Jul 30, 2017

Invest Malaysia 2017

■ CIMB co-hosted Invest Malaysia 2017, which ran from 25-26 July 2017.
■ This year's event attracted some 900 fund managers with total assets under
management (AUM) of US$19.9tr, a significant rise from US$11tr in. 2016.
■ Participants in the plenary sessions were generally positive on Malaysia’s prospects.
■ We are positive on the push to improve corporate governance in Corporate Malaysia.
■ Maintain our end-2017 KLCI target of 1,790 points (based on 16x forward P/E).

Invest Malaysia 2017: "Malaysia at 60: Maximising Potential"
This flagship Malaysian corporate conference is now in its 13 th year. CIMB co-hosted this event for the sixth time. This year’s event attracted c.900 fund managers with total AUM of US$19.9tr, a significant rise from US$11tr in 2016, a sign of a revival in investor interest in Malaysia. It kicked off with a keynote address from Prime Minister Dato’ Sri Najib Tun Razak’s followed by five plenary sessions. We also hosted 48 companies from 10 sectors and organised a tour to the recently overhauled Genting Highlands.

highlighted company
Malaysia’s resilient fundamentals
Participants in the plenary sessions were generally positive about Malaysia’s outlook. Among measures unveiled by the government: 1) launch of the Leading Entrepreneur Accelerator Platform (LEAP) market, 2) plans to establish an integrity and governance unit at government-linked companies (GLCs) and state- or ministry-owned businesses, 3) plans for a single regulator for the property sector, 4) greater gender diversity, corporate governance in Corporate Malaysia, and 5) next-stage development push under TN50. Unlocking shareholder returns Government-linked investment companies (GLICs), which have sizeable exposure to domestic equities, are doubling down on efforts to improve shareholder returns among Malaysian corporates. Speakers from four GLICs (EPF, Khazanah, KWAP, and PNB) suggested higher total shareholder returns could be achieved through corporate action
higher dividends or share buybacks, investments in the fast-growing technology sector, stable returns from infrastructure-related investments, and better corporate governance.

Finding hidden gems

The key enablers of digital disruption are increasing internet and smartphone penetration, a growing middle class population, demographic tailwinds and income growth. With the advent of new technologies, the development and innovation cycles of companies are becoming shorter, requiring businesses to continually adapt to stay relevant. The omnipresent threat of disruption to traditional business models underlines the risk of overpaying. The challenge for fund managers is to discover promising companies that are poised to benefit from structural tailwinds early enough to provide that margin of safety.

Positive takeaways from corporates
We are more upbeat on Muhibbah after the large track session, as the group indicated that it has fully received the RM600-700m variation orders claims in relation to its contract with New Doha International Airport. We are also more positive on Hartalega’s earnings prospects as the group is confident of retaining its strong profit margin and expects sales volumes for its gloves to remain robust.

Maintain KLCI target of 1,790 points
We are positive on the government's push to improve corporate governance via the establishing of integrity and governance unit at GLCs and state-owned enterprises. We maintain our end-2017 KLCI target of 1,790, which is still based on its 3-year average P/E of 16x. Our key sector picks for 2H17 are utilities, construction and small caps. Our three
big cap picks are Sime Darby, Gamuda and Tenaga.

source: CIMB Research – 27/07/2017.