consumer positive strategy note education neutral ptptn's

Malaysia│Equity research│January 28, 2016

Strategy Note

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Malaysia Strategy 2016 Revised Budget

The biggest surprise to us was the 3% cut in employee contributions to the EPF. ■This is positive as it would boost private consumption by RM8bn annually.

Biggest winner is MyEG, the government is giving illegal foreign workers the chance ■to get proper working permits. In 2015, MyEG was appointed to register the illegals.

Other winners are the consumer, media, gaming and aviation sectors. ■

Biggest loser is the telco sector as the government is looking to raise revenue ■through a spectrum auction.

Keep end-2016 KLCI target of 1,900. Bullish on banks, construction & small caps. ■

Neutral impact on the stock market We are neutral about the impact of the Revised Budget on the stock market. Potential winners in the consumer, media, gaming and aviation sectors may be offset by one major loser, the telco sector. The big three telco players stand to lose the most as they may have to pay substantial amounts of cash in a spectrum auction.

Reducing employee EPF contribution by 3% We are positive with the government’s move to reduce the employees’ contribution to the Employees Provident Fund (EPF) by 3% effective in Mar 16 to Dec 17. This should boost private consumption expenditure by RM8bn annually, says the government.

Biggest winner is MyEG MyEG is the biggest winner. The government has agreed to implement the rehiring programmes, which would give illegal foreign workers the opportunity to secure working permits to remain in the country legally. There are 2.5m legal workers and 4m-5m illegal workers in Malaysia now. Registration of illegal workers would enable the government to keep track of the number of foreign workers needed in the country. MyEG is responsible for the registration of the illegal workers.

Sector and stock top picks unchanged We think that the 2016 Revised Budget will be neutral on the stock market. We maintain our end-2016 KLCI target of 1,900pts, based on an unchanged 2017 P/E of 16.5x. Our top sectors remain banking, construction and small caps. The construction sector should remain positive in 2016 as the work on major infrastructure projects should continue as planned. Selected small-cap stocks still offer superior earnings growth.

[ X ]

Figure 1: Budget impact on the sectors

SOURCES: CIMB RESEARCH

▎Malaysia

Highlighted companies

Gamuda ADD, TP RM5.43, RM4.45 close

Gamuda potentially provides the biggest exposure to MRT 2. Budget revision continues to focus on public transport, which is positive, and could bump up its order book by more than 7x by mid 2016.

MY E.G. Services ADD, TP RM2.83, RM2.19 close

The biggest winner, government announced that illegal foreign workers are now able to secure proper working permits. The company was appointed by the government in 2015 to register illegal foreign workers.

RHB Capital Bhd ADD, TP RM8.50, RM5.03 close

RHB Capital is our top pick for Malaysian banks given (1) the benefits from the IGNITE 17 transformation programme, (2) cost savings from its Career Transition Scheme in 2016 onwards, (3) the aspiration for regional expansion in the longer term, and (4) attractive valuation.

Analyst(s)

Nigel FOO

T (60) 3 2261 9069 E [email protected]

Sector Impact Comments

Autos Neutral Nothing specific on the sector

Aviation Positive Chinese tourists allowed to travel into Malaysia without visas until end-2016

Banking Positive Benefiting from 3% reduction in EPF contributions

Brewery Neutral Nothing specific on the sector

Construction Positive Pump priming theme intact. Major jobs in original list are intact

Consumer PositiveReduction in employees' contribution to EPF by 3% and tax relief of RM2k for

taxpayers with monthly income below RM8k in 2015

Education Neutral PTPTN's RM5bn allocation is unchanged

Gaming Positive VISA free travel for Chinese tourists should boost visitation to Genting highlands

Healthcare Neutral No measures on the private healthcare sector

Media Positive Boost in adex and recovery in consumer sentiment from higher disposable income

Oil& gas Neutral Nothing specific on the sector

Plantations Neutral Nothing specific on the sector

Property NeutralMost listed developers price their units above RM300,000, except for the

government-mandated low-cost housing projects

REITs Neutral Nothing specific on the sector

Rubber Gloves Neutral Nothing specific on the sector

Technology Positive MyEG biggest winner as govt. allows illegals to get proper working permit

Telcos NegativeSpectrum auction could see telcos forking out substantial cash to retain/acquire

the 900MHz/1800MHz spectrum

Tobacco Neutral Nothing specific on the sector

Utilities Neutral No mention of changes in electricity and gas tariff

http://www.efa.biz/


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Figure 2: CIMB top picks

SOURCES: CIMB, COMPANY REPORTS

Figure 3: CIMB small-cap picks


Price Target Price P/BV (x)Recurring ROE

(%)

Dividend Yield

(%)

(local curr) (local curr) CY2015 CY2016 CY2015 CY2015 CY2015

AirAsia Bhd AIRA MK Add 1.34 1.80 877 na 6.5 na 0.97 -1.0% 0.0%

Gamuda GAM MK Add 4.45 5.43 2,518 16.5 16.6 1.7% 1.69 10.6% 2.6%

Genting Malaysia GENM MK Add 4.24 5.93 5,653 17.4 16.4 15.1% 1.44 8.5% 2.3%

Genting Plantations GENP MK Add 10.34 11.90 1,903 41.6 29.3 -8.5% 2.03 5.3% 1.5%

IJM Corp Bhd IJM MK Add 3.36 3.90 2,827 19.2 17.3 5.2% 1.63 8.7% 2.5%

Malayan Banking Bhd MAY MK Add 8.34 11.20 19,145 11.7 10.7 -1.3% 0.51 13.8% 6.0%

MISC Bhd MISC MK Add 8.82 10.03 9,258 13.1 12.8 4.5% 0.51 8.7% 1.7%

RHB Capital Bhd RHBC MK Add 5.03 8.50 3,637 8.5 6.9 -2.3% 1.04 9.2% 3.3%

Tenaga Nasional TNB MK Add 13.00 15.70 17,253 10.7 10.3 -3.8% 1.49 16.3% 2.3%

YTL Corporation YTL MK Add 1.55 1.85 3,798 14.3 12.8 2.4% 1.21 7.8% 6.4%

Average 17.0 14.0 1.4% 1.25 8.8% 2.9%

Company Bloomberg Ticker Recom. Market Cap (US$ m)Core P/E (x) 3-year EPS CAGR

(%)

Price Target Price P/BV (x)Recurring ROE

(%)

Dividend Yield

(%)

(local curr) (local curr) CY2015 CY2016 CY2016 CY2015 CY2015

Berjaya Auto BAUTO MK Add 1.94 3.04 522 9.5 8.7 3.6% 4.16 49.6% 4.9%

Berjaya Food Berhad BFD MK Add 2.05 3.27 181 21.0 14.8 26.3% 1.87 10.8% 3.1%

Evergreen Fibreboard EVF MK Add 1.48 2.06 295 12.6 9.6 789.5% 1.40 12.2% 0.7%

GHL Systems Bhd GHLS MK Add 0.76 1.40 115 39.8 21.3 44.5% 2.03 5.8% 0.0%

IFCA MSC IFCA MK Add 0.74 1.80 102 15.3 11.6 21.8% 4.68 38.4% 1.8%

Instacom Group INST MK Add 0.28 0.67 163 54.9 15.9 272.8% 1.94 3.1% 0.0%

Kawan Food KFB MK Add 3.68 4.48 183 27.6 19.9 29.4% 4.97 22.2% 0.8%

MY E.G. Services MYEG MK Add 2.19 2.83 1,238 40.0 23.5 63.0% 17.97 57.7% 0.6%

Only World Group Holdings OWG MK Add 2.28 4.11 119 28.7 17.7 30.0% 3.33 14.3% 0.5%

Prestariang PRES MK Add 2.70 2.82 307 62.8 18.4 47.5% 7.37 13.2% 3.4%

Average 38.4 18.3 72.7% 6.04 22.1% 1.0%

Company Bloomberg Ticker Recom. Market Cap (US$ m)Core P/E (x) 3-year EPS CAGR

(%)


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2016 Revised Budget highlights

Sector comments Telecommunications

The government announced that it will optimise revenue from the telecommunications spectrum through redistribution and the bidding process will be implemented soon. This is a negative surprise for the sector, as our recent conversation with the Malaysian Communications And Multimedia Commission (MCMC) suggested that the regulator was quite happy and did not intend to disrupt the good progress made by the existing mobile operators in building out their mobile data networks. A spectrum auction could result in the incumbent mobile operators forking out substantial cash to retain or acquire more 900MHz and 1800MHz spectrum.

The initial 900MHz/1800MHz spectrum licence terms expired several years ago and are now renewed on an annual basis. Currently, the 900MHz spectrum is concentrated in the hands of Maxis and Celcom, while the 1800MHz spectrum is evenly distributed among the Big 3 mobile operators.

There has never been a spectrum auction in Malaysia, as all spectrum were allocated on a “beauty contest” (3G-2.1GHz) or assignment (4G-2.6GHz) basis, with minimal upfront payment charged for the spectrum. Based on the recent spectrum auctions in Thailand, the reserve price for the 900MHz spectrum was set at THB12.9bn for 2 x 10MHz (each licence), or RM2.2m per MHz (paired) per million population. For the 1800MHz spectrum, the reserve price was THB15.9bn for 2 x 15MHz (each licence), or RM1.8m per MHz (paired) per million population.

Figure 4: Spectrum holdings of Malaysian telcos

* WIMAX/Broadband Wireless Access spectrum. Divided by 2 to reflect FDD equivalent


Assuming that the MCMC uses the Thailand reserve prices as the benchmark, the reserve price for the total 2 x 35MHz of 900MHz spectrum would be RM2.3bn and for the total 2 x 75MHz of 1800MHz spectrum would be RM4.0bn. Based on these estimated reserve prices, the minimum that Maxis, Celcom and DiGi would have to pay to retain their 900/1800MHz spectrum are RM2.37bn, RM2.43bn and RM1.46bn, respectively. This would shave 4.7% off our target prices for Maxis, 4.2% for Axiata and 3.8% for DiGi.

The final prices for the spectrum would depend on the terms of the auction (e.g. spectrum caps, size of spectrum blocks, auction method) and the ferocity of the bidding during the auction. During the recent Thai spectrum auctions, the final spectrum prices were 2.5x (1800MHz) to nearly 6x (900MHz) higher than the reserve prices due to intense bidding. If we assume that the Malaysian

Spectrum (MHz) 850 900 1800 2100 2300 2600 Total

Maxis 16.0 25.0 15.0 10.0 66.0

Celcom 17.0 25.0 15.0 10.0 67.0

DiGi 2.0 25.0 15.0 10.0 52.0

U Mobile 15.0 10.0 25.0

Asiaspace 15.0* 15.0

YTL 15.0* 10.0 25.0

P1/TM 10.0 15.0* 10.0 35.0

REDTone 12.5* 10.0 22.5

Altel 20.0 20.0


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spectrum auctions have the same disastrous outcome, we estimate that Maxis, Celcom and DiGi would have to fork out RM9.55bn, RM9.94bn and RM4.11bn, respectively, to retain their existing 900MHz/1800MHz spectrum holdings. In this case, our target prices for Maxis, Axiata and DiGi would have to be cut by 19.0%, 17.0% and 10.6%, respectively. While we admit that it is very difficult to predict the final auction outcome, we believe that the bidding would not be as intense as those of the Thai auctions as: (1) the existing Malaysian players have been relatively rational in their past market actions, and 2) a new entrant is unlikely, as the market is less attractive than Thailand’s and overcrowded, with five active players (including TM-P1).

An alternative scenario is that the mobile incumbents could lose spectrum to smaller existing operators (TM-P1, U Mobile, YES) that outbid them. In this scenario, the mobile incumbents would have to spend more capex to re-tune and build network capacity to make up for any loss of spectrum. The smaller operators could also become increasingly aggressive as their opex/capex efficiency improves with the additional spectrum.

In conclusion, among the Big 3 operators, we believe that Maxis and Celcom stand to lose the most as they may have to pay substantial amounts of cash to retain their large spectrum holdings. They may also risk losing some 900MHz spectrum, which would cause degradation in network coverage (especially in-building). Although DiGi could secure more 900MHz spectrum through the auction (which would be beneficial for its network coverage), we believe that it would have to fork out a lot of cash to outbid Maxis and Celco, in order to wrestle some spectrum from them.

Foong Choong Chen +60 (3) 2261-9081 – [email protected]

Aviation

The airline sector could benefit from the government's move to facilitate the entry of foreign tourists by way of the eVisa scheme, which will be extended to "several countries which have been identified". Also, tourists from China will no longer require a visa to visit Malaysia from 1 March to 31 December 2016 for a period of stay not exceeding 15 days, "subject to specific conditions". The Prime Minister's (PM) speech did not identify the specific conditions relating to visa-free Chinese travel, but this measure will certainly help boost Chinese tourist inflows into Malaysia.

Chinese tourist flows into Malaysia dipped into negative yoy territory in April 2014, after the MH370 crash on 8 March 2014. It only recovered to positive yoy territory in May 2015, due to the low-base effect. In fact, Chinese tourist arrivals into Malaysia remained disappointing in 2015. In 3Q15, 501,122 Chinese visitors entered Malaysia, up 20.2% yoy against 3Q14’s 416,887, but this was still 1% lower compared to the 505,721 Chinese visitors in 3Q13. So, the hard reality is that Chinese tourism into Malaysia has not yet fully recovered from the effects of MH370.


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Figure 5: Chinese tourist arrivals into Malaysia

SOURCES: CIMB, CEIC

The biggest beneficiaries will be the airlines that have the largest capacity to China, i.e. AirAsia (38% share of seat capacity), AirAsia X (22% share), Malaysia Airlines (15% share), followed by the Chinese airlines like China Southern. In January 2016, AirAsia started flights from Kota Kinabalu to Wuhan (7x weekly) and from Penang to Guangzhou (4x weekly). AirAsia also launched flights from KL to Changsha (4x weekly) in October 2015 and took over flights from KL to Chongqing (7x weekly) from AirAsia X beginning July 2015.

China is AirAsia's single largest international exposure, comprising 87.6m available seat kilometres (ASKs) in the week of 25-31 January 2016, or 19.4% of its international ASK capacity. With two-thirds of AirAsia's ASK capacity now deployed on international routes, China therefore, accounts for 13% of AirAsia's system-wide ASK capacity.

Malaysia Airports (MAHB) will also be a beneficiary of potential growth in Chinese tourist traffic. MAHB disclosed that China accounted for 7.9% of MAHB’s total passenger traffic in 2014, and this proportion would have increased in 2015. Any increase in MAHB’s traffic will be very helpful, as its operating costs are largely fixed.

Figure 6: Malaysia to China (seats per week, one way, 25-31 Jan 2016)

SOURCES: CIMB, CAPA

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Change (yoy %) Chinese Tourist Arrivals into Malaysia

Airline 25-31 Jan 2016 seat capacity Share

AirAsia 17,280 37.6%

China Southern Airlines 5,282 11.5%

AirAsia X 10,179 22.2%

Shanghai Airlines 1,640 3.6%

Xiamen Airlines 2,380 5.2%

Malaysia Airlines 6,914 15.1%

Spring Airlines 720 1.6%

Air China 1,204 2.6%

Malindo Air 324 0.7%

Total 45,923 100.0%


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Figure 7: AirAsia's international ASK breakdown (for the week of 25-31 January 2016)

SOURCES: CIMB, CAPA

Raymond YAP +60 (3) 2261-9056 – [email protected]

Technology

The government streamlines the management of foreign workers, with levies divided into only two categories. In addition, the authorities have agreed to implement the rehiring programmes, which would give illegal foreign workers the opportunity to secure legal working permits.

The rehiring programmes are positive for MyEG, as the company was appointed to register illegal foreign workers in 2015. There are 2.5m legal foreign workers and 4m-5m illegal foreign workers in Malaysia now, based on our estimates. Our earnings forecasts for MyEG assume that 1m illegal foreign workers will be registered in 2016. There is potential for upward revision in our FY16-18 EPS forecasts if the company registers more than 1m illegal workers over the next few months.

Nigel Foo +60(3)2261-9069 – [email protected]

Banking & Finance

The government has reduced the employee contribution to the Employees Provident Fund (EPF) by 3% in Mar-16 to Dec-17. However, the contribution by employers will remain the same. This measure is expected to increase private consumption expenditure by RM8bn a year, according to the PM.

The potential increase in private consumption resulting from the reduction in employee contribution to the EPF would help to support the banks’ fee income growth. Even if the additional disposal income is not “spent”, it would be kept in the banks as deposits. This would help to ease the tight liquidity in the banking system.

The government/Bank Negara Malaysia (BNM) will ensure that there is sufficient liquidity in the financial system. Recently, BNM announced a reduction in statutory reserve requirement (SRR) from 4% to 3.5%.

We are encouraged that the government specifically addressed the issue of tight liquidity in the banking system and will take steps to ease banks’ liquidity problems. This could involve further reduction in SRR. We estimate that a 50bp


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reduction in SRR would inject additional liquidity of about RM6bn into the banking industry.

Winson Ng, CFA +60(3) 22619071- [email protected]

Construction

Major projects with high multiplier effects and pro-growth that are earmarked under Budget 2016 will be sustained, in spite of the depressed oil price environment. This is in line with our expectations and ties in with our earlier checks on the ground.

The PM said that development expenditure (DE) will continue to be focused on affordable housing, schools, roads, security and most importantly, public transport, including projects under the private sector.

He also said that projects that are still under study, which have not passed the approval and tender stage will be rescheduled (meaning deferred or delayed, given the relatively-low priority). We reiterate that c.90% of the jobs in the original Budget 2016 list are of high priority.

The PM did not list the specific projects that will be deferred but we suspect that they will be projects that cost less than RM1bn each. Major highway projects like SUKE and DASH should continue, as these are led by Prolintas (private sector).

No change to the implementation of key projects such as MRT 2 dan LRT 3. Pan-Borneo Highway is also still on the cards. Petronas's RAPID project will continue and the KL-Singapore high-speed rail (HSR) project will proceed, after completing the request for information (RFI) in late 2015. The HSR's original target for international tender is 4Q16 - this timeline is still a moving target.

There was no mention of how the Chinese infra contractors will aid the funding of other major jobs. This was within our expectations.

Good news for Gamuda, and other contractors that are set to win MRT 2 packages starting in 2Q16. Gamuda is our top pick among the big caps. This is also positive news for Muhibbah Engineering, which is vying for jobs in Rapid. Muhibbah is our top pick among the small-to-mid caps in the sector. We expect more good news, given the expectation of strong momentum in sector awards newsflow in 2Q16 onwards. General share price weakness from earlier concerns of delays and deferment is good for selective buying opportunities.

Sharizan ROSELY +60(3) 2261-9077 – [email protected]

Consumer

Liberalising import quotas or approved permits (APs) on eight agricultural products for a temporary period to ensure consistent supply, establishing markets or MyFarm Outlets that will sell agricultural products at 5-20% below market prices for the ‘rakyat’ (population), reducing the employee contribution to the Employees Provident Fund (EPF) by 3% in Mar 16 to Dec 17; and special tax relief of RM2,000 to individual taxpayers with monthly income of RM8,000 and below for 2015.

The reduction in the employee contribution to EPF and special tax relief are positive for the consumer sector. Given the current softer consumer sentiment environment, following the Goods and Services Tax (GST) implementation and higher living costs, we believe that these measures and initiatives will increase the lower-to-middle income households' disposable income, as well as stimulate overall consumer spending. This, we believe, will lead to gradual recovery in domestic consumption in 2016.


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Education

Scholarships under four Public Service Department (JPA) for 2016 will continue: (1) National Scholarship Programme, (2) Engineering Special Programme, (3) Bursary Programme, and (4) scholarships for 8,000 students to pursue undergraduate degrees locally. The National Higher Education Fund Loan (PTPTN) allocation of RM5bn to undergraduates will remain. Offers to enroll in MyMaster programmes will be raised by 15,000, MyPhd by 5,000 and IPTA (public universities) Academic Training Scheme by 300. The government will boost the education allocation by RM300m in 2016. MyBrain1 and the Bumiputera Academic Training Scheme will be continued.

The continuation of PTPTN’s RM5bn allocation is positive for private colleges and universities. However, the government did not give any indication on Prestariang’s potential PISA teachers and students training project. Nonetheless, we believe that the government will continue to focus on the PISA teachers training project in 2016, as it wants to inculcate higher-order thinking skills (HOTS) in teachers and students. We expect more developments on the PISA training project in 2Q16.

Nigel Foo +60(3)2261-9069 – [email protected]

Gaming sector

The visa waiver for Chinese tourists is marginally positive for Genting Malaysia. Although 70% of visitors to Genting Highlands were day trippers, Chinese tourists have been coming back gradually since the MH370 incident and more than half of the Chinese tourists that enter Malaysia end up visiting Genting Highlands.

The 3% drop in EPF contribution by employees will benefit Only World Group (OWG) as it will encourage more domestic tourism spending. Other beneficiaries are the number forecast operators (NFOs) like Magnum and Berjaya Sports Toto, as the discretionary spending power of Malaysian consumers will rise.

Marcus Chan, CFA +60(3) 2261-9070 – [email protected]

Property

For all new housing projects, the government mandates that all houses priced up to RM300,000 be limited to first-time house buyers only, with immediate effect.

This measure, in our opinion, will have limited impact on the property developers. For one thing, houses launched by most listed developers are priced above RM300,000 per unit. In the Klang Valley, even studio or SOHO units are sold at prices close or above RM400,000 per unit. For another, the developers may be able to circumvent this ruling by pricing their units above RM300,000 per unit but offer big discounts to lower the net selling price below the threshold. We believe that this measure will benefit first-time homebuyers in the suburbs, as certain houses in these areas are still sold at RM300,000 per unit or lower.

SAW Xiao Jun, CFA +60(3)2261-9089 – [email protected]


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11

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AAV, ADVANC, AMATA, ANAN, AOT, AP, BA, BANPU, BBL, BCP, BDMS, BEAUTY, BEC, BEM, BH, BJCHI, BLA, BLAND, BTS, CBG, CENTEL, CHG, CK, CKP, CPALL, CPF, CPN, DELTA, DTAC, EARTH, EGCO, EPG, GL, GLOW, GPSC, GUNKUL, HANA, HMPRO, ICHI, INTUCH, IRPC, ITD, IVL, JAS, KBANK, KCE, KKP, KTB, KTC, LH, LHBANK, LPN, M, MAJOR, MINT, PLANB, PLAT, PS, PTG, PTT, PTTEP, PTTGC, QH, ROBINS, RS, S, SAMART, SAMTEL, SAWAD, SCB, SCC, SCCC, SCN, SGP, SIRI, SPALI, SPCG, STEC, STPI, SVI, TASCO, TCAP, THAI, THCOM, TICON, TISCO, TMB, TOP, TPIPL, TRUE, TTA, TTCL, TTW, TU, UNIQ, UV, VGI, VNG, WHA, WORK.

Corporate Governance Report:

The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information.

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Score Range: 90 - 100 80 - 89 70 - 79 Below 70 or No Survey Result

Description: Excellent Very Good Good N/A

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13

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Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (Thai IOD) in 2015, Anti-Corruption Progress Indicator 2015.

AAV – Very Good, 3B, ADVANC – Excellent, 3A, AEONTS – Good, 1, AMATA – Very Good, 2, ANAN – Very Good, 3A, AOT – Very Good, 2, AP - Good, 3A, ASK – Very Good, 3B, ASP – Very Good, 4, BANPU – Very Good, 4, BAY – Very Good, 4, BBL – Very Good, 4, BCH – not available, no progress, BCP - Excellent, 5, BDMS – Very Good, 3B, BEAUTY – Good, 2, BEC - Good, 3B, BECL – Very Good, 3B, BH - Good, 2, BIGC - Excellent, 3A, BJC – Good, 1, BLA – Very Good, 4, BMCL - Very Good, 1, BTS - Excellent, 3A, CBG – Good, 1, CCET – not available, 1, CENTEL – Very Good, 3A, CHG – Good, 3B, CK – Excellent, 3B, COL – Very Good, 3A, CPALL – Good, 3A, CPF – Very Good, 3A, CPN - Excellent, 5, DELTA - Very Good, 3A, DEMCO – Very Good, 3A, DTAC – Excellent, 3A, EA – not available, 3A, ECL – Good, 4, EGCO - Excellent, 4, EPG – not available, 3B, GFPT - Very Good, 3A, GLOBAL – Very Good, 2, GLOW - Good, 3A, GRAMMY - Excellent, 3B, GUNKUL – Very Good, 1, HANA - Excellent, 4, HEMRAJ – Very Good, 2, HMPRO - Excellent, 3A, ICHI – Very Good, 3A, INTUCH - Excellent, 4, ITD – Good, 1, IVL - Excellent, 4, JAS – not available, 3A, JASIF – not available, no progress, JUBILE – Good, 3A, KAMART – not available, no progress, KBANK - Excellent, 4, KCE - Excellent, 4, KGI – Good, 4, KKP – Excellent, 4, KSL – Very Good, 2, KTB - Excellent, 4, KTC – Very Good, 3A, LH - Very Good, 3B, LPN – Excellent, 3A, M - Good, 2, MAJOR - Good, 1, MAKRO – Good, 3A, MBKET – Good, 2, MC – Very Good, 3A, MCOT – Excellent, 3A, MEGA – Very Good, 2, MINT - Excellent, 3A, MTLS – Good, 2, NYT – Good, no progress, OISHI – Very Good, 3B, PLANB – Good, 3B, PS – Excellent, 3A, PSL - Excellent, 4, PTT - Excellent, 5, PTTEP - Excellent, 4, PTTGC - Excellent, 5, QH – Very Good, 2, RATCH – Excellent, 3A, ROBINS – Excellent, 3A, RS – Very Good, 1, SAMART - Excellent, 3B, SAPPE - Good, 3B, SAT – Excellent, 5, SAWAD – Good, 1, SC – Excellent, 3B, SCB - Excellent, 4, SCBLIF – not available, no progress, SCC – Excellent, 5, SCCC - Good, 3A, SIM - Excellent, 3B, SIRI - Good, 1, SPALI - Excellent, 3A, STA – Very Good, 1, STEC – Very Good, 3B, SVI – Very Good, 3A, TASCO – Very Good, 3A, TCAP – Very Good, 4, THAI – Very Good, 3A, THANI – Very Good, 5, THCOM – Excellent, 4, THRE – Very Good, 3A, THREL – Very Good, 3A, TICON – Very Good, 3A, TISCO - Excellent, 4, TK – Very Good, 3B, TMB - Excellent, 4, TPCH – Good, 3B, TOP - Excellent, 5, TRUE – Very Good, 2, TTW – Very Good, 2, TU – Very Good, 3A, VGI – Excellent, 3A, WORK – not available, no progress.

Comprises level 1 to 5 as follows:

Level 1: Committed

Level 2: Declared

Level 3: Established (3A: Established by Declaration of Intent, 3B: Established by Internal Commitment and Policy)

Level 4: Certified

Level 5: Extended.

Rating Distribution (%) Investment Banking clients (%)

Add 58.8% 9.3%

Hold 31.5% 4.0%

Reduce 8.5% 0.7%

Distribution of stock ratings and investment banking clients for quarter ended on 31 December 2015

1536 companies under coverage for quarter ended on 31 December 2015


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CIMB Recommendation Framework

Stock Ratings Definition:

Add The stock’s total return is expected to exceed 10% over the next 12 months.

Hold The stock’s total return is expected to be between 0% and positive 10% over the next 12 months.

Reduce The stock’s total return is expected to fall below 0% or more over the next 12 months.

The total expected return of a stock is defined as the sum of the: (i) percentage difference between the target price and the current price and (ii) the forward net dividend yields of the stock. Stock price targets have an investment horizon of 12 months.

Sector Ratings Definition:

Overweight An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a positive absolute recommendation.

Neutral A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral absolute recommendation.

Underweight An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a negative absolute recommendation.

Country Ratings Definition:

Overweight An Overweight rating means investors should be positioned with an above-market weight in this country relative to benchmark.

Neutral A Neutral rating means investors should be positioned with a neutral weight in this country relative to benchmark.

Underweight An Underweight rating means investors should be positioned with a below-market weight in this country relative to benchmark.

*Prior to December 2013 CIMB recommendation framework for stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand, Jakarta Stock Exchange, Australian Securities Exchange, Taiwan Stock Exchange and National Stock Exchange of India/Bombay Stock Exchange were based on a stock’s total return relative to the relevant benchmarks total return. Outperform: expected to exceed by 5% or more over the next 12 months. Neutral: expected to be within +/-5% over the next 12 months. Underperform: expected to be below by 5% or more over the next 12 months. Trading Buy: expected to exceed by 3% or more over the next 3 months. Trading Sell: expected to be below by 3% or more over the next 3 months. For stocks listed on Korea Exchange, Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Outperform: Expected positive total returns of 10% or more over the next 12 months. Neutral: Expected total returns of between -10% and +10% over the next 12 months. Underperform: Expected negative total returns of 10% or more over the next 12 months. Trading Buy: Expected positive total returns of 10% or more over the next 3 months. Trading Sell: Expected negative total returns of 10% or more over the next 3 months.

Travel and Leisure│Hong Kong│Equity research

Sector Flash Note

IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. IF THIS REPORT IS DISTRIBUTED IN THE UNITED STATES IT IS DISTRIBUTED BY CIMB SECURITIES (USA), INC. AND IS CONSIDERED THIRD-PARTY AFFILIATED RESEARCH.

Powered by the EFA Platform

Gaming Looking forward to Feb

Jan gross gaming revenue (GGR) reached MOP18.7bn (-21% yoy, +2% mom), ■higher than our expectation of -27% yoy.

We forecast Feb GGR of MOP20.5bn (+5% yoy, +10% mom), the first positive yoy ■growth after 20 consecutive months of declines.

Maintain Neutral on the sector. Stick to defensive names like Sands. ■

Jan above our estimates ● Jan GGR of MOP18.7bn (-21% yoy, +2% mom) exceeded our expectations.

● For Feb, we forecast GGR of MOP20.5bn (+5% yoy, +10% mom) which is similar with the monthly GGR totals from recent major holiday months in China, i.e. May and Oct 2015. Feb will likely be the first month of positive yoy GGR growth since May 2014.

● Macau gaming stocks are likely to stay volatile as the stocks tend to react to short-term news flow which can be unpredictable. Overall, we remain sector Neutral. Recently, sector valuations have rebounded 13% off their lows in mid-Jan and are now trading at 10x Bloomberg consensus EV/EBITDA, i.e. 1 s.d. below the sector’s 4-year average.

● We favour defensive names such as Sands whose YTD share price has outperformed the sector average by 6%. Our other two ADD calls in the sector, MGM and Galaxy have outperformed the sector average by 1% and 4% respectively.

Positive outlook for Lunar New Year visitation ● We spoke with Macau hotel staff and travel agencies in China to get their views on the

Lunar New Year visitation outlook. The general expectation is for this year’s visitation to be maintained at least at a similar level as last year with stronger visitation weighted towards the first half of the holiday period.

● From our channel checks, we did not hear of any discounting for hotels or tour packages for the upcoming holidays with room rates at least twice as much as during off-season periods, which indicate good demand.

● The Lunar New Year holidays in China are from 7 Feb to 13 Feb. But some higher spending players typically travel to Macau post the actual holidays to avoid the crowds. Hence, the Lunar New Year gaming impact can last for multiple weeks.

Figure 1: Macau monthly GGR

SOURCES: CIMB, DICJ

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▎Hong Kong

February 1, 2016 - 1:56 PM

Neutral (no change)

Highlighted companies

Galaxy Entertainment ADD, TP HK$33.61, HK$24.10 close

We expect Phase 2 to continue to ramp up, with margin stability due to cost cutting.

MGM China Holdings ADD, TP HK$17.16, HK$9.29 close

Given MGM China’s low fixed costs on an absolute basis, the operator is likely to be the first to see positive operating leverage when industry revenues recover.

Sands China ADD, TP HK$34.65, HK$26.80 close

Sands China’s dividends are the most stable among all gaming operators, making the stock relatively more defensive.

Summary valuation metrics

Analysts

Michael TING

T (852) 2532 1121 E [email protected]

Jensen POON T (852) 2868 0350 E [email protected]

P/E (x) Dec-15F Dec-16F Dec-17F

Galaxy Entertainment 18.79 20.36 19.92

MGM China Holdings 11.26 17.21 12.24

Sands China 19.43 22.04 21.79

P/BV (x) Dec-15F Dec-16F Dec-17F

Galaxy Entertainment 2.77 2.60 2.41

MGM China Holdings 3.46 3.41 2.93

Sands China 3.74 4.46 5.52

Dividend Yield Dec-15F Dec-16F Dec-17F

Galaxy Entertainment 2.66% 1.96% 2.01%

MGM China Holdings 5.33% 3.49% 4.90%

Sands China 8.21% 9.04% 9.94%

Travel and Leisure│Hong Kong│Equity research│February 1, 2016

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AAV, ADVANC, AMATA, ANAN, AOT, AP, ASP, BA, BANPU, BBL, BCH, BCP, BDMS, BEAUTY, BEC, BECL, BH, BJCHI, BLAND, BMCL, BTS, CBG, CENTEL, CK, CPALL, CPF, CPN, DELTA, DEMCO, DTAC, EARTH, EGCO, ERW, GFPT, GLOBAL, GLOW, GUNKUL, HANA, HMPRO, ICHI, INTUCH, IRPC, ITD, IVL, JAS, KBANK, KCE, KKP, KTB, KTC, LH, LHBANK, LOXLEY, LPN, M, MAJOR, MC, MINT, MONO, NOK, PACE, PS, PSL, PTT, PTTEP, PTTGC, QH, RATCH, RCL, ROBINS, RS, S, SAMART, SAPPE, SAWAD, SCB, SCC, SF, SGP, SIRI, SOLAR, SPALI, SPCG, STEC, STPI, SVI, TCAP, THAI, THCOM, TICON, TISCO, TMB, TOP, TPIPL, TRC, TRUE, TTA, TTCL, TTW, TUF, U, UNIQ, UV, VGI, WHA

Corporate Governance Report:

The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information.

The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that date. CIMBS does not confirm nor certify the accuracy of such survey result.

Score Range: 90 - 100 80 - 89 70 - 79 Below 70 or No Survey Result

Description: Excellent Very Good Good N/A

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is being issued outside the United Arab Emirates to a limited number of institutional investors and must not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose. Further, the information contained in this report is not intended to lead to the sale of investments under any subscription agreement or the conclusion of any other contract of whatsoever nature within the territory of the United Arab Emirates.

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Rating Distribution (%) Investment Banking clients (%)

Add 58.8% 9.3%

Hold 31.5% 4.0%

Reduce 8.5% 0.7%

Distribution of stock ratings and investment banking clients for quarter ended on 31 December 2015

1536 companies under coverage for quarter ended on 31 December 2015


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Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (Thai IOD) in 2015, Anti-Corruption Progress Indicator 2015.

AAV – Very Good, 3B, ADVANC – Excellent, 3A, AEONTS – Good, 1, AMATA – Very Good, 2, ANAN – Very Good, 3A, AOT – Very Good, 2, AP - Good, 3A, ASK – Very Good, 3B, ASP – Very Good, 4, BANPU – Very Good, 4, BAY – Very Good, 4, BBL – Very Good, 4, BCH – not available, no progress, BCP - Excellent, 5, BDMS – Very Good, 3B, BEAUTY – Good, 2, BEC - Good, 3B, BECL – Very Good, 3B, BH - Good, 2, BIGC - Excellent, 3A, BJC – Good, 1, BLA – Very Good, 4, BMCL - Very Good, 1, BTS - Excellent, 3A, CBG – Good, 1, CCET – not available, 1, CENTEL – Very Good, 3A, CHG – Good, 3B, CK – Excellent, 3B, COL – Very Good, 3A, CPALL – Good, 3A, CPF – Very Good, 3A, CPN - Excellent, 5, DELTA - Very Good, 3A, DEMCO – Very Good, 3A, DTAC – Excellent, 3A, EA – not available, 3A, ECL – Good, 4, EGCO - Excellent, 4, EPG – not available, 3B, GFPT - Very Good, 3A, GLOBAL – Very Good, 2, GLOW - Good, 3A, GRAMMY - Excellent, 3B, GUNKUL – Very Good, 1, HANA - Excellent, 4, HEMRAJ – Very Good, 2, HMPRO - Excellent, 3A, ICHI – Very Good, 3A, INTUCH - Excellent, 4, ITD – Good, 1, IVL - Excellent, 4, JAS – not available, 3A, JASIF – not available, no progress, JUBILE – Good, 3A, KAMART – not available, no progress, KBANK - Excellent, 4, KCE - Excellent, 4, KGI – Good, 4, KKP – Excellent, 4, KSL – Very Good, 2, KTB - Excellent, 4, KTC – Very Good, 3A, LH - Very Good, 3B, LPN – Excellent, 3A, M - Good, 2, MAJOR - Good, 1, MAKRO – Good, 3A, MBKET – Good, 2, MC – Very Good, 3A, MCOT – Excellent, 3A, MEGA – Very Good, 2, MINT - Excellent, 3A, MTLS – Good, 2, NYT – Good, no progress, OISHI – Very Good, 3B, PLANB – Good, 3B, PS – Excellent, 3A, PSL - Excellent, 4, PTT - Excellent, 5, PTTEP - Excellent, 4, PTTGC - Excellent, 5, QH – Very Good, 2, RATCH – Excellent, 3A, ROBINS – Excellent, 3A, RS – Very Good, 1, SAMART - Excellent, 3B, SAPPE - Good, 3B, SAT – Excellent, 5, SAWAD – Good, 1, SC – Excellent, 3B, SCB - Excellent, 4, SCBLIF – not available, no progress, SCC – Excellent, 5, SCCC - Good, 3A, SIM - Excellent, 3B, SIRI - Good, 1, SPALI - Excellent, 3A, STA – Very Good, 1, STEC – Very Good, 3B, SVI – Very Good, 3A, TASCO – Very Good, 3A, TCAP – Very Good, 4, THAI – Very Good, 3A, THANI – Very Good, 5, THCOM – Excellent, 4, THRE – Very Good, 3A, THREL – Very Good, 3A, TICON – Very Good, 3A, TISCO - Excellent, 4, TK – Very Good, 3B, TMB - Excellent, 4, TPCH – Good, 3B, TOP - Excellent, 5, TRUE – Very Good, 2, TTW – Very Good, 2, TU – Very Good, 3A, VGI – Excellent, 3A, WORK – not available, no progress.

Comprises level 1 to 5 as follows:

Level 1: Committed

Level 2: Declared

Level 3: Established (3A: Established by Declaration of Intent, 3B: Established by Internal Commitment and Policy)

Level 4: Certified

Level 5: Extended.

CIMB Recommendation Framework

Stock Ratings Definition:

Add The stock’s total return is expected to exceed 10% over the next 12 months.

Hold The stock’s total return is expected to be between 0% and positive 10% over the next 12 months.

Reduce The stock’s total return is expected to fall below 0% or more over the next 12 months.

The total expected return of a stock is defined as the sum of the: (i) percentage difference between the target price and the current price and (ii) the forward net dividend yields of the stock. Stock price targets have an investment horizon of 12 months.

Sector Ratings Definition:

Overweight An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a positive absolute recommendation.

Neutral A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral absolute recommendation.

Underweight An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a negative absolute recommendation.

Country Ratings Definition:

Overweight An Overweight rating means investors should be positioned with an above-market weight in this country relative to benchmark.

Neutral A Neutral rating means investors should be positioned with a neutral weight in this country relative to benchmark.

Underweight An Underweight rating means investors should be positioned with a below-market weight in this country relative to benchmark.

*Prior to December 2013 CIMB recommendation framework for stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand, Jakarta Stock Exchange, Australian Securities Exchange, Taiwan Stock Exchange and National Stock Exchange of India/Bombay Stock Exchange were based on a stock’s total return relative to the relevant benchmarks total return. Outperform: expected to exceed by 5% or more over the next 12 months. Neutral: expected to be within +/-5% over the next 12 months. Underperform: expected to be below by 5% or more over the next 12 months. Trading Buy: expected to exceed by 3% or more over the next 3 months. Trading Sell: expected to be below by 3% or more over the next 3 months. For stocks listed on Korea Exchange, Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Outperform: Expected positive total returns of 10% or more over the next 12 months. Neutral: Expected total returns of between -10% and +10% over the next 12 months. Underperform: Expected negative total returns of 10% or more over the next 12 months. Trading Buy: Expected positive total returns of 10% or more over the next 3 months. Trading Sell: Expected negative total returns of 10% or more over the next 3 months.

31 December 2015

CIMB-Principal Global Titans Fund

A S S E T M A N A G E M E N T

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Fund

Benchmark

INVESTMENT VOLATILITY

FUND INFORMATION

FUND OBJECTIVE

FUND PERFORMANCE in MYR

Cumulative Performance (%)

Calendar Year Performance (%)

CIMB-Principal Asset Management Berhad

10th Floor, Bangunan CIMB, Jalan Semantan

Damansara Heights, 50490 Kuala Lumpur.

Tel: (603) 2084 8888

Fax: (603) 2084 8899

Website: www.cimb-principal.com.my

Location Kuala Lumpur, Malaysia

Domicile Malaysia

Fund Currency Ringgit Malaysia

Fund Size (MYR) MYR 759.40 million

Fund Unit 896.13 million units

Fund Launch 18 July 2005

Fund Inception (MYR) 18 July 2005

Benchmark 42% S&P500 + 36% MSCI Europe + 12% MSCI

Japan + 10% CIMB Bank 1-Month Fixed Deposit

Rate

Dealing Daily (as per Bursa Malaysia trading day)

Application Fee Up to 5.50% of the NAV per unit

Management Fee Up to 1.80% p.a. of the NAV

Trustee Fee 0.07% p.a. of the NAV

Unit NAV (MYR) MYR 0.8474

Bloomberg TickerISIN CodeCurrency

MYR MYU1000AD001 CIMTTAN MK

To grow the value of Unit holders’ investments over the medium to long -term in an equity

fund that invests in the global titans market of the US, Europe and Japan with an exposure to

the Malaysian equities market to balance any short term volatilities.

3 Months 6 Months 3 Years 5 Years

Since

Inception1 Year1 MonthYTD

Fund 92.0284.5924.259.973.85-0.5924.25 89.27

Benchmark 88.4975.1020.789.052.62-0.9820.78 86.43

2014 2013 2012 2011 2010 2009

Fund 11.54-1.35-4.849.3134.1810.72

Benchmark 18.831.70-2.689.2233.428.66

8.43High

15 Dec 2015

3-yearFund Volatlity

Lipper Analytcs

^Based on the fund's portfolio returns as at 15 December 2015, the Volatility Factor (VF) for this fund is 8.43 and is classified as "High" (source: Lipper). "High" includes funds with VF that are above 7.975 but not more than 9.575. The VF means there is a possibility for the fund in generating an upside return or downside return around this VF. The Volatility Class (VC) is assigned by Lipper based on quintile ranks of VF for qualified funds. VF is subject to monthly revision and VC will be revised every six months. The fund's portfolio may have changed since this date and there is no guarantee that the fund will continue to have the same VF or VC in the future. Presently, only funds launched in the market for at least 36 months will display the VF and its VC.

We recommend that you read and understand the contents of the Master Prospectus Issue No. 19 dated 30 June 2015, which has been duly registered with the Securities Commission Malaysia, before investing and that you keep the said Master Prospectus for your records. Any issue of units to which the Master Prospectus relates will only be made upon receipt of the completed application form referred to in and accompanying the Master Prospectus, subject to the terms and conditions therein. Investments in the Fund are exposed to counterparty risk, country risk, currency risk, fund manager’s risk, legal and taxation risk and stock specific risk. You can obtain a copy of the Master Prospectus from the head office of CIMB-Principal Asset Management Berhad or from any of our approved distributors. Product Highlight Sheet ("PHS") is available and that investors have the right to request for a PHS; and the PHS and any other product disclosure document should be read and understood before making any investment decision. There are fees and charges involved in investing in the funds. We suggest that you consider these fees and charges carefully prior to making an investment. Unit prices and income distributions, if any, may fall or rise. Past performance is not reflective of future performance and income distributions are not guaranteed. You are also advised to read and understand the contents of the Financing for Investment in Unit Trust Risk Disclosure Statement/Unit Trust Loan Financing Risk Disclosure Statement before deciding to borrow to purchase units. Where a unit split/distribution is declared, you are advised that following the issue of additional units/distribution, the NAV per unit will be reduced from pre-unit split NAV/cum-distribution NAV to post-unit split NAV/ex-distribution NAV; and where a unit split is declared, the value of your investment in Malaysian ringgit will remain unchanged after the distribution of the additional units.

Most Recent Fund Distributions

5.00

Oct

2015

Gross (Sen/Unit)

CIMB-PRINCIPAL AWARDS AND ACCOLADES

Note: July 2005 to December 2015.

Performance data represents the combined income & capital return as a result of holding units in the fund for the

specified length of time, based on bid to bid prices. Earnings are assumed to be reinvested.

Source: Lipper

Page 1 of 2

31 December 2015

CIMB-Principal Global Titans Fund


FUND MANAGER'S REPORT

RISK STATISTICS

PORTFOLIO ANALYSIS

ASSET ALLOCATION

SECTOR BREAKDOWN

TOP HOLDINGS*

Mutual Fund 92.76%

Cash 7.24%

100.00%Total

Principal GLB - US EQ-INST ACC 19.80%

Principal GLB - EUR EQ-INS ACC 16.16%

Principal GLB - JAP EQ-INS ACC 2.86%

Schroder -ISF US Large Cap A Acc 22.23%

Schroder - ISF Euro Equity USD -A 21.15%

Schroder -ISF Japanese Opps USD A Acc 10.56%

Cash 7.24%

Total 100.00%

Apple Inc. 4.56%

Alphabet 4.24%

JP Morgan Chase 1.75%

Amazon.com 1.75%

Wells Fargo & Company 1.74%

The Fund fell 0.59% during the month of December

2015, outperforming the benchmark by 0.39%. The

out-performance was mostly driven by favourable

fund selection in Europe. On a year-to-date basis, the

fund gained 24.25%, outperforming the benchmark by

3.47%.

Most global equities slid amid disappointed European

Central Bank (ECB)’s easing actions, sharpening

worries about the stability of the global junk-bond

market and tumbling oil prices. Meanwhile, the much

debated U.S. Federal Reserve ("Fed") lift-off finally

happened on December 16. Janet Yellen managed

market expectations perfectly. Indeed, risk assets

rallied on the positive message from Yallen, albeit

temporarily. The broad retreat comes a day after

markets rallied to the Fed’s rate hike decision. Investors

shifted their focus back to some of the factors that

pressured stocks, such as the effects of the

strengthening dollar on commodity prices, like oil. The

markets ended lower in late-December given a lack of

new catalysts.

Within the context of developed market equities, we

have a preference for the Europe and Japan equity

markets. We remain neutral on US equities in light of the

slowdown in manufacturing, deteriorated earning cycle

and the tighter monetary environment. We expect ECB

and Bank of Japan ("BoJ") to extend or expand their

stimulus programmes. We expect these policy actions

to result in abundant liquidity, lowered volatility and risk ,

and translate to a bottoming of Purchasing Managers

Index ("PMI") in both regions.

Beta 1.01

Information Ratio 0.65

Sharpe Ratio 2.06

3 years monthly data

SAP 2.50%

Sanofi 2.44%

Svenska Cellulosa 2.00%

Galp Energia 1.83%

Fresenius Medical Care 1.72%

*Of the target fund.

Sumitomo Mitsui Financial Group 3.37%

Itochu 2.47%

Century Tokyo Leasing 2.25%

Aisin Seiki 2.10%

Sompo Japan Nipponkoa Holdings 2.02%

Page 2 of 2

31 December 2015

CIMB-Principal Global Multi Asset Income Fund


- 2%

- 1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

11%

12%

13%

14%

Jun-2014 Sep-2014 Dec-2014 Mar-2015 Jun-2015 Sep-2015 Dec-2015

Fund

FUND OBJECTIVE

FUND PERFORMANCE in MYR

Cumulative Performance (%)

CIMB-Principal Asset Management Berhad

10th Floor, Bangunan CIMB, Jalan Semantan

Damansara Heights, 50490 Kuala Lumpur.

Tel: (603) 2084 8888

Fax: (603) 2084 8899

Website: www.cimb-principal.com.my

Bloomberg TickerISIN CodeCurrency

MYR MYU1000FC002 CPGMAIN MK

The Fund aims to provide income and potential capital growth to investors through

investments in one collective investment scheme, which invests in a diversified portfolio of

global assets.

FUND INFORMATION

Location Kuala Lumpur, Malaysia

Domicile Malaysia

Fund Currency Ringgit Malaysia

Fund Size (MYR) MYR 288.74 million

Fund Unit 285.41 million units

Fund Launch 20 March 2014

Fund Inception (MYR) 20 March 2014

Benchmark The Fund is benchmark unconstrained as

the Target Fund is benchmark

unconstrained, i.e it will be actively

managed without reference to any specific

benchmark.

Dealing Daily (as per Bursa Malaysia trading day)

Application Fee IUTAs : Up to 5.50% of the NAV per unit

CWA : Up to 6.50% of the NAV per unit

Management Fee Up to 1.80% per annum of the NAV of the

Fund

Trustee Fee 0.04% per annum of the NAV of the Fund

Unit NAV (MYR) MYR 1.0116

3 Months 6 Months 3 Years 5 Years

Since

Inception1 MonthYTD 1 Year

Fund 8.56N/AN/A7.082.62-1.77-1.077.08

We recommend that you read and understand the contents of the CIMB-Principal Global Multi Asset Income Fund

Information Memorandum dated 20 March 2014 and First Supplemental Information Memorandum dated 19 March

2015, which have been deposited with Securities Commission Malaysia before investing and that you keep the said

Information Memorandum for your record. Any issue of units to which the Information Memorandum relates will only be

made upon receipt of the completed application form referred to in and accompanying the Information Memorandum,

subject to the terms and conditions therein. The principal risks are Fund manager’s risk, legal and taxation risk,

currency risk, default risk and country risk. The specific risks of the Target Fund are investment objective risk,

regulatory risk, liquidity risk, interest rate risk, financial derivative instrument risk, credit risk, currency risk, lower rated

and higher yielding debt securities risk, counterparty risk, credit default swap risk, futures, options and forward

transaction risk, property and real estate companies securities risk, mortgage related and other asset backed

securities risk and risk of investing in emerging markets. You can obtain a copy of the Information Memorandum from

the head office of CIMB-Principal Asset Management Berhad or from any of our approved distributors. We suggest

that you consider these fees and charges carefully prior to making an investment. Unit prices and income distributions,

if any, may fall or rise. Past performance is not reflective of future performance and income distributions are not

guaranteed. Product Highlight Sheet ("PHS") is available and that investors have the right to request for a PHS; and

the PHS and any other product disclosure document should be read and understood before making any investment

decision. There are fees and charges involved in investing in the funds. We suggest that you consider these fees and

charges carefully prior to making an investment. Unit prices and income distributions, if any, may fall or rise. Past

performance is not reflective of future performance and income distributions are not guaranteed. You are also advised

to read and understand the contents of the Financing for Investment in Unit Trust Risk Disclosure Statement/Unit Trust

Loan Financing Risk Disclosure Statement before deciding to borrow to purchase units. All performance figures have

been extracted from Lipper. Where a unit split/distribution is declared, investors are advised that following the issue of

additional units/distribution, the NAV per unit will be reduced from pre-unit split NAV/cum-distribution NAV to post-unit

split NAV/ex-distribution NAV; and where a unit split is declared, the value of your investment in Malaysian ringgit will

remain unchanged after the distribution of the additional units.

The Fund is only available to qualified investors, be it individuals or corporations as prescribed by the Guidelines on

Unlisted Capital Market Products under the Lodge and Launch Framework issued by the Securities Commission

Malaysia on 9 March 2015.

Most Recent Fund Distributions

0.32 0.34 0.34 0.34 0.34 0.85

JulAugSepOctNovDec

2015 2015 2015 201520152015

Gross (Sen/Unit)

0.32 0.85 0.34 0.34 0.34 0.34Yield (%)

CIMB-PRINCIPAL AWARDS AND ACCOLADES

Note: March 2014 to December 2015.

Performance data represents the combined income & capital return as a result of holding units in the fund for the

specified length of time, based on bid to bid prices. Earnings are assumed to be reinvested.

Source: Lipper

Page 1 of 2

31 December 2015

CIMB-Principal Global Multi Asset Income Fund


FUND MANAGER'S REPORT PORTFOLIO ANALYSIS

ASSET ALLOCATION

SECTOR BREAKDOWN*

TOP HOLDINGS*

COUNTRY ALLOCATION*

Schroder -ISF-Global Multi Asset Inc 99.22%

Cash 0.78%

100.00%Total

Diversified Financials 19.20%

Government 9.80%

Consumer Discretionary 8.30%

Telecommunication Services 6.80%

Health Care 6.60%

Industrials 6.60%

Consumer Staples 6.40%

Energy 5.10%

Information Technology 4.30%

Materials 4.00%

Utilities 3.50%

Other 3.10%

Transportation 0.10%

Cash 16.20%

Total 100.00%

North America 50.40%

Europe 21.10%

UK 14.00%

Emerging Markets 9.00%

Asia Pacific ex-Japan 3.50%

Japan 1.40%

Other 0.60%

Total 100.00%

1 Telecom Italia Spa 144A 5.303% 30/05/2024 Italy 0.60%

2 GCP Infrastructure Investments United Kingdom 0.50%

3 Schroder Real Estate Investment Trust United Kingdom 0.50%

4 Bway Holding Co 144A 9.125% 15/08/2021 United States 0.40%

5 International Public Partnerships Limited Ordinary 1P United Kingdom 0.40%

6 Ishares Mortgage Real Estate Capped United States 0.40%

7 Schroder European Real Estate Investment Trust Europe 0.40%

8 Starwood European Real Estate Finance Guernsey 0.40%

9 US Treasury Note .875% 31/01/2017 United States 0.40%

10 US Treasury Note 1% 15/09/2017 United States 0.40%

Total 4.40%

For the month of December 2015, the Fund declined

by 1.07%. Year-to-date ("YTD"), the Fund gained

7.08%. The Fund does not have a benchmark for

comparison.

European equities were amongst the biggest losers

due to European Central Bank (ECB) policy

disappointment. High yield bonds also detracted as

further declines in energy prices and fears of

contagion risk stemming from the liquidation of a US

mutual fund, which was focused towards the

distressed end of the high yield market, caused a

sharp sell-off in the asset class mid-month. However,

US high yield prices recovered towards month-end,

returning -2.6% through December.

The outlook for growth remains modest as the

industrial and manufacturing sectors, particularly in

the US, have continued to weaken. Central bank

policy announcements through December also

indicated that further volatility in asset prices may lie

ahead, with the ECB failing to meet investor

expectations for further easing while the Fed

embarked on its hiking cycle, implying that liquidity will

be withdrawn further in the coming quarters. China’s

currency reserves are also contracting, indicating

capital outflows and tighter liquidity conditions within

the economy. This is placing downward pressure on

the Chinese Yuan.

*Of the target fund.

Page 2 of 2

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