: RHB’s policy rate forecasts

% 2022 2023 2024F 2025F
US 4.50 5.50 5.0 - 5.25 4.25 - 4.50
Western Europe 2.60 4.48 4.25 3.50
Japan 0.00 0.00 0.10 0.20
China 3.65 3.45 3.35 3.00
ASEAN
Indonesia 5.50 6.00 6.25 5.50
Malaysia 2.75 3.00 3.00 3.00
Thailand 1.25 2.50 2.50 2.50
Vietnam 6.00 4.50 4.60 4.60
We continue to adopt an optimistic outlook for the global economy in 3Q24, whereby we
expect a continued economic recovery momentum in key markets such as the US, China and
selected ASEAN economies. Our views have materialised nicely in 1H24.
Notwithstanding the relative optimism, we now advocate some degree of caution on risk
appetite, following the evidence of growth normalising in key global economies, and the
slowdown of external indicators in the ASEAN region. We note that the recovery in key US
labour indicators are approaching long-term average growth rates (2011-2018), indicating
that the softening in the US labour momentum is part of the normalisation process in the post-
pandemic environment. Specifically, long-term (2011-2018) averages of US non-farm payroll
gains were around 1.6% on an annual basis, against 2023’s average gain of 2.3% and 2024’s
YTD average gain of 1.8%. Significantly, US non-farm payrolls have added 28.1mn jobs since
the COVID- 19 trough, against the loss of 21.4m jobs during the pandemic.

8
In ASEAN, we see some slowdown in its externally-facing backdrop, but think it may be
temporal as we had seen similar downsides in momentum in the past years over the same
period. Across ASEAN-5, we note a decline in trade numbers on both annual and momentum
bases YTD, led primarily by a slowdown in outbound shipments to the US (while exports to
China still appear supported), whereby the slowdown in exports is further reinforced by our
aforementioned paragraph regarding the normalisation of US growth YTD. Still, we remain
optimistic on specific ASEAN economies – especially Malaysia and Singapore, given their
strong semiconductor and manufacturing sectors, while our leading indicators for Thailand
and Indonesia are pointing to a slowdown in the growth momentum in 2H24.
We continue to see persistent global inflation, on the back of food, oil, and metal prices. Our
proprietary indicators for food inflation continue to suggest higher prices, at least into end-
2024. Separately, China’s recovery has supported base metal prices, with London Metal
Exchange base metal prices rising over 11% YTD. Meanwhile, oil prices will be underpinned
by an optimistic forecast for demand growth by OPEC, whereby the organisation said world
oil demand will rise by 2.25m barrels per day (bpd) in 2024 and by 1.85m bpd in 2025. Our
inflation trackers suggest US core personal core expenses (PCE) inflation is on a path towards
3.0% by the year-end, assuming that MoM percentages trend realistically around current
levels. As such, the inflation trend seen from now to the year-end indicates that US prices are
growing towards 3.0%, rather than the US Fed’s objective of 2.0%.
We maintain that global rates should be high for longer. We still expect the FOMC to cut its
FFR by only once in 2024 – specifically, in December – with the balance of risks magnified
towards no cut. Current swap pricing is indicating two rate cuts as of mid-Jun 2024, which we
think will be gradually priced out into the end of 2H24. The catalysts for our forecast are:
i) High-frequency US-centric economic data continues to suggest an improving growth
momentum backdrop, as seen from the resilient labour, consumer confidence and retail sales;
while ii) inflation risks remain elevated in 2Q24 with US core PCE inflation likely to accelerate
to its 3.0% handle on an annual basis. We do not think the European Central Bank (ECB) will
cut its policy rate in 2H24, following its rate reduction to 4.25% on 6 Jun, as: i) The inflation
risk will likely persist, while ii) the rate cut was one likely made in view of the widely
telegraphed guidance seen as early as Mar 2024.
The implications to our global macroeconomic views are as follows: We continue to expect
a stronger US Dollar Index (DXY) and sticky US Treasury (UST) yields into 3Q24. Our
forecasts for a stronger DXY and higher UST10YR yields materialised in the first eight weeks
of 2Q24, before levels declined against our forecast. We attribute the recent decline in DXY
and UST10YR yields on softer-than-expected US-centric labour numbers, albeit data was
likely merely normalising towards long-term averages. Swap pricing, which indicates two FFR
cuts by the year-end, is a reflection of how yields and currencies are trending. This, in turn
suggests that further pricing-out of rate cut expectations towards one (or potentially zero)
reductions into 4Q24 would mean a rally in DXY and sell-off in US Treasuries. As such, we
expect the DXY to rally to 105-107, with UST10YR yields approaching 4.5% in 3Q24.
China macreconomics view: Still positive

We remain positive on China, with our base case GDP growth forecast at 5.0% in 2024. Our  RHB Economics Team
numbers remain above that of the consensus, for its GDP growth, with market consensus
moving gradually towards our full-year forecast. China’s growth engines continue to be a
steady demand recovery, resilient exports and a relatively low base year. Separately, we are
seeing subtle signs of a recovery in the housing market, with new and used home prices seeing
some signs of bottoming from a momentum perspective, but the recovery still remains in its
early stages and is subject to uncertainties at this juncture. Notwithstanding the risks, we view
that China’s policies are made in the appropriate direction with regards to dealing with its
property-related risks – and efforts are likely still needed to address the idiosyncratic risks.
China’s recent high-frequency data has been positive on its growth, suggesting that the
economic outlook in 2H24 remains positive. Overall, China’s economy exhibited signs of
stabilisation in May 2024, led by strong policy stimulus and the recovery in its real economy.
These include retail sales (May: +3.7% YoY), industrial output (May: +5.6% YoY) and fixed
asset investment (January-May: +4.0% YoY). We continue to monitor the property risks,
owing to the continued decline in property investment (January-May: -10.1% YoY), while
sales area of new properties declined (January-May: -20.3% YoY). Real urban disposable
income per capita continued to advance, while overall investor sentiment is supported, as
seen from the rally in its equity market YTD.

9
FX view: DXY strength should persist in 3Q24 amid varying implications for ASEAN
 RHB Economics Team
Figure 9: RHB’s FX forecasts

G10FX 3Q24 4Q24 1H25 2H25
DXY 106.00 104.00 101.00 98.00
EUR/USD 1.070 1.103 1.145 1.203
USD/JPY 161.74 160.33 155.08 152.08
GBP/USD 1.230 1.255 1.278 1.367
AUD/USD 0.67 0.69 0.71 0.72
NZD/USD 0.619 0.623 0.651 0.660
AxJ FX 3Q24 4Q24 1H25 2H25
USD/CNH 7.404 7.215 7.100 7.000
USD/IDR 16,850 16200 15,600 15200
USD/MYR 4.781 4.650 4.500 4.400
USD/SGD 1.370 1.343 1.288 1.251
USD/THB 36.83 36.44 35.49 34.47
USD/VND 26,248 26,102 25,323 25,456
Note: The above forecasts are trading ranges for the end of the quarter
We forecast the DXY to strengthen marginally to an average of 106 in 3Q24, before

weakening to 104 in 4Q24. The catalysts are: i) Markets will continue to price out FFR cuts
towards our view for one reduction by end-2024, ii) US growth momentum will continue to
stay supported, and iii) risk-taking behaviour will likely benefit high-beta currencies such as
the AUD and NZD. Our base case is for the FFR to be cut in December (-25bps) in 2024, with
the balance of risks highly magnified towards no cuts for this year. In 2025, we look for one
rate cut per quarter in 1Q25-3Q25, totalling three rate cuts of a cumulative 75bps reduction.
At least for the rest of this year, the high-for-longer FFR suggests that flows will likely
continue into the USD on the back of yield-chasing behaviour and positive carry already seen
since 2023.
Across developed economies, we see idiosyncratic issues within the G7 space which could
have implications on how FX rates may trend. Specifically, we do not subscribe to more rate
reductions by the ECB, nor more rate hikes by the Bank of Japan (BOJ), in 2024. This view has
implications for EUR and JPY, whereby we see EUR/USD to be higher vs market consensus,
while JPY’s weakness will persist. We look for EUR/USD to rally at 1.10 per USD in 4Q24, on
the assumption that there are no more rate cuts by the ECB. The ECB’s recent rate cut in early
June was likely a response to its telegraph in March, and inflation risks into 2H24 will likely
keep policy parameters unchanged. Meanwhile, the BOJ’s higher inflation was led by cost-
push rather than demand-led factors, as services and non-fresh food prices decelerated in the
latest print. Separately, the UK’s slip in its high-frequency data – specifically the global
composite Purchasing Managers’ Index (PMI) – coupled with higher wage-driven inflation,
suggests that a rate cut could materialise in the August meeting, thereby explaining the
relative softness of the GBP against its G7 peers.
In 2Q24, the MYR remained under pressure amid persistence in the US-MY rates differential
and financial market expectations on the US monetary policy outlook. Integrated and
coordinated action has been taken to stabilise the MYR in 2Q24. For instance, officials have
encouraged the repatriation and conversion of foreign investment income by government-
linked companies (GLCs) and GLICs. In addition, there has been active engagement with
resident exporters and monitoring of the conversion of export proceeds to MYR. Our view for
the MYR to weaken to 4.8 per USD in 2Q24, as cited in our thematic report, materialised in
the early weeks of the quarter, before the bias strengthened to 4.71 per USD as of 25 Jun.
Looking forward, we maintain that the MYR is a function of US-Malaysia interest rate
differentials, as well as the fiscal and current account balances. Our quantitative analysis
suggests that the MYR will benefit from improved Malaysia-centric interest rate, trade and
fiscal matrices, while dragged by potentially lower oil prices and higher public debt. In the near
term, the positive carry in holding USD over MYR over would remain rich as the US FFR may
remain elevated for longer. Nevertheless, the improvement in the domestic macroeconomic
backdrop, ie the fiscal and current account position, is expected to keep the MYR stable,
following greater clarity on the fuel subsidy rationalisation measures.

10
We maintain our in-house view that the US FFR will only see rate cuts by end-2024, with the
balance of risks tilted towards no rate cuts. The latest FOMC statement and dot plot chart has
further reaffirmed our expectation, where the dot plot chart envisioned only one rate cut this
year. US Fed officials are relatively more hawkish than before, with four members signalling
for no change in the FFR (vs two prior to this round). Gradual pricing out of rate cuts is likely
to be extended to our 1-cut expectation (which is anticipated by 4Q24). As such, we expect
the DXY to rally towards 107 in 3Q24.
On the fiscal front, we believe thata Malaysia is on track to achieve its fiscal balance deficit
target of 4.3% of GDP in 2024 (vs 5.0% of GDP in 2023), in line with the Government’s
commitment to fiscal strengthening and consolidation. The recent implementation of a diesel
price float in West Malaysia would supplement other existing fiscal consolidation measures,
ie revision in services tax and utilities tariffs, which is expected to improve the fiscal position
relative to 2023.
We revised our current account balance projection to 2.9% of GDP vs 2.3% of GDP previously,
and 1.2% of GDP in 2023. The goods surplus is envisaged to be supported by higher exports
receipts, in tandem with strengthening external demand. Meanwhile, the services account is
expected to be buoyed by higher tourist arrivals and receipts. The current account surplus
gained pace to 3.5% of GDP in 1Q24 (exceeding our in-house projection of 1.3% of GDP) vs
the 4Q23 print of 0.1%, on broad-based improvement across the income, goods & services
account balance.
On the flip side, headwinds for the MYR could emanate from Malaysia’s elevated public debt
in 2024. The Government expects its federal debt to be sustained at 64.0% of GDP by the end
of 2024 vs 64.3% as of Dec 2023, which will likely cap MYR strength in 2024.
US presidential election: Too close to call

When: 5 Nov
What: 33 Senate seats and all 435 House seats
Currently:
Senate: 51 Democrats (including three independents) and 49 Republicans.
House of Representatives: 218 Republicans and 213 Democrats.

11
Figure 10: US presidential election polling trends
Source: https://projects.fivethirtyeight.com/polls/president-general/2024/national/
An electoral victory for Donald Trump will raise geopolitical risks and give rise to
uncertainties stemming from likely changes in policy settings. However, this scenario could
see the acceleration of the China Plus One strategy by global multinational corporations
seeking to diversify away from a single sourcing strategy (ie one that is solely dependent on
China). In parallel, China-origin corporates may also choose a One Plus China strategy to
diversify manufacturing resources outside of their home base, to mitigate business risks.
ASEAN economies are the beneficiaries of these trends.

12
Our view on oil: Resilient demand to support prices

We maintain our Brent crude oil price forecasts for 2024, 2025, and 2026 at USD88, USD83,
and USD80 per bbl. 1H24 QTD crude prices have averaged at USD83 per bbl. With a slight
tweak in our quarterly assumptions, we maintain our crude prices at USD88 per bbl in 2024,
which implies an average of USD91-92/bbl in the next two quarters. We see oil prices
trending upwards, as we continue to adopt an optimistic outlook for the global economy in
3Q24, driven by a continued economic recovery momentum in the key markets such as the
US, China and selected ASEAN economies. We maintain our above-consensus forecasts for
US and China to expand by 2.2% YoY and 5% YoY in 2024. That said, our in-house economist
also advocates some degree of caution on risk appetite, following evidence of growth
normalisation in key global economies.
Our main assumptions are:
i. Global oil demand will grow by 2.2mbpd to 104.4mbpd in 2024F, and by another
1.8mbpd to 106.2mbpd in 2025F;
ii. Russia’s oil and condensate production will remain at 9.57mbpd in 4Q23 and the country
will sustain its voluntary production cut until 2Q24. The full-year average is estimated at
9.7mbpd for 2024;
iii. Saudi Arabia-led OPEC may gradually unwind production cuts from 2H24 onwards, and
its production should average at 27.5mbpd (+0.5mbpd YoY) in 2024F and 28.4mbpd
(+0.9 mbpd YoY) in 2025F.
With these assumptions, the theoretical supply deficit is estimated at 0.9mbpd for 2024 and
0.3mbpd for 2025. We believe the market is able to absorb the additional barrels to be
returned by OPEC+ backed by healthy global oil demand growth.
Figure 11: Demand, supply and crude oil prices and forecasts
2021 2022 2023 1Q24 2Q24F 3Q24F 4Q24F 2024F 1Q25F 2Q25F 3Q25F 4Q25F 2025F
Crude oil price (USD/bbl)
Brent, RHB (new) 71 99 82 82 85 91 92 88 85 85 80 80 83
Brent, RHB (old) 71 99 82 82 90 90 90 88 85 85 80 80 83
World oil demand and supply balance (mbpd)

Total demand 97.2 99.7 102.2 103.5 103.8 104.9 105.6 104.5 105.3 105.5 107.0 107.4 106.3
YoY change 5.9 2.5 2.6 2.3 2.0 2.5 2.1 2.2 1.8 1.7 2.1 1.8 1.9
Total non-DoC*
47.7 49.3 51.7 52.6 52.8 53.0 53.4 53.0 54.0 53.7 54.0 54.6 54.1
production
DoC NGLs 7.6 7.9 8.2 8.4 8.3 8.2 8.3 8.3 8.3 8.4 8.2 8.3 8.3
Total non-DoC
55.3 57.2 59.9 61.0 61.1 61.2 61.7 61.3 62.3 62.1 62.2 62.9 62.4
and DoC NGLs
YoY change 0.6 1.9 2.7 2.0 1.8 1.2 0.5 1.4 1.4 1.0 0.9 1.2 1.1
OPEC 25.2 27.7 27.0 26.6 28.3 27.6 27.4 27.5 27.4 28.5 28.8 28.8 28.4
Non-OPEC Doc
15.0 15.1 15.0 14.7 14.7 15.0 15.1 14.9 15.1 15.2 15.3 15.4 15.3
crude production
Total production 95.5 100.1 101.9 102.3 104.1 103.8 104.2 103.6 104.8 105.8 106.3 107.1 106.0
Balance -1.6 0.4 -0.3 1.2 -0.3 1.1 1.4 0.9 0.5 -0.3 0.7 0.3 0.3
Note: Data as at Jun 2024. *Declaration of Cooperation (DOC) refers to OPEC+
Source: OPEC, RHB
No major cut in global oil demand projection. As per OPEC’s monthly report for Jun 2024,
global oil demand growth is still estimated at 2.2mbpd YoY, taking total demand to
104.5mbpd for 2024F (premised on global GDP growth of 2.8% YoY). We have seen a slight
downward adjustment in the projections of other international agencies, US Energy
Information Admnistration (EIA) and International Energy Agency (IEA), which are still
projecting a positive growth of 1.0-1.1mbpd this year. Non-Organisation for Economic Co-
operation and Development or non-OECD areas have the highest growth demand projection
of 2.0mbpd in 2024 – led by China, India, the Middle East, and other parts of Asia. For 2025,
OPEC expects global oil demand to grow by 1.8mbpd.

13
OPEC+ decided to extend its production cuts, including both voluntary and group-wide cuts,
until 2025 with a gradual ramp-up plan. Note: The United Arab Emirates (UAE) baseline-
required production has been increased by 300kbpd – this takes effect over Jan-Sep 2025.
Despite extending the baseline production cut of 3.66mbpd until the end of Dec 2025, eight
OPEC+ countries have extended their additional voluntary cuts from June until September
this year, and indicated a phasing out of such voluntary production cuts starting from 4Q24
until end-2025.
A relatively clear production cut unwinding plan somewhat indicated that OPEC+ members
have demonstrated their eagerness to increase production after a relatively long period of
cuts. This was also against some of the market’s earlier expectation that OPEC+ would
continue to extend its additional voluntary cuts – at least until the end of the year – without a
clear production ramp-up plan. However, we note that this monthly increase can still be
paused or reversed – subject to market conditions. The actual impact to the oil market may
not be very significant, especially when the UAE and Iraq have been producing more than
what had been required. Therefore, with the meeting outcome allowing some countries to lift
production gradually, we are still of the view that the cartel remains intact and would choose
to support the oil market whenever necessary.
Figure 12: OPEC’s latest production adjustments for 2024-2025
Note: (1)Required production levels as per the 37th ONOMM before applying the additional voluntary cuts announced in Apr
2023 and Nov 2023
Note 2: (2)UAE required production has been increased by 300kbpd. This increase will be phased in gradually starting Jan
2025 till end Dec 2025
Note: (3)This is the required production level as per the 37th ONOMM as assessed by the secondary sources and Russia is
working with secondary sources to update these figures
Source: OPEC
Figure 13: OPEC’s spare capacity Figure 14: OPEC – crude oil production
Source: Bloomberg Note: *OPEC supply excludes that from Angola starting Jan 2024
Source: Bloomberg

14
Note that US crude oil production remained flat in the past few months, ie hovering slightly
above 13mbpd. The EIA expects production to average 13.2mbpd (+2% YoY, +0.3mbpd) in
2024 before production levels surge to a new record high in Feb 2025. The recent higher
production levels were mainly led by better productivity at the oil wells. The US rig count is
still on a downtrend, hovering at c.588 units (-14% YoY; -5% YTD). Despite the decreasing
downtrend, we are uncertain over whether the US could achieve a new record high in
February next year if capex spending does not pick up accordingly.
According to the IEA, global observed oil inventories surged by 19.3m bbl in April from a 16-
month low in January. This is mainly due to a surge in land stocks after eight months of draw,
offsetting a decline in offshore stocks.
Figure 15: US rig count Figure 16: US crude oil production
Source: Bloomberg Source: Bloomberg
Domestic macreconomics view: Increasing sign of rosy economic prospects
 RHB Economics Team

Figure 17: Key economic forecasts
2023 2024F 2025F 1H24F 2H24F 1H25F 2H25F
Real GDP Growth (% YoY) 3.7 4.6 4.7 4.6 4.6 4.8 4.7
Contribution to real GDP Growth (%)
Private Consumption 2.8 3.5 3.5 3.3 3.7 3.5 3.5
Investment 1.1 1.4 0.6 1.6 1.2 0.6 0.6
Government Consumption 0.5 0.6 0.4 0.6 0.5 0.5 0.3
Net Exports -0.6 0.2 0.3 -0.2 0.7 0.5 0.1
CPI 2.5 2.6 2.9 1.8 3.4 3.0 2.8
Policy Interest Rate 3.00 3.00 3.00 3.00 3.00 3.00 3.00
Current Account Balance (% of GDP) 1.2 2.9 3.0 3.3 2.6 2.9 3.1
Fiscal Balance (% of GDP) -5.0 -4.3 -3.8 -4.1 -4.5 -3.7 -3.9
Source: CEIC, RHB Economics & Market Strategy
We maintain our Malaysia GDP forecast at 4.6% YoY in 2024 (2023: 3.7% YoY) vs the official
projected range of 4.0-5.0%. Our composite leading indicator, RHB-LEI (MY), suggests that
Malaysia’s economic growth will accelerate to 5% YoY in 2Q24 and this is likely persist into
3Q24. The economic growth momentum is envisaged to remain resilient, driven by both
external and internal drivers. Domestic confidence has shown signs of improvement. Three
key proxies, specifically:
i. A rebound in the manufacturing Purchasing Managers’ Index;
ii. Increased imports of capital and intermediate goods, and

15
iii. Rising business confidence.

This suggests that manufacturers' and businesses' optimism is up. Investment spending is
projected to remain robust in 2024, supported by capacity expansion and business-friendly
policies. Public investment and construction sector activities have picked up in recent
quarters amid accelerated progress of selected civil engineering projects, coupled with
support from special trade and residential activities. Further upsides on investments would
emanate from the implementation of catalytic initiatives under the national master plan.
On downside risks, we recognise opposing factors where dampening effects may emanate
from reduced subsidies and revision in consumption tax measures, which will cap consumer
expenditure and disposable income from a wealth effect perspective. However, the impact
would be cushioned by healthy labour demand conditions, continuation of social assistance
of targeted groups, and the differing impact across income groups where the higher-income
group has relatively inelastic demand.
Malaysia’s trade performance sgould be buoyed by resilient economic growth prospects in
major economies, upside for commodity prices, and re-acceleration in the global technology
cycle. The upturn in the technology cycle is indicated by the uptrend in E&E exports by
regional economies and the projected strong rebound in global semiconductor sales. Our
positive view is further reinforced by recent developments such as upbeat trade numbers in
the past data releases, coupled with improvements in the manufacturing sector sentiment and
investment appetite.
We revise our 2024 headline inflation projection to 2.6% YoY from 3.3% YoY. The projected
range is revised to 2.5-2.8% YoY from 3.2-3.6% YoY. Our revision is founded on the marginal
direct impact of diesel subsidy rationalisation on headline inflation and the delay in the
implementation of RON95 petrol subsidy to end-2024 (at the earliest), with more details
likely being released during the tabling of Budget 2025. The direct impact of diesel subsidy
float in West Malaysia would be marginal, with potential upside on the headline inflation
being less than 0.1%. The subsidies will continue for most of the diesel-powered commercial
vehicles and for public transportation.
Based on our quantitative analysis, every 1% increase in the RON95 retail price would have
an 0.05% upside in headline inflation. This implies the free float of RON95 petrol might have
potential upside on inflation by 3.05% (based on the unsubsidised RON95 petrol price of
MYR3.30/litre as at 19 June vs the current retail price of MYR2.05/litre). The retargeting of
the RON95 subsidy rationalisation might take form in a more gradual approach, as it involves
a larger consumer base with a significant weightage of 5.5% in the CPI basket (vs diesel at
0.2%). The inflation trajectory going forward would hinge on: i) Lagged impact from the
services tax revision and implementation of Low Value Goods Tax (LVGT), ii) impact from
RON95 subsidy rationalisation, iii) potential demand upside from partial pension fund
withdrawals, and iv) the spill-over impact from higher global commodity and food prices.
We revise our current account balance projection to 2.9% of GDP from 2.3% of GDP (1.2%
of GDP in 2023). The current account surplus gained pace to 3.5% of GDP in 1Q24 (exceeding
our in-house projection of 1.3% of GDP), on broad-based improvements across the income,
goods & services account balance. Going forward, the goods surplus would be buoyed by
higher exports receipts, in tandem with strengthening external demand. Meanwhile, the
services account would be supported by higher tourism arrivals and receipts. Tourism
activities are expected to be boosted by government measures, ie tourism promotion
activities abroad and the 30-day visa-free travel for nationals from China and India.
We maintain our 2024 fiscal deficit projection at 4.3% of GDP. Malaysia is on track to
achieve its fiscal deficit target of 4.3% of GDP in 2024 (against 5.0% of GDP in 2023), in line
with the Government’s committment to fiscal strengthening and consolidation. With the
operating expenditure (OE) accounting for more than 95% of central government revenue,
the adoption of a 2-pronged fiscal consolidation strategy, ie revenue diversification and OE
rationalisation, is necessary to contain the fiscal deficit. The recent implementation of a diesel
price float in West Malaysia would supplement other existing fiscal consolidation measures,
ie revision in services tax and utilities tariffs, which is expected to improve the fiscal position
relative to 2023. We view that higher revenue collection would be achievable for 2024,
supported by higher proceeds of company and individual tax collection amid improved
economic prospects and a broader tax base, coupled with greater tax collection efficiency.
On the policy front, the OPR is likely to be maintained at 3.00% for 2024. We see a lack of
impetus for Bank Negara Malaysia to tweak its policy rate level in 2024, considering the rosier
domestic economic prospects amid uncertainties in the inflationary trajectory.

16
The wide official inflation range of 2.0% to 3.5% should provide sufficient room against future
price movements. The policymakers might maintain the OPR rate while assessing the lagged
impact of fiscal policy changes on the overall inflationary trajectory and economic
momentum.
Malaysia politics: On an even keel

Following the failed “Dubai Move” towards the end of 2023 , the ascension of the Sultan of
Johor to become the Yang di-Pertuan Agong and news that six MPs from Parti Pribumi
Bersatu Malaysia (Bersatu) were switching support to the unity government that further
bolstered the Government’s two-thirds parliamentary majority, we note the palpable easing
of political risks. This has given the administration led by Prime Minister Dato’ Seri Anwar
Ibrahim the platform to undertake economic, fiscal, social and political reforms the country so
sorely needs that was stymied by the lack of political will from past governments. While
political allies can turn into foes in a blink of an eye, chances now look promising that the
current parliament will be able to see out its term until the 16th general election (GE16) –
which is only due by end-2027.
Domestic reforms: More progress seen

Given the urgency or fiscal reforms to be implemented and the narrow window of
opportunity, investors are naturally impatient for the process to begin. However, it seems the
Government is prepared to take a gradual approach to implement the necessary changes to
avoid unduly rocking the boat, so that the market has ample time to adapt. As such, there have
been doubts on whether there is enough political will in store for tough decisions on fiscal
reform to be implemented, given the obvious political costs and implications for inflation and
consumption spending.
Targeted diesel subsidies: The recent implementation of diesel fuel subsidy rationalisation
beginning 10 Jun came as a surprise to some sceptics. We believe the introduction of targeted
subsidies is a step in the right direction to prevent the misallocation of resources and
eliminate smuggling, which seems to be rampant based on media reports. The Government
expects to achieve annual savings of MYR4bn. This has resulted in the retail price of diesel
rising to MYR3.35/litre from MYR 2.15/litre previously, ie a 56% jump.
The removal of diesel subsidy is only effective in West Malaysia for now and does not apply to
eligible individuals, small farmers and smallholders as well as selected segment such as public
transportation vehicles. The eligible individuals, small farmers and smallholders may apply for
monthly aid of MYR200 under Budi Madani, a platform for individuals to receive cash
handouts as part of the government’s targeted subsidy mechanism while selected sector
players are able to purchase diesel at subsidised rates via fleet card mechanism.

17
Figure 18: Diesel price subsidy rationalisation – impact on sectors

Sector Comment
Auto Minimally negative as, in 2023, diesel-powered vehicles only make up 8% of total car registrations. Most companies under our coverage
have a roughly 5% exposure to diesel vehicles with the exception of Tan Chong Motor (25%).
Bank We would watch out for the indirect impact on mid- to low-income consumer and SME segments. That said, the impairment buffers that
banks had built up from the pandemic are still on the books and will help cushion against potential asset quality issues.
Basic Materials Companies operating in East Malaysia (Press Metal and Cahya Mata Sarawak) will not be affected as the diesel price increase will takes
effect in West Malaysia. For Malayan cement, we gather that the company is eligible to apply for the diesel fleet card, so the
rationalization should have a minimal impact on the group.
Construction No impact, as the construction sector was never eligible for subsidised diesel for the use of the companies’ machineries and lorries.
Consumer Muted impact on operating costs as most companies under our coverage we spoke to have gotten the approval for the diesel subsidy
fleet cards, so they should continue to enjoy subsidised diesel prices. The impact to consumer spending power should also be minimal
considering the amount of consumers using diesel-powered vehicles
Gaming NA
Healthcare Minimal impact on healthcare service providers, given their strong pricing power. Expect mild margin compression risk to Duopharma
Biotech (<MYR1m on absolute basis, 1-2% impact to earnings). Impact on UEM Edgenta will be more meaningful (c.MYR1.5m or >10%
impact to earnings).
Media The rationalisation of diesel subsidies (to be expanded to RON97 petrol subsequently) would further dampen consumer sentiment and
advertising expenditure (adex) propensity. It would also lead to weaker discretionary spending, resulting in lower pay-TV subscription
revenue, with subscribers downtrading to cheaper packages or terminating their subscriptions altogether. We keep our NEUTRAL
rating on the media sector as the weak earnings prognosis is priced in. Sector earnings momentum should remain lackluster, amid
inflationary pressures.
Non-Banks Financials The impact on NBFIs will mostly be indirect through any increase in the cost of living – this, then, poses asset quality risks for the non-
bank lenders (ie AEON Credit, RCE Capital, ELK-Desa)
Oil & Gas Negative for petrol retailers as we shall see lower diesel sales volume following the subsidy removal implementation, partially due to
lower diesel smuggling activities. It could harm the commission for petrol retailers (dealers, mainly) due to the potential spike in the
merchant discount rate (MDR) and evaporation costs that are linked to ASPs.
Plantation Technically there should be no impact as plantation companies already pay commercial diesel rates for their transportation
requirements.
Property NA
Property-REITs NA
Rubber Products Minimal to no impact on the glove makers as products are being sold at FOB (free on board) basis (i.e. customers are liable for cost of
shipment).
Technology NA
Telecommunications NA
Transport Neutral for land transport, as players currently still enjoy diesel subsidies via the fleet card system.
Utilities Generally neutral for the utilities sector. That said, we caution that solar EPCC contractors’ margins could be affected if raw material
prices spike up.
Source: RHB
Figure 19 : A comparison of regional diesel prices

USD RON95 Diesel
Malaysia 0.44 0.71
Singapore 2.04 1.88
Indonesia 0.89 0.94
Thailand 1.29 0.90
Philippines 1.09 1.01
As of 24 June 2024
Source: GlobalPetrolPrices.com
The other (bigger) elephant in the room is the RON95 petrol subsidy rationalisation that will
have a much bigger impact on the man on the street. More time could be needed for the
Government to grapple with alleged profiteering, following the diesel price adjustment. RHB
economists believe that the RON95 petrol subsidy rationalisation may not materialise until
late 2024, with more details likely available during the tabling of Budget 2025.

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To achieve greater fiscal reform, a Goods & Services Tax (GST) cannot be ruled out despite
the tax being heavy pollicised during its earlier iteration. Much work needs to be done to
prepare the ground to understand the advantages of GST compared to the Sales & Services
Tax (SST).
Other reform initiatives include:
i. The National Semiconductor Strategy (NSS);
ii. China-Malaysia economic and trade cooperation pact;
iii. Malaysia My Second Home visa programme (MM2H);
iv. EPF Account 3.
NSS. Launched on 29 May by the Ministry of Investment, Trade and Industry (MITI), NSS aims
to elevate Malaysia’s position in the global semiconductor industry by enhancing local
capabilities, fostering innovation, and building a resilient supply chain.
Phase 1: Building on foundations
i. Focus on modernising OSATs, support intellectual property (IP) creation, grow
Malaysian fabrication;
ii. Invest in upskilling, attract semiconductor manufacturing equipment players, blend local
and international talent.
Phase 2: Moving to the frontier
i. Pursue cutting edge technology;
ii. Attract foreign direct investments (FDI) in advanced chips, develop local champions,
engage in EVs and sensors.
Phase 3: Innovating at the frontier
i. Develop semiconductor design, advanced packaging, manufacturing equipment.
ii. Attract buyers for advanced chips.
Targets
i. MYR500bn in DDI and FDI, focused on advanced packaging, IC design, wafer fabs,
manufacturing equipment;
ii. Create 10 companies in design and advanced packaging with MYR1bn to USD1bn
revenue; 100+ companies with high revenue (MYR1b or more);
iii. Establish Malaysia as a semiconductor R&D hub with universities, corporate R&D,
centres of excellence;
iv. Train and upskill 60,000 high-skilled Malaysian engineers;
v. Allocate at least MYR25bn for NSS.
China-Malaysia economic and trade cooperation pact: On 19 Jun, Prime Minister Dato’ Seri
Anwar Ibrahim and Chinese Premier Li Qiang oversaw the exchange of 14 memoranda of
understandings (MOUs) and agreements between Malaysia and China. These documents,
involving nine Malaysian ministries, were part of Li Qiang's first official visit to Malaysia as
Premier, marking the 50th anniversary of diplomatic relations between the two countries.
The agreements covered various sectors including investment, digital economy, green
development, media cooperation, postal services, higher education, science and technology
and housing. The visit also included a luncheon hosted by Dato’ Seri Anwar Ibrahim and
participation in the East Coast Rail Link ground-breaking ceremony.
Other than the MOUs, Malaysia and China have also inked the second cycle of 5-year
programme (2024-2028) for economic and trade cooperation between the two nations. The
programme’s objective is to exchange expertise as well as establishing linkages between high-
priority industries including digital economy, robotics, entrepreneur development, among
many others.
China has been Malaysia’s largest trading partner for 15 years since 2009, accounting for
17.1% of Malaysia’s 2023 global trade value.

19
Figure 20: Ministries and MOUs involved

Ministry MOU details
 Strengthening investment cooperation in the digital economy

Ministry of Investment, Trade and Industry
 Promoting investment cooperation in green developments
Ministry of Agriculture and Food Security  Protocol of phytosanitary requirement for export of fresh durian fruits to China
 Cooperation in housing and urban development including smart housing, urban redevelopment and
Ministry of Housing and Local Government
smart city profiling
 Letter of Intent with the Ministry of Foreign Affairs, the People’s Republic of China on visa exemption
Ministry of Home Affairs until the end of 2026
 Preventing and combatting transnational crimes
Ministry of Finance  Single-window cooperation in cross-border trade
Ministry of Science, Technology and Innovation  Cooperation on science and technology, people-to-people exchange programmes
Ministry of Higher Education  Cooperation in the field of higher education
 Cooperation in the field of tourism

Ministry of Tourism, Arts and Culture
 Executive programme for the implementation of the agreement on cultural cooperation (2024-2029)
 Strengthening cooperation in the postal field between MCMC and China State Postal Bureau
Ministry of Communication
 Cooperation in the field of media with China Media Group
Source : Ministry of Foreign Affairs, The Edge,
Figure 21: China-Malaysia MOU details
Source: The Star

20
MM2H
Figure 22: Revised MM2H Guidelines

New MM2H Guidelines
Category Eligibility PR Offshore Liquid Fixed Fixed MM2H Visa Work One-off Min value of
Criteria Eligibility Monthly Assets to Deposit Deposits Validity & Eligibility fee (MYR) property
Income Show (MYR (USD Withdrawal Renewal Fees purchase
(MYR) 000's) 000's) (MYR 000's)
(NEW)
Silver 1) Foreigners 5 years
from countries No N/A N/A 150 No 1,000 600
(MYR1,500)
Gold with diplomatic 15 years
relations with No N/A N/A 500 No 3,000 1,000
(MYR3,000)
Platinum Malaysia
2) At least 25 Maximum
years old withdrawal
3) Applications of 50% of
submitted FD
through the principal
MM2H One- value 20 years
No N/A N/A 1,000 Yes 200,000 2,000
Stop Centre (MYR5,000)
4) Have been in
Malaysia for at
least 90
cumulative days
per year
2021 MM2H Guidelines
N/A 1) Above 35 years
old
2) Have been in
MYR
Malaysia for at N/A 40,000 1,500 Up to 50% 10 years Part-time 5,000 N/A
1,000
least 90
cumulative days
per year
Source: MOTAC, New Straits Times
We are positive on the recent announcements on the new MM2H regulations. The new
programme aims to attract high net worth individuals. The requirement for MM2H
participants to own a property also means that the Government targets to attract more
serious and committed long-term residents and investors. We think developers with
exposure in the Kuala Lumpur city centre, Mont’ Kiara, Penang and Iskandar Malaysia will
likely benefit more from the new guidelines. The establishment of the JSSEZ should also draw
more participants from Singapore, given the ease of travelling and cheaper living costs.
EPF Account 3
What - EPF account restructuring, ie from two accounts to three accounts. Account 3
(Flexible Account) is the third classification.
When - The restructured regulations took effect on 11 May. Account 3 starts with a zero
balance, so 10% of savings contributed after 11 May 2024 will go into this account. Between
11 May 2024 and 31 Aug 2024, members will have an option to transfer part of the savings
balance in their Wellbeing Account (previously Account 2) as an initial amount to the Flexible
Account. If the member does not choose to opt in for an initial amount, no transfer will be
made and the existing balance will remain in Akaun Sejahtera.
Why - This new account is designed to meet members’ short-term financial needs as savings
in this account can be withdrawn any time.
Who - Those in the lower income bracket or people in need who want immediate access to
part of their EPF savings
How much - EPF has anticipated a withdrawal of up to MYR25bn from Account 3 in the first
year, followed by MYR5bn in the subsequent year.

21
Equity portfolio flows: Foreign funds in a holding pattern

Figure 23: Regional foreign equity flows YTD Figure 24: Monthly foreign equity portfolio flows
USDm
2024 YTD (USDm) 2023 YTD (USDm) MYRbn
3,000
Malaysia : (172.6) Indonesia : (353.3)
MYR : (0.82)bn 3.0
Malaysia : (514.2)
Indonesia : (427.0) MYR (2.34bn)
2,000 Philippines : (863.3)
Philippines : (527.4)
Thailand : (3,230.9) Thailand : (5,507.2)
1,000
0 1.0
MY
ID
PH
-1,000
Jan-23 Apr-23 Jul-23 Oct-23 Jan-24 Apr-24 Jun-24, (0.1)bn
-2,000
-1.0
-3,000
TH
-4,000
Indonesia Philippines Thailand Malaysia
-3.0
Source: Bloomberg Source: Bursa Malaysia
Figure 25: Local institutional equity flows YTD Figure 26: Local retail equity flows YTD
MYRm MYRm
MYRm MYRm
local insti (LHS) cumulative local insti (RHS) 200.0 local retail (LHS) cumulative local retail (RHS) 1,000
600 9,000
150.0
8,000
0
400 100.0
7,000
6,000 50.0 -1,000

200
5,000 0.0
-2,000
0 4,000 -50.0
3,000
-100.0 -3,000
-200
2,000
-150.0
1,000 -4,000
-400 -200.0
0
-250.0 -5,000
-600 -1,000
Source: Bloomberg, RHB Source: Bloomberg, RHB
Figure 27: Malaysia equities – foreign ownership trend
% Index
26.0 2,000
24.3
23.2 23.5 1,800
24.0
22.3 22.3 22.3 1,600
22.0 20.7 20.4 20.6 20.4 20.4 1,400
20.2 20.0 20.0 19.9 19.7
19.6 19.5 19.5 19.6 19.5 19.6 19.9 19.6 19.6 19.6 19.5 1,200
20.0
1,000
18.0 800
16.0 600
400
14.0
200
12.0 0
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2023 2023 2023 2023 2023 2023 2023 2023 2023 2023 2023 2024 2024 2024 2024 2024 2024
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
% mkt cap (LHS) FBMKLCI index (RHS)
Source: Bursa Malaysia

22
Figure 28: YTD Domestic market share by investor category Figure 29: YTD market share trends by investor category
% Insti Retail Foreign

60.0
50.0
Local Retail, 22.1%
40.0
Foreign Investors, 34.0%
30.0
20.0
10.0
Local Institutional, 43.9%
0.0
Jan-21
Jan-22
Jan-23
Jan-24
Mar-21
Jul-21
Mar-22
Jul-22
Mar-23
Jul-23
Mar-24
May-21
Sep-21
May-22
Sep-22
May-23
Sep-23
May-24
Nov-21
Nov-22
Nov-23
Source: Bursa Malaysia Source: Bursa Malaysia
Figure 30: Sectoral trades by investor type

2023 2024 YTD
Sector Foreign Local Institutions Retail Foreign Local Institutions Retail
(MYRm) (MYRm) (MYRm) (MYRm) (MYRm) (MYRm)
Construction 796.7 (699.4) (99.5) 423.3 (279.6) (143.8)
Consumer (1,847.6) 1,202.6 645.2 (1,499.1) 1,177.2 322.2
Energy (141.4) 408.4 (266.5) (111.6) 300.6 (189.0)
Financial (3,390.7) 1,497.7 1,889.3 (3,428.4) 2,994.2 434.7
Healthcare (662.2) 809.5 (148.4) 357.0 (12.8) (320.8)
Industrial (1,011.8) 1,803.5 (790.6) (196.0) 923.1 (727.5)
Plantation 415.7 (189.3) (226.7) (1,167.0) 1,219.1 (52.5)
Property 1,023.2 (799.1) (224.3) 986.1 (233.8) (752.1)
REIT (336.4) 152.4 153.3 (183.8) 94.0 89.5
Technology 718.0 (93.5) (624.9) 748.6 (255.5) (492.5)
Telecommunication (188.2) 241.0 (52.7) 319.0 (312.5) (7.0)
Transportation 448.9 (382.5) (66.0) 1,082.8 (1,055.2) (27.9)
Utilities 2,050.8 (668.0) (1,381.8) 1,921.3 (333.1) (1,588.5)
Total (2,124.9) 3,283.4 (1,193.5) (747.8) 4,225.5 (3,455.2)
Note: 2024 YTD data is as at (28 Jun)
Source: Dibots
Foreign portfolio funds were net buyers of domestic equities in May and June, which helped
to reverse the heavy net selling in March and April. However, YTD, foreign funds are in a net
neutral position on Malaysia equities. This compares well against our regional peers Indonesia
and Thailand, where foreign funds flow has decidedly pointed to net sells in 2Q24. We believe
foreign investors’ lukewarm positioning in ASEAN equities are largely a function of the
expectation for the USD, ie influenced by the US Fed’s monetary policy (amongst other
things). With the jury still out on when the US Fed will commence the long awaited interest
rate-cutting cycle, the USD will likely remain elevated until US monetary policy expectations
crystallise, with foreign funds positioning likely remaining neutral until this happens.
Domestic investor appetite has been skewed toward the institutions that have been heavy
net buyers. This is likely to be a function of moral suasion following the Prime Minister’s call
to GLICs and GLCs to focus on domestic investments.

23
Mar 2024 quarter results: Sequential improvements seen
Figure 31: Results tracker – actual vs RHB

60%
50%
40%
30%
20%
10%
0%
Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 Mar-24
Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 Mar-24
Above 10.2% 11.1% 18.0% 15.6% 13.8% 15.9% 15.0% 14.4% 19.8% 33.3% 34.5% 26.8% 22.6% 29.8% 34.7% 25.0% 32.8% 34.8% 27.4% 12.3% 13.1% 21.1% 24.1% 19.8%
In Line 55.5% 49.2% 48.9% 46.7% 45.5% 42.4% 45.9% 37.1% 40.5% 34.1% 45.4% 39.8% 46.1% 37.7% 43.2% 39.7% 40.3% 38.6% 45.2% 43.1% 48.5% 45.1% 40.6% 45.8%
Below 34.3% 39.7% 33.1% 37.8% 40.7% 41.7% 39.1% 48.5% 39.7% 32.5% 20.2% 33.3% 31.3% 32.5% 22.0% 35.3% 26.9% 26.5% 27.4% 44.6% 38.5% 33.8% 35.3% 34.4%
Source: RHB
Figure 32: Misses-to-beats ratio trend

(x)
5.0
4.5
4.6
4.0
3.53.6 3.4 3.6
3.5 3.4
3.4
3.4
3.0 2.9 2.9
2.8
2.4 2.6 2.6
2.5 2.5
2.8 2.0
1.8 2.4 2.5 2.3
2.0 1.8
1.8 1.7
1.9 1.6
1.5 1.8 1.4 1.5
1.0 1.4 1.5 1.3
1.5
1.2
1.0 1.0 0.8 1.0
1.3 0.8
1.1 0.6 0.8
0.7 0.6
0.5 0.7
0.6
0.0
results vs RHB results vs consensus
Source: RHB
Corporate Malaysia emerged from the 1Q24 reporting season in pretty good shape. The
complexion of the results overall improved sequentially, with three sectors above and seven
below expectations (Dec 2023: one above, eight below). Results were marred by some high-
profile large-cap misses in the O&G and plantation sectors, offset by positive revisions in the
basic materials, telecoms and property sectors. 19.8% of results beat expectations, with
45.8% in line (Dec 2023: 24.1% above and 40.6% in line) – this led to the misses-to-beats ratio
slipping to 1.7 (Dec 2023: 1.5). Sector beats include O&G, non-bank financials and gaming
while earnings from the auto, plantations, technology, media, construction rubber products
and property sectors disappointed. However, note that there were more recommendation
upgrades (six up and five down) and also more target price upgrades (55 up and 22 down)
implying that forward expectations remain robust. Large-cap misses in O&G and plantations
sector saw FY24 earnings estimates trimmed by 1.3%.
In the large-cap space, earnings cuts in the O&G and plantation sectors were offset by
upgrades from telecoms and basic materials. FBM KLCI FY24 earnings estimates were cut by
1.6% while FY25 estimates were broadly unchanged. Tenaga Nasional’s results were in line
but merited a recommendation upgrade. There were eight target price upgrades offset by five
downgrades. Bellwether banking sector earnings were in line and notable for operating
income strength and solid asset quality metrics. Forward guidance remain guarded with
respect to the operating environment although loan demand remains good enough for banks
to be more selective – which we see as a positive.

24
Earnings outlook: Corporate earnings have turned the corner

Figure 33: Earnings outlook and valuations
FBM KLCI RHB BASKET RHB BASKET (EX-FBM KLCI)
COMPOSITE INDEX @ 1,585.38 2023 2024F 2025F 2023 2024F 2025F 2023 2024F 2025F
25 Jun 2024
Revenue Growth (%) 1.6 5.2 3.5 3.5 6.9 5.5 8.9 11.2 8.8
EBITDA Growth (%) (3.0) 8.6 1.9 (2.9) 8.8 2.1 1.1 12.7 8.5
Normalised Earnings Growth (%) 1.3 10.9 6.7 1.0 11.2 6.9 (5.2) 19.1 11.7
Total PATAMI (MYRm) 55,278 62,150 66,957 75,407 87,329 94,862 20,129 25,178 27,904
Normalised EPS (sen) 56.1 60.7 64.8 46.8 51.3 55.2 24.3 28.4 31.9
Normalised EPS Growth (%) 0.2 8.3 6.7 (0.7) 9.6 7.6 (5.1) 16.9 12.3
Prospective P/E (x) 18.1 16.1 15.0 18.8 16.2 14.9 20.5 16.4 14.8
Normalised EPS (sen) ex-Plantation 55.3 60.6 64.7 46.7 51.9 55.8 24.9 28.8 32.6
Normalised EPS Growth (%) ex-Plantation 4.1 9.6 6.7 3.1 11.2 7.4 (9.2) 15.9 12.9
Prospective P/E (x) ex-Plantation 16.4 14.6 13.6 17.6 15.2 14.0 19.8 15.7 14.2
P/BV (x) 1.6 1.5 1.5 1.5 1.4 1.4 1.3 1.2 1.2
Dividend Yield (%) 3.7 3.7 3.9 3.7 3.5 3.7 3.5 3.1 3.4
ROE (%) 13.0 14.0 14.0 12.9 13.7 14.0 12.5 13.1 13.8
Note: Excludes FBM KLCI stocks not under RHB Research’s coverage, ie HLFG, YTLC, RHB Bank, and PPB
Source: RHB
Figure 34: FBM KLCI – weightings & valuations

Market Cap Weight EPS Growth (%) P/E (x)
MYRbn (%) FY23 FY24F FY25F FY23 FY24F FY25F
Sime Darby 17.7 1.77 (3.4) 15.9 19.5 15.3 13.2 11.1
Auto 17.7 1.77 (3.4) 15.9 19.5 15.3 13.2 11.1
CIMB 71.4 7.12 25.7 9.0 6.2 10.2 9.4 8.8

HL Bank 41.5 4.14 16.0 5.8 5.3 10.3 9.7 9.2
Maybank 119.6 11.92 16.6 5.5 4.8 12.8 12.1 11.6
Public Bank 77.6 7.74 8.7 4.1 4.6 11.7 11.2 10.7
Banking 310.2 30.93 14.6 5.9 5.5 11.3 10.6 10.1
Press Metal 47.7 4.76 (15.1) 45.7 7.7 39.3 27.0 25.1
Basic Materials 47.7 4.76 (15.1) 45.7 7.7 39.3 27.0 25.1
Nestle 28.7 2.86 20.4 4.0 5.0 38.5 37.0 35.2

Mr DIY 18.1 1.81 16.9 12.9 13.5 31.7 28.1 24.7
QL Resources 15.8 1.58 59.6 22.5 3.8 45.5 37.2 35.8
Consumer 62.7 6.25 21.6 4.9 5.1 35.9 33.7 31.3
IHH Healthcare 55.3 5.52 (7.3) 25.5 6.0 42.4 33.8 31.9
Healthcare 55.3 5.52 (7.3) 25.5 6.0 42.4 33.8 31.9
Sunway 20.3 2.02 19.1 1.1 3.2 26.2 25.9 25.1

Property 20.3 2.02 19.1 1.1 3.2 26.2 25.9 25.1
MISC 38.2 3.81 6.0 15.2 4.4 17.3 15.0 14.3

Petronas Dagangan 17.1 1.70 24.7 6.7 2.6 18.1 17.0 16.5
Oil & Gas 107.2 10.69 (19.5) 14.2 6.4 22.6 18.2 16.3
IOI Corp 23.1 2.31 (24.2) (22.0) 15.2 15.5 19.8 17.2
Kuala Lumpur Kepong 23.0 2.29 (39.8) (28.6) 15.4 15.9 22.3 19.3
SD Guthrie 29.4 2.93 (57.8) 51.6 (1.4) 32.5 21.5 21.8
Plantation 75.5 7.53 (40.0) (21.5) 12.8 19.7 21.2 19.4
Axiata 23.8 2.37 (65.9) 42.0 79.2 43.3 30.5 17.0

CelcomDigi 41.6 4.15 29.1 6.0 6.0 26.8 25.3 23.9
Maxis 27.3 2.73 2.6 (0.3) 4.2 20.2 20.3 19.5
Telecommunication 118.5 11.82 3.2 (4.3) 10.4 22.1 21.9 19.2
Petronas Gas 35.7 3.56 7.2 0.5 0.9 19.3 19.2 19.0
Tenaga 81.0 8.08 (19.5) 25.7 13.5 25.2 20.0 17.6
YTL Power 38.3 3.82 440.3 51.7 (5.4) 18.6 12.2 12.9
Utilities 155.0 15.46 8.2 15.9 4.1 21.7 17.1 16.4
FBM KLCI 1002.8 100.00 0.2 8.3 6.7 18.1 16.1 15.0

25
Figure 35: Trend of revisions to consensus forecasts

(sen)
Forecast of 2024 EPS Forecast of 2025 EPS
130.0
125.0
120.0
2025
115.0
110.0 2024
105.0
Source: Bloomberg
Figure 36: Regional valuations

Malaysia Singapore Thailand Indonesia
2024F EPS growth (%) 8.3 3.8 9.2 2.9
2025F EPS growth (%) 6.7 4.5 6.5 7.7
2024F P/E (x) 16.1 10.9 15.6 11.6

2025F P/E (x) 15.0 10.4 14.6 10.8
P/E / EPS growth

2024F (x) 1.9 2.9 1.7 4.0
2025F (x) 2.2 2.3 2.2 1.4
Performance (%)
2023 (YoY) (2.7) (0.3) (15.2) 6.2
2024 (YTD)* 9.3 2.9 (8.1) (2.9)
Note: *As at 28 Jun 2024 closings
Source: RHB

26
Changes to sector weightings

Figure 37: RHB Basket – sector weightings & valuations
Sectors Mkt Cap Weight EPS Growth (%) P/E (x) Recommendation
MYRbn % FY23 FY24F FY25F FY23 FY24F FY25F
Utilities 163.7 11.5 (1.9) 19.7 7.0 24.1 17.3 16.4 Overweight
Oil & Gas 136.9 9.6 (36.1) 20.3 9.2 21.0 16.5 15.2 Overweight
Property 69.1 4.9 22.4 3.3 1.3 20.0 18.8 18.6 Overweight
Healthcare 66.3 4.7 (5.2) 23.0 6.5 38.0 31.6 29.4 Overweight
Construction 40.4 2.8 14.0 5.2 19.3 23.6 20.8 17.5 Overweight
Technology 39.1 2.7 (65.1) 82.8 56.8 47.8 36.6 27.3 Overweight
Transport 31.8 2.2 78.0 20.0 11.0 22.0 19.1 17.1 Overweight
Rubber Products 27.8 2.0 (88.5) 689.2 52.7 n.m. 129.3 48.1 Overweight
Banking 341.8 24.0 16.1 6.1 5.3 11.2 10.6 10.0 Neutral
Telecommunications 128.3 9.0 5.1 (2.4) 9.5 22.1 21.7 19.0 Neutral
Consumer 109.1 7.7 15.6 6.2 5.6 23.8 21.3 18.9 Neutral
Plantation 92.2 6.5 (42.0) (18.8) 11.2 18.4 19.5 18.3 Neutral
Basic Materials 58.0 4.1 (10.0) 62.2 7.1 36.6 23.0 21.2 Neutral
Gaming 36.4 2.6 334.0 80.1 17.3 21.3 12.5 10.5 Neutral
Property-REITs 35.4 2.5 6.8 12.0 4.8 17.7 16.3 15.6 Neutral
Auto 23.2 1.6 5.6 3.9 7.2 13.4 12.4 10.9 Neutral
Non-Bank Financials 20.8 1.5 14.2 5.2 6.4 10.9 10.1 9.5 Neutral
Media 2.3 0.2 (43.6) (18.2) 15.8 11.6 14.7 12.6 Neutral
RHB BASKET 1422.7 100.0 (0.7) 9.6 7.6 18.8 16.2 14.9
Source: RHB
There were no sector weighting changes in the past quarter.
End-2024 FBM KLCI target

The palpable pick-up in business and investor sentiment, positive news flow, encouraging
macroeconomic backdrop, swelling liquidity conditions and greater confidence that
corporate earnings are on track for a year of solid growth have prompted us to raise our end-
2024 FBM KLCI target to 1,720pts (from 1,600pts) ) after ascribing a higher 16x target P/E
(from 15x) to forward FY25F EPS.
Dec 2024 FBM KLCI semi-annual review

Cut-off date: 25 Nov close of business
Announcement by FTSE Russell: 5 Dec close of business
Effective from: 23 Dec

27
Figure 38: Top 50 stocks by market cap

Market Cap
No Ticker Name (MYRbn) Price
1 MAY MK Equity MALAYAN BANKING 119.58 9.91
2 TNB MK Equity TENAGA NASIONAL 81.02 14.00
3 PBK MK Equity PUBLIC BANK 77.64 4.00
4 CIMB MK Equity CIMB GROUP HOLDINGS 71.44 6.68
5 IHH MK Equity IHH HEALTHCARE 55.31 6.28
6 PCHEM MK Equity PETRONAS CHEMICALS GROUP 51.92 6.49
7 PMAH MK Equity PRESS METAL ALUMINIUM 47.71 5.79
8 CDB MK Equity CELCOMDIGI 41.65 3.55
9 HLBK MK Equity HONG LEONG BANK 41.53 19.16
10 YTLP MK Equity YTL POWER INTERNATIONAL 38.27 4.67
11 MISC MK Equity MISC 38.17 8.55
12 YTL MK Equity YTL CORP 36.20 3.29
13 PTG MK Equity PETRONAS GAS 35.70 18.04
14 SDG MK Equity SD GUTHRIE 29.39 4.25
15 NESZ MK Equity NESTLE (MALAYSIA) 28.73 122.50
16 MAXIS MK Equity MAXIS 27.33 3.49
17 T MK Equity TELEKOM MALAYSIA 25.75 6.71
18 RHBBANK MK Equity RHB BANK 23.93 5.49
19 AXIATA MK Equity AXIATA GROUP 23.78 2.59
20 IOI MK Equity IOI CORP 23.14 3.73
21 KLK MK Equity KUALA LUMPUR KEPONG 23.00 20.98
22 PEP MK Equity PPB GROUP 20.51 14.42
23 SWB MK Equity SUNWAY 20.30 3.60
24 HLFG MK Equity HONG LEONG FINANCIAL GROUP 19.70 17.20
25 GENT MK Equity GENTING 18.25 4.74
26 MRDIY MK Equity MR DIY GROUP 18.15 1.92
27 GAM MK Equity GAMUDA 18.01 6.50
28 SIME MK Equity SIME DARBY 17.72 2.60
29 PETD MK Equity PETRONAS DAGANGAN 17.09 17.20
30 MAHB MK Equity MALAYSIA AIRPORTS 16.22 9.72
31 QLG MK Equity QL RESOURCES 15.79 6.49
32 GENM MK Equity GENTING MALAYSIA 14.45 2.55
33 WPRTS MK Equity WESTPORTS HOLDINGS 14.22 4.17
34 AMM MK Equity AMMB HOLDINGS 14.18 4.29
35 INRI MK Equity INARI AMERTRON 13.75 3.65
36 DLG MK Equity DIALOG GROUP 13.54 2.40
37 KLCCSS MK Equity KLCCP STAPLED GROUP 13.54 7.50
38 IOIPG MK Equity IOI PROPERTIES GROUP 12.39 2.25
39 CHIN MK Equity CHIN HIN GROUP 11.68 3.30
40 FNH MK Equity FRASER & NEAVE 11.63 31.70
41 HART MK Equity HARTALEGA 11.13 3.26
42 HAP MK Equity HAP SENG CONSOLIDATED 10.90 4.38
43 IJM MK Equity IJM CORP 10.48 2.99
44 UPL MK Equity UNITED PLANTATIONS 9.93 23.94
45 TDC MK Equity TIME DOTCOM 9.21 4.98
46 SDPR MK Equity SIME DARBY PROPERTY 8.91 1.31
47 TOPG MK Equity TOP GLOVE CORP 8.65 1.08
48 KPJ MK Equity KPJ HEALTHCARE 8.38 1.92
49 VITRO MK Equity VITROX CORP 7.85 4.15
50 BAK MK Equity BATU KAWAN 7.76 19.76
Note: KLCI stock components are highlighted
Note 2: *As at 29 Mar 2024 closing
Source: Bloomberg

28
Key Risks
US Fed and the monetary policy narrative

Persistently sticky inflation and robust economic data points could encourage the US Fed to
remain hawkish, leading to the monetary policy staying high for longer. Markets are still
pricing in 2-3 US rate cuts, and material shifts in expectations could destabilise equity
markets. RHB Economics is already flagging risks that there may be no rate cuts this year. The
US Fed’s dilemma is committing policy errors, where cutting rates too soon could see inflation
becoming more entrenched, while cutting too late would be detrimental to continued
economic growth.
USD: Stronger for longer

The USD’s role as the main currency for global trade and finance means that its volatility has
wide-ranging implications for the global economy. USD strength has been fuelled by the yield
gap from the US Fed’s monetary policy tightening and evolving expectations on when market
conditions (including inflation) will allow the regulator to begin easing rates. Slower global
economic growth and worsening geopolitical tensions could encourage a flight to safety and
further boost the USD. A stronger USD multiplies the liabilities of governments and
companies with USD-denominated debt, giving rise to imported inflation and decelerating
global economic growth. Expectations for the USD to remain high will reduce the propensity
for the sustained return of equity portfolio flows into ASEAN markets.
Slower-than-expected global growth

Risk of policy errors amid a high interest rate environment increases the risks of a global
recession. This would be exacerbated by risks stemming from a financial sector crisis that
could have severe implications for the global economy. Global trade remains highly correlated
to USD-led financial conditions. Slower global growth will impact corporate earnings and
equity valuations.
Slower-than-expected China economic recovery

Slower-than-expected economic growth in China would drag on the growth prospects of
ASEAN economies, given the former’s importance as a key trading partner – China is a major
off-taker of ASEAN exports, an important source of investment capital and a major source of
outbound tourists into ASEAN.
Worsening US-China ties

A further worsening of the US-China relationship beyond trade and technology issues could
have profound consequences for global trade relationships and geopolitical stability. There
are ample sources of friction between the two sides that include Taiwan, Hong Kong, Xinjiang,
Tibet, the South China Sea, trade, and technology. The US-China relationship is an evolving
one, and investor sentiment could turn more cautious. Businesses may decide to delay their
investment plans, should ties worsen. However, some sectors may benefit from the
acceleration of the China Plus One strategy that seeks to reduce reliance on China and aims
to diversify into other countries
Middle-east tensions and oil price volatility

An escalation of the Israel-Hamas conflict to involve other countries in the region would
significantly spike global risks that could lead to higher oil prices and disruptions to global
shipping links. Higher fuel subsidies would worsen the state of Malaysia’s public finances.
Prolonged high oil price levels in addition to higher transportation costs will have negative
implications for global growth.

29
Ukraine crisis
The Ukraine crisis retains the potential to significantly escalate. This could engulf the wider
European theatre in a conflict and even drag NATO countries in. A protracted crisis will result
in continued volatility for risk assets. The war in Ukraine will continue to be a significant
inflationary event keeping upward pressure on the prices of commodities such as crude oil,
edible oils and metals and dampening the outlook for global growth including business and
investor sentiment. Threats by Russia to use nuclear weapons against Western allies and in
Ukraine would be a red line beyond which there is no return.
Political and policy risks

While the unity government has positively surprised with its resilience, the continued ability
of the various political coalitions to work cohesively together through the remainder of its
term is not assured. Prime Minister Dato’ Seri Anwar Ibrahim’s political acumen to keep the
Government intact will be put to the test.
Reform agenda
Market expectations for the Anwar Ibrahim-led administration to deliver on its promised
reform agenda will require innovative economic and fiscal policies to be introduced, as well as
a large amount of political will. The propensity to roll out populist policy measures at the
expense of making unpopular decisions, for the longer term and greater good, would need to
be closely monitored. The Government will need to ensure that the needs of the most
economically vulnerable segments of society are fairly addressed.
Sovereign rating risks

Should government finances worsen, we cannot rule out a downgrade of Malaysia’s sovereign
rating. This could raise bond yields, lift funding costs, and accelerate the outflow of capital,
which could pressure the MYR lower.
Outflow of foreign capital

Malaysia could be vulnerable to outflows of foreign capital on rising domestic risks and
changes in the external environment – given the high foreign ownership levels in the domestic
debt market. Reduced foreign demand could lead to higher yields and steeper funding costs
for the Government.

30
Market Strategy
The stars are aligning but…

Our core view for domestic equity markets remains positive. The macroeconomic house view
on global growth and the China recovery story is intact. Stubborn inflation has been the main
impediment to an easier monetary policy environment, delaying the pivot to stronger
emerging market currencies. Meanwhile, progress on the reform agenda has surprised
positively and investor sentiment has picked up palpably.
Local equity markets have trended broadly in line with expectations. The benchmark FBM
KLCI has been the star performer within the ASEAN-5, up 9.3% YTD despite the recent bout
of profit-taking. We also note that mid- and small-cap stocks have further outperformed the
large-cap index on the back of renewed optimism on the technology sector and recent positive
news flow driving interest in utilities, property, construction and healthcare stocks. We have
seen progress on fiscal reform and news flow on what could be a new era of cooperation
between Malaysia and China. The deluge of data centre investments have been a boon for the
property, construction and energy sectors while the 1Q24 reporting season passed without
significant earnings disappointments. The political environment has been stable that helps to
lower core market risk.
...strong short-term catalysts are absent

While news flow has been upbeat, the aligning of positive factors is a stark contrast to the
persistent earnings disappointments seen in recent years and we think the market is still
trying to overcome investor scepticsm built up over the years. The gradual pooling of
domestic liquidity will continue support equity markets. As foreign funds have been treading
water, retail investors remain in a trading mode (albeit net sellers) while domestic insitutional
funds are strong net buyers but are close to average cash holding levels. Foreign portfolio
funds will likely remain neutral in the near term until there is better clarity on the lean of the
US Fed policy, which may not be apparent for another few months yet. The market’s YTD
relative outperformance and lack of clear near-term drivers may tempt investors to topslice
to lock in gains. Investors are also observing how the relevant government agencies are
dealing with the impact of the diesel subsidy rationalisation on inflation and business
conditions while also bracing for RON95 price adjustments. Accordingly, the short-term
market dynamics look like rangebound to lower trends, until further positive catalysts
become more apparent.
Figure 39: YTD performance comparison of key markets
18.3%
9.3%
3.9%
2.9%
-0.25% -0.6%
-2.9%
-8.1%
NKY Index FBMKLCI Index HSI Index STI Index SHCOMP Index PCOMP Index JCI Index SET Index
Source: Bloomberg

31
Summary of key drivers

The key influences on domestic equity markets going into 2H24 will largely be
macroeconomic-centric in addition to various evolving geopolitical flashpoints that could turn
markets on its head. Ultimately, these factors will link back to influence corporate earnings
and foreign portfolio flows. Progress on reform and FDI newsflow will also be key influences.
i. How the global macroeconomic cookie crumbles: The global macroeconomic picture
now centres on the US economy achieving a soft landing (or no landing) and how the
inflation data pans out, which will influence the monetary policy narrative at the US Fed.
The RHB Economics team has noted a hawkish shift in Fedspeak with core PCE inflation
still trending above target. Our house view is for one rate cut in Dec with the balance of
risks tilted towards no cuts that suggests that the USD will remain high for awhile longer.
ii. How the geopolitical picture plays out: While the geopolitical environment has
quietened of late, the are multiple geopolitical flashpoints that could turn into market
risk events. The Middle East situation remains on a knife’s edge and risks are elevated
for an escalation of the conflict that could see a spike in oil prices, shipping congestion
and higher freight rates. We also expect to see greater market volatility in the run-up to
the US presidential election in November.
iii. Domestic growth trends improving: The economic growth momentum is envisaged to
remain resilient, driven by both external and internal drivers. Malaysia’s GDP is
forecasted to grow by 4.6% YoY in 2024 (2023: 3.7% YoY) and business confidence is on
the rise. The rebound in the global technology cycle and improved regional economic
landscapes are expected to support export-oriented segments.
iv. Domestic politics: Domestic political risks have eased in recent months and this will be
essential to provide a solid framework within which effective policies can be
implemented to facilitate long-term growth and competitiveness.
v. Managing the domestic reform process: All eyes are on the the Government’s ability to
manage the fallout from the recent diesel price subsidy rationalisation, and the
inferences that can be drawn on when and how the price adjustments for RON95 will be
implemented. Such fiscal reforms are a neccesary inconvenience to help raise revenues
and rationalise costs that will be critical to improve the state of public finances. The
window of opportunity will likely be a narrow one before the spectre of GE16 re-
emerges on the political horizon. Initiatives to reduce subsidies will have implications for
inflation, and crimp disposable incomes – with markets needing time to adjust.
Investment themes
Our core investment view on equities remains an encouraging one with positives
outnumbering the negatives. However, we note the absence of strong near-term catalysts but
acknowledge the pooling of domestic liquidity and improving domestic fundamentals that will
likely limit the depth of the pullback.
Buy on weakness. The currently hesitant investor sentiment represents opportunities to
accumulate stocks with robust fundamentals. RHB’s optimistic macroeconomic base case
suggests oportunities for attractive entry points to build positions for the medium term. If the
market drifts lower, this should elicit a stronger bottom-fishing response from investors.

32
Figure 40: Top BUYs

FYE Price TP Shariah Market EPS EPS Growth 3 yrs EPS P/E P/BV P/CF DY
compliant Cap (sen) (%) CAGR (%) (x) (x) (x) (%)
(MYR/s) (MYR/s) (MYRm) FY24F FY25F FY24F FY25F FY22-FY25F FY24F FY25F FY25F FY25F FY25F
25 Jun 2024
Tenaga Nasional Dec 14.00 16.10 YES 81,023 69.9 79.3 25.7 13.5 4.7 20.0 17.6 1.3 5.5 3.7
CIMB Dec 6.68 7.60 NO 71,436 71.3 75.7 9.0 6.2 13.3 9.4 8.8 0.9 n.a. 6.3
IHH Healthcare Dec 6.28 7.90 YES 55,308 18.6 19.7 25.5 6.0 7.2 33.8 31.9 1.8 13.6 0.9
Mr DIY Group Dec 1.92 2.20 YES 18,147 6.8 7.8 12.9 13.5 14.4 28.1 24.7 7.9 16.7 2.6
Gamuda Jul 6.50 7.69 YES 18,009 33.7 40.8 2.9 21.3 9.5 19.3 15.9 1.5 21.3 2.5
AMMB^ Mar 4.29 5.50 NO 14,181 54.4 58.4 3.9 7.2 3.6 7.9 7.4 0.7 n.a. 6.1
Sime Darby Property Dec 1.31 2.00 YES 8,909 6.8 7.3 15.6 6.9 22.0 19.1 17.9 0.8 19.2 2.1
MPI Jun 38.60 44.80 YES 7,679 87.2 146.3 127.1 67.7 (1.2) 44.3 26.4 3.5 12.3 1.2
Bursa Malaysia Dec 8.84 9.85 YES 7,154 35.1 36.1 23.1 2.9 8.8 25.2 24.5 8.1 22.5 3.7
Malayan Cement Jun 4.94 7.18 YES 6,583 41.7 42.9 230.0 2.9 76.8 11.8 11.5 0.9 11.5 0.0
Mah Sing Group Dec 1.75 2.26 YES 4,480 10.0 11.0 12.4 10.6 14.1 17.6 15.9 1.1 27.8 2.9
Guan Chong Dec 3.62 5.10 YES 4,252 33.9 41.7 266.8 23.0 41.4 10.7 8.7 1.8 4.5 2.9
Dayang Enterprise Dec 2.69 3.58 YES 3,114 21.0 23.8 29.4 13.4 35.0 12.8 11.3 1.5 8.6 1.7
Kerjaya Prospek Dec 1.82 2.15 YES 2,295 12.9 14.0 24.6 8.6 15.3 14.2 13.0 1.9 17.0 5.5
Synergy House Dec 1.65 2.01 YES 825 8.1 10.2 53.4 27.2 46.4 20.5 16.1 5.0 19.8 1.9
Focus Point Dec 0.80 1.12 YES 370 8.0 9.2 13.5 14.2 5.5 9.9 8.7 2.3 4.1 5.7
Note: ^FY24-25F valuations refer to that of FY25-26F
Source: RHB
Figure 41: Top SELLs

FYE Price TP Shariah Market EPS EPS growth 3-yr EPS P/E P/BV P/CF DY
compliant cap (sen) (%) CAGR (%) (x) (x) (x) (%)
(MYR/s) (MYR/s) (MYRm) FY24F FY25F FY24F FY25F FY22-FY25FFY24F FY25F FY25F FY25F FY25F
25 Jun 2024
Affin Bank Dec 2.48 1.65 NO 5,953 19.8 22.0 13.6 11.5 3.9 12.5 11.3 0.5 n.a. 3.6
FGV Holdings Dec 1.28 1.20 YES 4,670 2.7 3.2 10.7 18.4 (57.0) 48.0 40.5 0.8 6.1 2.0
RCE Capital^ Mar 2.83 2.40 YES 2,074 21.2 22.3 12.1 5.1 5.6 13.3 12.7 2.3 n.a. 5.9
Ranhill Utilities Dec 1.31 1.15 YES 1,698 3.6 4.1 1165.6 11.3 30.3 36.0 32.3 2.1 10.3 1.1
ELK-Desa^ Mar 1.24 1.05 NO 564 9.1 10.1 13.0 11.2 (1.2) 13.6 12.2 1.1 n.a. 5.1
Tan Chong Dec 0.86 0.73 YES 557 (11.0) (7.1) 36.0 36.0 8.4 n.m. n.m. 0.2 6.0 1.2
Chin Well Jun 1.21 0.94 YES 347 3.9 11.7 (70.3) 197.6 (29.6) 30.7 10.3 0.5 23.7 3.9
Source: RHB
Near-term defensive posturing: As we expect the markets the take a breather in the coming
quarter, a shift toward a more defensive investment profile may suit risk-averse investors.
Figure 42: Defensive stocks with domestic-centric characteristics
EPS 3-yr EPS P/E P/BV P/CF DY
Price TP Mkt cap EPS Growth (%)
(sen) CAGR (%) (x) (x) (x) (%)
(MYR/s) (MYR/s) (MYRm) 24F 25F 24F 25F FY22-25F 24F 25F 25F 25F 25F
Rec 25 Jun 2024
Tenaga Nasional Buy 14.00 16.10 81,023 69.9 79.3 25.7 13.5 4.7 20.0 16.9 1.3 5.5 3.7
Public Bank Buy 4.00 4.80 77,643 35.7 37.3 4.1 4.6 5.7 11.2 10.3 1.3 n.a. 5.3
Nestle Neutral 122.50 131.00 28,726 331.1 347.6 4.0 5.0 9.5 37.0 33.8 41.6 25.4 2.8
QL Resources^ Neutral 6.49 6.36 15,794 17.5 18.1 22.5 3.8 26.6 37.2 34.7 4.5 20.6 1.2
Time DotCom Neutral 4.98 5.60 9,207 24.6 27.0 10.7 9.5 4.9 20.2 17.6 1.5 14.3 4.3
KPJ Health Buy 1.92 2.14 8,379 6.7 7.6 2.9 13.9 24.2 28.7 22.6 3.1 11.3 2.1
IGB REIT Buy 1.82 2.03 6,569 10.5 11.1 4.2 6.2 5.7 17.4 15.8 1.6 14.0 6.4
CTOS Digital Buy 1.48 1.77 3,419 5.4 6.6 19.1 22.8 21.4 27.6 18.6 4.9 26.7 2.8
Taliworks Corporation Buy 0.80 0.98 1,603 3.3 4.5 59.0 36.5 19.3 24.0 16.9 2.1 10.4 5.0
Focus Point Buy 0.80 1.12 370 8.0 9.2 13.5 14.2 5.5 9.9 8.0 2.3 4.1 5.7
Source: RHB

33
Figure 43: High-dividend yield stocks

Price Target DY (%) EPS Growth (%) P/E (x) P/BV (x) ROE (x)
(MYR/s) (MYR/s) FY24F FY25F FY24F FY25F FY23F FY24F FY24F FY24F
25 Jun 2024
MBM 5.20 4.70 9.2 6.7 (12.1) (26.4) 6.1 6.9 0.9 13.5
Bermaz Auto^ 2.50 3.25 8.8 10.4 (10.1) 14.4 8.2 9.2 3.3 37.3
Sentral REIT 0.80 0.91 8.5 8.7 2.2 2.6 11.6 11.4 0.7 6.2
Sports Toto^ 1.55 1.69 7.3 7.5 (10.2) 5.3 9.4 10.5 1.9 18.1
Pavilion REIT 1.37 1.39 6.8 6.8 8.0 0.4 16.4 15.2 0.9 6.4
Ta Ann 3.80 3.55 6.6 6.8 (4.8) (0.4) 8.6 9.0 0.9 10.0
BIMB 2.49 2.45 6.4 6.8 11.4 6.1 10.4 9.3 0.7 8.1
Maybank 9.91 10.60 6.4 6.7 5.5 4.8 12.8 12.1 1.2 10.3
Sunway REIT 1.56 1.77 6.3 6.6 4.9 4.8 15.8 15.1 1.0 6.4
IGB REIT 1.82 2.03 6.0 6.4 4.2 6.2 18.1 17.4 1.6 9.3
DXN Hldg^ 0.64 0.93 5.9 6.7 12.7 14.2 9.5 8.5 2.2 27.5
CIMB 6.68 7.60 5.9 6.3 9.0 6.2 10.2 9.4 1.0 10.9
Heineken Malaysia 23.20 29.60 5.8 6.2 7.0 6.6 18.1 16.9 15.1 89.4
Matrix Concepts^ 1.80 2.15 5.8 6.1 0.4 2.9 9.1 9.0 1.0 11.5
Power Root 1.60 1.68 5.8 6.5 18.7 13.3 17.5 14.7 2.1 14.4
Source: RHB
Laggard plays to position for the next market wave: Our core positive view on equities and
the outperformance of the broader market and selected sectors suggests a natural rotation
into laggard names that we remain convicted on.
Figure 44: YTD sectoral index performance
37.40%
34.85%
25.38%
22.10%
20.52%
19.00%
16.84%
13.21% 12.25%
9.31%
7.06%
5.65% 5.64% 4.59%
-0.36%
FBM70 Index
KLCI Index
REIT
Energy
Utilities
Property
Healthcare
Plantation
Transportation & Logistics
Consumer Products & Services

Technology
Financial Services
Industrial Products & Services
Telecommunications & Media

Construction
Source: Bloomberg

34
Figure 45: Laggards

Price TP Shariah Mkt EPS EPS 3-year P/E P/BV P/CF DY
FYE (MYR/s) (MYR/s) Compliant Cap (sen) Growth (%) EPS (x) (x) (x) (%)
25 Jun 2024 (MYRm) FY24F FY25F FY24F FY25F CAGR (%) FY24FFY25F FY25F FY25F FY25F
FY22-
FY25F
Public Bank Dec 4.00 4.80 NO 77,643 35.7 37.3 4.1 4.6 5.7 11.2 10.7 1.3 n.a. 5.3
Hong Leong Bank Jun 19.16 23.60 NO 41,533 197.2 207.7 5.8 5.3 8.9 9.7 9.2 1.0 n.a. 3.4
Axiata Group Dec 2.59 3.40 YES 23,781 8.5 15.2 42.0 79.2 (4.6) 30.5 17.0 1.1 3.1 3.9
IOI Corp Jun 3.73 4.40 YES 23,140 18.8 21.7 (22.0) 15.2 (12.1) 19.8 17.2 1.8 12.4 2.7
KLK Sep 20.98 23.00 YES 23,003 94.1 108.6 (28.6) 15.4 (20.9) 22.3 19.3 1.5 10.0 2.4
Malakoff Dec 0.78 0.86 YES 3,812 5.6 7.2 168.2 29.2 (18.7) 14.0 10.8 0.8 2.3 6.5
Axis Reit Dec 1.84 2.09 YES 3,215 9.5 10.5 6.9 10.7 3.1 19.3 17.4 1.1 12.7 5.7
Syarikat Takaful Dec 3.80 4.40 YES 3,182 48.9 50.9 17.8 4.2 14.6 7.8 7.5 1.4 n.a. 4.3
Bermaz Auto^ Apr 2.50 3.25 YES 2,920 27.3 31.3 (10.1) 14.4 6.2 9.2 8.0 3.1 9.1 10.4
Duopharma Dec 1.25 1.44 YES 1,202 7.7 9.3 21.9 19.8 (7.5) 16.1 13.5 1.5 11.7 1.8
Pintaras Jaya Jun 1.75 2.09 YES 290 5.1 6.4 197.1 25.1 (27.0) 34.0 27.2 0.7 10.5 1.8
Gabungan AQRS Dec 0.35 0.50 YES 190 6.3 7.6 (8.3) 20.4 16.1 5.5 4.6 0.2 2.7 2.9
Source: RHB
The Johor story has room to run: A variety of factors are set to propel Johor’s economy into
the next stage of growth. News flow on the JS-SEZ may continue to spur foreign and domestic
direct investments in the areas of industrial parks such as the Sedenak Technology Park,
which houses large-scale data centres. Additionally, the anticipated KL-Singapore High Speed
Rail and Johor Bahru Light Rail Transit (LRT) are upcoming projects that may not just catalyse
Johor’s property market, but also keep contractors well occupied with jobs.
Figure 46: Johor theme – Top BUY list

FYE Price TP Shariah Market EPS EPS Growth 3 yrs EPS P/E P/BV P/CF DY
compliant Cap (sen) (%) CAGR (%) (x) (x) (x) (%)
(MYR/s) (MYR/s) (MYRm) FY24F FY25F FY24F FY25F FY22-FY25F FY24F FY25F FY25F FY25F FY25F
25 Jun 2024
YTL Power Jun 4.67 6.68 NO 38,272 38.1 36.1 51.7 (5.4) 97.9 12.2 12.9 1.8 9.5 2.3
Sunway Berhad Dec 3.60 4.00 YES 20,296 13.9 14.3 1.1 3.2 7.5 25.9 25.1 1.5 28.9 1.7
IJM Corporation Mar 2.99 3.60 YES 10,483 14.8 15.7 4.0 5.5 26.2 20.1 19.1 1.0 14.1 2.7
UEM Sunrise Dec 1.04 1.60 YES 5,261 1.7 1.8 23.1 4.6 7.3 60.1 57.5 0.7 35.2 0.0
SunCon Dec 3.73 4.92 YES 4,809 13.9 18.9 5.1 36.6 19.3 26.9 19.7 4.9 41.9 3.0
IOI Properties Jun 2.25 2.47 NO 12,389 12.8 12.9 (15.4) 1.0 9.4 17.6 17.5 0.5 9.1 2.7
Eco World Oct 1.53 1.88* YES 4,507 6.7 7.7 4.6 14.6 6.2 22.2 19.3 19.3 65.8 4.2
Kimlun Corp Dec 1.38 1.05* YES 488 10.5 12.2 231.7 17.1 8.8 9.4 8.0 8.0 8.3 2.7
Note 2: *Based on fair value
Source: RHB

35
Small-Mid Cap – Supported By Various Tailwinds
Supported by various tailwinds. Both the FBM 70 (+21.3%) and FBM SC (+16.6%)
outperformed the FBM KLCI (+9.0%) in 1H24. This was attributed to strong interest in sectors
such as technology, construction, and property, which drove trading volumes up by 54% and
23%. Overall market sentiment was buoyed by easing inflation, favourable government
policies, and a stable domestic economy, on top of the weakening USD. Corporate activities
including restructuring, value-unlocking strategies, and thematic trends, also played a pivotal
role. Additionally, strong participation from local institutions and foreign investors further
supported the market rally.
Figure 47: YTD performances of the FBM SC and FBM 70 vs the FBM KLCI
Figure 48: Yearly returns of the major indices

2024
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
YTD
FBM KLCI 9.8% 11.0% -5.7% -3.9% -3.0% 9.4% -5.9% -6.0% 2.4% -3.7% -4.6% -2.7% 9.0%
FBM 70 6.0% 15.5% -7.9% 0.5% -0.8% 23.4% -18.7% 8.7% 6.6% -6.2% -8.4% 12.3% 21.3%
FBM SC -1.1% 36.0% -4.2% 6.0% -7.7% 15.9% -33.7% 25.4% 9.9% 1.3% -5.3% 9.6% 16.6%
Figure 49: YTD trading volumes Figure 50: YTD total turnover (MYRm)

36
Surging trading momentum. Robust trading interest has been observed across all indices,
including FBM KLCI, FBM 70, and FBM SC, with significant surges in trading volume and
turnover YTD. Notably, the turnover for the FBM 70 and FBM KLCI has reached levels
comparable to the highs seen during the pandemic, when high market liquidity was boosted
by a low interest rate environment. This uptick was attributed to overall positive market
sentiment – driven by ample liquidity, robust domestic economy, supportive government
policies, and thematic plays ie Johor, water, infrastructure, data centres and the anticipation
of stronger YoY corporate earnings.
Figure 51: YTD trading activity by sector – FBM 70 Figure 52: YTD trading activity by sector – FBM SC
Further upside bias is supported on valuation grounds, with various bottom-up

opportunities remaining for alpha generation within the small-mid cap space. According to
Bloomberg's compilation, valuations for both the FBM 70 and FBM SC are currently at +0.5SD
above their 5-year mean levels. In terms of valuation spread vs the FBM KLCI, the FBM SC is
trading at a discount (-2x) to the FBM KLCI, falling below its 10-year historical mean valuation
spread, further emphasising the potential for alpha returns in this sector. Conversely, the
FBM 70 trades at a premium (+2x) to the FBM KLCI, reflecting its strong performance over
the past year and remaining above historical mean levels.
Nonetheless, the valuation spread is less compelling based on stocks under RHB’s coverage
(Figure 53). Small to mid-cap stocks are now trading at par with the FBM KLCI, albeit with
higher FY24F growth prospects of 16.9% for the small-to-mid caps vs 8.3% growth for the
FBM KLCI, based on stocks under our coverage.
Figure 53: Historical valuation spread
Source: Bloomberg, RHB.

37
Figure 54: P/E band for the FBM SC Figure 55: P/E band for the FBM 70
Positive sentiment will continue to support the rally. We believe the bull run for both the
FBM 70 and FBM SC will sustain into 2H24, although 3Q24 may see more sideways
movement due to the strong run-up in 1H, awaiting liquidity from foreign investors.
Nonetheless, positive market sentiment will continue to be supported by a robust domestic
economic outlook and promising corporate earnings growth. Market liquidity should still be
abundant, with local institutions maintaining a risk-on sentiment and refocusing their
mandate into the domestic market for certain houses. Additionally, pump-priming
infrastructure spending and elevated disposable income from the newly-implemented EPF
Account 3 are expected to boost the consumption amid stronger spending power.
Despite the strong YTD outperformance, small- and mid-cap stock valuations remain fair –
trading slightly above its 5-year mean vis-à-vis their growth potential. Various in-trend
thematic plays are concentrated in the small-mid caps segment, attracting unwavering
interest from investors. These include, but are not limited to the Johor and Sarawak themes,
data centre-related play, infrastructure, commodity trend, trade recovery, revival in
semiconductor and electronic manufacturing services (EMS), and trade tension diversion
plays.
We believe the majority of these investment themes remain relevant into 3Q24. However, it
would be prudent to top-slice names with rich valuations and high expectations, while
bottom-fishing for laggard names with potential turnarounds and low expectations, as some
of the potential beneficiaries are well-flagged and the risk-reward ratio is no longer
compelling. Balancing exposure between value and growth stocks is paramount in the current
dynamic landscape.
On top of that, imminent China FDIs and more cooperation in agricultural commodities, digital
economy, green development, tourism, housing and urban development, higher education,
and technology are expected to boost market sentiment. The merger and acquisition (M&A)
angle for some stocks within this space remains a strong catalyst for an outperformance.
Favourable industries include property, construction, consumer, logistics, O&G and
technology.
The roll-out of major infrastructure projects and improving property sales, coupled with
booming industrial properties and DC-related jobs, will continue to support the property and
construction sectors. The logistics sector, including ports and third-party logistics (3PL),
should witness higher throughput volume due to a rebound in trade activities and higher
freight rates stemming from port congestion.
Consumer companies are expected to see better profitability from a low base in 2023,
boosted by higher disposable income and the normalisation of input costs. O&G activities are
anticipated to remain high, driven by better FPSO rates and demand, while solar energy
continues to be in trend due to favourable policies and downward-trending panel prices.
We expect the recovery in the technology sector to continue into 2H24 and beyond,
supported by better guidance and visibility, but an uneven recovery is observed across
different segments. Additionally, the non-semiconductor space – particularly players in the IT
infrastructure segment – should continue benefitting from public spending, data centre
growth, and the tech refresh cycle.

38
Key risks:
i. Persistent high-interest rate environment; Analyst

ii. Susceptible to higher input costs; Lee Meng Horng
+603 2302 8115
iii. Slump in consumer demand; lee.meng.horng@rhbgroup.com
iv. Earnings disappointments;

v. Liquidity issues, which may compound fund outflows;
vi. Unfavourable FX movements;
vii. Higher ESG-related risks for smaller-cap companies.
Figure 56: Small-mid cap Top Picks

Price TP Shariah Mkt EPS EPS Growth P/E P/BV P/CF DY Rec
compliant cap (sen) (%) (x) (x) (x) (%)
(MYR/s) (MYR/s) (MYRm) FY24F FY25F FY24F FY25F FY24F FY25F FY25F FY25F FY25F
25 Jun 2024
MPI^ 38.60 44.80 YES 7,679 87.2 146.3 127.1 67.7 44.3 26.4 3.5 12.3 1.2 Buy
UEM Sunrise 1.04 1.60 YES 5,261 1.7 1.8 23.1 4.6 60.1 57.5 0.7 35.2 0.0 Buy
Mah Sing Group 1.75 2.26 YES 4,480 10.0 11.0 12.4 10.6 17.6 15.9 1.1 27.8 2.9 Buy
Guan Chong 3.62 5.10 YES 4,252 33.9 41.7 266.8 23.0 10.7 8.7 1.8 4.5 2.9 Buy
Dayang Enterprise 2.69 3.58 YES 3,114 21.0 23.8 29.4 13.4 12.8 11.3 1.5 8.6 1.7 Buy
Kerjaya Prospek Group 1.82 2.15 YES 2,295 12.9 14.0 24.6 8.6 14.2 13.0 1.9 17.0 5.5 Buy
TASCO^ 0.87 1.15 YES 696 9.8 10.8 28.5 10.1 8.9 8.1 0.9 4.9 2.6 Buy
OCK Group 0.58 0.76 YES 619 4.8 5.7 39.4 19.0 12.1 10.2 1.1 2.6 1.6 Buy
Mynews^ 0.68 0.81 NO 510 1.8 4.0 282.9 122.3 37.7 17.0 1.8 3.8 1.8 Buy
Focus Point 0.80 1.12 YES 370 8.0 9.2 13.5 14.2 9.9 8.7 2.3 4.1 5.7 Buy
AWC 1.03 1.06* YES 340 9.3 10.9 57.8 16.9 9.9 8.5 8.5 6.9 2.2 NR
Inta Bina 0.44 0.54* YES 238 5.5 6.0 28.0 9.9 7.0 6.4 6.4 11.4 3.9 NR
Note: ^FY24F-25F valuations refer to those of FY25F-26F
Source: RHB

39
FBM KLCI: From a Technical Perspective

Figure 57 : FBM KLCI monthly chart
Jul 2014’s high

1,896
Head &
Shoulder Dec 2020’s high
1,696
1,613
1,500
Aug 2015’s low Bullish

1,504 1,452 Marubozu
“Hammer” low 1,208
Source: RHB, Bloomberg
Short-term weakness; bullish for the long term

Upside movement blocked by immediate resistance. The FBM KLCI went into a sideways
consolidation after failing to extend its upside movement. In May and June, the index charted a
candlestick with a long upper shadow, and the 1,613-pt resistance level remained intact.
Strong support formed at the 1,500-pt level. In event that the index pulls back for a correction,
we expect strong support to emerge at 1,500 pts. We observed that the 1,500-pt level is a major
support level, which has been tested at least twice since Jul 2021. The technical setup will remain
bullish as long as the index stays above 1,500 pts.
Bulls are looking to stage a breakout. Post consolidation, the index may attempt to break past
the 1,613-pt immediate resistance level. In a bullish setup, the resistance tends to be weak and a
bullish breakout is likely.
Breakout would lift the index higher. An extension of the bullish setup, or a fresh “higher high”,
would propel the index towards the next resistance level of 1,696 pts. Towards the downside, the
immediate support level has formed at 1,500 pts, followed by the lower support at 1,452 pts.
Analyst
Joseph Chai
+603 2302 8113
joseph.chai@rhbgroup.com

40
FBM 70: From a Technical Perspective

Figure 58 : FBM 70 monthly chart
19,500
18,000
Jan 2018’s high: 16,894
16,000
14,200
One White Soldier
Aug 2015’s low:

11,024
Mar 2020’s low:
8,952
Eyeing a bullish breakout

Technical setup remains bullish. The FBM 70 extended its upside movement in 2Q24, breaking
past the 16,894-pt resistance level (2018’s high) to close at 17,842 pts. The latest “higher high”
candlestick has strengthened the bullish technical setup.
Bullish momentum still in play. Since breaking past the 14,200-pt resistance level in Dec 2013,
the index has been moving upwards in a series of “higher highs” and “higher lows”. Although the
index has yet to cross above the 18,000-pt resistance level, it charted a bullish candlestick in June.
The price action suggests that the bullish momentum remains strong.
A strong support has formed. Despite the strong bullish momentum in play, we do not discount
the possibility of the index resorting to a correction. We expect strong support to emerge at
16,000 pts, which is a resistance-turned-support level.
Testing the 18,000-pt resistance. In the event that the index breaks past the 18,000-pt
resistance, it will extend its bullish trajectory to test the higher resistance level of 19,500 pts.
Towards the downside, the support levels are marked at 16,000 pts, followed by 14,200 pts.

41
FBM SC: From a Technical Perspective

Figure 59 : FBM SC monthly chart
21,500
Aug 2014’s high:

19,388
Double Top Apr 2021’s high:
17,446
Neckline/Support
15,119
Mar 2020’s low:

7,520
Testing key resistance level

Looking to cross above 2024’s high. The FBM SC broke past the 17,446-pt double-top resistance
level to close stronger at 19,290 pts. The breakout reaffirmed that the bulls have the technical
advantage and are aiming to extend the upside movement.
Bulls still in the driver’s seat. Although the index charted a candlestick with a long upper shadow
in June, the technical setup remains bullish. We observed that for the past three months, the index
has been charting a series of “higher highs” with “higher lows”, showing that strong bullish
momentum is underway.
Strong support established. The double-top resistance has turned into the immediate support
level. The 17,446-pt level will provide an immediate buffer if the index resorts to a correction. In
a bullish setting, the support tends to be strong.
Poised to move into uncharted territory. In the months ahead, the index may move sideways for
consolidation. However, if it climbs above 2014’s high (19,388 pts), the index will be lifted towards
the next resistance at 21,500 pts. On the downside, the immediate support is marked at 17,446 Analyst
pts, followed by the lower support at 15,119 pts. Joseph Chai
+603 2302 8113
joseph.chai@rhbgroup.com

42
Auto & Autoparts: Anticipating a Weaker 2H Performance NEUTRAL
Our 2024F TIV is revised to 740k. May TIV totalled 68.7k units, marking an 18% MoM
increase after a seasonally softer April – this brought 5M24 TIV to 328.9k units (+8% YoY).
The strong YTD growth was mainly driven by outstanding Perodua sales, which grew by 20%
YoY even after two years of record-high sales. Hence, we now forecast a higher 2024 TIV of
740,000 units from 625,000 units, implying an 18% upward revision. We believe our previous
assumption was too conservative, given the stronger-than-expected TIV performance to date
– thanks to stronger Perodua sales. We have revised our 2024 Perodua sales assumption to
330k units from 250k units, ie a 32% rise. Our revised 2024F TIV is in line with the Malaysian
Automotive Association’s TIV estimate for the year. This translates to a 7.5% YoY decline in
this year’s TIV after two record-breaking years, as we expect 2024 Perodua sales to be flattish
YoY while TIV ex-Perodua declines YoY. We believe a meaningful decline will likely be seen in
2H as backlogs recede and sales volumes normalise. Note: Excluding Perodua, YTD TIV only
grew by 0.7% YoY.
First national EV soon? Proton recently launched its new EV brand, e.MAS. This brand will be
used for all future Proton EVs. While no timeline has been set, the latter anticipates that its
first model will be launched as soon as 2025, or even earlier. Proton’s other local carmaker
counterpart, Perodua, also unveiled its EV prototype recently as it plans to launch its first EV
by end-2025. The latter said the pricing for its EV will be within MYR50-100k, which will make
it the most affordable EV in the country. However, we believe the emergence of local EVs
would only move the TIV needle from 2025 onwards.
Minimal impact of subsidy rationalisation, for now. The Government’s subsidy
rationalisation commenced in early June, beginning with the removal of diesel subsidies. In
general, the impact on the sector has been minimally negative, as most companies under our
coverage have around 5% of total exposure. The exception is Tan Chong Motor (TCM MK,
SELL, TP: MYR0.73), as Nissan’s diesel-powered Navara makes up 25% of the latter’s total
models registered in 2023. Note: In 2023, c.8% of cars registered domestically were diesel-
powered vehicles. However, while the petrol subsidy rationalisation is confirmed to take
effect, the timing remains unknown. We believe the impact of such subsidy rationalisation on
the auto sector would mainly be in the mid-market segment, as the low-income group is still
expected to benefit from subsidies. Meanwhile, high-income earners should be less affected
by the ending of subsidies, in our view.
What to expect ahead? Major marques such as Perodua and Toyota have seen declines in
their order backlogs to 100k and 20k currently, from 128k and 28k in end-Dec 2023.
Furthermore, the loan approval rate for vehicle purchases YTD is 59% (2022-2023: 62-63%)
while gross loans for vehicle purchases have grown by only 4.3% despite TIV rising by 8%. This
may imply tighter lending requirements and downtrading activities by consumers. Coupled
with looming inflationary pressure, we believe car sales will continue to recede in the coming
quarters as sales volumes normalise. For 2H24, we anticipate TIV to be weaker YoY, given the
receding backlogs. This is in line with our view that the sector is seeing a cyclical downturn in
sales volumes after two record-breaking years.
Maintain NEUTRAL on the sector, premised on a weaker TIV performance as normalisation
of sales volumes take place, likely in 2H24. Our Top Pick is still Bermaz Auto (BAUTO MK,
BUY, TP: MYR3.25), as we still like its c.9% dividend yield and believe its car sales should
remain resilient vs those of other marques. Analyst
Syahril Hanafiah
Key downside sector risks include softer-than-expected orders and deliveries, and resurgent +603 2302 8131
supply chain issues. The opposite represents the upside risks. syahril.hanafiah@rhbgroup.com
Figure 60: Valuations of auto stocks

Price Target Mkt cap P/E (x) EPS growth (%) P/BV(x) P/CF(x) ROE (%) DY (%) Rec
(MYR/s) (MYR/s) (MYRm) FY24F FY25F FY24F FY25F FY24F FY24F FY24F FY24F
Sime Darby 2.60 3.20 17,721 13.2 11.1 15.9 19.5 0.8 5.1 7.1 5.0 Buy
Bermaz Auto^ 2.50 3.25 2,920 9.2 8.0 (10.1) 14.4 3.3 7.4 37.3 8.8 Buy
MBM Resources 5.20 4.70 2,033 6.9 9.4 (12.1) (26.4) 0.9 20.4 13.5 9.2 Neutral
Tan Chong Motor 0.86 0.73 557 n.m. n.m. 36.0 36.0 0.2 1.7 (2.7) 1.2 Sell
Sector Avg 10.1 9.1 3.9 7.2
Source: RHB

43
Banks: In Search Of a Rerating Catalyst NEUTRAL
2Q24 and YTD banks’ performance review. Banking stocks’ performance took a breather in
2Q24, after a decent start to the year. YTD, the sector’s total return of 9% is in line with that
of the FBM KLCI. Outperformers were Affin (ABANK MK, SELL, TP: MYR1.65) on
expectations that the emergence of a new major shareholder will be a fundamental
gamechanger for the group, and CIMB (CIMB MK, BUY, TP: MYR7.60) on earnings
momentum and potential capital management initiatives. On the other hand, notable laggards
have been defensive names – Public Bank (PBK MK, BUY, TP: MYR4.80) and Hong Leong Bank
(HLBK MK, BUY, TP: MYR23.60).
1Q24 reporting quarter – a good start, with sector PATMI rising 7% YoY (+5% QoQ)
underpinned by operating income strength. 1Q24 operating income rose 11% YoY (+5%
QoQ) on robust non-II (+32% YoY; +12% QoQ) thanks to stronger treasury and markets
income as well as decent fees. Meanwhile, NII was up by a more modest 4% YoY (+2% QoQ),
with healthy loan growth more than offsetting lingering NIM pressures (-1bp QoQ, -7bps
YoY). Opex was elevated YoY but thanks to the strong income growth, cost efficiency was
sustained. Also, while credit cost ticked up further by 2bps YoY to 22bps (4Q23: 30bps), the
GIL ratio improved to 1.48% from 1.62% a year ago and LLC was comfortably above the 100%
mark at 109% (1Q23: 117.5%).
Key takeaways from results briefings. Banks continue to appear guarded in their
macroeconomic outlook, citing factors such as geopolitical uncertainties, a higher-for-longer
global interest rate environment, inflationary pressures and, domestically, the normalisation
of interest rates, among others. That said, we note optimism on NIMs ahead as banks continue
with efforts to lower funding costs and improve asset yields. As for loans, demand remains
supported by retail loans, SMEs loans and the rollout of infrastructure projects – but some
banks could pare back growth in the quarters ahead to conserve capital and if margins are too
thin. Also, some banks mentioned that capital markets-related fee income and trading gains
are harder to forecast, as these depend on market opportunities – implying that the 1Q24
non-II may be challenging to repeat. Finally, while there were upticks in GIL for the retail and
SME portfolios, overall asset quality continues to hold up. This, coupled with overlay buffers
in banks’ books, should help keep credit cost in check.
Sector earnings outlook. Our FY24F-25F sector PATMI remains relatively unchanged, with
minor tweaks made to some individual banks’ forecasts. There were also no recommendation
changes made during the reporting quarter. We continue to expect the sector to post net
profit growth of 5-6% in FY24-25 on a rebound in NII. We have pencilled in NIMs stabilising
in 2024 after a 25bps YoY drop in 2023 and, despite a mild moderation in loan growth, these
should help NII recover from the decline in 2023. We have also assumed that the credit cost
will ease to 23bps in 2024 from 24bps in 2023. For now, despite the strong start to non-II, we
continue to assume a moderation in sector non-II growth to 6% YoY (2023: +30%), with fees
helping to pick up some of the modest growth from non-fee income.
Maintain sector NEUTRAL, amid a backdrop of normalising sector earnings growth. Indeed,
notwithstanding a decent 1Q24 reporting quarter and sector valuation that is at -1SD from
mean levels, the muted share price performance of banks in 2Q indicates that investors are in
search of better growth opportunities elsewhere. It may also be possible that the sector has
undergone a structural derating, but we do not think that is the case at this juncture, given
solid capital and loan loss coverage buffers. We continue to advocate stocks with better
growth prospects – earnings and/or dividends. Our sector preferred picks are CIMB (above
average earnings growth plus potential for capital management) and AMMB (AMM MK, BUY, Analysts
TP: MYR5.50) (DPS growth given management’s target to double absolute DPS by FY29). We David Chong, CFA
also like Public Bank and Hong Leong Bank for their defensiveness and on valuation grounds, +603 2032 8106
david.chongvc@rhbgroup.com
while ABMB (ABMB MK, BUY: TP: MYR4.40) is our small-cap pick on valuation grounds.
Sector risks. Upside risks to earnings estimates could come from: i) Better-than-expected Nabil Thoo
NIM, should competition for deposits pan out to be milder than expected; ii) stronger-than- +603 2302 8123
expected credit demand, should economic activities pick up significantly; and iii) lower-than- nabil.thoo@rhbgroup.com
expected credit cost, should delinquencies moderate and asset quality improve, which could
allow banks to write back some of the built-up overlays. Downside risks stem from weaker- Ammar Affan
than-expected NIM and/or non-II. Higher-than-expected opex from an inflationary +603 2302 8103
environment, business expansion, and technology spending could also lead to weaker-than- ammaraffan@rhbgroup.com
expected bottomlines.

44
Figure 61: 2Q24 total returns from Malaysia banks were Figure 62: YTD, Affin outperformed on news flow while defensive
relatively muted despite the sector posting a decent set of 1Q banks lagged
results
Figure 63: MY Banks’ 12-month forward P/E Figure 64: MY Banks’ 12-month forward P/BV vs ROE
Figure 65: Valuations of bank stocks

Price Target Mkt cap P/E(x) EPS growth (%) P/BV(x) DY (%) ROE (%) Rec
(MYR/s) (MYR/s) (MYRm) FY24F FY25F FY24F FY25F FY24F FY25F FY24F FY25F FY24F FY25F
Public Bank 4.00 4.80 77,643 11.2 10.7 4.1 4.6 1.3 1.3 5.0 5.3 12.3 12.2 Buy
CIMB 6.68 7.60 71,436 9.4 8.8 9.0 6.2 1.0 0.9 5.9 6.3 10.9 10.9 Buy
HL Bank 19.16 23.60 41,533 9.7 9.2 5.8 5.3 1.1 1.0 3.2 3.4 11.5 11.2 Buy
AMMB^ 4.29 5.50 14,181 7.9 7.4 3.9 7.2 0.7 0.7 5.7 6.1 9.0 9.2 Buy
Alliance Bank^ 3.77 4.40 5,836 8.0 7.4 6.2 8.0 0.7 0.7 5.1 5.5 9.8 9.8 Buy
Maybank 9.91 10.60 119,583 12.1 11.6 5.5 4.8 1.2 1.2 6.4 6.7 10.3 10.5 Neutral
BIMB 2.49 2.45 5,644 9.3 8.8 11.4 6.1 0.7 0.7 6.4 6.8 8.1 8.3 Neutral
Affin 2.48 1.65 5,953 12.5 11.3 13.6 11.5 0.5 0.5 3.2 3.6 4.1 4.4 Sell
Sector Avg 10.7 10.1 6.1 5.3 1.1 1.0
Source: RHB

45
Basic Materials: Capitalising On The Construction Boom NEUTRAL
Aluminium
Our thesis and view on the prospects of the aluminium sector remains unchanged despite the
recent rally in London Metal Exchange (LME) aluminium prices, which was attributed to the
expected surplus in FY24 –we are now seeing the build-up of both LME and Shanghai
aluminium inventory levels. Despite historically low aluminium inventory levels, global
aluminium demand remains unexciting due to weak demand persisting in Europe and mixed
performances among sub-sectors in China. While we recognise Press Metal (PMAH MK, TP:
MYR5.14) as one of the lowest-cost smelters in the world, we retain our NEUTRAL
recommendation on the stock. This is given the lukewarm sentiment surrounding the
aluminium industry, coupled with limited upside potential in PMAH’s current valuation.
Raw material prices. Following the spike in LME prices in May (2Q average: USD2,600 per
tonne), we seeing prices softening to USD2,400 per tonne. Meanwhile, carbon anode prices
still remain below the CNY4,000 (c.USD550) per tonne mark, in line with our expectations.
Barring any significant supply shortages, we anticipate prices to remain at this level. Our
house assumptions aluminium prices remain at USD2,300 (FY24) and USD2,350-2,400 per
tonne (FY25).
Figure 66: Aluminium vs alumina price trend Figure 67: Carbon anode price trend (CNY/tonne)
Figure 68: LME aluminium inventory Figure 69: Shanghai aluminium inventory

46
Cement
Cement price trend. Following the cost-push inflationary pressures seen in 2022, bulk
cement prices have stabilised. They continue to be sustained at MYR380 per tonne as of May
2024 as the demand for cement continues to grow, as evidenced by the strong sales volumes
recorded by cement companies since 1H23. We expect to see prices remaining within this
price point, given the strong demand due to the anticipated influx of mega infrastructure
projects in the country.
We prefer cement players over aluminium firms due to their direct exposure to the rebound
in construction and property activities. With numerous infrastructure projects on the
domestic horizon, building materials players – particularly cement producers – are expected
to reap significant benefits from the country’s infrastructure initiatives.
Figure 70: Bulk and bag cement prices Figure 71: Cement production in Malaysia (Jan 2019-Sep 2023)
Maintain NEUTRAL. Our sector Top Pick is Malayan Cement (LMC MK, BUY, TP: MYR 7.18). Analyst
We prefer LMC among the cement makers, given its pricing power as the market leader and Nai Wan Yan
because it is a direct beneficiary of the revival in West Malaysia’s construction and property +603 2302 8125
activities. Key downside risks: i) Higher-than expected raw material costs, and ii) a sharp nai.wan.yan@rhbgroup.com
deterioration in global economic conditions, which will dampen construction activities and
undermine the demand for aluminium and cement.
Figure 72: Valuations of basic materials stocks

Price Target Mkt Cap P/E (x) EPS Growth (%) P/BV(x) P/CF(x) ROE (%) DY (%) Rec
Kelington Group 3.40 3.85 2,292 22.6 21.6 10.3 4.7 7.4 8.9 35.7 1.6 Buy
Malayan Cement 4.94 7.18 6,583 11.8 11.5 230.0 2.9 0.9 11.8 8.6 0.0 Buy
Press Metal 5.79 5.14 47,707 27.0 25.1 45.7 7.7 5.7 29.3 23.0 1.1 Neutral
CMS 1.33 1.12 1,429 13.0 8.7 8.2 48.8 0.4 5.6 3.3 1.7 Neutral
Sector Avg 23.4 21.6 62.2 7.1
Source: RHB

47
Construction: Still Room To Go Higher OVERWEIGHT
We maintain our OVERWEIGHT sector call. Our broad view on the sector remains
unchanged. Despite the Bursa Malaysia Construction Index gaining more than 50% over the
last 12 months, we believe there is still room for the sector to move higher. This is premised
on additional positive factors that were not present during the 2017 construction sector
upcycle (when most contractors benefited from rampant job replenishment trends) – namely
the data centre cycle boom and the uptick in industrial building jobs, fuelled by robust foreign
direct investment trends.
Contract rollouts (private and government) have generally been active so far with
MYR69.9bn worth of construction projects awarded in 5M24, 37% YoY higher than the
MYR50.9bn recorded in 5M23. Moreover, Deputy Works Minister Datuk Seri Ahmad Maslan
estimated that 40% of the MYR90bn development expenditure allocated under Budget 2024
will be given out in the middle of this year.
We take comfort from the slew of private sector projects which we believe may continue to
grow (particularly in the industrial space such as data centres and factories). According to the
National Property Information Centre (NAPIC), the value of transactions for industrial
properties grew 28% YoY in 1Q24. In fact, the value of projects awarded for the non-
residential property segment (which includes industrials) hit MYR52.2bn in 5M24 – more
than half of the MYR81bn recorded in 2023.
A major catalyst would be a quicker-than-expected rollout for other mega projects ie Mass
Rapid Transit (MRT) 3, which we think may see its debut towards late 1H25 as MRT Corp is
expected to finalise the land to be acquired in late 2H24, in our view. As for the Kuala Lumpur-
Singapore High Speed Rail (HSR), we expect announcements on the shortlisting of
consortiums for the request-for-proposal stage to be by the end of 3Q24, subject to the
Government’s approval post evaluation by MyHSR Corp.
We expect the revenue recognition of contractors to ramp up in CY24 in tandem with the
higher value of construction work done. The total value of construction work done in 1Q24
grew by 14% YoY or 7.8% QoQ to reach MYR36.8bn – the highest in 17 quarters. In terms of
sub-sector, the value of construction work done in 1Q24 for civil engineering saw the largest
rise, up 24.7% YoY. We think this is attributable to the ongoing infrastructure projects
expected to be fully completed within the next 1-3 years, ie the Light Rail Transit (LRT) 3
(c.95% physical completion), Pan Borneo Highway Sarawak Phase 1, and East Coast Rail Link
(c.64% completion).
Impact of fuel subsidy rationalisation. Generally, fuel in the form of diesel usually makes up
1-2% of a contractor’s total cost component. Therefore, any rise in these components would
have a negligible impact on contractors’ overall costs. For the purpose of powering machinery
and equipment, contractors have always only been able to purchase diesel at the market price
(or unsubsidised price). Hence, any removal of the subsidy in diesel price should not have an
impact on contractors, in terms of operating machineries at the site.
Valuations. The Bursa Malaysia Construction Index (BMCI) is trading at a forward P/E of 17x
– above the 15-16x level seen during the 2017 construction upcycle (a period during which
most large-cap contractors saw an uptick in job wins). We view that there is still room for
upside for the BMCI, premised on the prevalence of data centre and industrial jobs not
present during the 2017 upcycle. As mentioned above, Datuk Seri Ahmad Maslan estimated
that 40% of the MYR90bn development expenditure allocated under Budget 2024 will be
given out in the middle of this year.
We advocate investors to be selective on players that have credentials in local public
infrastructure projects while still having decent exposure either in overseas markets or
private industrial jobs, in addition to having a lean balance sheet (net cash or manageable net
gearing positions). Such attributes are crucial to weather any downside risks that may arise in
the form of unexpected labour shortages, a slow rollout of public infrastructure projects in
Malaysia, and unexpected heightened volatility in building material costs. Contractors that
suit these criteria are Gamuda (GAM MK, BUY, TP: MYR7.69), Sunway Construction (SCGB
Analyst
MK, BUY, TP: MYR4.92), and Kerjaya Prospek (KPG MK, BUY, TP: MYR2.15).
Adam bin Mohamed Rahim
Key downside sector risks to our investment view would stem from: i) Slower-than-expected +603 2302 8101
rollout of mega projects, ii) unexpected cuts to overall project costs, and iii) an unexpected adam.mohamed.rahim@rhbgroup.com
shortage of labour supply for the construction sector.

48
Figure 73: Construction projects already/expected in the pipeline (not comprehensive, updated as of June)
Estimated job
Projects Latest updates Announced/potential winners
value (MYRbn)
As of end 1Q24, the LRT3 project (initial stations) Any reinstatement of the previously five omitted stations could be
Reinstatement
c.1.5 (for had achieved 94% completion, with the awarded to Malaysian Resources Corp (MRC MK, BUY, TP:
of five LRT3
stations) commencement of the LRT Shah Alam Line MYR0.80) as the main contractor. Subcontractors may comprise
stations
operations targeted for 1 Mar 2025. Gabungan AQRS (AQRS MK. BUY, TP: MYR0.50) and SCGB.
Phase 1 of SSLR has reached 13.6% completion as at

Phase 2 of SSLR could likely be secured by Kimlun Corp (KICB MK,
Sabah-Sarawak Apr 2023 with expected completion by Jan 2026.
1.1 (for Phase 1) NR) on a subcontractor level, as the main contractor has been
Link Road (SSLR) The Phase 2 of SSLR estimated at (c.MYR7.2bn) has
appointed.
been awarded to Maltimur Aktif Unggul JV.
Pan Borneo Second phase of PBH Sarawak likely to be secured by either KKB
Phase 1 of the Sarawak PBH project is c.98.9%
Highway 16.2 (Phase 1) Engineering (KKB MK, BUY, TP: MYR2.11), Zecon (ZEC MK, NR), or
complete as at Dec 2023.
(PBH)Sarawak Naim Holdings (NHB MK, NR).
Phase 1A of Sabah Pan Borneo Highway project,

spread over 15 packages, is 88% complete as of Jan
Phase 1B of PBH Sabah is eyed by GAM, MRC, and Gabungan
Pan Borneo 2024 and is on track for completion by Jan 2025.
15.7 (Phase 1B) AQRS. So far, there are two non-listed contractors which secured
Highway Sabah Meanwhile, for Phase 1B of Pan Borneo Highway,
packages under this project.
the remaining 16 packages out of 20 will be rolled
out by end-1H24.
Linewide progress stood at 64% as at March. The line
from Kota Bharu, Kelantan to Gombak is set to be Remaining portions to be secured by contractors could be for the
East Coast Rail
50.3> completed in late 2026, while the line from Gombak southern portion which connects to Port Klang. Potential
Link
to Port Klang is expected to be completed by late beneficiaries include IJM Corp (IJM MK, BUY, TP: MYR3.60).
2027.
Approved by the Federal Government in March and

Penang Light
comprises three segments – Silicon Island to Komtar
Rail Transit c.10 GAM for Segment 1 and IJM, MRC, and SCGB for Segment 2.
(Segment 1), Komtar to Penang Sentral (Segment 2),
Mutiara Line
and rolling stocks and systems package (Segment 3).
Upper Padas 187.5 MW hydroelectric plan developed under a

Hydroelectric 4.0 45:40:15 partnership between GAM, Sabah Energy GAM to undertake the majority of construction works.
Dam Corporation, and Kerjaya Kagum Hitech JV.
Johor State Government has identified three lines

for the LRT that stretches 30km – Tebrau, Skudai,
Johor Bahru and Iskandar Puteri lines, which will stretch until the
16-20 Potential winners: SCGB, Kimlun and MGB.
Light Rail Transit Senai International Airport in Kulai. The project is
subject to the implementation of an LRT or
autonomous rapid transit (ART) in Johor.
Johor state Government is opting to build an ART
system with a shorter construction timeline
Johor Bahru
(compared to the Johor Bahru LRT) – enabling ART
Autonomous 7 Potential winners: SCGB and Kimlun.
services to coincide with commencement of the
Rapid Transit
Johor Bahru Rapid Transit System (RTS) Link in
2027.
Nationwide
MYR11.8bn was allocated under Budget 2024 for
flood mitigation 11.8 MRC has been shortlisted for a flood mitigation project in Selangor.
the nationwide flood mitigation project.
project
Sungai Klang Various contractors ie Econpile (ECON MK, BUY, TP: MYR0.69) and
Link elevated 8-10 Award of contracts should take place in 2H24. MTD Construction have inked MoUs with the Sungai Klang Link S/B
highway for the development of the project.
PLUS Malaysia presented the proposal to the Public-
Juru-Sungai Dua
Private Partnership Unit (of the Prime Minister’s
elevated 1.8 Pintaras Jaya (PINT MK, BUY, TP: MYR2.09).
Department) in February. Once confirmed, the next
highway
step would involve seeking the cabinet’s approval,
MyHSR Corp is currently evaluating concept
Kuala Lumpur-
proposals by seven consortiums (after the deadline Potential winners: MRC and IJM (via consortium with Berjaya Rail
Singapore High 60-100
to submit concept proposal on 15 Jan) before and Keretapi Tanah Melayu) and YTL Corp (YTL MK, NR).
Speed Rail
proceeding to the request-for-proposal stage.
Land acquisition process to start in 2Q24 with the
finalisation of land to be acquired expected to be in
Mass Rapid Potential winners: SCGB, IJM, Gamuda, TRC Synergy (TRC MK,
34.3> 3Q24 based on MRT Corp’s timeline. We think that
Transit 3 NR).
contract awards for MRT3 could likely happen after
this – in 1H25.
Note: *Project value reduced post revision
Note 2: >Civil works
Source: Various media, Company data, RHB

49
Figure 74: Valuations of construction stocks

Gamuda 6.50 7.69 18,009 19.3 15.9 2.9 21.3 1.6 (36.5) 8.2 2.5 Buy
IJM Corp^ 2.99 3.60 10,483 20.1 19.1 4.0 5.5 1.0 16.6 5.0 2.7 Buy
Sunway Construction 3.73 4.92 4,809 26.9 19.7 5.1 36.6 5.4 10.4 20.9 2.2 Buy
MRCB 0.62 0.80 2,770 68.3 51.5 161.3 32.6 0.6 4.3 0.9 1.6 Buy
Kerjaya Prospek 1.82 2.15 2,295 14.2 13.0 24.6 8.6 2.0 11.9 14.1 5.5 Buy
Econpile^ 0.45 0.69 638 n.m. 72.0 12.1 148.1 1.7 (329.5) (4.9) 0.0 Buy
KKB Engineering 1.67 2.11 482 16.4 13.7 10.2 19.0 1.1 58.1 7.1 3.1 Buy
MGB 0.80 1.16 473 8.5 7.6 16.0 11.8 0.8 4.8 9.6 2.3 Buy
Pintaras 1.75 2.09 290 34.0 27.2 197.1 25.1 0.7 5.6 2.1 1.5 Buy
Gabungan AQRS 0.35 0.50 190 5.5 4.6 (8.3) 20.4 0.3 2.2 5.4 2.9 Buy
Sector Avg 21.1 17.7 5.2 19.3
Source: RHB

50
Consumer: Subsidy Rationalisation Still a Key Concern NEUTRAL
Top Picks: Mr DIY (MRDIY MK, BUY, TP: MYR2.20), Guan Chong (GUAN MK, BUY, TP:
MYR5.10), Heineken Malaysia (HEIM MK, BUY, TP: MYR29.60), DXN Holdings (DXN MK,
BUY, TP: MYR0.93), Focus Point (FOCUSP MK, BUY, TP: MYR1.12) and Mynews (MNHB
MK, BUY, MYR0.81). The introduction of EPF’s Account 3 and pay raises for civil servants are
effective measures to support consumer spending. In addition, the pickup in tourist arrivals
should benefit the consumer retail players. On the flip side, the uncertainty on the inflationary
impact of subsidy rationalisation will remain a key concern for the sector. Maintain NEUTRAL.
Key observations. The general feedback we gathered from companies is that consumer
sentiment has remained subdued, given the heightened inflationary pressures. This continued
to give rise to downtrading activities, as price-sensitive consumers constantly sought or
hunted for value. That said, recent supportive government measures such as the introduction
of EPF Account 3 and pay raises for civil servants, along with rising tourist arrivals, are positive
developments for the sector. Key concerns of corporations include the upcoming
implementation of subsidy rationalisation for petrol, FX risks, commodity market movements
and geopolitical risks.
Sector Top Picks. Mr DIY is a prime beneficiary to capitalise on the EPF’s flexible withdrawal
scheme and salary hikes of civil servants, given its entrenched network of stores and value-
for-money product offerings. We also highlight GUAN as strong demand has driven up its
ASPs, which should also limit the marked-to-market hedging losses going forward. We like
Focus Point for its industry-leading growth, underpinned by effective marketing initiatives
and rising population of myopic people. DXN’s valuation is undemanding – considering the
steady earnings growth whilst its dividend yield is attractive at c.6%. We also like Mynews, as
we believe the robust growth of the myNEWS brand and anticipated turnaround of the CU
brand could trigger a valuation rerating.
1Q24 sector results in line with expectations. Within our coverage, eight companies
reported earnings within expectations, four surprised on the upside and one disappointed ie
Analysts
Padini – dragged by aggressive price discounts and a rise in staff costs. With 1Q24 capturing
Soong Wei Siang
the festive demand of the Lunar New Year and Aidil Fitri, all companies under our coverage
+603 2302 8130
except Nestle Malaysia (NESZ MK, NEUTRAL, TP: MYR131.00) recorded robust YoY topline soong.wei.siang@rhbgroup.com
growth. The QoQ momentum was also largely positive, particularly for the consumer
discretionary players, with their performance lifted by favourable seasonal factors.
Meanwhile, there was a healthy GPM growth for most of the consumer staples companies Tai Yu Jie
including Farm Fresh, Nestle, and QL Resources – these were largely driven by easing input +603 2302 8132
tai.yu.jie@rhbgroup.com
costs.
Downside risks to our sector weighting include drastic subsidy rationalisation and a sharp
rise in commodity prices.
Figure 75: Valuations of consumer stocks
Price Target Mkt cap P/E (x) EPS growth (%) P/BV (x) P/CF (x) ROE (%) DY (%) Rec
Mr DIY Group 1.92 2.20 18,147 28.1 24.7 12.9 13.5 8.9 17.6 33.8 2.1 Buy
Heineken Malaysia 23.20 29.60 7,009 16.9 15.9 7.0 6.6 15.1 14.3 89.4 5.8 Buy
Carlsberg 18.76 22.20 5,736 16.7 15.6 6.3 7.1 20.0 13.8 131.4 5.1 Buy
VS Industry 1.27 1.49 4,873 27.5 18.6 (4.4) 47.6 2.2 14.7 8.2 1.8 Buy
Guan Chong 3.62 5.10 4,252 10.7 8.7 266.8 23.0 2.1 10.9 21.0 2.3 Buy
DXN^ 0.64 0.93 3,183 8.5 7.4 12.7 14.2 2.2 7.5 27.5 5.9 Buy
Farm Fresh^ 1.49 1.69 2,790 26.5 21.9 65.9 20.8 3.7 17.8 14.8 1.1 Buy
Leong Hup Int 0.61 0.82 2,227 8.0 7.7 (14.1) 3.8 0.9 4.0 11.9 3.8 Buy
SKP Resources^ 1.14 1.31 1,781 14.8 11.7 23.2 26.8 1.9 10.4 13.0 4.1 Buy
Synergy House 1.65 2.01 825 20.5 16.1 53.4 27.2 6.4 14.4 35.0 1.5 Buy
Mynews Holdings 0.68 0.81 510 37.7 17.0 282.9 122.3 1.9 4.3 5.2 0.8 Buy
Focus Point 0.80 1.12 370 9.9 8.7 13.5 14.2 2.7 4.4 29.2 5.0 Buy
Texchem 0.86 1.44 100 12.2 6.8 182.1 79.5 0.5 8.0 9.9 2.9 Buy
Nestle 122.50 131.00 28,726 37.0 35.2 4.0 5.0 42.1 25.4 114.4 2.7 Neutral
QL Resources^ 6.49 6.36 15,794 37.2 35.8 22.5 3.8 4.9 21.0 14.3 1.1 Neutral
Scientex 4.26 4.35 6,608 11.4 11.1 25.1 2.9 1.8 10.4 16.8 3.1 Neutral
Padini 3.81 3.68 2,507 14.6 14.1 10.8 3.7 2.2 8.3 14.3 2.8 Neutral
Aeon Co (M) 1.40 1.26 1,966 14.3 13.5 19.6 6.1 1.0 3.0 7.3 3.5 Neutral
Power Root^ 1.60 1.68 736 14.7 13.0 18.7 13.3 2.1 11.7 14.4 5.8 Neutral
Chin Well 1.21 0.94 347 30.7 10.3 (70.3) 197.6 0.5 19.4 1.7 1.3 Sell
Sector Avg 21.1 19.0 6.2 5.7
Source: RHB

51
Gaming (NFO): Approaching a Softer Season NEUTRAL
Still NEUTRAL on number forecast operators (NFOs). While ticket sales are gradually
improving and inching closer to pre-pandemic levels, we believe the current sector valuation
– close to its mean – is fair, and that the market has priced in the recovery in ticket sales.
Despite the lack of catalysts, and the sector’s generally unexciting outlook, we believe NFOs
offer defensive qualities due to the inelastic demand from punters, and their attractive yield
profile. We prefer Sports Toto (SPTOTO MK, NEUTRAL, TP: MYR1.69) on valuation grounds
and for its superior yield.
Approaching a softer season. Lottery ticket sales for 2Q24 are expected to decline, after the
recent strong sales (driven by the Lunar New Year period). Beyond the immediate term, NFOs
recognise the ongoing threat posed by illegal NFOs and believe the latter have gained market
share – especially in the two northern states where NFO outlets are not allowed to operate.
This has not only hampered the sales recovery, but also resulted in significant tax revenue
losses for the Government. In relation to the ban, we understand that NFOs are still in talks
with the federal and state governments on solutions (eg relocation) for the current situation.
Key catalysts for a sector re-rating include the enactment of stricter legislation against illegal
NFOs and the legalisation of online gaming. However, we believe these policies are not
currently prioritised by the Government.
SPTOTO’s HR Owen sales are also expected to decline after a seasonally strong 3QFY24
(Jun). We believe it will continue to face challenges from high inflation and interest rates in
the UK. With higher depreciation and interest expenses from its newly launched Hatfield
showroom, we believe HR Owen's margins will remain under pressure. That said, we highlight
that SPTOTO’S dividends are mainly from its lottery business. Hence, the challenges at HR
Owen should not hamper SPTOTO’S dividend payouts.
1Q24 results roundup. SPTOTO’s earnings and dividends exceeded expectations, primarily Analysts
due to higher-than-expected sales in the gaming and motor segments, driven by stronger Tai Yu Jie
seasonality. Gaming ticket sales rose due to the Lunar New Year festive season, while motor +603 2302 8132
revenue was boosted by the release of new vehicle registration plates in the UK. On the other tai.yu.jie@rhbgroup.com
hand, Magnum's (MAG MK, NEUTRAL, TP: MYR1.08) results disappointed, due to an
unfavourable luck factor (1Q24 prize payout: 67.6% vs 1Q23: 64.6%). Lee Meng Horng
Key downside risks include unfavourable luck factor and policies, as well as softer-than- +603 2302 8115
lee.meng.horng@rhbgroup.com
expected ticket sales. The converse represents upside risks.
Figure 76: SPTOTO’s prize payout trend Figure 77: Magnum’s prize payout trend
Source: Company data, RHB Source: Company data, RHB

52
Figure 78: SPTOTO’s sales per draw trend Figure 79: Magnum’s sales per draw trend
Figure 80: Valuations of gaming stocks

Price Target Mkt cap P/E (x) EPS growth (%) P/BV (x) P/CF(x) ROE (%) DY (%) Rec
Magnum 1.12 1.08 1,610 13.7 12.4 (6.0) 10.1 0.7 16.5 4.8 5.5 Neutral
Sports Toto 1.55 1.69 2,091 10.5 10.0 (10.2) 5.3 1.9 5.0 18.1 7.3 Neutral
Sector Avg 12.5 10.5 80.1 17.3
Source: RHB

53
Healthcare: Eyeing Sustainable Growth OVERWEIGHT
Maintain OVERWEIGHT. Growth prospects for the healthcare sector remain promising,
predicated by the players’ organic and inorganic expansion strategies, extended visa-free
entry for China tourists (the second largest contributors of health tourism revenue) until
2026, the inelastic nature of demand for healthcare services, rising health awareness among
consumers, and a rapidly ageing society. These should propel the growth of generic
drugmakers in the mid- to long-term. We now favour companies with strong pricing power
and solid balance sheets to sustain expansion, and trade at attractive valuations. With that,
IHH Healthcare (IHH MK, BUY, TP: MYR7.90) is now our Top Pick.
IHH. The primary focus for IHH will hinge on its aggressive expansion strategy going forward.
According to PWC, the global M&A trends in the healthcare industry is expected to accelerate
in 2024, as hospitals around the world are faced with financial and operational challenges
stemming from heightened operating costs and clinical workforce shortages. Being the
largest healthcare service provider in Asia, IHH’s clinical excellence and advanced medical
equipment will enable it to spread its geographical presence in the high-growth region. We
learnt that the company has held talks with various potential acquisition targets (local and
regional ie Indonesia and Vietnam). Notably, this includes Island Hospital Penang (a 600-bed
facility founded in 1996), which IHH is reported to be bidding for in an initial round. We
remain positive on IHH’s growth outlook, underpinned by the group’s organic expansion
strategy to boost its bed capacity by 4,000 by 2028, and backed by its healthy balance sheet.
KPJ Healthcare (KPJ MK, BUY, TP: MYR2.14). Meanwhile, we expect KPJ to record a
stronger 2H24 in view of an improvement in operating efficiency from hospitals under
gestation as well as a pickup in health tourism (HT). We learnt that KPJ has received an
overwhelming response from visitors during its marketing roadshows in Jakarta, which were
held in May. This, along with the influx of health tourists (visa-free travel for China and India
nationals), should propel KPJ’s growth trajectory in 2H24. Beyond HT, the group has been
actively driving its digital transformation plan, with the likes of the electronic medical record
(EMR) project (to be implemented by the end of 2024) and 5G-enabled VSI Holomedicine
(introduced at the Damansara Specialist Hospital 2 (DSH2)). We expect further margin
improvement in KPJ’s operating efficiency, as its hospitals under gestation continue to report
narrower losses. That said, we understand the operating metrics of DSH2 have improved,
evidenced by its rising bed occupancy rate (BOR) despite adding new beds recently.
Meanwhile, we like the group’s strategic move to upscale its existing hospitals into tertiary
and quaternary care centres, as this could transform KPJ’s ability to tap into more complex
and uncommon procedures, resulting in better revenue intensity going forward.
Pharmaceuticals. We maintain that the pharmaceutical sector should see a robust recovery
in 2H24, underpinned by a pickup in the consumer healthcare (CHC) and over-the-counter
(OTC) product segments as well as benefiting from the spillover effects of rising hospital
activities and a surge in foreign tourist arrivals. Acceleration in trade and manufacturing
activities as forecasted by RHB Economics should propel the growth of pharmaceutical
companies with export exposure (Kotra Industries (KTRI MK, BUY, TP: MYR5.00): 32%;
Duopharma Biotech (DBB MK, BUY, TP: MYR1.44): 8%). On the other hand, the higher
government budget allocation for medicine procurement (2024F: MYR5.5bn vs 2023:
MYR4.9bn), as well as the recently concluded price negotiations under the approved products
purchase list (APPL) should support earnings growth for DBB. For KTRI, its mid- to long-term
prospects are expected to be anchored by rising health awareness among consumers and a
rapidly ageing society. Nevertheless, its valuation appears rich, in our view – the counter is
trading at par against its historical P/E mean of 11x vs DBB, which is trading at -0.2SD from
its historical mean of 17x.
Strategy. We maintain our OVERWEIGHT call on the healthcare sector and favour IHH as our
Top Pick – predicated by its robust balance sheet (IHH’s net gearing of 0.26x vs KPJ’s 0.49x),
established medical technology infrastructure and appetite for inorganic growth. IHH’s Analyst
valuation remains attractive, as it is trading at 12.3x 2024F EV/EBITDA, or -1SD from its Oong Chun Sung
historical mean of 15x. Meanwhile, KPJ is trading at a 9% premium over IHH vs the historical +603 2302 8126
mean of a 14.5% discount (Figure 83), which we deemed as unjustified – given IHH’s more chun.sung@rhbgroup.com
aggressive expansion plan to drive growth.

54
Figure 81: IHH’s 12-month forward EV/EBITDA Figure 82: KPJ’s 12-month forward EV/EBITDA
Figure 83: KPJ’s valuation discount/premium vs IHH
Key downside risks include higher-than-expected operating costs, lower-than-expected

patient visits and revenue intensity growth, as well as unfavourable changes to the drug
pricing mechanism by the Ministry of Health.
Figure 84: Valuations of healthcare stocks

IHH Healthcare 6.28 7.90 55,308 33.8 31.9 25.5 6.0 1.8 10.8 5.5 0.9 Buy
KPJ Healthcare 1.92 2.14 8,379 28.7 25.2 2.9 13.9 3.3 11.8 11.9 1.8 Buy
Duopharma Biotech 1.25 1.44 1,202 16.1 13.5 21.9 19.8 1.6 9.3 11.7 1.8 Buy
UEM Edgenta 0.89 0.89 740 20.0 19.1 14.7 4.5 0.5 5.5 2.3 2.8 Neutral
Kotra Industries 4.31 5.00 639 11.3 10.9 (11.2) 4.2 2.1 15.0 19.8 4.4 Neutral
Sector Avg 31.6 29.4 23.0 6.5
Source: RHB

55
Media: Still Tough Going Into 2H24 NEUTRAL
Media stocks continued to underperform relative to the FBM KLCI YTD (Figure 86), with
inflationary pressures, global macroeconomic and political headwinds, and weak
discretionary spending sapping advertising expenditure (adex). While we see nominal
improvements in 2H24 adex, the rationalisation of diesel subsidies (to subsequently be
extended to RON95 petrol) could still frustrate any meaningful recovery in sector earnings,
in our view, as the feeble consumer and business sentiment is likely to persist. Note that the
sector’s weak earnings profile is priced in, with media stocks already trading at depressed
valuations. A tactical trading strategy focusing on stocks with positive news flows is
advocated, with RHB’s economics team maintaining its sanguine outlook on global growth and
above-consensus domestic GDP growth forecast. We remain NEUTRAL on the sector.
Gross industry adex rose by 7% YoY in YTD-May; downside risks to adex in 2H24. Growth
was largely buoyed by the free-to-air or FTA television (+13.1% YoY), magazines (+1.9% YoY),
radio (+4.1% YoY), and digital (+2.1% YoY) businesses. These were partially offset by the
declines in the newspaper (-4.7% YoY) and cinema (-1.2% YoY) segments. The double-digit
YoY adex growth at the start of the year appears to have fizzled out, with March and April
adex down 0.2% and 8.8% YoY before an 8% rebound in May – as consumer sentiment turned
cautious ahead of the Government’s subsidy rationalisation exercise. This, together with the
external geopolitical developments, underpin our conservative view on adex prospects for
2H24. For 2024, we see gross industry adex growing at mid-single-digit levels (2023: +2%
YoY), with several sporting events – such as the Paris 2024 Olympics and UEFA Euro 2024
Championship – as key drivers.
Figure 85: Monthly gross adex has been on a decline in recent months
Source: Nielsen Media Research (NMR)
We expect sector earnings growth to remain lacklustre. Media stocks mostly disappointed
in the Jan-Mar 2024 reporting period due to softer-than-expected adex amid inflationary Analysts
concerns and global macroeconomic headwinds. Media Prima’s (MPR MK, NEUTRAL, TP:
MYR0.45) 1Q24 core earnings fell 80% QoQ to MYR1.9m against the high base in 4Q23. This Jeffrey Tan
compares with a 1Q23 net loss of MYR11.7m on better cost management and 7% higher adex. +603 2302 8112
Meanwhile, Astro Malaysia (ASTRO MK, NEUTRAL, TP: MYR0.32) posted further weakness jeffrey.tan@rhbgroup.com
in subscription revenue (-14% YoY) in 4QFY24 (Jan) on higher EBITDA margin (29% vs 19%
in 4QFY23), driven by lower content costs and marketing expenses. QoQ, the pay-TV Cindy Lee
provider’s core earnings narrowed 17%. +603 2302 8105
cindy.chin.hui@rhbgroup.com
Key downside risks for the sector/stocks include: i) Domestic and global economic
headwinds, ii) weaker MYR/USD, and iii) negative earnings surprises. The converse
represents upside risks.

56
Figure 86: YTD media sector’s share price performance vs the Figure 87: Media stocks’ share price performance vs the FBM KLCI
FBM KLCI (2023)
Figure 88: ASTRO’s historical EV/EBITDA band (x) Figure 89: MPR’s 1 year forward P/BV (x)
Figure 90: Pay-TV subs revenue Figure 91: Pay-TV subs and TV penetration
Source: Company data Source: Company data

57
Figure 92: Valuations of media stocks

Astro Malaysia^ 0.34 0.32 1,774 14.0 11.9 (30.2) 17.9 1.1 1.8 9.2 3.2 Neutral
Media Prima 0.46 0.45 510 32.0 17.5 (57.0) 82.8 0.7 9.1 2.3 3.3 Neutral
Sector Avg 14.7 12.6 (18.2) 15.8
Source: RHB

58
M-REITs: Stable Earnings Outlook NEUTRAL
Maintain NEUTRAL. YTD, the KL REIT Index (KLREI) is up 6.1%, lagging behind the FBM KLCI
(+9.6%). With stable YoY growth in tenant sales for the malls of M-REITs under our coverage
– partly attributed to the tourism recovery – most retail REITs are guiding for mid-single-digit
rental reversions. M-REITs have also been active in their acquisition activities, most notably
by Sunway REIT (SREIT MK, BUY, TP: MYR1.77), Axis REIT (AXRB MK, BUY, TP: MYR2.09),
and KLCCP Stapled (KLCCSS MK, NEUTRAL, TP: MYR7.96), which should drive earnings
growth further, especially as interest rate hikes are expected to have peaked. Our overall
sector Top Picks are Sunway REIT and Axis REIT.
The current yield spread between the KLREI and the 10-year Malaysian Government
Securities (MGS) is at 220bps, which is +1SD above the historical average. As expectations on
interest rate cuts have been delayed due to the persistent inflationary issues, the yield spread
may not widen further – possibly until at least 2025. RHB Economics forecasts the 10-year
MGS to be at 3.72% in 1H25, and 3.6-3.7% in 2H25. YTD, while both the 10-year US and
Malaysia bond yields have increased by 10% and 3.3%, M-REIT yield spreads have widened
from better REIT earnings and, hence, DPUs.
Figure 93: Yield spreads between KLREI and government bonds Figure 94: Yield spreads currently at c.220bps
% Spread Average +1SD +2SD -1SD -2SD % Spread KLREI Index MAG10YR Index
3.0 7
+2SD: 2.80%
2.5 6
2.0 +1SD: 2.19% 5
1.5
Average: 1.58% 4
1.0
3
-1SD: 0.96%
0.5
2
-2SD: 0.35%
0.0
1
-0.5
Sep-18
Sep-19
Sep-20
Sep-21
Sep-22
Sep-23
May-24
May-18
May-19
May-20
May-21
May-22
May-23
Jan-18
Jan-19
Jan-20
Jan-21
Jan-22
Jan-23
Jan-24
0
Sep-18
Sep-19
Sep-20
Sep-21
Sep-22
Sep-23
May-24
May-18
May-19
May-20
May-21
May-22
May-23
Jan-18
Jan-19
Jan-20
Jan-21
Jan-22
Jan-23
Jan-24
The improving tourism industry has been a big plus for M-REITs. In 1Q24, Tourism Malaysia
revealed that 5.8m tourists arrived (+33% YoY), boosted by the 30-day visa exemption for
visitors from China and India. This has helped hotel players such as KLCCP Stapled and
Sunway REIT to record higher than pre-pandemic room rates. We think the high room rates
are sustainable in the medium term, with minimal downside risks to occupancy rates. The
higher tourist numbers are one of the reasons why Suria KLCC and Pavilion Kuala Lumpur
have continued to record YoY growth despite the opening of The Exchange TRX providing
new competition. We think this trend should continue, as the country looks forward to Visit
Malaysia 2026 when it aims to attract 36m tourists to these shores.
While we expect normalising earnings growth ahead, IGB REIT’s and Sunway REIT’s may
increase, due to their asset enhancement initiatives. Both REITs are undergoing
reconfiguration works at their malls – Mid Valley Megamall and Sunway Pyramid – for spaces
currently occupied by anchor tenants. This is to incorporate new tenants in order to Analysts
reinvigorate these spaces, which should lift rental rates after the reconfigurations are Wan Muhammad Ammar Affan
completed in 2H24. Additionally, Sunway REIT is also upgrading the old wing at Sunway +603 2302 8103
Carnival Mall to match the aesthetics of the new wing – this is slated for completion by 2H25. ammaraffan@rhbgroup.com
For offices, Sentral REIT (SENTRAL MK, BUY, TP: MYR0.91) may see its occupancy rates dip
in the near term, as tenants move around. However, we are optimistic that any loss in tenants Loong Kok Wen, CFA
will be replaced within the year, as most of the lease expiries are within Menara Shell and +603 2302 8116
loong.kok.wen@rhbgroup.com
Platinum Sentral, ie Sentral REIT’s flagship buildings.

59
Axis REIT remains our segment Top Pick for the industrial sub-sector. We are positive on the
earnings growth outlook for this REIT, as it announced that it entered into new acquisitions
totalling MYR526m YTD – we believe earnings should pick up in FY25 when these
acquisitions are completed. Despite the strong increase in industrial developments over the
past few years, we think oversupply concerns are mitigated at the moment, as most major
developments are built-to-suit types, with long-term tenancies already committed.
We remain NEUTRAL on the sector as a whole, as the risk-reward profile is fairly balanced at
the current juncture. Sunway REIT and Axis REIT are our Top Picks for the sector. We like
Sunway REIT for its diverse property portfolio and active acquisition strategy. As for Axis
REIT, it is our pick due to the resilient industrial sub-sector, and it should record a strong DPU
growth in FY25 on the strength of new acquisitions made (mentioned in the previous
paragraph).
The potential acquisition of Mid Valley Southkey mall makes IGB REIT a wild card, in our view,
with a low gearing ratio that should easily fund the acquisition.
Figure 95: Valuations of M-REIT stocks

IGB REIT 1.82 2.03 6,569 17.4 16.4 4.2 6.2 1.6 14.8 9.3 6.0 Buy
Sunway REIT 1.56 1.77 5,343 15.1 14.4 4.9 4.8 1.0 17.2 6.4 6.3 Buy
Axis REIT 1.84 2.09 3,215 19.3 17.4 6.9 10.7 1.1 14.3 5.7 5.0 Buy
Sentral REIT 0.80 0.91 956 11.4 11.1 2.2 2.6 0.7 9.8 6.2 8.5 Buy
KLCCP Stapled 7.50 7.96 13,540 16.6 15.9 15.0 4.7 1.0 15.6 6.1 5.7 Neutral
Pavilion REIT 1.37 1.39 5,010 15.2 15.1 8.0 0.4 0.9 9.0 6.4 6.8 Neutral
AME REIT^ 1.38 1.42 725 19.6 18.1 (28.1) 8.1 1.3 15.7 6.4 5.5 Neutral
Sector Avg 16.4 15.5 12.0 4.8
Source: RHB

60
NBFIs: Mixed Risk-Reward Profiles NEUTRAL
Maintain NEUTRAL. We believe earnings for the sector should hold up in 2024, supported by
a decent macroeconomic backdrop, even though challenges specific to each sub-sector still
linger. Our sector Top Pick is Bursa Malaysia (BURSA MK, BUY, TP: MYR9.85), as we think
the market has yet to fully price in the supernormal level of securities activity, which we think
can be sustained. We are more selective towards the remaining five companies in the sector
under our coverage, as the risk-reward profiles are mixed. Hence, we prefer those firms with
bright growth prospects and are trading at reasonable valuations.
BURSA – sentiment on the up. While its share price is already up >25% YTD, we think there
is further upside potential. The market appears yet to have priced in the supernormal
securities average daily value (SADV) levels, which – at mid-June – stood at MYR3.6bn
(previous annual high excluding 2020 and 2021 was MYR2.6bn). We think the current SADV
level is sustainable, due to the surge of positive news flow, ample liquidity to be invested in
the domestic market, and expectations of further structural reforms. BURSA, being the
operator of the domestic securities market, is poised to reap greater earnings from a more
vibrant market. Our TP of MYR9.85 is derived from a 26.5x target P/E (+1SD), ie the highest
level reached in the record SADV year, ie 2017.
Insurers – staying selective. In FY23, investment returns formed the bulk of insurers’ (ie
those we cover) earnings on the back of stable marked-to-market movements vs heavy
marked-to-market losses in 1H22. Underwriting results, on the other hand, took a back seat
amid still-elevated claims and higher reinsurance expenses. In 2024, we are likely to see
earnings moderation arising from: i) Stable investment returns (on an absence of the low base
effect), and ii) softer general insurance revenue growth as domestic new car sales are set to
moderate off a record-high base. These will be mitigated, in our view, by stabilising claims and
reinsurance costs, as well as a recovery in the life insurance and family takaful business.
Notwithstanding the moderation expected, decent growth in the contractual service margin
or CSM should provide some boost to bottomline prospects. We prefer Syarikat Takaful
Malaysia Keluarga (STMB MK, BUY, TP: MYR4.40) for its market leadership in the bright
takaful space, while we also think its investment portfolio (mainly fixed income instruments)
should be less prone to volatile marked-to-market movements. We are NEUTRAL on Allianz
Malaysia (ALLZ MK, TP: MYR21.70), as we forecast earnings growth, particularly for its
general insurance arm, to moderate in FY24.
Non-bank lenders – positive on receivables growth. YTD, non-bank lenders’ share price
performance has been mixed. ELK-Desa Resources (ELK MK, SELL, TP: MYR1.05) held steady,
whereas AEON Credit Service (ACSM MK, BUY, TP: MYR7.90) saw a 36% appreciation, likely
due to investors looking beyond near-term earnings pressure from start-up losses from its
digital bank. RCE Capital (RCE MK, SELL, TP: MYR2.40)’s share price declined by 8% –
possibly a reflection of a relatively soft 4QFY24 (Mar) alongside ongoing externally driven
asset quality issues, ie early retirements and exits from the civil service. Otherwise, we believe
the group remains fundamentally sound.
On the whole, we think earnings for the sub-sector should hold up. The overall tone on
receivables growth from the respective management teams seems to be positive, with both
ACSM and ELK expecting double-digit YoY growth in FY25 (FYE February for ACSM and
March for ELK), while RCE’s more cautious approach towards disbursements could be
overturned, given the impending salary review for civil servants. Asset quality overall also
appears decent, with the management teams – with the exception of RCE’s – guiding for credit
costs to normalise back to pre-pandemic levels in FY25. However, we flag the ongoing
execution of the Government’s subsidy rationalisation initiative as carrying asset quality risk, Analysts
given its uncertain impact on the rakyat’s cost of living. Nabil Thoo
+603 2302 8123
In terms of stock picks for the non-bank lenders, our singular BUY call is on ACSM, as its risk- nabil.thoo@rhbgroup.com
reward profile looks the most appealing (c.1.3x P/BV vs 15-16% ROE). The group has also
hinted that it is looking into the possibility of raising dividend payouts to bring its dividend David Chong, CFA
yields closer to that of its peers. We have SELL recommendations on RCE and ELK – mostly +603 2302 8106
on valuation grounds –as both companies are trading at significant premiums to their own david.chongvc@rhbgroup.com
P/BV mean levels.

61
Figure 96: BURSA’s share price has moved in tandem with the YTD Figure 97: BURSA – YTD 2024 SADV has shown a steep recovery
2024 SADV from the subdued levels recorded in 2022 and 2023*
Bn units SADVol SADV (RHS) MYR bn

% Bursa Malaysia Bhd FBMKLCI
33
10.0 6.0
30.3
5.2
28 9.0
5.0
8.0
23
7.0 3.8 3.9
3.7 3.5 4.0
18 6.0 3.2
3.0
5.0 2.7 2.7 2.7 3.0
13
2.2 2.1
2.3 2.2 2.2 2.3
4.0 1.9
8 9.0 1.8
2.0
3.0
3 2.0
1.0
1.0
-2 8.6 6.6 4.7 3.7 3.3 3.1 2.5 3.1 3.7 3.2 3.6 3.7 4.6 5.2 5.8 3.0 3.6 4.9
0.0 0.0
Source: Bloomberg, RHB Note: *SADVol = securities average daily volume. Data is up to 21 Jun 2024
Source: Bursa Malaysia, RHB
Figure 98: Insurers’ share price momentum has been muted since Figure 99: ACSM is the clear outperformer in the sub-sector after
the release of their 1Q24 results – we prefer STMB, partly as a a laggard showing in 2023
laggard play
% Allianz Syarikat Takaful FBMKLCI AEON Credit RCE Capital ELK-Desa FBMKLCI
%
35.0 50.0
30.0 40.0
25.6 35.7
25.0
30.0
20.0
20.0
15.0
10.0
9.0
10.0 9.0
0.0 1.6
5.0 6.4
(5.3)
0.0 (10.0)
(5.0) (20.0)
Figure 100 : Valuations of NBFI stocks

ROE
Price Target Mkt Cap P/E (x) EPS Growth (%) P/BV (x) (%) DY (%) Rec
Bursa Malaysia 8.84 9.85 7,154 25.2 24.5 23.1 2.9 8.4 8.1 33.9 3.6 Buy
Syarikat Takaful 3.80 4.40 3,182 7.8 7.5 17.8 4.2 1.6 1.4 22.4 4.1 Buy
AEON Credit^ 7.56 7.90 3,860 9.3 8.1 0.6 14.7 1.3 1.2 15.1 3.2 Buy
Allianz Malaysia 22.12 21.70 3,937 5.3 5.0 2.6 5.6 0.7 0.6 13.8 5.0 Neutral
RCE Capital^ 2.83 2.40 2,074 13.3 12.7 12.1 5.1 2.4 2.3 18.2 5.6 Sell
ELK-Desa^ 1.24 1.05 564 13.6 12.2 13.0 11.2 1.1 1.1 8.4 4.6 Sell
Sector Avg 10.1 9.5 5.2 6.4
Source: RHB

62
Oil & Gas: The Upstream Wave Continues OVERWEIGHT
Maintain OVERWEIGHT; Top Picks: Dialog (DLG MK, BUY, TP: MYR2.96), Dayang
Enterprise (DEHB MK, BUY, TP: MYR3.58), and Yinson (YNS MK, BUY, TP: MYR3.32).
Reading through Petronas’ 1Q24 report card, we expect capex spending to be sustained at
MYR50-60bn in 2024 (2023: MYR52.8bn), with the upstream segment being the key focus, in
order to achieve its production targets. As such, we remain positive on the upstream services
players – premised on sustained activities, elevated services rates, and positive news flow
related to contract renewals. Our 2024-2025 crude oil price estimates remain at USD88-85
per bbl.
Figure 101: Petronas’ capex trend
Source: Petronas, RHB
Petronas’ 2024 capex in the range of MYR50-60bn. Petronas’ capex spending was
maintained at MYR10.7bn (+2% YoY) in 1Q24. The upstream segment was the largest
contributor (64%), followed by gas (17%) – with Gentari and downstream businesses having
an equal split of 7%. Domestic capex accounted for 51% of total capex and increased by 20%
YoY in 1Q24 to MYR5.5bn – mainly on a near-shore floating LNG project in Sabah, the
Kasawari gas field development and CO2 sequestration facilities in Sarawak. It is in line with
Petronas’ domestic average capex spending guidance of c.MYR22.6bn pa (5-year capex of
MYR113bn) between 2023 and 2027. Overall group costs also increased 3% YoY to
MYR70bn, predominantly led by higher domestic costs (+10% YoY) to support operations in
Malaysia.
Petronas recorded production of 2,587kboepd (+4% YoY, +1% QoQ) with Malaysia
production exceeding 2,000kboepd. We saw an emphasis on the upstream segment, and
believe this trend is likely to continue, since the national oil company aims to achieve a total
production of 2.7mboepd by this year (2mboepd from the domestic portfolio) and sustain
these numbers until 2030.
Overall, we remain positive on the upstream services players in 2024; 3Q24 is likely to be
the strongest quarter, with activities ramping up. Drilling activities should remain solid,
similar to maintenance activities. A new maintenance contract cycle is expected to be rolled
out by end-2024. Meanwhile, the OSV market is should be robust, as there are still potential
improvements in daily charter rates due to tight vessel supply. Long-term contract tenders
have been submitted by various OSV players, and we expect these contract renewals to be
awarded in the near term.
FPSO job pipeline to stay robust. Global FPSO demand remains robust and players like
Yinson, Bumi Armada (BAB MK, BUY, TP: MYR0.68) and MISC (MISC MK, BUY, TP: MYR9.35)
are still actively bidding for new projects. As it is currently a vendor’s market, some of the
clients will negotiate directly with contractors and upfront payments will be offered to reduce
its equity outlay. Some of the upcoming tenders are the Balaine, Paon projects in Ivory Coast,
Barracuda Caratinga and Albacora projects in Brazil, WL-400 project in Malaysia and Dorado
project in Australia.

63
Yinson expects the monetisation of the FPSO projects to materialise by this year, allowing it
to fund new projects without having to turn to equity fund-raising. We believe it will be a
positive catalyst to unlock its value and enable further recycling of capital
Carbon capture and storage (CCS) gaining traction. Meanwhile, the new business and net
zero carbon emissions-related capex accounted for about only 10% of Petronas’ total capex
in 1Q24. Almost two-thirds of it was spent on renewable energy (RE) while the remaining one-
third was for CCS. The national oil major’s RE capacity in operations and under-development
projects remained unchanged QoQ, at 2.9GW. We believe capex spending for both RE and
CCS will continue to rise in the long run. As highlighted by Rystad Energy, the Asia-Pacific
(APAC) region is growing rapidly as a key player in the CCS sector, with Malaysia, Australia
and Indonesia being the emerging hubs within the region and spurring cross-border solutions
with countries like Japan and Korea.
Figure 102: APAC CO2 capture demand
Source: Rystad Energy
Expect a modest recovery in petrochemical prices in 2H24. In Asia, substantial overcapacity

and weak demand led to negative margins for major value chains, such as that of ethylene,
polyethylene (PE), and polypropylene (PP). We expect to see a modest recovery in 2H24 Analyst
following the tail-end of destocking activities, coupled with stronger demand on the back of Sean Lim, CFA
more robust China economic growth assumptions. That said, we are not seeing a major
+603 2302 8128
upcycle – given the pressures from new capacity additions and persistent market share
sean.lim@rhbgroup.com
battles for certain petrochemical products (ie olefins and polyolefins).
Figure 103: Valuations of oil & gas stocks

MISC 8.55 9.35 38,165 15.0 14.3 15.2 4.4 1.0 5.7 6.4 4.4 Buy
Dialog 2.40 2.96 13,542 25.4 24.9 15.4 2.2 2.5 22.5 10.2 1.8 Buy
Yinson^ 2.36 3.32 7,072 12.8 9.8 48.3 31.6 1.3 7.8 10.3 1.7 Buy
Bumi Armada 0.56 0.68 3,290 3.9 5.5 154.4 (29.4) 0.5 3.2 13.9 0.0 Buy
Dayang Enterprise 2.69 3.58 3,114 12.8 11.3 29.4 13.4 1.7 9.5 12.2 1.7 Buy
MMHE 0.46 0.60 728 18.9 13.9 107.9 36.6 0.6 22.8 3.0 0.0 Buy
Petronas Dagangan 17.20 20.82 17,087 17.0 16.5 6.7 2.6 2.9 7.2 17.2 4.7 Neutral
Wasco 1.39 1.55 1,076 10.2 9.8 38.8 4.0 1.4 6.0 14.2 3.2 Neutral
Coastal Contracts 1.70 1.64 909 6.5 5.9 (57.3) 10.4 0.5 5.9 7.7 0.0 Neutral
Sector Avg 17.1 15.6 20.2 9.2
Source: RHB

64
Plantation: Watch Out For La Nina In 2H24 NEUTRAL
CPO prices retreated from highs of MYR4,400-4,500/tonne in April to current levels of

MYR3,800-3,900/tonne. With YTD prices at MYR3,947 per tonne, we expect average prices
for 2024 to come close to our MYR3,900 per tonne assumption. We believe the biggest
catalyst for prices now is the prospect of La Nina, which could push prices up again in 2H24.
The most recent forecasts suggest that La Niña may start to develop during Jul-Sep 2024
and then persist through 4Q24 – with an 85% probability. As the last “triple-dip” years of La
Nina in 2020-2023 were weak-to-moderate events, there is a chance that 2024’s La Nina
could be strong. While the impact of La Nina on palm production is not normally significant, Analyst
we saw the last three back-to-back years of La Nina having an impact on other oilseed crops, Hoe Lee Leng
due to extreme rainfall and flooding in Australia, prolonged drought in Africa, and the +603 2302 8110
exceptional drought in the southwestern US. We would, therefore, need to monitor the hoe.lee.leng@rhbgroup.com
severity of this La Nina, if it eventuates, and its impact on other crops.
Figure 104: Southern Oscillation Index at neutral levels Figure 105: La Nina Probability at 85% in 4Q24
Source: Australian Bureau of Meteorology Source: US National Oceanic and Atmospheric Administration
Figure 106: Historical El Nino/La Nina events
Source: Golden Gate Weather Services

65
Oilseed output being revised down for 2024F. Notwithstanding La Nina, there have been
downward revisions made for soybean output in the US and South America, but rising
forecasts from other crops like rapeseed and sunseed over the last few months – resulting in
total oilseed output forecasts being revised downwards for 2024. According to Oil World,
total global oilseed output is now projected to improve just 2.8% YoY in 2024F – with total
soybean output rising 4.4% YoY, while that of rapeseed could drop by 2.0% YoY and sunseed
output grow by 3.6% YoY. Given the now-smaller growth expectations for oilseed output, the
timing of a La Nina occurrence is important, as oilseed harvesting activities in the US, Ukraine
and Russia starts in September, while new planting activities in South America start in
November/December. Should a strong La Nina eventuate, the supply of oilseeds may shrink
instead, in 2024F. For 2025, assuming no adverse weather conditions, output is expected to
recover somewhat, with global oilseeds growing at 4.8%, driven largely by soybean (+7.1%).
Figure 107: Ten oilseeds output growth moderating Figure 108: Soybean supply and demand
Source: Oil World Source: Oil World
Moderate vegetable oil output growth, more reliance on other non-palm vegetable oils.
Given the now-tighter oilseed output, global vegetable oil output is also expected to grow at
a more moderate +2.5% in 2024F. This is mainly on the back of less areas being available for
harvest (due to replanting activities) and the anticipated weather impact of El Nino on palm
oil. Palm oil output itself is relatively tight, with flattish projections for 2024F and a 2% YoY
growth for 2025F. As such, any shortage in palm oil supply will have to be fulfilled by other
vegetable oils, and reliance on other oilseeds will increase.
Figure 109: Vegetable oil output growth more moderate Figure 110: Palm oil supply is relatively tight
Source: Oil World Source: Oil World

66
Demand for palm oil has been relatively lacklustre, but should start improving soon … With
the recent fall in soybean oil (SBO) and sunflower oil prices, CPO is now trading at a more
normal discount of USD124 per tonne (from USD152 per tonne last month) to SBO, and to
sunflower oil of USD105 per tonne (from USD11 per tonne last month, albeit still below
historical discounts of USD150-200 per tonne). This, together with the low stock levels at
main buying countries could translate to increased buying activities in the coming months. PO
stock levels in China and Pakistan are now 45% and 3% below historical levels at end May-
2024, while Bangladesh’s stock levels are 16% above. In India, vegetable oil stocks are also
22.2% below historical levels as at end-May 2024.
… while biofuel will continue to provide strong support for demand and prices. Indonesia’s
biodiesel demand will continue to utilise at least 11-12m tonnes of PO (24% of output) a year
based on a B35 mandate. In the US, demand for SBO for the US’ biodiesel policy will also soak
up some 5-6m tonnes of SBO in 2024, or about 5% of US output.
Figure 111: CPO vs SBO, sunflower, and rapeseed oil prices Figure 112: Palm oil used for biodiesel production by region
Source: Bloomberg Source: Oil World
Overall, stock/usage ratio trends for 2024F and 2025F remain above historical averages.
While stock/usage ratios are mixed for oils and oilseeds, we note that all the stock/usage
ratios for the composite 17 oils and fats, 10 oilseeds and 8 vegetable oils are still above
historical averages for 2024F and 2025F – which means that stocks are not in a tight position.
However, as stock/usage ratios for palm oil and soybean oil are below historical levels for
2024F and 2025F – the supply of global vegetable oils will have to shift more to soybean oil in
the coming years, translating to a need for an increase in crushing activities.
We maintain our NEUTRAL sector weighting. Assuming normal weather conditions, we

expect prices to moderate in 2H24, as output improves moving toward the peak output
season. However, should La Nina occur, this could impact other oilseed crops – and vegetable
oil prices would be elevated again as a result. This is a key catalyst to watch out for. In the
longer term, demand will continue to be supported by mandatory biodiesel demand. Overall,
we are still not in a dire situation, however, as demand needs can be met with supply, with
stock/usage ratios forecasted to remain above historical averages in 2024F and 2025F. Our
CPO price per tonne assumptions of MYR3,900 for 2024 and MYR3,800 for 2025 are
unchanged. Our sector Top Picks are now a mix of integrated and pure planters, based on
valuation grounds – namely Sarawak Oil Palms (SOP MK, BUY, MYR3.30) and IOI
Corporation (IOI MK, Buy, MYR4.40).

67
Figure 113: Valuations of plantation stocks

IOI Corp 3.73 4.40 23,140 19.8 17.2 (22.0) 15.2 1.9 17.3 10.0 2.4 Buy
Kuala Lumpur Kepong 20.98 23.00 23,003 24.6 21.1 (35.4) 16.5 1.5 9.1 6.3 2.1 Buy
Sarawak Oil Palms 2.88 3.30 2,568 7.4 8.7 14.3 (14.7) 0.7 4.2 9.5 3.5 Buy
SD Guthrie 4.25 3.90 29,392 21.5 21.8 51.6 (1.4) 1.7 8.4 7.7 2.5 Neutral
Ta Ann 3.80 3.55 1,674 9.0 9.0 (4.8) (0.4) 0.9 4.9 10.0 6.6 Neutral
BM Greentech^ 1.62 1.21 836 20.5 19.5 12.0 5.3 287.6 55.1 14.7 1.4 Neutral
FGV Holdings 1.28 1.20 4,670 48.0 40.5 10.7 18.4 0.8 7.7 1.6 1.6 Sell
Sector Avg 20.7 19.4 (23.7) 11.7
Note: ^FY24F-25F valuations refer to those of FY25F-26F
Source: RHB

68
Property: Focus On DC Real Estate Play OVERWEIGHT
Maintain OVERWEIGHT. Earnings growth prospects for developers with exposure to the
industrial segment, sizeable landbanks and strong balance sheets should strengthen ahead.
While the demand for property should continue to be supported by improving economic
growth and catalytic infrastructure developments, investments by data centre (DC) and E&E
players could significantly boost demand for industrial developments. Upcoming detailed
announcements on the JSSEZ and the potential revival of the Kuala Lumpur-Singapore high-
speed rail could further spur investor interest on Johor-related property stocks. Our Top
Picks: UEM Sunrise (UEMS MK, BUY, TP: MYR1.60), Sime Darby Property (SDPR MK, BUY,
TP: MYR2.00) and Mah Sing (MSGB MK, BUY, TP: MYR2.26).
Key downside risks to our call: i) Severe weakening of the MYR, ii) political turbulence, and
iii) an unfavourable turn in government policies on DC.
Multi-billion MYR investments in DC and semiconductor spaces. Announcements on DC-
related transactions have accelerated, especially over the last two months. According to
Prime Minister Dato’ Seri Anwar Ibrahim, Malaysia has approved MYR114.7bn worth of
investments in DCs and cloud services over 2021-2023. Meanwhile, Malaysia also aims to
attract MYR500bn in investments on integrated circuit design, advanced packaging and
manufacturing equipment for semiconductor chips. Demand for industrial land and
properties in Malaysia is expected to pick up more substantially in the coming years.
We think the influx of DC investments are only at the initial stage, and anticipate more and
more industrial land transactions ahead. While some developers – especially those with
strong balance sheets – may start to look at the viability of these DC-related real estate
investments. Developers such as SDPR and Mah Sing may further expand their investments
going forward.
Expect stronger property sales in 2H24. 1Q24 property sales were decent, but we expect
sales in 2H to come in much stronger as developers ramp up their launches during the mid-
year. Demand for landed homes at township developments and high-rise property projects at
strategic locations remain encouraging. Lately, we also saw strong take-up rates for high-end
landed units and luxury condominiums with extensive floor space. Senna and Fera at
Andaman Island by Eastern & Oriental, The Ophera at KLGCC by SDPR and Aetas Seputeh by
Avaland (AVALAND MK, NR) are all 50-90% sold.
Footfall to sales galleries in Iskandar Malaysia doubled from last year. During our recent
visit to Iskandar Malaysia, we discovered that property sales are gaining momentum. Footfall
to Sunway Iskandar’s sales gallery has doubled from last year, and the marketing team is now
seeing more and more purchases from foreign buyers, especially during the weekend.
Meanwhile, UEMS has also received a significant number of bookings or registrants (for the
next launch) who were not able to buy Senadi Hills (due to over-subscription) which was
launched at the end of last year.
We think the greater urbanisation and industrialisation trend in Iskandar Malaysia – as a
result of the potential economic impact of the JSSEZ – will fuel the demand for properties in
Johor in the coming years. The Government also recently awarded a construction contract to
undertake works for additional lanes for the North-South Expressway from Yong Peng
(North) to Senai (North) Phase 1: Senai (North) – Sedenak (Package A). This is another effort
to improve the road network and ease the traffic bottleneck as road traffic picks up.
Expect more news flow in 2H24. Going into 2H24, we believe positive news flow on the
potential incentives and initiatives on the JSSEZ, infrastructure developments, as well as
foreign and domestic direct investments will continue to buoy investor sentiment on the
property sector in 2H24. The incentives for the Special Financial Zone in Forest City are
expected to be finalised in August, while the detailed announcement on the JSSEZ is likely to
take place in September-October, possibly when Budget 2025 is tabled. The revival of the
Kuala Lumpur-Singapore High Speed Rail is a wild card, which could spur further re-rating of
many property stocks.
Maintain OVERWEIGHT. The sector is currently trading at a 45% discount to RNAV, which is
slightly above +1SD from the historical mean. Unlike the previous upcycle in 2010-2014 Analyst
which was held up by low interest rates and the developers’ interest-bearing scheme, we think Loong Kok Wen, CFA
the current property market upcycle is much healthier as the interest rate is now at +603 2302 8116
normalised levels, and the market is adapting to a new norm for inflation. loong.kok.wen@rhbgroup.com

69
More importantly, the influx of FDI this round is primarily in the technology and
semiconductor industries, which should help to drive the country’s GDP growth in the coming
years.
Top Picks
UEM Sunrise (UEMS). UEMS remains the key proxy for Iskandar Malaysia’s multi-year growth
story. With the proper plans in place, including the 40-acre renewable energy industrial park
in Precinct 2, and the 74-acre DC campus in Precinct 4, development plans for the industrial
component at Gerbang Nusajaya are slowly taking shape. We expect LOGOS to secure big
players to be in the DC campus. Connectivity to Port of Tanjung Pelepas via the train line also
provides opportunities for logistics-related industrial developments in Precinct 3. While
property sales have been sluggish so far, we think the numbers should accelerate once its
Johor projects are launched over the next few months.
Sime Darby Property (SDPR). We expect a faster turnaround of SDPR’s industrial landbank
ahead after Google announced that it will set up a DC and Google Cloud worth MYR1.7-2bn
in Elmina Business Park in May 2024. SDPR has both landbank and a robust balance sheet to
accommodate more DC demand going forward. We believe there could be further
investments from Google for subsequent phases, given its investment commitment of
USD2bn in Malaysia. Besides the new DC segment, SDPR’s property sales are among the
strongest. In 1Q24, the company already raked in MYR956m in property sales, and we expect
it to surpass its sales target of MYR3bn again this year.
Mah Sing. DC is now a new growth engine for the company. Management recently secured
500MW in power allocation for its Southville DC Hub. We believe the supply certainty will
significantly enhance the value of its 150-acre land earmarked for DC developments. This
should also pave the way for subsequent take-ups from other DC players as the ready
infrastructure, power and water supply should entice technology companies that are looking
to commence their DC operations in the near term. Meanwhile, management remains focused
on growing its property development business. The company is likely to acquire more sites
that are suitable for its M-series projects, as well as industrial development. This should
provide further upside to our RNAV estimate.
Figure 114: Valuations of property stocks

Sunway 3.60 4.00 20,296 25.9 25.1 1.1 3.2 1.5 23.0 6.0 1.5 Buy
Sime Darby Property 1.31 2.00 8,909 19.1 17.9 15.6 6.9 0.9 42.2 4.6 2.1 Buy
SP Setia 1.33 1.72 6,332 13.9 16.3 30.9 (15.1) 0.4 27.5 2.8 1.2 Buy
UEM Sunrise 1.04 1.60 5,261 60.1 57.5 23.1 4.6 0.8 71.4 1.2 0.0 Buy
Mah Sing 1.75 2.26 4,480 17.6 15.9 12.4 10.6 1.1 32.5 6.4 2.6 Buy
Matrix Concepts^ 1.80 2.15 2,252 9.0 8.8 0.4 2.9 1.0 8.9 11.5 5.8 Buy
Eastern & Oriental^ 0.96 1.38 1,965 15.4 13.9 (20.5) 10.9 0.7 6.9 5.2 1.6 Buy
AME Elite Consortium 1.62 2.20 1,035 6.3 10.4 77.7 (39.8) 1.1 (37.0) 17.8 4.9 Buy
IOI Properties 2.25 2.47 12,389 17.6 17.5 (15.4) 1.0 0.5 6.8 3.1 2.2 Neutral
UOA Development 1.83 2.02 4,557 19.9 17.5 36.1 14.2 0.9 8.0 4.3 5.5 Neutral
LBS Bina 0.74 0.93 1,139 8.2 7.6 (1.2) 8.3 0.7 20.8 8.9 3.7 Neutral
Tambun Indah 1.12 1.20 492 9.8 9.5 22.1 3.5 0.6 9.5 6.5 4.6 Neutral
Sector Avg 18.6 18.3 3.3 1.3
Source: RHB

70
Rubber Products: Outlook Remains Buoyant OVERWEIGHT

Maintain OVERWEIGHT. Industry operating dynamics continue to favour the glove
manufacturers on the back of better demand visibility, supply rationalisation, and ASP
stabilisation. We gather that 2Q24 sales volume growth is set to accelerate further as a result
of a pick-up in stock replenishment activities. That said, the current production run rate has
shown significant improvements, which we think should lead to better operating efficiencies.
Moving forward, we expect a meaningful demand recovery trend by 2H24 and pick-up in ASPs
to propel glovemakers’ profitability in 2024. Key downside risks include weaker-than-
expected demand (due to slower-than-expected inventory drawdowns) and higher-than-
expected operating costs. Our sector Top Picks are Riverstone (RSTON SP, BUY, TP:
SGD1.05), Hartalega (HART MK, BUY, TP: MYR4.10), and Kossan Rubber (KRI MK, BUY, TP:
MYR2.73).
ASPs. Industry-blended ASPs are currently hovering at USD20-21 per 1,000 pieces from
USD20 in 1Q24. According to our channel checks, China glovemakers’ ASPs per 1,000 pieces
now range USD17-18, vs USD15-16 in 1Q24. We think the continued narrowing of the ASP
gap means the prolonged price war is approaching its tail-end – which ultimately allows
Malaysian manufacturers to compete via product quality rather than price.
Demand. Malaysia’s glove exports volumes spiked by 3.6% MoM (+46% YoY), registering the
steepest ever post-pandemic YoY gain in April. Export value contracted 3.8% MoM (+39%
YoY) at MYR1,094.6m. Meanwhile, China glove exports contracted 12% MoM in April,
following a 21% MoM expansion in March. Analyst
All in, we maintain our 2024 global glove demand growth of 22%, premised on the recovery of Oong Chun Sung
glove restocking activities in 2H24. That said, Malaysian Rubber Glove Manufacturers +603 2302 8126
chun.sung@rhbgroup.com
Association (MARGMA) expects global glove demand to chart a 2023-2027 CAGR of 10% to
450bn pieces.
Figure 115: Global demand & supply overview Figure 116: 2024 market share by installed capacity
Source: Malaysian Rubber Gloves Manufacturers Association (MARGMA) Source: MARGMA, Company data
Supply. Current industry plant utilisation rates have seen encouraging improvements post
production plant rationalisation initiatives undertaken in 2023. We gather that local
manufacturers are running their plants at 60-80% vs 40-70% in the previous quarter. That
said, we expect a marginal change in the global industry supply of 4.3bn in 2024 on the back
of planned capacity replenishment by Hartalega (4bn pieces, as a result of the relocation of
production lines to NGC1.5 by end-2024) and 0.3bn-piece planned capacity expansion by Sri
Trang Gloves (Thailand).

71
Figure 117: Malaysian glove exports (in tonnes) Figure 118: China glove exports (in tonnes)
Source: Department of Statistics Malaysia, RHB Source: General Administration of Customs (China)
Raw material prices. The price of natural latex rose by 12% QoQ in 2Q24 (averaging at
MYR1.60 per kg) due to severe weather conditions delaying the rubber tapping process.
Thailand’s meteorological agency recently issued warnings predicting heavy downpours from
17 May to 22 May. We think natural latex prices could remain elevated in June (no thanks to
unfavourable weather conditions) before coming off their peaks in the coming months.
Meanwhile, acrylonitrile prices inched up by 3.6% QoQ (averaging at USD1.30 per kg) –
driven by soaring container freight rates. Moving forward, we expect the price of acrylonitrile
to stabilise in 2H24 on the back of easing raw material prices, ie polypropylene.
Lastly, the country’s natural gas tariff is set to stabilise, in our view, in the upcoming tariff
review (3Q24) following the recent 5-6% increase in 2Q24. The latter increase was mainly
due to higher natural gas tariffs during the period – this has been attributed to the
maintenance at Chevron’s Wheatstone Project regasification plant in Australia, as well as the
production disruption from Gorgon LNG. Both facilities have a combined capacity that makes
up 6% of global supply.
Figure 119: Natural latex and acrylonitrile prices Figure 120: Natural gas prices
Valuation and strategy. The sector is trading at a compelling forward P/BV of 1.7x against the 5-
year pre-COVID-19 mean of 3.8x – this is in view of the potential sectoral earnings recovery by
2024-2025. Our sector OVERWEIGHT rating is warranted, based on the improving cost-pass-
through model, restocking activities that are likely to materialise by 2H24 (as demand-supply
dynamics are expected to achieve equilibrium), and easing price competition from China.
Our Top Picks are: i) RSTON – thanks to its above-peer margins, exposure to cleanroom gloves
(which should benefit from the recovery of semiconductor sales), and consistent dividend payout,
as well as ii) HART – owing to its better operating efficiency among local glovemakers (resulting
in better margins and operating efficiencies), and iii) KRI – for its highest net cash among peers,
above-peer average margin profiles, and consistent dividend payouts.
Downside risks: i) Decrease in glove ASPs, ii) slower-than-expected demand recovery, iii) lower-
than-expected utilisation rates, and iv) higher-than-expected raw material prices.

72
Figure 121: Valuations of rubber products stocks

Hartalega^ 3.26 4.10 11,127 48.6 30.9 642.5 57.5 2.3 28.6 4.8 0.0 Buy
Top Glove 1.08 1.28 8,650 n.m. n.m. 66.1 96.8 1.9 15.9 (3.8) 0.0 Buy
Kossan Rubber 2.28 2.73 5,818 33.2 28.4 428.1 17.1 1.5 24.3 4.5 0.9 Buy
Supermax 0.87 1.01 2,229 n.m. +>100.0 88.7 269.9 0.5 (138.1) (0.3) 0.0 Buy
Sector Avg 128.4 47.7 301.0 74.7
Source: RHB

73
Technology: Recovery Is Gaining Momentum OVERWEIGHT
Maintain OVERWEIGHT. The Bursa Malaysia Technology Index has been trending up, as per
our thesis of bottomed-out earnings and the expectation of a recovery in share prices.
Nonetheless, agile trading strategies to navigate changing market dynamics are essential on
the back of market volatility and an uneven pace of recovery across segments. Investors
should continue to establish positions in the current early phase of the new semiconductor
upcycle, as sector demand and earnings have bottomed. Often lagging behind the front-end
space, domestic Automated Test Equipment (ATEs) and OSAT players are poised for a
recovery in 2H24 and further growth into FY25, while valuation metrics should improve with
better growth visibility. We see opportunities in the small- to mid-cap space, as the market
has already factored in a slow 1H24.
The new upcycle begins. The 2022-2023 downcycle that lasted for five quarters has come to
an end after several delays. World semiconductor sales data compiled by Semiconductor
Industry Association continues showing a sustained recovery and 16% growth in 2024 is
forecasted, followed by another 12.5% increase into 2025F. This new upcycle is currently
supported by the logic integrated circuits (ICs), especially in the server-related space and
power management integrated circuits (PMIC), recovery in the smartphone space in China
coupled with the sustained recovery in the memory space. In addition, early recovery
indications in the ATE space, along with traction in the front-end semiconductor space,
bolster our belief in a sustained sector recovery that is expected to gain pace in 2H24. We
should see a broad sector recovery into 2025, where the replacement cycle intensifies.
Sector earnings are expected to continue improving YoY and HoH into 2H24, keeping
investor interest in the industry warm. In fact, many remain invested in the technology space
despite several push-outs in the recovery. The Street has pencilled in a rather robust growth
expectation (+97%) for FY24 from a low base and the expectation of a sector recovery. While
we acknowledge that the jury is still out – given the uncertainties in the pace of recovery and
as some earnings disappointment could be inevitable – the market seems well-guided with
regards to a gradual recovery scenario, and is willing to weather through the uncertainties.
Build positions to ride on the new upcycle. The sector’s valuation is now c.27-30x CY24F P/E
– which is slightly above its 5-year historical mean. We observe a more optimistic tone from
the guidance of semiconductor-related companies – albeit uneven – with players citing a
volume recovery especially in China, various new opportunities and clientele from the China
Plus One strategy, and One Plus China Strategy from various China firms that are trying to
diversify away from their home base. Besides, the peaking of the FFR by 2024 should also
underpin sector valuations, in general. Note that most technology players have solid balance
sheets, while the persistently strong USD is a boon for exporters.
Top Picks. For the semiconductor space, we have BUYs on Malaysian Pacific Industries (MPI
MK, BUY, TP: MYR44.80) and Pentamaster (PENT MK, BUY, TP: MYR6.16) – which are
anticipated to ride on the sector recovery, given their diverse exposure to various end-
applications from smartphones to automotive and various PMIC chips used in servers.
Furthermore, the recovery in China’s semiconductor space should help to boost the
utilisation rate and turnaround of MPI’s China plant. Meanwhile, PENT should benefit from
the reacceleration of capex spending and sustained strength in the medical technology space.
Both companies also stand to benefit from the US-China trade tensions in their respective
plants in Malaysia – deemed as neutral ground – as well as the self-sustaining policy in China.
In the smaller-cap space, Coraza Integrated Technology (CORAZA MK, TP, MYR0.68), and
JHM Consolidation (JHMC MK, BUY, TP: MYR0.78) are the other BUY stocks we believe that
are on track for a 2H recovery, despite the weak 1H24.
Non-chipmakers. For non-semiconductor exposure, we like CTOS Digital (CTOS MK, TP:
MYR1.77) for its domestic-focused business, leading position, and growth prospects that
track the expansion of the digital economy – given the higher demand for its various digital
solutions, analytical insights, and exposure to fintech. We also favour Datasonic Group
(DSON MK, BUY, TP: MYR0.68) as we expect to see sustained strong demand for its solutions
in various national security projects, while its ASP increase should still buoy its strong Analyst
earnings in FY25F (Mar). Lee Meng Horng
+603 2302 8115
Downside risks: Softer consumer demand, unfavourable FX, obsolescence of technology, loss lee.meng.horng@rhbgroup.com
of clients/contracts and intensifying geopolitical tensions.

74
Figure 122: KLTEC vs NASDAQ vs SOX (YTD performance) Figure 123: Monthly global semiconductor sales (YoY growth)
Source: Bloomberg, RHB Note: *3-month moving average

Source: Bloomberg, RHB.
Figure 124: WSTS and SOX lead the KLTEC Index Figure 125: Historical forward P/E band for KLTEC Index
Figure 126: Valuations of technology stocks

MPI 38.60 44.80 7,679 44.3 26.4 127.1 67.7 3.8 29.8 8.9 1.1 Buy
Unisem 4.07 4.40 6,565 38.1 28.3 114.0 34.6 2.7 16.3 7.2 2.0 Buy
Pentamaster 4.93 6.16 3,450 34.5 26.9 15.9 28.3 4.5 20.4 13.7 0.4 Buy
CTOS Digital 1.48 1.77 3,419 27.6 22.5 19.1 22.8 5.4 31.0 20.1 2.3 Buy
Datasonic^ 0.51 0.68 1,409 15.2 17.0 20.8 6.4 3.9 9.4 26.0 5.2 Buy
JHM Consolidation 0.66 0.78 397 71.5 15.4 (60.7) 364.3 1.2 6.1 1.7 0.0 Buy
Coraza 0.56 0.68 276 32.5 15.8 293.7 105.7 1.8 50.0 5.7 0.0 Buy
Inari Amertron 3.65 3.60 13,753 41.6 32.1 2.1 29.7 5.1 27.6 12.4 2.0 Neutral
GHL Systems 1.07 1.08 1,221 45.1 35.7 5.4 26.5 2.2 9.3 4.9 1.4 Neutral
Globetronics 1.41 1.29 952 27.9 23.5 35.9 18.8 3.0 38.6 10.8 2.9 Neutral
Sector Avg 36.2 27.0 82.8 56.8
Source: RHB

75
Telecommunications: Warming Up NEUTRAL

Stay NEUTRAL; Top Picks: Axiata Group (AXIATA MK, BUY, TP: MYR3.40) and OCK Group
(OCK MK, BUY, TP: MYR0.76). We continue to favour the fixed line/integrated players on
structural catalysts and the stronger earnings outlook. While the signing of the share
subscription agreements (SSAs) by the mobile network operators (MNOs) essentially
removes the 5G policy uncertainty/overhang, the devil is the details of the second 5G
network, on which information remains sketchy. Our preliminary analysis suggests that
Maxis’ (MAXIS MK, NEUTRAL, TP: MYR4.00) and CelcomDigi’s (CDB MK, NEUTRAL, TP:
MY4.35) FY25-26F core earnings could be negatively impacted by 5.4-7.8% from higher
financing cost, annual fees and amortisation of the 5G spectrum, assuming both vie for Entity
B, all else being equal. Maintain NEUTRAL on sector.
Industry mobile service revenue (MSR) growth to remain tepid; Maxis gains further revenue
and EBITDA market share. The March quarter was associated with typical seasonality
(shorter working days), with industry MSR (Big-2 telcos) down 1.1% QoQ. It grew by a
marginal 0.1% YoY, with Maxis notching further revenue market share gains at the expense
of CDB. The former’s EBITDA market share also expanded 2% pts QoQ to 41.4%. Industry
blended ARPUs stayed under pressure (-4% YoY) on inflationary pressures and the still-tight
competition in the market. We see the tepid industry MSR growth continuing in 2H24, with
cost of living issues curtailing wallet share and telcos sustaining their value propositions with
the upselling of fibre broadband (FBB) services. The mobile operators have maintained their
flat- to-low single digit revenue growth guidance for the year.
Stronger earnings outlook for fixed line/integrated players with more resilient growth. We
continue to see structural drivers – eg strong demand for cloud services, enterprise
digitalisation, backhaul fiberisation and managed services – pushing forth the growth of fixed
line and telco-infrastructure centric players with stronger wholesale and site deployment
revenues. For 1Q24, aggregate fixed line core earnings grew 22% YoY, ahead of the 14% YoY
growth in aggregate mobile core earnings (Big-2 telcos).
CDB’s network integration on track for completion in 2025. The telco’s network integration
exercise which started in early 2023 has crossed the halfway mark as at end-June (>7,200
sites modernised), ie on track to meet the 75% target by end-2004 – with full completion set
for 2025. So far, the consolidation exercise involving 12,000 sites each of Celcom and Digi
have not led to any major disruptions or downtime. After booking MYR252m in synergies for
FY23 (net of MYR114m in integration cost), CDB expects additional gross synergies of
MYR700m in FY24. The sum includes MYR80-90m in headcount savings arising from a staff
severance package implemented, which saw MYR139m in one-off costs booked in 1Q24.
Telekom Malaysia (TM) enters into a landmark data centre (DC) deal with Singtel. TM
entered into a 51:49 JV with Singtel (ST SP, BUY, TP: SGD3.25) on 18 Jun for the development
of a 64MW Artificial Intelligence (AI)- ready DC at Iskandar Puteri, Johor. To be constructed
on a 42-acre site, the JV marks the single largest DC development of its kind involving
incumbent telcos, with completion slated for mid-2026. The parties have committed to
MYR1.12bn in equity funding over five years, with TM’s proportionate share at MYR588m.
SSAs for DNB inked. With the exception of TM, which is set to seek shareholders’ approval
for the SSA by 21 Aug, four other telcos (Maxis, CDB, Maxis and YTL Communications)
announced that the conditions precedent for the acquisition of a 14% stake each in Digital
Nasional (DNB) have been met on 20 Jun, with final share agreements inked on 28 June. This
marks a key milestone in the embattled 5G policy saga, with the removal of a major execution
risk paving the way for the transition to the second 5G network. The MNOs will need to
discuss amongst themselves who will remain in DNB, with a call-and-put option entered into
for the divestment (those that opt to move to Entity B) of their respective stakes in DNB back
to the remaining shareholders. We see the overall process (alongside the release of the
Application Information Package (AIP) for the 5G spectrum) potentially extending into 4Q24.
The Ministerial Direction issued in 2021 to DNB for 5G spectrum exclusivity will also need to
be revoked for Entity B to take shape. As the Government had previously highlighted that the Analyst
second 5G network will be commercially-driven, we see a beauty contest being held by way Jeffrey Tan
of a spectrum tender. The process will likely be similar to that planned by the Pakatan Harapan +603 2302 8112
(PH) Government before the change in policy direction towards a single wholesale network. jeffrey.tan@rhbgroup.com

76
5G spectrum could cost Entity B MYR1.4bn upfront. Based on the AIP package issued by the
regulator in Oct 2017, the upfront fee for the 700Mhz band was pegged at MYR215.5m
(10MHz) with annual fee at MYR18.5m. Using these as the basis, we estimate the total
spectrum outlay for the 700MHz band could come up to MYR1.97bn. This assumes that half
(50%) of the spectrum previously allocated to DNB is re-assigned to the second 5G network
access provider (Entity B). Similarly, for the mid-band (3500MHz) and mmwave bands
(24GHz- 26GHz), we estimate the total outlay at MYR1.1bn and MYR112m. This comprised
an upfront payment of MYR496m and annual fee of MYR42m for the 3500MHz, and upfront
payment of MYR49m and annual fee of MYR4.2m for the mmwave band, using Singapore’s
previous reserve prices as a gauge. Based on the computations and assuming Entity B is made
up of two consortium members, each partner/telco would incur an upfront or annual fee of
MYR704m or MYR903m (over 15 years of the spectrum assignment) or a total spectrum
outlay of MYR1.6bn. The upfront fee for all three bands of MYR1.4bn is slightly lower than
DNB’s valuation of c. MYR1.6bn under the SSA.
We think the regulator would look to “neutralise” 4G spectrum for 5G use which is prohibited
under the current framework. This would further lower 5G capex and expedite the rollout of
the second 5G network, in our view. It is also possible that the regulator/Government assigns
the 3500MHz and mmwave bands at a nominal cost vs the 700MHz band which has the
greatest reach. Note that the telcos have yet to guide on 5G capex due to regulatory
uncertainties but have previously highlighted that their existing networks are 5G-ready,
which could indicate incremental 5G capex. Given the time needed to roll out a new network,
we expect the telcos to continue with the wholesale arrangement with DNB in the medium
term. This could portend some earnings risks in the interim, in our view, as telcos bear
additional wholesale charges and opex related to the new 5G network.
Figure 127: Potential outlay for the 5G spectrum

mmwave
5G Spectrum Assignment (SA) 700MHz 3500MHz (24GHz- 28GHz)
Total bandwidth (MHz)- DNB 80 200 1600
50% re-assignment to Entity B 40 100 800
Price (MHz/year/pop) (MYR) 0.10 22,770 284.2
Spectrum outlay (MYRm) 1,974.5 1,127.1 112.5
Indicative upfront fee (MYRm) 862.1 495.9 112.5
Indicative annual fee (MYRm) 74.2 42.1 4.20
Source: Company data, RHB
Key downside risks for the sector/stocks are competition, weaker-than-expected earnings
and regulatory setbacks.
Figure 128: Sector performance vs FBM KLCI YTD Figure 129: 1-year forward sector EV/EBITDA
FBMKLCI Index Telco EV/EBITDA EV/EBITDA (Mean)
14% (%) +1 sd +2 sd
-1 sd -2 sd
12%
11.5
10%
8% 10.5
6%
9.5
4%
8.5
2%
0% 7.5
-2%
6.5
4-Mar
11-Mar
18-Mar
25-Mar
5-Feb
12-Feb
19-Feb
26-Feb
6-May
13-May
20-May
27-May
1-Jan
8-Jan
15-Jan
22-Jan
29-Jan
1-Apr
8-Apr
15-Apr
22-Apr
29-Apr
3-Jun
10-Jun
17-Jun
24-Jun
Nov-11
Dec-15
Nov-18
Dec-22
Sep-10
Jan-13
Aug-13
Feb-17
Sep-17
Jan-20
Aug-20
Feb-24
Mar-14
Mar-21
Apr-11
Jun-12
Jul-16
Apr-18
Jun-19
Jul-23
Oct-14
May-15
Oct-21
May-22

77
Figure 130: Sector core earnings growth YoY Figure 131: Overall 5G subs (defined as “at best” 5G subs)
Total- mobile only Total- wireline only
5G subs Total Subs
100% 5G subs penetration 5G population penetration
80% 70 40%
60 35%
60%
30%
40% 50
25%
20% 40
20%
0%
30
15%
-20%
20
10%
-40%
10 5%
-60%
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
1Q21
2Q21
3Q21
4Q21
1Q22
2Q22
3Q22
4Q22
1Q23
2Q23
3Q23
4Q23
1Q24
0 0%
4Q22 1Q23 2Q23 3Q23 4Q23 1Q24
Source: Company data, RHB Source: Company data, RHB, MCMC
Figure 132: Blended ARPU (MYR) Figure 133: Industry MSR (Big-2) growth
60
Maxis Celcom Digi
7,000 Total Y-o-Y chg 15%
55
6,000
10%
50 5,000
5%
45 4,000
(MYRm)
3,000
40 0%
2,000
35 -5%
1,000
30 0 -10%
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
1Q18
3Q18
1Q19
3Q19
1Q20
3Q20
1Q21
3Q21
1Q22
3Q22
1Q23
3Q23
1Q24
1Q12
4Q12
3Q13
2Q14
1Q15
4Q15
3Q16
2Q17
1Q18
4Q18
3Q19
2Q20
1Q21
4Q21
3Q22
2Q23
1Q24
Figure 134: Valuations of telecommunications stocks

Axiata 2.59 3.40 23,781 30.5 17.0 42.0 79.2 1.1 (5.8) 3.5 3.9 Buy
OCK 0.58 0.76 619 12.1 10.2 39.4 19.0 1.2 1.7 8.8 1.6 Buy
Maxis 3.49 4.00 27,334 20.3 19.5 (0.3) 4.2 4.1 7.6 21.7 4.6 Neutral
CelcomDigi 3.55 4.35 41,647 25.3 23.9 6.0 6.0 2.5 7.1 10.0 3.7 Neutral
Time dotCom 4.98 5.60 9,207 20.2 18.5 10.7 9.5 1.5 18.4 7.5 4.0 Neutral
Sector Avg 21.9 19.2 (2.4) 9.5
Source: RHB

78
Transport: All Set For a Recovery OVERWEIGHT
Maintain OVERWEIGHT; Top Picks: Westports (WPRTS MK, BUY, TP: MYR4.52) and
TASCO (TASCO MK, BUY, TP: MYR1.15). We prefer Westports among the infrastructure
players, following the shift in optimism on the country’s and region’s trade prospects. As the
operator of the largest marine port in Malaysia, Westports is poised to benefit from the
recovery in trade activities, supported by the growth in E&E and commodity exports. Within
the logistics sector, we still like TASCO for its diversified client base and business segments
that will sustain its earnings base, as well as the Integrated Logistics Services (ILS) tax
incentives that offer a buffer against sector headwinds.
Trade recovery is picking up pace. Looking forward, RHB Economics remains upbeat on
Malaysia’s trade outlook in 2024, based on: i) Resilient economic growth in major economies,
ii) the upside for commodity prices, and ii) a re-acceleration in the global technology cycle. This
is further reinforced by recent developments such as the positive trade performance for May,
coupled with stronger sentiment on the manufacturing sector and healthier investment
appetite. We expect this to benefit Westports and logistics players like TASCO and FM Global
(FM MK, NEUTRAL, TP: MYR0.69).
Malaysia’s exports should be lifted by the upturn in the global technology cycle and upside
for commodity prices. The E&E export momentum showed signs of sustained improvement
in the first few months of the year. The upturn in the technology cycle is indicated by higher
E&E exports by regional economies and the projected strong rebound in global
semiconductor sales. Commodity-based sectors such as petroleum and petroleum-based
products and non-metal mineral and metal products are expected to gain from higher
commodity prices and may likely spur export earnings.
Figure 135: Recovery in the global technology cycle Figure 136: Regional E&E exports
Ocean freight outlook. As the Red Sea crisis continues, traffic passing through the Suez Canal
fell by 66% YoY in April, according to the UK’s The Guardian. The extended Red Sea diversions
also allow carriers to maintain the high rates due to tight capacity. Freight rates have
remained firm despite the post-Lunar New Year slack period; the World Container Index
(WCI) and Shanghai Containerised Freight Index (SCFI) are 87% and 118% higher YoY.
Congestion at ports in Dubai and Singapore is also causing delays and more blanked sailings
are anticipated. According to DHL Global Forwarding, the container shortage has worsened
in many Asian locations, with all new boxes fully booked until August. This capacity shortage
could last through the usual peak season until October. Nevertheless, the rates are being fully
passed on to customers, resulting in a neutral impact on freight forwarders. If demand was to
increase significantly and supply constraints tighten, this could present better pricing
opportunities for major volume forwarders such as FM. Analyst
Air freight industry. Global air cargo volume in May remained resilient, and increased 10% Nai Wan Yan
YoY, mainly boosted by rising e-commerce demand and a modal shift from ocean to air freight +603 2302 8125
due to ongoing Middle East conflicts. The Red Sea crisis is expected to prolong congestion at nai.wan.yan@rhbgroup.com
many central seaports around the world, impacting air cargo market and rates.

79
Figure 137: Drewry’s Ocean Freight Index (USD/FEU) Figure 138: Drewry’s air freight average rate (USD/kg)
12000 8
7
10000
6
8000
5
6000 4
3
4000
2
2000
1
0 0
Ocean freight (USD/TEU) Air freight (USD/kg)
Malaysia Airports is currently under review. Our last call and TP was BUY and MYR 9.67.
Downside risks to our sector outlook include a continued slowdown in global economic
growth which will paralyse trade flows, and a further weakening of freight rates.
Figure 139: Valuations of transport stocks

(MYR/s) (MYR/s) FY24F FY25F FY24F FY25F FY24F FY24F FY24F FY24F
Westports 4.17 4.52 14,220 17.3 16.4 5.7 5.0 3.9 12.7 23.1 4.3 Buy
TASCO 0.87 1.15 696 8.9 8.1 28.5 10.1 1.0 4.4 0.0 2.6 Buy
FM Global Logistics 0.61 0.69 338 9.8 7.7 (16.7) 26.6 0.8 6.7 8.8 5.0 Neutral
Sector Avg 19.1 17.3 20.4 10.9
Source: RHB

80
Utilities: The DC-Led Demand Wave OVERWEIGHT
Maintain OVERWEIGHT; Top Picks: Tenaga Nasional (TNB MK, BUY, TP: MYR16.10), YTL
Power (YTLP MK, BUY, TP: MYR6.68) and Samaiden (SAMAIDEN MK, BUY, TP: MYR1.58).
Demand for electricity is set to remain fairly resilient in 2024. We believe TNB should
undergo a further re-rating, since it is a proxy to Malaysia’s energy transition growth journey
under the National Energy Transition Roadmap (NETR). We continue to like the renewable
energy (RE) sector as Malaysia exhibits a robust growth momentum in this area, with several
key initiatives currently underway. These are the Corporate Green Power Programme
(CGPP), Integrated Clean Energy (TBB), and NETR – all have shown a strong commitment to
the energy transition, which should translate to earnings growth for local solar EPCC
contractors.
Data centres to drive electricity demand. Electricity demand rose at a much faster 9.6% YoY,
vs GDP growth of 4.2% in 1Q24, largely driven by the stronger commercial (+11.2%) and
domestic (+16.8%) segments. Demand hit a new peak of 20,028MW in April. There are two
projects with total capacity of 535MW completed under the Green Lane Pathway, while
another two projects (c.165MW) are set to be completed. There are 10 projects with 2GW of
energy demand being committed to, and with electricity supply agreements signed. Despite
strong demand growth of 9.6% YoY in 1Q24, TNB still guided for an annual demand growth
of 2.5-3% YoY for this year and the upcoming regulatory period.
Figure 140: New peak demand of 19,716MW recorded in 2Q23
Source: Company data
Third-party access (TPA) is coming. The potential announcement of the TPA is a significant
step towards the reform of the power industry, which would lead to a more liberal and
competitive market. Near-term earnings should still be safeguarded by the Incentive-Based
Regulation (IBR) framework and contracted power purchase agreements (PPA), but the
wheeling charges pricing determination is crucial to entice energy trading with new power
suppliers. This may pressure existing independent power producers (IPPs) such as TNB and
Malakoff (MLK MK, BUY, TP: MYR0.86) to strive for higher generation efficiency and provide
cleaner energy alternatives, with more players entering the space. At the same time, this is
also an opportunity for existing IPPs to sell their power output to new clients upon their PPA
expiry. We believe this could attract more players to become power producers (of green
energy, perhaps) since they may possibly be able to determine their pricing. That said, green
energy trading, in our view, may be under the TPA – and this may not be executed so soon, as
the latest connection points and power system study can only be identified subsequent to the Analysts
Large-Scale Solar (LSS) 5 awards. Meanwhile, we believe that TNB will also no longer be the Sean Lim, CFA
single buyer by then, but the impact is unclear – currently, the single buyer role is a part of the +603 2302 8128
regulated business. The regulated earnings derived from the single buyer role is also rather sean.lim@rhbgroup.com
insignificant. We believe the TPA framework is not a threat, because TNB’s T&D assets will
still be the infrastructure owner and it may have to incur capex to upgrade the existing Miza Izaimi
infrastructure. TNB could charge IPPs a fee for using its grid infrastructure. The impact on +603 2302 8121
TNB’s T&D segment will also be rather neutral, assuming the utilisation of T&D assets will be miza.izaimi@rhbgroup.com
compensated fairly with wheeling charges.

81
Energy exchange unveiled. Enegem, Malaysia's new platform for RE cross-border electricity
sales (CBES RE), represents a significant step forward for Malaysia's RE ambitions. Enegem
will start with a pilot auction offering 100MW of RE exported to Singapore, leveraging on
existing interconnection infrastructure. This initial phase will focus on utilising Malaysia's
existing solar and hydro power resources. While the Government touts a fast-tracked
platform development, achieving full functionality might take more time. This timeline,
coupled with the necessity to navigate through the single buyer, raises concerns about market
growth and profit margins. Despite these concerns, Enegem is a necessary first step towards
facilitating exports of RE, and potentially positions Malaysia as a regional energy hub. The
coming months will be crucial, as we monitor the execution of the pilot phase.
CGPP contract awards kick off. The CGPP is making significant progress, with off-taker
agreements nearing finalisation and financial close on the horizon. Recently, one of the solar
players, Sunview, secured an EPCC contract under the programme – marking the beginning
of contract awards. We anticipate more jobs to be awarded in the coming months. The influx
of CGPP contracts will replenish the orderbooks (which is much needed) of solar EPCC
players, given the wrapping up of LSS 4 projects.
Other prospects and anticipated developments. Looking ahead, we also anticipate the
announcement of LSS 5 winners in 2H24, following the application deadline on 24 Jul. The LSS
5 programme serves as a testament to Malaysia's commitment to expanding its RE portfolio,
with its largest quota ever offered – a 2GW capacity. Adding to the momentum is the
concurrently running NETR with ambitious targets that include at least 4GW of additional
solar capacity.
mRECs. Further boosting the earnings of solar players is the commercial trading of mRECs,
which are designed to increase market demand for RE by allowing companies to trade
certificates representing RE production. As demand for green energy attributes grows, solar
companies will benefit from higher sales volumes. Provided that mRECs remain cheaper than
the green electric tariff, it will continue to be an attractive, cost-effective option for
businesses aiming to meet their sustainability goals. This presents a significant opportunity
for solar power players to capitalise on the growing green energy market.
We continue to like the Malaysian solar power landscape, as structural growth is fuelled by a
solid number of government initiatives and aided by favourable market conditions, since solar
power panel prices are expected to remain soft throughout 2024. As a result, solar power
players are well-positioned for continued growth and expansion in the coming years.
Figure 141: Valuations of utilities stocks

Tenaga Nasional 14.00 16.10 81,023 20.0 17.6 25.7 13.5 1.3 5.8 6.6 3.2 Buy
YTL Power 4.67 6.68 38,272 12.2 12.9 51.7 (5.4) 2.0 11.6 17.3 2.0 Buy
Malakoff 0.78 0.86 3,812 14.0 10.8 168.2 29.2 0.9 2.2 6.2 5.7 Buy
Taliworks Corp 0.80 0.98 1,603 24.0 17.6 59.0 36.5 2.1 10.7 9.2 5.0 Buy
Samaiden 1.27 1.58 532 31.8 18.3 60.5 73.7 4.0 (25.1) 14.3 0.0 Buy
Petronas Gas 18.04 17.47 35,696 19.2 19.0 0.5 0.9 2.6 12.1 13.6 4.4 Neutral
Ranhill Utilities 1.31 1.15 1,698 36.0 32.3 1165.6 11.3 2.1 4.9 5.9 1.1 Sell
Sector Avg 17.5 16.6 19.7 7.0
Source: RHB

82
Appendix
Figure 142: Valuations and ratings of individual stocks under our coverage
Core EPS EPS Growth P/E EV/EBITDA
FYE Price Target
(sen) (%) (x) (x)
(MYR/s) (MYR/s) 23 24F 25F 23 24F 25F 23 24F 25F 23 24F 25F
BUY
AEON Credit^ Feb 7.56 7.90 81.1 81.6 93.6 1.6 0.6 14.7 9.3 9.3 8.1 n.a. n.a. n.a.
Alliance Bank^ Mar 3.77 4.20 44.6 47.4 51.2 1.9 6.2 8.0 8.5 8.0 7.4 n.a. n.a. n.a.
AME Elite^ Mar 1.62 2.20 14.5 25.8 15.5 (10.1) 77.7 (39.8) 11.1 6.3 10.4 8.1 4.6 7.3
AMMB^ Mar 4.29 5.50 52.4 54.4 58.4 (0.0) 3.9 7.2 8.2 7.9 7.4 n.a. n.a. n.a.
Axiata Dec 2.59 3.40 6.0 8.5 15.2 (65.9) 42.0 79.2 43.3 30.5 17.0 3.3 2.9 2.4
Axis REIT Dec 1.84 2.09 8.9 9.5 10.5 (7.3) 6.9 10.7 20.6 19.3 17.4 0.6 1.5 1.3
Bermaz Auto^ Apr 2.50 3.25 30.4 27.3 31.3 16.3 (10.1) 14.4 8.2 9.2 8.0 5.8 5.9 5.1
Bumi Armada Dec 0.56 0.68 5.6 14.3 10.1 (54.7) 154.4 (29.4) 9.9 3.9 5.5 3.0 1.1 0.7
Bursa Malaysia Dec 8.84 9.85 28.5 35.1 36.1 1.8 23.1 2.9 31.0 25.2 24.5 19.0 14.9 14.2
Carlsberg Dec 18.76 22.20 105.6 112.2 120.3 (2.5) 6.3 7.1 17.8 16.7 15.6 13.0 11.9 11.1
CIMB Dec 6.68 7.60 65.5 71.3 75.7 25.7 9.0 6.2 10.2 9.4 8.8 n.a. n.a. n.a.
Coraza Integrated Dec 0.56 0.68 (0.9) 1.7 3.5 (121.3) 293.7 105.7 n.m. 32.5 15.8 52.7 13.5 8.2
CTOS Digital Dec 1.48 1.77 4.5 5.4 6.6 22.3 19.1 22.8 32.8 27.6 22.5 28.2 22.2 17.8
Datasonic^ Mar 0.51 0.68 3.1 3.3 3.0 20.8 6.4 (10.3) 16.2 15.2 17.0 9.7 9.8 10.6
Dayang Enterprise Dec 2.69 3.58 16.2 21.0 23.8 67.8 29.4 13.4 16.6 12.8 11.3 7.8 7.1 6.0
Dialog Jun 2.40 2.96 8.2 9.4 9.6 0.5 15.4 2.2 29.4 25.4 24.9 32.8 25.8 23.4
Duopharma Biotech Dec 1.25 1.44 6.4 7.7 9.3 (45.9) 21.9 19.8 19.7 16.1 13.5 11.8 8.8 8.0
DXN Hldg^ Feb 0.64 0.93 6.7 7.6 8.6 10.9 12.7 14.2 9.5 8.5 7.4 6.4 5.1 4.2
E&O^ Mar 0.96 1.38 7.8 6.2 6.9 57.8 (20.5) 10.9 12.3 15.4 13.9 11.2 8.9 8.5
Econpile Jun 0.45 0.69 (1.5) (1.3) 0.6 50.9 12.1 148.1 n.m. n.m. 72.0 603.0 na 32.0
Farm Fresh Mar 1.49 1.69 3.4 5.6 6.8 9.8 65.9 20.8 44.0 26.5 21.9 20.9 14.1 12.0
Gabungan AQRS Dec 0.35 0.50 6.9 6.3 7.6 41.7 (8.3) 20.4 5.1 5.5 4.6 3.7 2.3 1.8
Gamuda Jul 6.50 7.69 32.7 33.7 40.8 5.1 2.9 21.3 19.9 19.3 15.9 16.4 14.5 12.3
Guan Chong Dec 3.62 5.10 9.2 33.9 41.7 (37.4) 266.8 23.0 39.1 10.7 8.7 18.7 9.5 8.1
Hartalega^ Mar 3.26 4.10 6.7 10.6 14.6 (73.7) 642.5 57.5 +>100 48.6 30.9 52.9 23.6 16.7
Heineken Dec 23.20 29.60 128.0 137.0 146.0 (6.3) 7.0 6.6 18.1 16.9 15.9 12.2 11.3 10.6
Hong Leong Bank Jun 19.16 23.60 186.4 197.2 207.7 16.0 5.8 5.3 10.3 9.7 9.2 n.a. n.a. n.a.
IGB REIT Dec 1.82 2.03 10.0 10.5 11.1 6.8 4.2 6.2 18.1 17.4 16.4 (2.1) (2.0) (2.0)
IHH Healthcare Dec 6.28 7.90 14.8 18.6 19.7 (7.3) 25.5 6.0 42.4 33.8 31.9 13.2 12.3 11.7
IJM Corp^ Mar 2.99 3.60 14.3 14.8 15.7 83.1 4.0 5.5 21.0 20.1 19.1 7.5 9.3 8.8
IOI Corp Jun 3.73 4.40 24.1 18.8 21.7 (24.2) (22.0) 15.2 15.5 19.8 17.2 11.5 11.7 9.9
JHM Consolidation Dec 0.66 0.78 2.3 0.9 4.3 (33.7) (60.7) 364.3 28.1 71.5 15.4 9.7 11.5 6.4
Kelington Dec 3.40 3.85 13.7 15.1 15.8 90.5 10.3 4.7 24.9 22.6 21.6 16.3 12.0 11.1
Kerjaya Prospek Dec 1.82 2.15 10.3 12.9 14.0 13.3 24.6 8.6 17.6 14.2 13.0 10.7 7.6 7.3
KKB Engineering Dec 1.67 2.11 9.3 10.2 12.1 103.1 10.2 19.0 18.0 16.4 13.7 6.2 5.5 5.1
KLK Sep 20.98 23.00 131.8 94.1 108.6 (39.8) (28.6) 15.4 15.9 22.3 19.3 10.1 8.7 8.6
Kossan Dec 2.28 2.73 1.3 6.9 8.0 (80.1) 428.1 17.1 +>100. 33.2 28.4 47.4 14.5 12.5
KPJ Healthcare Dec 1.92 2.14 6.5 6.7 7.6 63.4 2.9 13.9 29.6 28.7 25.2 13.8 13.5 12.3
Leong Hup Int Dec 0.61 0.82 8.9 7.6 7.9 59.3 (14.1) 3.8 6.9 8.0 7.7 4.3 4.1 3.8
Mah Sing Dec 1.75 2.26 8.9 10.0 11.0 19.5 12.4 10.6 19.7 17.6 15.9 10.4 9.9 9.3
Malakoff Dec 0.78 0.86 (8.2) 5.6 7.2 (161.0) 168.2 29.2 n.m. 14.0 10.8 9.0 4.6 4.1

83
Figure 143: (continued from previous page) – valuations and ratings of individual stocks under coverage
P/CF P/BV DIV YIELD ROE Mkt
% Chg in price
(x) (x) (%) (%) cap
23 24F 25F 23 24F 25F 23 24F 25F 23 24F 25F 1-mth 3-mth 12-mth (MYRm)
BUY
n.m n.m n.m 1.5 1.3 1.2 3.7 3.2 3.7 16.7 15.1 15.7 2.0 21.2 35.2 3,860
n.a. n.a. n.a. 0.8 0.7 0.7 4.8 5.1 5.5 9.9 9.8 9.8 (0.3) 2.7 12.2 5,836
3.9 (37.0) 6.7 1.2 1.1 1.0 3.7 4.9 3.1 11.0 17.8 9.7 (5.8) (7.4) 26.6 1,035
n.a. n.a. n.a. 0.7 0.7 0.7 5.3 5.7 6.1 9.9 9.0 9.2 0.5 4.1 18.5 14,181
2.7 (5.8) 3.1 1.1 1.1 1.1 3.9 3.9 3.9 2.4 3.5 6.3 (9.8) (7.5) (2.3) 23,781
15.2 14.3 12.7 1.1 1.1 1.1 4.7 5.0 5.7 5.5 5.7 6.5 (1.6) 1.1 0.5 3,215
14.9 7.4 9.1 3.5 3.3 3.1 10.3 8.8 10.4 44.3 37.3 39.8 1.6 5.0 17.7 2,920
4.2 3.2 3.8 0.6 0.5 0.5 0.0 0.0 0.0 6.1 13.9 8.8 (2.6) (3.5) 18.1 3,290
33.8 24.4 22.5 8.7 8.4 8.1 3.3 3.6 3.7 28.7 33.9 33.7 3.4 19.9 38.3 7,154
17.6 13.8 12.8 24.4 20.0 19.7 5.0 5.1 6.3 168.3 131.4 127.3 (6.2) 0.5 (8.7) 5,736
n.a. n.a. n.a. 1.0 1.0 0.9 5.4 5.9 6.3 10.7 10.9 10.9 (2.9) 2.8 29.6 71,436
33.1 50.0 25.8 1.9 1.8 1.6 0.0 0.0 0.0 (2.5) 5.7 10.8 (3.4) 15.5 (30.9) 276
47.3 31.0 26.7 5.8 5.4 4.9 2.2 2.3 2.8 18.8 20.1 22.8 8.8 16.5 5.7 3,419
26.6 9.4 13.5 4.1 3.9 3.7 4.4 5.2 4.7 25.4 26.0 22.2 (2.9) 14.8 12.2 1,409
14.8 9.5 8.6 1.9 1.7 1.5 1.1 1.7 1.7 14.1 12.2 12.5 (4.6) 12.1 111.8 3,114
19.8 22.5 43.6 2.7 2.5 2.4 1.5 1.8 1.8 9.5 10.2 9.9 (4.0) 6.2 14.8 13,542
24.5 9.3 11.7 1.7 1.6 1.5 1.8 1.8 1.8 7.8 11.7 11.4 1.6 4.2 (4.6) 1,202
8.8 7.5 6.4 2.5 2.2 1.9 5.6 5.9 6.7 27.8 27.5 27.3 (5.2) 3.2 (9.9) 3,183
7.0 6.9 7.2 0.8 0.7 0.7 0.0 1.6 1.9 6.4 5.2 5.2 (10.3) (8.6) 209.7 1,965
(226.9) (329.5) 39.5 1.7 1.7 1.7 0.0 0.0 0.0 (4.0) (4.9) 2.4 (11.8) (5.3) 143.2 638
20.5 17.8 17.0 4.2 3.7 3.4 0.7 1.1 1.8 9.8 14.8 16.2 #N/A #N/A 13.7 2,790
1.8 2.2 2.7 0.3 0.3 0.2 2.9 2.9 2.9 6.2 5.4 6.2 2.9 (1.4) 32.1 190
42.3 (36.5) 21.3 1.6 1.6 1.5 7.7 2.5 2.5 8.3 8.2 9.5 7.4 25.0 45.7 18,009
(5.1) 10.9 4.5 2.3 2.1 1.8 0.6 2.3 2.9 6.0 21.0 22.0 (8.1) 53.4 54.7 4,252
(202.0) 28.6 25.3 2.4 2.3 2.1 0.0 0.0 0.0 0.6 4.8 7.1 (3.6) 22.1 64.6 11,127
11.9 14.3 13.0 15.3 15.1 15.0 5.5 5.8 6.2 84.3 89.4 94.4 (5.5) (0.4) (12.5) 7,009
n.a. n.a. n.a. 1.2 1.1 1.0 3.1 3.2 3.4 11.8 11.5 11.2 (1.2) (1.1) 1.9 41,533
11.1 14.8 14.0 1.6 1.6 1.6 5.8 6.0 6.4 9.1 9.3 10.0 0.0 5.2 11.7 6,569
14.7 10.8 13.6 1.9 1.8 1.8 3.0 0.9 0.9 10.7 5.5 5.6 0.2 4.1 7.2 55,308
10.5 16.6 14.1 1.0 1.0 1.0 2.7 2.7 2.7 6.0 5.0 5.2 19.6 27.2 102.0 10,483
13.6 17.3 12.4 2.0 1.9 1.8 4.0 2.4 2.7 10.0 10.0 10.9 (6.3) (6.0) (0.3) 23,140
7.0 6.1 44.0 1.2 1.2 1.2 0.0 0.0 3.1 4.5 1.7 7.8 (5.8) 13.9 (12.7) 397
16.7 8.9 19.7 8.8 7.4 6.1 0.9 1.6 1.6 35.6 35.7 30.9 12.6 25.5 128.2 2,292
85.0 11.9 17.0 2.0 2.0 1.9 4.3 5.5 5.5 11.4 14.1 15.0 (0.5) 1.1 71.7 2,295
15.0 58.1 6.4 1.2 1.1 1.1 4.2 3.1 3.6 6.6 7.1 8.1 (8.2) 3.7 22.8 482
15.6 8.7 10.0 1.6 1.5 1.5 2.9 2.1 2.4 2.2 7.0 7.7 (5.5) (6.3) (3.7) 23,003
28.8 24.3 18.6 1.5 1.5 1.4 1.8 0.9 1.1 (0.2) 4.5 5.1 (3.0) 16.9 71.4 5,818
12.7 11.8 11.3 3.5 3.3 3.1 1.7 1.8 2.1 12.2 11.9 12.7 (4.5) 1.1 74.9 8,379
2.6 4.0 4.0 1.0 0.9 0.8 4.9 3.8 3.9 15.3 11.9 11.4 7.0 5.2 24.5 2,227
7.9 32.5 27.8 1.1 1.1 1.1 2.3 2.6 2.9 5.9 6.4 6.9 15.1 53.5 184.6 4,480
2.2 2.2 2.3 0.9 0.9 0.8 1.9 5.7 6.5 (8.1) 6.2 7.8 5.4 23.8 35.7 3,812

84
FYE Price Target Core EPS EPS Growth P/E EV/EBITDA
(sen) (%) (x) (x)
BUY
Malayan Cement Jun 4.94 7.18 12.6 41.7 42.9 62.9 230.0 2.9 39.1 11.8 11.5 13.9 8.8 8.1
Matrix^ Mar 1.80 2.15 19.8 19.9 20.5 18.9 0.4 2.9 9.1 9.0 8.8 3.0 2.9 2.5
MGB Dec 0.80 1.16 8.1 9.4 10.5 221.8 16.0 11.8 9.9 8.5 7.6 5.5 3.6 2.7
MISC Dec 8.55 9.35 49.6 57.1 59.6 6.0 15.2 4.4 17.3 15.0 14.3 9.7 8.3 7.9
MMHE Dec 0.46 0.60 (30.3) 2.4 3.3 (5023.1) 107.9 36.6 n.m. 18.9 13.9 na 4.3 3.4
MPI Jun 38.60 44.80 38.4 87.2 146.3 (74.7) 127.1 67.7 +>100.0 44.3 26.4 17.7 13.5 10.8
Mr DIY Group Dec 1.92 2.20 6.1 6.8 7.8 16.9 12.9 13.5 31.7 28.1 24.7 15.6 13.9 12.3
MRCB Dec 0.62 0.80 (1.5) 0.9 1.2 (241.9) 161.3 32.6 n.m. 68.3 51.5 12.5 14.5 10.8
Mynews Holdings Oct 0.68 0.81 (1.0) 1.8 4.0 61.0 282.9 122.3 n.m. 37.7 17.0 5.8 4.5 3.4
OCK Group Dec 0.58 0.76 3.4 4.8 5.7 20.3 39.4 19.0 16.9 12.1 10.2 6.7 4.7 4.0
Pentamaster Dec 4.93 6.16 12.3 14.3 18.3 6.2 15.9 28.3 40.0 34.5 26.9 20.7 17.6 13.7
Pintaras Jun 1.75 2.09 (5.3) 5.1 6.4 (132.0) 197.1 25.1 n.m. 34.0 27.2 4.8 2.9 2.4
Public Bank Dec 4.00 4.80 34.3 35.7 37.3 8.7 4.1 4.6 11.7 11.2 10.7 n.a. n.a. n.a.
Samaiden Group Jun 1.27 1.58 2.5 4.0 6.9 (17.3) 60.5 73.7 51.1 31.8 18.3 34.2 21.6 11.5
Sarawak Oil Palms Dec 2.88 3.30 33.9 38.7 33.0 (40.5) 14.3 (14.7) 8.5 7.4 8.7 4.9 4.1 4.3
Sentral REIT Dec 0.80 0.91 6.9 7.0 7.2 0.2 2.2 2.6 11.6 11.4 11.1 (5.2) (3.6) (3.5)
Sime Darby Jun 2.60 3.20 16.9 19.6 23.5 (3.4) 15.9 19.5 15.3 13.2 11.1 6.7 5.2 4.4
Sime Darby Property Dec 1.31 2.00 5.9 6.8 7.3 46.9 15.6 6.9 22.1 19.1 17.9 12.7 11.5 10.8
SKP Resources^ Mar 1.14 1.31 6.3 7.7 9.8 (33.0) 23.2 26.8 18.2 14.8 11.7 8.6 7.0 5.8
SP Setia Dec 1.33 1.72 7.3 9.6 8.1 10.2 30.9 (15.1) 18.1 13.9 16.3 10.3 10.7 11.8
Sunway Bhd Dec 3.60 4.00 13.7 13.9 14.3 19.1 1.1 3.2 26.2 25.9 25.1 36.5 36.1 33.0
Sunway Construction Dec 3.73 4.92 13.2 13.9 18.9 18.2 5.1 36.6 28.3 26.9 19.7 15.9 17.4 12.6
Sunway REIT Dec 1.56 1.77 9.9 10.4 10.9 4.5 4.9 4.8 15.8 15.1 14.4 (0.4) (0.5) (0.5)
Supermax Jun 0.87 1.01 (4.3) (0.5) 0.8 (115.5) 88.7 269.9 n.m. n.m. +>100. na 5.4 3.8
Syarikat Takaful Dec 3.80 4.40 41.5 48.9 50.9 22.6 17.8 4.2 9.2 7.8 7.5 n.a. n.a. n.a.
Synergy House Dec 1.65 2.01 5.2 8.1 10.2 60.7 53.4 27.2 31.4 20.5 16.1 19.5 13.2 10.2
Taliworks Corporation Dec 0.80 0.98 2.1 3.3 4.5 (21.8) 59.0 36.5 38.2 24.0 17.6 12.6 11.0 8.3
TASCO Mar 0.87 1.15 7.6 9.8 10.8 (32.9) 28.5 10.1 11.4 8.9 8.1 7.3 5.1 5.3
Tenaga Dec 14.00 16.10 55.6 69.9 79.3 (19.5) 25.7 13.5 25.2 20.0 17.6 6.2 6.0 5.8
Texchem Dec 0.86 1.44 (8.5) 7.0 12.5 (132.8) 182.1 79.5 n.m. 12.2 6.8 3.0 2.9 2.2
Top Glove Aug 1.08 1.28 (6.4) (2.2) (0.1) (231.4) 66.1 96.8 n.m. n.m. n.m. na 71.9 25.1
UEM Sunrise Dec 1.04 1.60 1.4 1.7 1.8 (4.0) 23.1 4.6 74.0 60.1 57.5 30.6 23.7 24.2
Unisem Dec 4.07 4.40 5.0 10.7 14.4 (67.5) 114.0 34.6 81.6 38.1 28.3 18.6 13.2 10.7
VS Industry Jul 1.27 1.49 4.9 4.6 6.8 (10.5) (4.8) 45.6 26.1 27.4 18.8 11.4 11.3 8.5
Westports Dec 4.17 4.52 22.9 24.2 25.4 11.4 5.7 5.0 18.2 17.3 16.4 11.0 10.0 9.5
Yinson^ Jan 2.36 3.32 12.4 18.4 24.2 16.9 48.3 31.6 19.0 12.8 9.8 6.7 9.5 8.0
YTL Power Jun 4.67 6.68 25.1 38.1 36.1 440.3 51.7 (5.4) 18.6 12.2 12.9 9.5 7.6 7.8
NEUTRAL
Aeon Co. (M) Dec 1.40 1.26 8.2 9.8 10.4 3.2 19.6 6.1 17.1 14.3 13.5 2.8 2.5 2.2
Allianz Malaysia Dec 22.12 21.70 410.7 421.3 444.7 18.8 2.6 5.6 5.4 5.3 5.0 n.a. n.a. n.a.
AME REIT Mar 1.38 1.42 9.8 7.0 7.6 (2.9) (28.1) 8.1 14.1 19.6 18.1 20.4 19.9 18.8
Astro^ Jan 0.34 0.32 3.5 2.4 2.9 (41.5) (30.2) 17.9 9.8 14.0 11.9 5.3 5.0 5.1
BIMB Dec 2.49 2.45 24.0 26.7 28.3 5.0 11.4 6.1 10.4 9.3 8.8 n.a. n.a. n.a.
BM Greentech^ Mar 1.62 1.21 7.0 7.9 8.3 85.1 12.0 5.3 23.0 20.5 19.5 11.3 9.8 9.0
Cahya Mata Sarawak Dec 1.33 1.12 9.5 10.3 15.3 (51.2) 8.2 48.8 14.0 13.0 8.7 3.7 3.8 3.0
CelcomDigi Dec 3.55 4.35 13.2 14.0 14.9 29.1 6.0 6.0 26.8 25.3 23.9 9.6 9.2 9.0
Coastal Contracts Dec 1.70 1.64 61.6 26.3 29.0 158.6 (57.3) 10.4 2.8 6.5 5.9 0.7 0.4 (0.5)
FM Global Logistics Jun 0.61 0.69 7.4 6.2 7.9 (9.9) (16.7) 26.6 8.1 9.8 7.7 4.8 4.0 3.8
GHL Systems Dec 1.07 1.08 2.2 2.4 3.0 (13.0) 5.4 26.5 47.6 45.1 35.7 16.1 14.7 12.3
Globetronics Dec 1.41 1.29 3.7 5.0 6.0 (46.1) 35.9 18.8 38.0 27.9 23.5 13.8 12.9 10.7
Amertron Jun 3.65 3.60 8.6 8.8 11.4 (17.3) 2.1 29.7 42.5 41.6 32.1 31.5 30.0 22.0
IOI Properties Jun 2.25 2.47 15.1 12.8 12.9 53.0 (15.4) 1.0 14.9 17.6 17.5 24.7 26.0 25.9

85
P/CF P/BV DIV YIELD ROE % Chg in price Mkt
(x) (x) (%) (%) cap
23 24F 25F 23 24F 25F 23 24F 25F 23 24F 25F 1-mth 3-mth 12-mth (MYRm)
BUY
39.1 11.8 11.5 1.0 0.9 0.9 0.0 0.0 0.0 2.7 8.6 8.1 (6.8) (1.0) 68.6 6,583
13.3 8.9 7.0 1.1 1.0 1.0 5.6 5.8 6.1 12.0 11.5 11.3 1.7 0.6 27.7 2,252
8.5 4.8 5.9 0.9 0.8 0.7 1.0 2.3 2.6 9.2 9.6 10.0 (13.5) (1.2) 16.8 473
7.5 5.7 6.4 1.0 1.0 0.9 4.2 4.4 4.4 5.8 6.4 6.6 2.3 12.6 18.9 38,165
(4.0) 22.8 2.6 0.6 0.6 0.5 0.0 0.0 0.0 -31.9 3.0 3.9 (11.7) (3.2) (13.3) 728
21.0 29.8 12.3 4.0 3.8 3.5 0.9 1.1 1.2 3.1 8.9 13.9 0.3 27.9 36.4 7,679
18.2 17.6 16.7 10.2 8.9 7.9 1.7 2.1 2.6 35.3 33.8 33.8 6.1 29.7 22.3 18,147
6.4 4.3 5.7 0.6 0.6 0.6 1.6 1.6 1.6 2.2 0.9 1.2 (10.1) (2.4) 106.7 2,770
7.4 4.3 3.8 2.0 1.9 1.8 0.5 0.8 1.8 (3.0) 5.2 10.9 19.3 30.8 47.8 510
5.0 1.7 2.6 0.9 1.2 1.1 1.6 1.6 1.6 5.9 8.8 11.3 (9.4) (4.9) 43.2 619
16.3 20.4 19.4 5.0 4.5 3.9 0.4 0.4 0.4 13.4 13.7 15.4 5.2 13.7 5.2 3,450
18.7 5.6 10.5 0.7 0.7 0.7 2.9 1.5 1.8 (0.5) 2.1 2.6 (1.7) 13.6 1.7 290
n.a. n.a. n.a. 1.4 1.3 1.3 4.8 5.0 5.3 12.7 12.3 12.2 (4.1) (5.7) 3.1 77,643
18.0 (25.1) 12.3 5.4 4.0 3.3 0.5 0.0 0.0 11.2 14.3 19.5 (8.6) (8.6) 33.7 532
7.0 4.2 5.3 0.7 0.7 0.6 1.6 3.5 3.5 8.8 9.5 7.6 (3.0) (8.6) 12.1 2,568
(5.9) 9.8 9.5 0.6 0.7 0.7 8.4 8.5 8.7 5.6 6.2 6.4 (1.2) 1.9 (3.0) 956
17.7 5.1 3.5 1.0 0.8 0.8 5.0 5.0 5.4 7.0 7.1 7.5 (11.9) (0.4) 26.8 17,721
34.5 42.2 19.2 0.9 0.9 0.8 1.9 2.1 2.1 4.2 4.6 4.7 5.6 42.4 184.8 8,909
8.1 10.4 15.4 2.0 1.9 1.8 2.7 4.1 5.1 11.0 13.0 15.5 (0.9) 29.5 4.6 1,781
3.1 27.5 4.0 0.4 0.4 0.4 1.0 1.2 1.3 2.1 2.8 2.4 (11.3) (1.5) 158.3 6,332
50.2 23.0 28.9 1.5 1.5 1.5 1.4 1.5 1.7 5.6 6.0 6.1 (4.3) 1.4 123.6 20,296
(16.8) 10.4 41.9 5.9 5.4 4.9 1.6 2.2 3.0 21.9 20.9 26.0 16.2 25.6 136.1 4,809
17.8 17.2 17.6 1.0 1.0 1.0 6.0 6.3 6.6 6.1 6.4 6.7 0.6 4.0 (0.6) 5,343
(29.1) (138.1) 17.4 0.5 0.5 0.5 5.8 0.0 0.2 (2.4) (0.3) 0.5 (7.4) 6.7 3.6 2,229
n.a. n.a. n.a. 1.9 1.6 1.4 3.5 4.1 4.3 22.5 22.4 20.1 (1.6) 7.0 10.8 3,182
(147.2) 14.4 19.8 8.2 6.4 5.0 1.0 1.5 1.9 35.0 35.0 34.9 0.6 103.7 323.1 825
12.3 10.7 10.4 2.3 2.1 2.1 7.5 5.0 5.0 5.7 9.2 12.0 (0.6) 5.3 (2.5) 1,603
6.3 4.4 4.9 1.1 1.0 0.9 2.6 2.6 2.6 0.0 0.0 0.0 3.6 6.1 3.6 696
2.5 5.8 5.5 1.3 1.3 1.3 3.3 3.2 3.7 5.3 6.6 7.4 6.9 21.7 52.2 81,023
n.m n.m n.m 0.6 0.5 0.5 0.0 2.9 5.2 (5.7) 4.5 7.8 (2.8) (5.0) (27.5) 100
72.3 15.9 33.5 1.9 1.9 1.9 0.0 0.0 0.0 (18.0) (3.8) (0.1) (4.4) 35.8 25.6 8,650
19.7 71.4 35.2 0.8 0.8 0.7 0.0 0.0 0.0 0.8 1.2 1.3 (11.1) (8.8) 285.2 5,261
18.0 16.3 14.9 2.8 2.7 2.6 2.0 2.0 1.8 2.7 7.2 9.3 (0.2) 10.6 34.8 6,565
11.5 10.6 19.2 2.3 2.2 2.1 1.7 1.8 2.9 8.7 8.2 11.4 22.1 57.8 40.3 4,873
14.3 12.7 12.3 4.0 3.9 3.7 3.8 4.3 4.6 22.9 23.1 23.2 4.0 8.6 15.8 14,220
(2.7) 7.8 4.7 1.4 1.3 1.2 0.8 1.7 2.1 20.1 10.3 12.4 (1.7) (2.9) (7.8) 7,072
11.1 11.6 9.5 2.3 2.0 1.8 1.3 2.0 2.3 13.2 17.3 14.6 (5.7) 21.0 273.6 38,272
NEUTRAL
3.1 3.0 2.8 1.1 1.0 1.0 2.9 3.5 3.7 6.3 7.3 7.4 (2.1) 27.3 8.5 1,966
n.a n.a n.a 0.8 0.7 0.6 4.5 5.0 5.2 14.7 13.8 13.1 (3.5) 11.4 54.9 3,937
16.3 15.7 13.6 1.2 1.3 1.3 5.3 5.5 6.0 9.0 6.4 7.0 (2.1) 3.0 12.2 725
3.2 1.8 3.1 1.6 1.1 1.0 0.7 3.2 3.2 16.7 9.2 8.9 1.5 13.3 (42.4) 1,774
n.a. n.a. n.a. 0.8 0.7 0.7 6.5 6.4 6.8 7.7 8.1 8.3 0.4 (2.0) 29.0 5,644
20.5 55.1 20.0 319.6 287.6 259.7 1.4 1.4 1.4 14.6 14.7 14.0 26.6 75.1 110.4 836
18.5 5.6 8.5 0.4 0.4 0.4 1.6 1.7 2.3 3.1 3.3 4.7 14.7 43.8 35.7 1,429
6.8 7.1 7.2 2.5 2.5 2.5 3.7 3.7 3.7 9.5 10.0 10.4 (12.3) (16.7) (16.5) 41,647
5.4 5.9 10.8 0.5 0.5 0.4 0.0 0.0 0.0 20.9 7.7 7.8 4.9 16.4 (23.1) 909
2.5 6.7 4.6 0.9 0.8 0.8 5.8 5.0 6.6 11.3 8.8 10.6 (5.5) 0.0 6.1 338
25.1 9.3 20.8 2.2 2.2 2.1 1.4 1.4 1.4 4.9 4.9 6.1 8.6 72.6 33.8 1,221
20.4 38.6 18.9 3.1 3.0 2.9 2.2 2.9 3.4 8.1 10.8 12.5 10.2 (2.8) 12.7 952
53.2 27.6 28.9 5.2 5.1 4.9 2.0 2.0 2.6 12.1 12.4 15.6 6.1 13.7 33.7 13,753
(6.2) 6.8 9.1 0.6 0.5 0.5 2.3 2.2 2.7 4.1 3.1 3.1 (10.7) (0.9) 110.3 12,389

86
FYE Price Target Core EPS EPS Growth P/E EV/EBITDA
(sen) (%) (x) (x)
NEUTRAL
KLCCP Stapled Dec 7.50 7.96 39.3 45.2 47.3 8.5 15.0 4.7 19.1 16.6 15.9 0.5 0.4 0.4
Kotra Industries Jun 4.31 5.00 42.9 38.1 39.7 6.8 (11.2) 4.2 10.0 11.3 10.9 7.4 6.8 6.2
LBS Bina Dec 0.74 0.93 9.1 9.0 9.7 10.3 (1.2) 8.3 8.1 8.2 7.6 4.1 4.6 4.0
Magnum Dec 1.12 1.08 8.7 8.2 9.0 21.1 (6.0) 10.1 12.9 13.7 12.4 11.4 12.3 11.1
Maxis Dec 3.49 4.00 17.3 17.2 17.9 2.6 (0.3) 4.2 20.2 20.3 19.5 9.7 9.2 8.5
Maybank Dec 9.91 10.60 77.6 81.8 85.7 16.6 5.5 4.8 12.8 12.1 11.6 n.a. n.a. n.a.
MBM Resources Dec 5.20 4.70 85.6 75.2 55.3 24.5 (12.1) (26.4) 6.1 6.9 9.4 2.4 1.5 0.3
Media Prima Jun 0.46 0.45 1.4 2.6 2.9 (57.0) 82.8 9.2 32.0 17.5 16.0 1.4 0.7 0.1
Nestle Dec 122.50 131.00 318.5 331.1 347.6 20.4 4.0 5.0 38.5 37.0 35.2 26.5 23.3 22.2
Padini Jun 3.81 3.68 23.5 26.0 27.0 (30.7) 10.8 3.7 16.2 14.6 14.1 4.5 4.8 4.1
Pavilion REIT Dec 1.37 1.39 8.4 9.0 9.1 3.7 8.0 0.4 16.4 15.2 15.1 18.2 16.0 15.9
Petronas Dagangan Dec 17.20 20.82 94.9 101.3 104.0 24.7 6.7 2.6 18.1 17.0 16.5 10.6 9.8 9.5
Petronas Gas Dec 18.04 17.47 93.5 94.0 94.9 7.2 0.5 0.9 19.3 19.2 19.0 9.9 9.3 9.1
Power Root^ Mar 1.60 1.68 9.2 10.9 12.3 (28.7) 18.7 13.3 17.5 14.7 13.0 12.6 10.1 9.0
Press Metal Dec 5.79 5.14 14.7 21.4 23.1 (15.1) 45.7 7.7 39.3 27.0 25.1 44.7 16.0 14.6
QL Resources^ Mar 6.49 6.36 14.3 17.5 18.1 59.6 22.5 3.8 45.5 37.2 35.8 17.1 16.8 16.1
Scientex Jul 4.26 4.35 29.8 37.3 38.3 14.9 25.1 2.9 14.3 11.4 11.1 11.6 10.1 8.3
SD Guthrie Dec 4.25 3.90 13.1 19.8 19.5 (57.8) 51.6 (1.4) 32.5 21.5 21.8 10.2 9.3 9.5
Sports Toto Jun 1.55 1.69 16.4 14.7 15.5 35.8 (10.2) 5.3 9.4 10.5 10.0 6.5 6.5 6.1
Ta Ann Dec 3.80 3.55 44.3 42.2 42.0 (42.1) (4.8) (0.4) 8.6 9.0 9.0 4.6 3.8 3.5
Tambun Indah Dec 1.12 1.20 9.3 11.4 11.8 (33.2) 22.1 3.5 12.0 9.8 9.5 6.7 5.5 5.4
Time dotCom Dec 4.98 5.60 22.3 24.6 27.0 (4.8) 10.7 9.5 22.4 20.2 18.5 8.9 10.9 10.1
UEM Edgenta Dec 0.89 0.89 3.9 4.5 4.7 (43.1) 14.7 4.5 22.9 20.0 19.1 3.2 4.6 4.4
UOA Development Dec 1.83 2.02 6.7 9.2 10.5 (28.9) 36.1 14.2 27.1 19.9 17.5 16.6 10.2 9.5
Wasco Dec 1.39 1.55 9.8 13.6 14.1 24.1 38.8 4.0 14.2 10.2 9.8 4.0 4.4 4.1
SELL
Affin Bank Dec 2.48 1.65 17.4 19.8 22.0 (11.4) 13.6 11.5 14.2 12.5 11.3 n.a. n.a. n.a.
Chin Well Jun 1.21 0.94 13.3 3.9 11.7 (60.5) (70.3) 197.6 9.1 30.7 10.3 4.1 9.9 4.4
ELK-Desa Mar 1.24 1.05 8.1 9.1 10.1 (23.2) 13.0 11.2 15.4 13.6 12.2 n.a. n.a. n.a.
FGV Holdings Dec 1.28 1.20 2.4 2.7 3.2 (93.9) 10.7 18.4 53.1 48.0 40.5 6.0 6.3 6.0
Ranhill Utilities Dec 1.31 1.15 0.3 3.6 4.1 (84.3) 1165.6 11.3 +>100 36.0 32.3 4.5 4.1 4.1
RCE Capital^ Mar 2.83 2.40 18.9 21.2 22.3 (0.0) 12.1 5.1 14.9 13.3 12.7 n.a. n.a. n.a.
Tan Chong Dec 0.86 0.73 (17.2) (11.0) (7.1) (210.7) 36.0 36.0 n.m. n.m. n.m. 11.7 8.7 8.4

87
P/CF P/BV DIV YIELD ROE % Chg in price Mkt
(x) (x) (%) (%) cap
23 24F 25F 23 24F 25F 23 24F 25F 23 24F 25F 1Mth 3 Mth 12 Mth (MYRm)
NEUTRAL
15.6 15.6 14.9 1.0 1.0 1.0 5.4 5.7 6.0 7.0 6.1 6.4 (2.0) 1.6 9.0 13,540
8.5 15.0 9.1 2.4 2.1 1.9 5.9 4.4 4.6 25.3 19.8 18.7 (4.2) (8.3) (18.2) 639
1.7 20.8 16.8 0.8 0.7 0.6 3.7 3.7 4.0 9.9 8.9 8.8 3.5 0.0 69.0 1,139
7.0 16.5 10.9 0.7 0.7 0.6 5.4 5.5 5.6 5.2 4.8 5.2 (3.4) (0.9) 12.0 1,610
7.8 7.6 7.3 4.8 4.1 4.0 4.6 4.6 4.6 16.4 21.7 20.8 (5.9) 0.6 (15.5) 27,334
n.a. n.a. n.a. 1.3 1.2 1.2 6.1 6.4 6.7 10.4 10.3 10.5 (0.7) 3.0 13.4 119,583
22.6 20.4 25.4 1.0 0.9 0.9 10.4 9.2 6.7 16.0 13.5 9.5 3.8 12.1 57.9 2,033
9.1 3.1 2.9 0.7 0.7 0.7 3.3 3.3 3.3 2.3 4.1 4.3 0.0 4.5 10.8 510
22.5 25.4 25.4 42.6 42.1 41.6 2.2 2.7 2.8 101.4 114.4 118.7 (4.3) 3.8 (6.4) 28,726
5.6 8.3 7.8 2.4 2.2 2.1 3.0 2.8 3.1 23.1 14.3 14.6 1.2 10.9 0.7 2,507
10.3 9.0 10.4 0.9 0.9 1.0 6.6 6.8 6.8 6.3 6.4 6.5 0.7 6.2 13.2 5,010
(195.9) 7.2 12.2 3.0 2.9 2.8 4.7 4.7 4.8 16.4 17.2 17.0 (13.6) (20.9) (19.6) 17,087
11.9 12.1 11.9 2.6 2.6 2.5 4.4 4.4 4.5 13.6 13.6 13.4 (1.6) 2.7 7.8 35,696
15.8 11.7 12.5 2.1 2.1 2.0 4.4 5.8 6.5 13.3 14.4 15.9 (8.6) (3.6) (24.0) 736
18.5 29.3 17.7 6.8 5.7 4.9 0.8 1.1 1.2 17.5 23.0 21.1 8.4 25.9 22.2 47,707
18.3 21.0 20.6 5.4 4.9 4.5 1.0 1.1 1.2 15.6 14.3 13.6 0.6 10.6 21.3 15,794
8.2 10.4 8.8 1.9 1.8 1.6 2.3 3.1 3.5 13.5 16.1 15.1 (4.1) 11.5 23.8 6,608
9.6 8.4 11.0 1.8 1.7 1.6 3.5 2.5 2.5 5.3 7.7 7.4 (2.3) (2.3) 0.1 29,392
9.0 5.0 5.9 1.9 1.9 1.8 5.8 7.3 7.5 22.9 18.1 18.2 0.0 9.9 13.7 2,091
6.3 4.9 4.9 0.9 0.9 0.9 6.6 6.6 6.8 8.8 10.0 9.6 (3.6) (3.3) 18.0 1,674
(466.3) 9.5 7.4 0.7 0.6 0.6 3.5 4.6 4.7 5.5 6.5 6.5 (4.3) 21.7 24.4 492
11.8 18.4 14.3 1.5 1.5 1.5 17.2 4.0 4.3 9.0 7.5 8.1 (3.5) (3.9) (2.3) 9,207
(12.8) 5.5 5.5 0.5 0.5 0.4 2.3 2.8 2.9 1.9 2.3 2.4 (6.8) (6.3) (7.8) 740
17.5 8.0 23.0 1.1 0.9 0.9 16.3 5.5 5.5 3.9 4.3 5.0 (9.4) (2.7) 17.3 4,557
4.5 6.0 5.3 1.5 1.4 1.3 0.0 3.2 3.2 16.9 14.2 13.5 (10.9) 9.4 55.3 1,076
SELL
n.a. n.a. n.a. 0.5 0.5 0.5 2.3 3.2 3.6 3.7 4.1 4.4 0.0 (0.8) 33.3 5,953
2.6 19.4 23.7 0.5 0.5 0.5 4.6 1.3 3.9 5.9 1.7 4.8 (4.7) 0.8 (9.0) 347
n.a. n.a. n.a. 1.2 1.1 1.1 4.0 4.6 5.1 7.7 8.4 9.0 (4.6) 0.0 (0.8) 564
3.0 7.7 6.1 0.8 0.8 0.8 2.3 1.6 2.0 1.9 1.6 1.9 (6.6) (9.2) (5.9) 4,670
7.4 4.9 10.3 2.2 2.1 2.1 1.1 1.1 1.1 7.5 5.9 6.4 (9.7) 176.8 (9.7) 153
n.a. n.a. n.a. 2.5 2.4 2.3 5.3 5.6 5.9 17.0 18.2 18.2 (9.0) (0.7) 31.6 2,074
(8.0) 1.7 6.0 0.2 0.2 0.2 1.2 1.2 1.2 (4.0) (2.7) (1.7) (0.6) 0.6 (22.3) 557

88
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Malaysia Strategy

5 July 2024 Market Outlook | Market Strategy

significant policy risks, and could further raise geopolitical tensions.

recent progress on diesel subsidy rationalisation, given the scepticism on the

may now be pushed back until end-2024. Careful execution of economic

strongly as it prepares to enter the latter half of its 5-year mandate.

Small-Mid Cap: Supported By Various Tailwinds 36

FBM KLCI: From a Technical Perspective 40

See important disclosures at the end of this report

Figure 1: Event chart

Source: Bloomberg, RHB

See important disclosures at the end of this report

See important disclosures at the end of this report

Figure 2: Performance of the FBM KLCI vs other regional markets

Figure 3: Bursa Malaysia’s performance by sector

See important disclosures at the end of this report

Figure 4 : Top performers and underperformers under our coverage (YTD)

See important disclosures at the end of this report

Equity market continues to build momentum

August 2 US Nonfarm Payrolls

September 4-5 5th Monetary Policy Committee meeting

October 4 US Nonfarm Payrolls

November 1 US Nonfarm Payrolls

December 6 US Nonfarm Payrolls

See important disclosures at the end of this report

Global macroeconomics view: A Cautiously Optimistic Approach May Be Prudent in 3Q24

Figure 6: RHB’s real GDP growth forecasts

Figure 7: RHB’s CPI inflation forecasts

Figure 8: RHB’s policy rate forecasts

See important disclosures at the end of this report

China macreconomics view: Still positive

See important disclosures at the end of this report

 RHB Economics Team

Figure 9: RHB’s FX forecasts

We forecast the DXY to strengthen marginally to an average of 106 in 3Q24, before

See important disclosures at the end of this report

US presidential election: Too close to call

See important disclosures at the end of this report

Figure 10: US presidential election polling trends

See important disclosures at the end of this report

Our view on oil: Resilient demand to support prices

World oil demand and supply balance (mbpd)

See important disclosures at the end of this report

Figure 12: OPEC’s latest production adjustments for 2024-2025

See important disclosures at the end of this report

Source: Bloomberg Source: Bloomberg

Domestic macreconomics view: Increasing sign of rosy economic prospects

 RHB Economics Team

Contribution to real GDP Growth (%)

Private Consumption 2.8 3.5 3.5 3.3 3.7 3.5 3.5

Investment 1.1 1.4 0.6 1.6 1.2 0.6 0.6

Government Consumption 0.5 0.6 0.4 0.6 0.5 0.5 0.3

Net Exports -0.6 0.2 0.3 -0.2 0.7 0.5 0.1

CPI 2.5 2.6 2.9 1.8 3.4 3.0 2.8

Source: CEIC, RHB Economics & Market Strategy

See important disclosures at the end of this report

iii. Rising business confidence.

See important disclosures at the end of this report

Malaysia politics: On an even keel