RHB Report SCB Final A 40766288941930055cca58db36969

TOP MALAYSIA
SMALL CAP COMPANIES
20 JEWELS
2019 EDITION
MALAYSIA
Alexander Chia, ACA alexander.chia@rhbgroup.com (603) 9280 8889
Alan Lim, CFA alan.lim@rhbgroup.com (603) 9280 8890
Fiona Leong fiona.leong@rhbgroup.com (603) 9280 8886
Hoe Lee Leng, CPA hoe.lee.leng@rhbgroup.com (603) 9280 8860
Jeffrey Tan jeffrey.tan@rhbgroup.com (603) 9280 8863
Lee Meng Horng lee.meng.horng@rhbgroup.com (603) 9280 8866
Lim Jia Yi lim.jia.yi@rhbgroup.com (603) 9280 8873
Lim Sin Kiat, CFA lim.sin.kiat@rhbgroup.com (603) 9280 8879
Loong Kok Wen, CFA loong.kok.wen@rhbgroup.com (603) 9280 8861
Muhammad Afif Bin Zulkaplly muhammad.afif.zulkaplly@rhbgroup.com (603) 9280 8883
Muhammad Syafiq Bin Mohd Salam muhammad.syafiq.mohd@rhbgroup.com (603) 9280 8867
Soong Wei Siang soong.wei.siang@rhbgroup.com (603) 9280 8865
Tay Yow Ken, CFA tay.yow.ken@rhbgroup.com (603) 9280 8682

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CONTENTS
List Of Companies By Alphabetical Order
AWC ……………………………………………………………………………………………………………………… 1
Bioalpha Holdings……………………………………………………………………………………………………….. 3
Chemical Company of Malaysia……………………………………………………………………………………….. 5
Chin Well Holdings………………………………………………………………………………………………………. 7
Dancomech Holdings……………………………………………………………………………………….................. 9
Dufu Technology Corp……………………………………………………………………………………….…………. 11
Econpile Holdings……………………………………………………………………………………………………….. 13
Fitters Diversified………………………………………………………………………………………………………… 15
Frontken Corporation…………………………………………………………………………………………………… 17
Guan Chong……………………………………………………………………………………………………………… 19
Ideal United Bintang International…………………………………………………………………………………….. 21
Kelington Group…………………………………………………………………………………………………………. 23
Mega First Corporation..………………………………………………………………………………………………... 25
Pentamaster Corporation………………………………………………………………………………………………. 27
QES Group………………………………………………………………………………………………………………. 29
RCE Capital……………………………………………………………………………………………………………… 31
Revenue Group………………………………………………………………………………………………………….. 33
Superlon Holdings………………………………………………………………………………………………………. 35
Techbond Group………………………………………………………………………………………………………… 37
Teo Seng Capital………………………………………………………………………………………………………… 39

List Of Companies By Industry Classification
Basic Materials
Chemical Company of Malaysia ……………………………………………………………………………………. 5
Techbond Group ……………………………………………………………………………………………………… 37
Construction
Econpile Holdings …………...……………………………………………………………………………………..... 13
Consumer
Bioalpha Holdings ……………………………………………………………………………………………………. 3
Guan Chong …………………………………………………………………………………………………………... 19
Teo Seng Capital …………………………………………………………………………………………………...... 39
Industrial Product
Chin Well Holdings …………………………………………………………………………………………………… 7
Dancomech Holdings ………………………………………………………………………………………………… 9
Fitters Diversified …………………………………………………………………….………………………………. 15
Kelington Group ……………………………………………………………………………………………………… 23
Superlon Holdings ……………………………………………………………………………………………………. 35
Non-Bank Financial
RCE Capital ………………………………………………………………….……………………………………… 31
Property
Ideal United Bintang International ……………………………………………………….…………………………. 21
Real Estate Services

AWC …………………………………………………………………………………………………………………… 1
Technology
Dufu Technology Corp……………………………………………………….………………………………………. 11
Frontken Corporation……………………..……………………………………….…………………………………. 17
Pentamaster Corporation……………………………………………………………………………………………. 27
QES Group ……………………………………………………………………………………………………………. 29
Revenue Group……………………………………………………………………………………………………….. 33
Utilities
Mega First Corporation..……………………………………………………………………………………………... 25
Foreword
2019 marks the 15th anniversary our Top Malaysia Small Cap Jewels. This Small Cap Jewels book is unique and has
been a trademark of RHB Research over the years. As usual, it is part of a regional compendium, which compiles all
the high potential small cap ideas from other Asean markets. As part of our flagship product offering, we continue our
utmost efforts in researching new ideas and unearthing potential gems, despite the challenging market environment.
This year, our Top 20 Jewels from Malaysia have an average market cap of MYR515m (or median market cap of
MYR335m), encompassing stocks from 9 different sectors. Three of the 20 names are listed on the Ace Market with
the remaining from the Main Market. Generally, the main criterion for our picks this year focuses more on growth
prospects and earnings delivery. We have also put more emphasis on corporate governance screening of the
featured names, which is an increasingly important selection criterion.
RHB Research wishes to express our gratitude to the management of the featured companies for their generous time
in helping us to understand their business models and prospects. Credit should be given to our dedicated team of
analysts for the efforts put in to unearth this year’s jewels. We hope this product can provide our esteemed clients
with some alpha ideas in today’s tough market. Last but not least, RHB Research is grateful and humbled by the
continued interest and support from all our institutional and retail clients.
Lee Meng Horng Alexander Chia

Head of RHB Malaysia Small Cap Research Head of RHB Regional Research
25 April 2019
Top Malaysia Small Cap Companies 2019

20 Jewels – at a glance
Company name FV Mkt Cap P/E (x) P/BV (x) Div Yield (%) ROE (%)
(MYR) (MYRm) FY17 FY18 FY17 FY18 FY17 FY18 FY17 FY18
AWC 1.03 - 1.24 221.0 9.6 9.9 1.1 1.4 3.1 3.8 11.0 13.2
Bioalpha Holdings 0.31 - 0.32 176.0 20.5 17.5 1.5 1.1 0.5 0.5 8.8 8.2
Chemical Company of
2.57 - 3.44 308.4 na 11.6 1.1 1.0 1.4 4.9 na 8.4
Malaysia
Chin Well Holdings 2.50 - 2.71 523.0 10.3 9.4 1.0 1.0 3.9 4.1 9.9 10.4
Dancomech Holdings 0.84 - 0.95 184.8 17.2 12.3 1.7 1.6 na na 10.0 12.7
Dufu Technology Corp 2.57 - 3.72 412.5 16.2 8.6 3.1 2.6 3.8 3.0 18.4 29.8
Econpile Holdings 0.60 - 0.67 655.0 8.0 8.0 2.2 1.8 9.2 5.1 29.0 26.0
Fitters Diversified 0.58 - 0.69 222.0 na 14.7 0.5 0.5 na na na 4.3
Frontken Corporation 1.24 - 1.37 1,037.5 28.9 18.9 3.5 3.0 0.5 1.6 12.1 16.1
Guan Chong 4.80 - 5.76 1,705.0 17.1 8.6 3.5 2.5 0.7 1.1 20.1 33.0
Ideal United Bintang
1.26 - 1.29 119.0 8.0 2.5 1.3 0.9 na na 18.4 35.0
International
Kelington Group 1.52 362.1 18.3 19.9 5.2 3.4 1.3 1.2 6.8 6.3
Mega First Corporation 5.10 - 5.70 1,529.1 73.7 122.4 1.2 1.1 1.0 1.0 1.7 0.9
Pentamaster Corporation 4.74 - 5.72 1,111.2 23.2 18.1 6.2 3.1 na na 26.5 17.2
QES Group 0.32 - 0.37 185.9 9.9 13.2 3.1 2.1 na na 31.1 15.6
RCE Capital 2.10 - 2.20 557.3 6.8 6.2 1.3 1.1 1.9 4.3 17.6 18.5
Revenue Group 1.58 - 1.74 270.0 51.6 36.9 16.0 11.4 na na 31.0 30.9
Superlon Holdings 1.61 - 2.00 176.2 9.0 17.5 2.0 1.8 4.1 2.6 24.0 10.9
Techbond Group 1.28 182.9 12.6 13.6 2.5 2.2 na na 25.4 16.9
Teo Seng Capital 1.65 - 1.76 366.0 86.6 9.5 1.2 1.0 na 2.5 1.4 11.5
Note: All prices as at 29 Mar 2019
Note 2: na = not available
Source: Bloomberg, RHB

Market capitalisation of the Top 20 (MYRm) FY18 ROE of the Top 20 (%)
Guan Chong Ideal United Bintang International
Mega First Corporation Guan Chong
Pentamaster Corporation Revenue Group
Frontken Corporation Dufu Technology Corp
Econpile Holdings Econpile Holdings
RCE Capital RCE Capital
Chin Well Holdings Pentamaster Corporation
Dufu Technology Corp Techbond Group
Teo Seng Capital Frontken Corporation
Kelington Group QES Group
Chemical Company of Malaysia AWC
Revenue Group Dancomech Holdings
Fitters Diversified Teo Seng Capital
AWC Superlon Holdings
QES Group Chin Well Holdings
Dancomech Holdings Chemical Company of Malaysia
Techbond Group Bioalpha Holdings
Superlon Holdings Kelington Group
Bioalpha Holdings Fitters Diversified
Ideal United Bintang International Mega First Corporation
0 1,000 2,000 0% 10% 20% 30% 40%
Source: Bloomberg, RHB Source: Bloomberg, RHB

FY18 P/E of the Top 20 (x) FY18 dividend yield for the Top 20 (%)
Mega First Corporation Econpile Holdings
Revenue Group Chemical Company of Malaysia
Kelington Group RCE Capital
Frontken Corporation Chin Well Holdings
Pentamaster Corporation AWC
Bioalpha Holdings Dufu Technology Corp
Superlon Holdings Superlon Holdings
Fitters Diversified Teo Seng Capital
Techbond Group Frontken Corporation
QES Group Kelington Group
Dancomech Holdings Guan Chong
Chemical Company of Malaysia Mega First Corporation
AWC Bioalpha Holdings
Teo Seng Capital Dancomech Holdings
Chin Well Holdings Fitters Diversified
Guan Chong Ideal United Bintang International
Dufu Technology Corp Pentamaster Corporation
Econpile Holdings QES Group
RCE Capital Revenue Group
Ideal United Bintang International Techbond Group
0 5 10 15 20 25 30 35 40 0% 2% 4% 6%
Source: Bloomberg, RHB Source: Bloomberg, RHB

Target: N/A
AWC Price: MYR0.78
On Track For Steady Growth

AWC (AWCF MK)
Price Close
Investment Merits
1.2
1.1  Sustainable earnings growth backed by MYR1bn outstanding

1.0
orderbook across all business segments;
0.9
0.8  MYR12m profit guarantee from the acquisition of Trackwork &

0.7
Supplies SB;
0.6
0.5  Potential growth from the domestic rail asset management sector.
0.4
Apr-17
Apr-18
Feb-17
Jun-17
Aug-17
Oct-17
Dec-17
Feb-18
Jun-18
Aug-18
Oct-18
Dec-18
Feb-19
Company Profile
Source: Bloomberg AWC is an investment holding company that provides integrated
facilities management (IFM) and engineering services, specialising in
Stock Profile quality engineering services. The company provides total asset
Bloomberg Ticker AWCF MK management services such as IFM, and engineering services to
Avg Turnover (MYR/USD) 1.1m/0.27m building owners. It is also an international leader in the design and
supply of automated pneumatic waste collection system (AWCS), with a
Net Gearing (%) Net Cash
proven track record in Malaysia, Singapore and the Middle East.
Market Cap (MYRm) 221m
Beta (x) 1.2 Highlights
BVPS (MYR) 0.58
CARP is key for IFM business. Prospects at the facilities management
52-wk Price low/high (MYR) 0.6 - 0.93 (FM) division remain solid, with renewed concessions to provide FM to
Free float (%) 54 the Southern region (comprising the states of Johor, Malacca, Negeri
Sembilan) and Sarawak state buildings. We believe the concessions
would provide a stable stream of revenue in the facilities segment for
Major Shareholders (%) the next 10 years, with the company receiving MYR52m pa for the first
five years, followed by MYR59m pa for the remaining five years. In
K-Capital SB 29.07
addition, the group should benefit from the introduction of Critical Asset
Ahmad Kabeer 5.05 Refurbishment Programme (CARP) with MYR14 pa for 10 years.
Trackwork strategic acquisition. AWC has made strategic move to
acquire 60% stake in Trackwork & Supplies SB (Trackwork) for
MYR43.5m, which was completed on 9 Oct 2018. Trackwork has over
Share Performance (%) 18 years of experience in rail-related industry services including
1m 3m 6m 12m supplying of track materials and rolling stocks, maintenance works for
Absolute (3.8) 14.6 23.6 134.5 railway tracks, supplying and commissioning of various equipment and
Relative (4.2) 10.6 23.0 132.7 machineries used for track maintenance, and supply of depot
equipment. The acquisition comes with a profit guarantee of MYR12m
until Sep 2019. We believe the acquisition bodes well with the group’s
strategy to become a domestic rail asset manager. With the booming
Muhammad Syafiq Bin Mohd Salam upcoming rail project, the group expects rail maintenance related cost
+603 9280 8867
to be c.3-5% pa of the overall rail total asset value.
muhammad.syafiq.mohd@rhbgroup.com
Growing IFM market in Malaysia. We expect the company to continue
benefiting from the growing IFM market in Malaysia. The sector
reportedly experienced a decent CAGR of 7.91% over the last five
years. IFM services are beginning to be widely accepted, and this has
led to a paradigm shift in the way businesses operate today. IFM not
only drives efficiency and reduces excess, but also minimises
unnecessary costs that can be incurred by inefficient FM processes.
1
P rofit & Loss Jun- 16 Jun- 17 Jun- 18
Good growth back by sustainable IFM business. With IFM services
Total turnover (MYRm) 249 296 304
providing stable recurring income, its other business eg engineering,
Reported net profit (MYRm) 17 22 22
environment, and rail division may provide good growth potential. The
Rec urring net profit (MYRm) 17 22 22
group currently has MYR1bn outstanding orderbook across all
Rec urring net profit growth (%) 112.3 28.3 (1.6)
businesses. In the near term, we expect rail segment to be a new
Rec urring EPS (MYR) 0.08 0.08 0.08
growth driver, while engineering division is also expected to benefit from
DPS (MYR) 0.03 0.03 0.03
the rapid development in the Klang Valley and KLCC area.
Dividend Yield (%) 3.1 3.1 3.8
Rec urring P/E (x) 10.5 9.6 9.9
Return on average equity (%) 11.6 11.0 13.2
Company Report Card P/B (x) 1.2 1.1 1.4

P/CF (x) (59.6) 6.7 (14.2)
Latest results. In 2QFY19 (Jun), AWC recorded significant 21.7% YoY Sourc e: Company, RHB
rise in core net profit, and 8.09% YoY increase in net EPS. Growth was
from its maiden contribution of Trackwork, and the improved Ba la nc e S he e t (MY Rm) Jun- 16 Jun- 17 Jun- 18
performance from most of its existing businesses. Meanwhile, PATAMI Total c urrent assets 192 225 225
margin has also improved to 8.5% from 7.5%, arising from better margin Total assets 235 276 276
83 64 64
from the newly acquired division. Total c urrent liabilities
Total non- c urrent liabilities 4 12 12
Balance sheet/cash flow. Based on its latest 2QFY19 results, AWC is Total liabilities 87 76 76
currently in a net cash position. Shareholder's equity 148 200 164
Minority interest 29 36 60
ROE. The group recorded a strong ROE of 13.3%, higher than average
Other equity 0 0 0
IFM peers. 235 276 276
Total liabilities & equity
Dividend. The group has not specified any dividend policy. Having said Total debt 1 13 13
that, with steady cash flows generated from its businesses, AWC is able Net debt Net Cash Net Cash Net Cash
to provide a decent dividend payout of about 30%. Sourc e: Company, RHB
Management. All four divisions are helmed by four different managing Ca sh Flow (MY Rm) Jun- 16 Jun- 17 Jun- 18
directors (MDs)/CEOs with more than 20 years of experience in their Cash flow from operations (1) 36 (13)
respective areas. The group is led by its MD, Dato’ Ahmad Kabeer, who Cash flow from investing ac tivities (6) (4) (4)
is also the largest shareholder in the company. Cash flow from financ ing ac tivities (2) (11) 5
Cash at beginning of period 54 45 68
Net c hange in c ash (9) 22 (12)
Recommendation Ending balanc e c ash

Sourc e: Company, RHB
45 67 56
Valuation. Pegging the stock to 10-12x FY20F P/E, we arrive at our

valuation estimate of MYR1.03-1.24. We like AWC for its stable IFM
services income, the synergy between its business divisions and
outstanding orderbook of MYR1bn. We believe the group deserves to
trade at 10-12x P/E, in line with its 5-year historical small cap index
average.
2
Target: N/A
Bioalpha Holdings Price: MYR0.205
Multi-Pronged Growth Strategy To Bear Fruit
Investment Merits
 Impending increase in harvest tonnage should lower uncertainty in
raw materials supply
 Expanding production capacity to meet growing demand
 Anticipate stronger retail pharmacy contribution
Company Profile
Bioalpha is involved in agricultural, research and development,
Source: Bloomberg manufacturing, and selling of food and health supplement products.
This original design manufacturer (ODM) and original brand
Stock Profile manufacturer’s (OBM) supplement products are certified halal and its
Bloomberg Ticker BIOA MK products are sold in Malaysia. Indonesia and China are its main export
Avg Turnover (MYR/USD) 0.31m/0.08m markets.
Market Cap (MYRm) 176m
Beta (x) 0.76
Highlights
BVPS (MYR) 0.15 Boost in harvest tonnage via ongoing land clearing and planting
52-wk Price low/high (MYR) 0.19 - 0.275 activities at herbal parks. We believe herbal farming helps to reduce
Free float (%) 52 uncertainty in raw materials supply and lower raw material costs. So far,
it has developed 260 acres and 100 acres at the Pasir Raja Herbal Park
(PRHP) in Terengganu and Desaru Herbal Park in Johor, with a
balance of 744 acres and 200 acres still to come. Barring unforeseen
Major Shareholders (%) circumstances, PRHP should be complete in 2020. It aims to harvest
William Hon Tian Kok 14.3 1,000-2,000 tonnes of raw herbs from both parks during FY19-20F.
Perbadanan Nasional Berhad 14.1
Expanding production capacity to meet growing demand. It is
Khazanah Nasional Berhad 12.5 upgrading the main manufacturing plant in Bangi (expected completion
by 1Q19). Construction of its new hazard analysis and critical control
points (HACCP) factory at Pasir Raja to process herbs harvested on-
Share Performance (%) site at PRHP has also begun, and scheduled to complete by 2Q19. The
1m 3m 6m 12m overall utilisation rate is 80% and capacity should increase by 50% post
expansion – we believe this should meet growing demand for OBM
Absolute 0.0 (2.4) (18.0) (4.7)
products (ie Apotec, Nushine) and ODM items from existing and new
Relative 3.8 0.5 (9.7) 6.8
customers. We think demand will be driven by rising household income
and greater health awareness. Also, it secured a new ODM customer
that is the second largest personal care products group in Malaysia,
Lim Jia Yi +603 9280 8873 with a large portfolio of personal care and household products. Moving
lim.jia.yi@rhbgroup.com forward, we see potential improvement in recurring supplement sales.
Anticipate stronger retail pharmacy contribution. It has 21
pharmacies under its own brand, Constant. It is targeting to add another
15 outlets in 2019, focusing on the Southern region where competition
is less stiff. We believe this, coupled with a strategic partnership with
Angkatan Koperasi Kebangsaan Malaysia (ANGKASA) to promote
franchise opportunities to the latter’s 8m members nationwide from
some 12,000 cooperatives, could bump up sales.
3
P rofit & Loss De c - 16 De c - 17 De c - 18
Company Report Card Total turnover (MYRm) 47 56 70
Latest results. Bioalpha achieved record high revenue and earnings in Reported net profit (MYRm) 8 8 12
FY18, as it had higher orders for current and new ODM products from
Rec urring net profit growth (%) (7.2) 20.9 16.9
existing clients, with contribution from new ODM customers as well as
Rec urring FD EPS (MYR) 0.25 0.20 0.18
better house brand sales at the pharmacy division (Constant outlets).
DPS (MYR) 0.00 0.00 0.00
However, 4Q18 recorded a softer QoQ performance given that local
customers stocked up in 3Q18 during the tax holiday period prior to the
Rec urring FD P/E (x) 24.7 20.5 17.5
implementation of the SST. Also, the effective tax rate was higher at
36%, mainly due to adjustments on deferred tax.
P/B (x) 1.4 1.5 1.1
Balance sheet/cash flow. Bioalpha has been in a net cash position P/CF (x) 5.3 11.1 12.0
since FY13. Its net cash per share as at 4Q18 was approximately 2 sen. Source: Company data, RHB
ROE. Its ROAE stood at 8.2% in FY18, slightly lower than FY17’s 8.8%.
Ba la nc e S he e t (MY Rm) De c - 16 De c - 17 De c - 18
Dividend. The group adopted a dividend policy in 2014 to pay out Total c urrent assets 61 81 91
approximately 30% of PAT. We expect the dividend payout to be Total assets 114 154 181
maintained at 30% of net profit for now, assuming cash is conserved for Total c urrent liabilities 11 12 12
expansion. Total non- c urrent liabilities 5 7 11

Total liabilities 16 19 23
Management. William Hon Tian Kok is the founder, major shareholder Shareholder's equity 98 135 158
and MD of the group. He oversees the group’s performance and Minority interest (1) (1) (1)
strategic direction and was instrumental in developing the export Other equity 0 1 2
markets in Indonesia and China. Goh Siew Cheng, the group CFO Total liabilities & equity 114 154 181
oversees the finance, accounting and human resources functions of the Total debt 4 4 6
group. Low Chen Kong, the group GM is responsible for overseeing the Net debt Net Cash Net Cash Net Cash
business operations of production, R&D and agriculture division. Source: Company data, RHB
Ca sh Flow (MY Rm) De c - 16 De c - 17 De c - 18
Investment Case Cash flow from operations 1 20 16

Cash flow from investing activities (14) (28) (28)
Fair value. Our estimated fair value range of MYR0.31-0.32 is based on Cash flow from financing activities 5 20 2
FY19F FD P/E of 20-21x, near the stock’s 3-year historical mean. This Cash at beginning of period 12 5 17
is premised on expanded capacity meeting growing demand, double- Net change in cash (7) 12 (9)
digit earnings growth, strengthening presence in all key markets, and Ending balance cash 5 17 7
strong R&D under its experienced management team. Source: Company data, RHB
Our valuation is in line with Bursa Malaysia Consumer Product Index’s

3-year historical –1SD of 20x. That said, we believe it is conservative as
the stock is trading at forward FD P/E of 13x, with 2-year earnings
CAGR of 23%. Our valuation uses a FD share base of 1,024m,
assuming 10% private placement and 133.3m warrants (strike price:
MYR0.22) are exercised.
Key risks include unsuccessful R&D and interruptions in the supply of
utilities.
4
Target: N/A
Chemical Company of Malaysia Price: MYR1.85
2019: A Re-Rating Year
Chemical Co. of Malaysia (CCM MK)

Investment Merits
Price Close
2.5  Well-positioned to capture the growth in demand with capacity
2.0 expansions;
1.5  Yielding the results from post de-gearing and de-merger exercises.
1.0  Unjustified valuation discount vs peers at only 8.9-7.2x forward P/Es
0.5 given its manufacturing capabilities and market commanding position;
0.0  Healthy balance sheet with attractive dividends.
Oct-17
Apr-18
Oct-18
Dec-18
Aug-17
Dec-17
Feb-18
Jun-18
Aug-18
Feb-19
Source: Bloomberg
Company Profile
Chemical Company of Malaysia is involved in the manufacturing,
Stock Profile marketing, trading, and developing of a wide variety of general and
Bloomberg Ticker CCM MK specialty chemical products and polymer coating solutions.
Avg Turnover (MYR/USD) 0.42m/0.1m
Net Gearing (%) 17.8 Highlights
Market Cap (MYRm) 308.4m
Commanding market position. CCM manufactures and trades
Beta (x) 0.90 specialty chemical products with market shares of c.26% in caustic
BVPS (MYR) 1.92 soda and 36% in chlorine. It is among the Top 3 in polymer coatings
52-wk Price low/high (MYR) 1.55 - 2.41 and related products. Operating in a duopoly, CCM is set to benefit from
Free float (%) 42 the current shortage of caustic soda in Malaysia (estimated at 200,000
tonnes pa) with capacity expansions and increases in trading activities.
While the price of South-East Asian caustic soda is currently hovering
at c.USD400 per tonne (2018 average: USD506 per tonne), CCM will
Major Shareholders (%)
still make healthy profits. This is because the supply arrangement for
Yayasan Pelaburan Bu 48.9 long-term takers are in a formularised pricing scenario within an
Billion Victory Sdn 3.6 oligopolistic market, as evidenced in the recent 4Q18 results.
Cimb Group Holdings 3.3 A proxy for Pengerang and gloves sector. The start-up of the
Refinery & Petrochemical Integrated Development (RAPID) project is
expected to increase caustic soda demand. The expected additional
Share Performance (%) demand for caustic soda from the ramp-up of RAPID is c.60,000 tonnes
1m 3m 6m 12m in 2019 and 156,000 tonnes from 2021 onwards. With a plant situated
in close proximity to Pasir Gudang within a duopoly chlor–alkali market,
Absolute (5.6) 3.4 (12.3) (8.9)
CCM stands to benefit from RAPID’s commissioning. Polymer coating
Relative (2.3) 6.1 (4.0) 2.9
demand is also expected to continue its growth. This is given the long-
term growth prospects of the rubber gloves manufacturers, with planned
capacity expansions of c.50bn from an existing 200bn pieces by 2020.
Lee Meng Horng +603 9280 8866
Multiple capacity expansions. CCM embarked on a capacity
lee.meng.horng@rhbgroup.com
expansion plan to grow its chemicals and polymer capacities by 50%
and 15% to capture the market’s growth pockets and supply deficits. By
reactivating the Pasir Gudang Works 1 facility, it can boost chlor-alkali
production capacity by 20,000 electro-chloro units (ECU) (+50%) to
60,000 ECU. Additionally, the expansion of CCM’s Shah Alam calcium
nitrate plant to 24,000 tonnes pa (+100%) is set to come on stream by
2Q19.
5
For the polymer business, by relocating the warehouse and corporate
office to a new plant, the existing plant capacity in Bangi is expected to Reported net profit (MYRm) 12 (17) 26
be boosted 10-12% from the current 18,000 tonnes pa. FY19’s total Rec urring net profit (MYRm) 34 (13) 27
capex could be in the region of MYR60-70m. Rec urring net profit growth (%) NM NM NM
Rec urring EPS (MYR) 0.07 (0.08) 0.16
DPS (MYR) 0.05 0.03 0.09
Company Report Card Dividend Yield (%) 2.7 1.4 4.9
Rec urring P/E (x) 25.0 NM 11.6
Latest results. In FY18, core PATAMI improved to MYR31.2m from Return on average equity (%) 4.6 NM 8.4
MYR3.2min FY17 on higher revenue (+6.8% YoY), lower finance costs P/B (x) 1.2 1.1 1.0
(after the de-gearing exercise), and lower administration expenses, P/CF (x) 13.3 4.1 5.3
given the improvements in operating efficiency. Source: Company data, RHB
Balance sheet/cash flow. The net-gearing position has improved to Ba la nc e S he e t (MY Rm) De c - 16 De c - 17 De c - 18
0.18x at end-FY18 from 1.10x in FY17 following the de-merger and de- Total c urrent assets 684 540 290
leveraging exercises in 2018. FY18 FCF yield was a healthy 26%, but Total assets 1685 861 580
lower than FY17’s – mainly due to the de-merger exercise. Total c urrent liabilities 228 448 89
Dividend. FY18 DPS stood at MYR0.09 – a payout of 50%. Based on a Total liabilities 794 580 256
similar payout ratio, we believe total dividends in FY19-20 could reach Shareholder's equity 740 282 320
MYR0.11-0.13, yielding 5.6-6.9% at current prices. Minority interest 152 (1) 4

Other equity 0 0 0
Management. CCM is a 54%-owned strategic investment for Total liabilities & equity 1685 861 580
Permodalan Nasional. It is now led by Nik Fazila Binti Nik Mohamed Total debt 622 468 194
Net debt 333 308 58
Shihabuddin, who was re-designated as group managing director in
Dec 2017 post completion of the corporate de-merger exercise. Nik Source: Company data, RHB
Fazila was previously group COO and CFO. The group CFO post is
now held by Mohd Junaidy Ab-Mutalib, who joined the group in May Ca sh Flow (MY Rm) De c - 16 De c - 17 De c - 18
Cash flow from operations 64 76 58
2018 after accumulating more than 20 years of experience in
Cash flow from investing activities 14 (229) 197
accountancy, financial reporting, corporate strategy and restructuring, Cash flow from financing activities (111) 19 (279)
corporate governance, audit, and risk management. Cash at beginning of period 313 288 160
Net change in cash (24) (128) (24)
Ending balance cash 288 160 136
Investment Case Source: Company data, RHB
An undervalued gem. CCM is currently trading at FY19F-20F P/Es of
8.9-7.2x – a discount of 30-45% to its peers, which we deem as
unjustified. We believe its manufacturing capabilities in chlor-alkali,
coagulant, and calcium nitrate – and commanding market position in
chlorine, caustic soda, and polymer coatings – should see it trade at
least (if not higher) at a P/E that is on par with its peers, who are
predominantly chemical traders in nature.
Yielding the results. We believe FY19F-20F will continue to yield the
results after the de-gearing and de-merger exercises in 2018. The
expected growth will mainly be fuelled by a MYR13-14m pa interest
savings exercise and improvements in margins, given better operating
efficiencies post last year’s corporate exercises. Additionally, extra
contributions from capacity expansions, supply shortages, and being a
potential beneficiary from the ramp-up in Pengerang are among other
catalysts. The investment case is further supported by potential implied
yields of 6.1-6.6%.
Fair value. We estimate a fair value of MYR2.57-3.44 based on P/Es of
12-13x on FY19F-20F earnings – on par with the valuations of other
chemical players in market. We believe P/E re-rating is warranted, given
that FY19 is the year of realising value following the corporate exercises
last year and FY19F-20F growth trends.
Key risks: Weaker demand from its polymers and chemicals
businesses, and a softening in caustic soda prices.
6
Target: N/A
Chin Well Holdings Price: MYR1.78
Stepping Up Its Game
Investment Merits
 Imminent higher orders from wire products portfolio expansion;
 Expect higher contributions from DIY fasteners segment;
 Potential beneficiary of US-China trade war.
Company Profile
Chin Well manufactures and supplies fasteners: screws and nuts &
bolts. The company’s fasteners are used in highway guard rails, power
Source: Bloomberg transmission towers, and furniture, while wire products are used in
galvanised steel wire mesh, gabion, and chicken mesh. Its production
Stock Profile facilities in Malaysia and Vietnam have combined capacities of 144,000
Bloomberg Ticker CWH MK tonnes pa (fasteners) and 54,000 tonnes pa (wire products).
Market Cap (MYRm) 523m Highlights
Beta (x) 0.72 Looking at higher orders from wire products portfolio expansion.
BVPS (MYR) 1.83 Chin Well allocated MYR10m over FY18-19 (Jun) to upgrade its wire
52-wk Price low/high (MYR) 1.49 – 2.00 products production lines – the latter are estimated to commence in
Free float (%) 33 mid-to-end April. The new product lines – ie welded fencing, gabion,
and poultry mesh – offer high value-added margins. This may
potentially lift the segment’s margins. Besides having consistent orders
for galvanised wire from Australia, Canada, Dubai, and India, we deem
Major Shareholders (%) the expansion as timely. This is because overseas customers may
Benua Handal SB 55.2 switch providers to ensure more stable supply amid ongoing trade war
Samarang UCITS 9.6 concerns.
AIA Berhad 2.8 Expecting higher contributions from DIY fastener segment.
According to Zion Market Research’s Jan 2017 report, the global
industrial fasteners market is expected to grow at a CAGR of 5.4% in
Share Performance (%) 2017-2022. The company is in talks with 2-3 DIY retailers to expand its
1m 3m 6m 12m distribution network in Europe and the US. This could be the next
earnings driver, as margins are typically higher than what is the norm in
Absolute (0.6) 11.9 (6.3) 9.2
the conventional fasteners segment.
Relative 3.2 14.8 2.0 20.7
Potential beneficiary of the US-China trade war. Chinese fastener
products exported to the US were to be charged an extra 10% tariff
effective 24 Sep 2018 and then to 25% by 1 Jan. While the latter was
Lim Jia Yi +603 9280 8873
put on hold for 90 days, assuming that a tariff is subsequently put in
lim.jia.yi@rhbgroup.com place and is higher than the initial 10% rate, we believe the elevated
tariffs may bring in more US orders for bulk fasteners outside of China.
As Chin Well’s fastener plants in Malaysia and Vietnam are running at
utilisation rates of c.30% and 80%, we believe there is ample room for
the company to benefit from a potential surge in orders.
7
Latest results. Chin Well’s 1HFY19 earnings grew 15% YoY on Reported net profit (MYRm) 63 51 56
improvements in revenue (+14% YoY) for both fasteners and wire
Rec urring net profit growth (%) 55.6 (19.7) 9.8
products segments. That said, core net margin was flattish at 9.8%,
given higher cost of sales, which we believe was due to an increase in
DPS (MYR) 0.09 0.07 0.07
raw material costs.
QoQ wise, 2QFY19 revenue dropped 6% on lower revenue from the Rec urring P/E (x) 8.2 10.3 9.4
fasteners segment. For earnings, the latter segment was 8% lower, Return on average equity (%) 13.4 9.9 10.4
mainly due to decreased revenue and higher administration expenses. P/B (x) 1.1 1.0 1.0
Meanwhile, wire products were mainly impacted by elevated raw P/CF (x) 4.7 18.1 18.4
material costs during the same period. Source: Company data, RHB
Balance sheet/cash flow. Chin Well has invested c.MYR10m over

Ba la nc e S he e t (MY Rm) Jun- 16 Jun- 17 Jun- 18
FY18-19 to upgrade its wire products production lines. Although higher
Total c urrent assets 452 467 521
borrowings were utilised to finance the purchasing of raw materials, the
Total assets 610 621 665
company remains in a net cash position of MYR36.4m as at 1HFY19.
Total c urrent liabilities 106 79 114
ROE. ROE has expanded to 10.4% in FY18 from 9.9% in FY17. Moving Total non- c urrent liabilities 8 8 8
forward, we expect ROE to grow gradually on progressive Total liabilities 115 88 122
improvements in future earnings. Shareholder's equity 496 534 543

Dividend. Chin Well has been in a net cash position since FY15 and Other equity 0 0 0
has a dividend policy to distribute a minimum 40% of PATMI to Total liabilities & equity 610 621 665
shareholders. Assuming no major capex – post completion of the wire Total debt 60 48 73
products upgrade works – we believe there is potential for a higher Net debt Net Cash Net Cash Net Cash
payout rate. Source: Company data, RHB
Management. Managing director Tsai Yung Chuan is one of the

founders. Tsai Chia Ling – Chin Well Fasteners Co (CWFC) general Ca sh Flow (MY Rm) Jun- 16 Jun- 17 Jun- 18
manager since Jul 2013 – is currently overseeing the entire operations Cash flow from operations 101 24 21
of CWFC. On the Vietnam side, Tsai Cheng Hsun has been the general
Cash flow from financing activities (15) (37) (7)
director of Chin Well Fasteners (Vietnam) (CWFV) since Jun 2013.
Cheng Hsun is currently overseeing the entire operations of CWFV.
Net change in cash 79 (22) 6
Source: Company data, RHB

Investment Case
Fair value. Our estimated fair value range of MYR2.50-2.71 is based on
FY19F P/E of 12-13x, near +2SD of Chin Well’s 7-year historical mean.
We think our valuation is justifiable, as it is premised on a widening
product portfolio, shifting global demand, consistent dividend payout,
and sturdy financials under prudent management. That said, our
valuation is still conservative, considering that the counter is at a 13-
20% discount to Bursa Malaysia Industrial Production Index’s 5-year
historical -2SD of 15x, given its relatively smaller market cap for now.
Chin Well currently trades at a forward P/E of just 9x, while the 2-year
earnings CAGR stands at 10%.
Key risks include volatility in global wire rod and zinc ingot prices,
global political uncertainties, and weaker demand.
8
Target: N/A
Dancomech Holdings Price: MYR0.62
Underappreciated Gem
Investment Merits
 Has exclusive distribution rights for PCE products complemented by
in-house brands
 Robust balance sheet with strong net cash position
 Ability to tap into the growing Indonesian downstream palm oil market
Company Profile
Source: Bloomberg Dancomech is primarily involved in the trading and distribution of
process control equipment (PCE) and measurement instruments with
Stock Profile focus on industries like palm oil and olechemicals, oil and gas,
Bloomberg Ticker DMEC MK petrochemical and water treatment industries.
Avg Turnover (MYR/USD) 1.13/0.28m
Market Cap (MYRm) 184.8m Highlights
Beta (x) 1.203 Premium process equipment distributor with exclusive rights. The
BVPS (MYR) 0.40 group takes pride in being the authorised distributor of several
52-wk Price low/high (MYR) 0.335-0.675 international suppliers of PCE products under established brands such
Free float (%) 19 as Diaval, Eurotech, Neway in Malaysia. Seven exclusive distributorship
rights have been granted to the group from the mentioned suppliers.
Since 1989, the group has been sourcing products from foreign players
Major Shareholders (%) in China, the UK and Germany and the group was appointed as the
Abc Equity 41.56 approved vendor to supply British Rototherm equipment pressure to
c.60 FELDA’s palm oil mills.
Aik Cwo Shing 6.63
In-house brands to synergise business. Since 2007, Dancomech
has further upgraded itself to brand owners for certain products with
brands like WAGI, VMX and Omaval being introduced with the help of a
pool of 24 OEM manufacturers based in China and Taiwan. Its in-house
Share Performance (%)
brands has been hugely successful in the local market with c.40% of its
1m 3m 6m 12m topline coming from in-house brands. This has given us comfort on
Absolute 21.6 42.5 14.8 69.9 grounds of higher client stickiness to the group’s products coupled with
Relative 20.4 41.0 19.1 77.1 greater brand presence.
Indonesia, the next area of growth. Aside from its stable Malaysian
distribution business, Indonesia could be the company’s main leg for
Lim Sin Kiat, CFA +603 9280 8879 growth for years to come. Accounting for 21% of group revenue, its
lim.sin.kiat@rhbgroup.com Indonesian business is set to continue growing in double-digit, tapping
on the large potential of growth from the palm oil downstream market
with biodiesel producers expected to ramp up their capacities – which in
turn increases demand for PCE products – to meet higher government
mandates.
9
Latest results. In 4Q18, net profit surged 36.4% YoY driven by higher Rec urring net profit (MYRm) 13 11 15
profit contribution from recently-acquired Arah Edar (conveyer belt Rec urring net profit growth (%) 16.9 (16.4) 39.6
system supplier) and the Indonesian division, which saw its revenue Rec urring EPS (MYR) 0.05 0.04 0.05
grew by a whopping 37.9%. Cumulative profit also surged 37.4% YoY in DPS (MYR) 0.00 0.00 0.00
FY18 driven by sustained growth in the Indonesian business.
Rec urring P/E (x) 13.1 17.2 12.3
Dividend. Dancomech has a dividend policy to pay 30% of its net profit Return on average equity (%) 12.7 10.0 12.7
P/B (x) 1.7 1.7 1.6
as dividends it has exceeded the policy by paying 35% of profits as
P/CF (x) 12.4 18.2 25.6
dividends in FY18 with MYR0.0175 per share total dividend proposed.
The group also has a strong balance sheet with net cash per share of
MYR0.138 recorded as per 4Q18’s results. This gives the group more
than sufficient fire power to make value-accretive acquisitions in Ba la nc e S he e t (MY Rm) De c - 16 De c - 17 De c - 18
relevant businesses to further enhance its strength in Malaysia and
Indonesia.
Management. This group is managed by co-founder and owner of the Total non- c urrent liabilities 2 2 1
group, Aik Swee Tong, who has been with Dancomech since 1989. The Total liabilities 11 12 16
management team comprises mainly the Aik family with the COO, Shareholder's equity 101 108 118
1 2 2
executive director and managing director positions filled by family Minority interest
0 0 0
members. Collectively, the Aik family still owns c.60% of the group. Other equity
Total liabilities & equity 113 121 135
Total debt 3 3 2
Net debt Net Cash Net Cash Net Cash

Under-researched company with growth catalysts. We believe the

group deserves more attention from the investment community given its Ca sh Flow (MY Rm) De c - 16 De c - 17 De c - 18
positive earnings growth outlook with earnings CAGR of 31.4% from
Cash flow from investing activities (3) (22) 0
2019-2021. Our indicative valuation for the stock is between MYR0.84- Cash flow from financing activities 9 (5) (5)
0.95 per share, pegged to 12-14x FY20F P/E. Given strong projected Cash at beginning of period 0 0 0
earnings growth and robust net cash position, we believe the group Net change in cash 19 (16) 2
deserves to trade at least in line with the FBM Small Cap Index 5-year Ending balance cash 0 0 0
average P/E of 12x. Source: Company data, RHB
Key risks include the termination of product exclusive distributorship

rights and a slowdown in the palm oil downstream industry in Malaysia
and Indonesia.
10
Target: N/A
Dufu Technology Corp Price: MYR1.69
Riding The Big Data Era
Dufu Technology (DUFU MK)

Investment Merits
Price Close
3.0  Riding on strong demand for storage solutions for enterprise and data
2.5 centre infrastructure with the adoption of industry 4.0
2.0
 Surge in demand for high quality (high margin) HDD components
1.5
1.0
 Solid balance sheet with net cash position and healthy dividends
0.5  Trading at only 6.8x 2019F P/E, below historical average and peers
0.0
Oct-17
Apr-18
Oct-18
Dec-18
Aug-17
Dec-17
Feb-18
Jun-18
Aug-18
Feb-19
Company Profile
Source: Bloomberg
Dufu Technology is engaged in the design, development, and
manufacturing of precision machining components, computer disk-drive
Stock Profile related components, steel moulds and stamping components, as well
Bloomberg Ticker DUFU MK as providing marketing and engineering support services.
Highlights
Beta (x) 1.76 Riding the Industry 4.0 revolution. IDC, in its Data Age 2025 report,
BVPS (MYR) 0.71 predicts that worldwide data creation will grow to an enormous 163
52-wk Price low/high (MYR) 0.627 - 2.713 zettabytes (ZB) by 2025, which is 10x the amount of data produced in
2017, while hard drives will be central in managing 70% of the
Free float (%) 41.3
datasphere. Internet of Things (IoT), real-time data, cognitive artificial
intelligence (AI) systems, increased security data requirements, and big
data analytics are among the key trends. The trend should result in
Major Shareholders (%) strong demand for high capacity HDDs, especially from data centres
Perfect Full Yen Sdn 10.99 and catering to growing demand for big data and cloud services. Dufu,
Perfect Commerce Sdn 10.39
which manufactures HDD-related components, is set to ride on the
increasing demand for HDD.
Lee Hui-Ta 9.68
HDD still very much relevant. Enterprise solutions and data centres
are largely still on HDD (or hybrid HDD and SSD) given its stability and
Share Performance (%) longevity with lower cost per GB, while SSDs could be 10x more
expensive for high capacity drives. Note that the latest helium-filled
1m 3m 6m 12m
HDD platform in the market can house up to nine platters, which
Absolute 0.6 (18.0) (3.6) 136.9 essentially increases demand for spacers. This is part of the reason
Relative 4.0 (15.2) 4.7 148.7 why HDD unit shipments are downtrending (along with the popularity of
SSD and contraction in PC market), while total storage capacity is still
on the rise (combined storage shipment jumped 21% to 912 exabytes in
Lee Meng Horng +603 9280 8866 2018) – this has increased demand for HDD components.
lee.meng.horng@rhbgroup.com Next generation HDD is ready. The next generation enterprise hard
drive Heat-Assisted Magnetic Recording (HAMR) and Microwave-
Assisted Magnetic Recording (MAMR) have been successfully
developed and mass production is expected in 2019. First models to hit
the market this year will be 16-20 TB drives for data centres.
Essentially, both new technologies are aiming to increase areal density
(up to 5tbpsi) to produce larger capacity hard drives, and both would
require higher quality material spacers eg titanium (at higher margin) to
ensure reliability – this is Dufu’s speciality.
11
Extra machines to cater to higher order flow. We understand that the
group has c.450 machines with a yield of >98%, and 50 more machines Total turnover (MYRm) 170 181 241
(+11%) are expected to be fully commissioned by this year to cater to Reported net profit (MYRm) 27 26 52
growing demand from its customers – this is driven by growing demand Rec urring net profit (MYRm) 27 27 51
from data centres and the mass production of new generation HDDs. Rec urring net profit growth (%) 147.0 1.7 87.3
Capex of MYR10-15m is earmarked for FY19. Rec urring EPS (MYR) 0.10 0.10 0.20
DPS (MYR) 0.05 0.07 0.05
Company Report Card Rec urring P/E (x) 16.5 16.2 8.6

Latest results. In FY18, Dufu recorded core net profit of MYR51.5m, a P/B (x) 3.4 3.1 2.6
significant 87% YoY rise on higher revenue of MYR241.5m (+33% P/CF (x) 0.1 0.2 0.1
YoY). The spike was driven by both higher demand for its HDD
components and improved margins given higher ASPs for the higher
grade products.
Balance sheet/cash flow. Net cash position of MYR30.7m or MYR0.12 Total c urrent assets 122 123 154
per share as at 31 Dec 2018. FCF yield improved to 18% from 10.9% in Total assets 176 176 220
FY17 owing to the higher earnings base. Total c urrent liabilities 39 31 39

Dividend. 1 share dividend for every 20 shares held was proposed
(going ex on 28 May 2019), on top of an interim cash dividend of
Shareholder's equity 129 142 174
MYR0.025, giving a decent yield of 6.5% at the current price. We
believe higher dividends can be sustained in FY19F, with the improved
Other equity 0 0 0
earnings trajectory and healthy cash flow generation.
Management. Lee Hui-Ta is the executive chairman and major Total debt 13 6 11
shareholder of the group. He was a co-founder of the group in the early Net debt Net Cash Net Cash Net Cash
90s and has more than 26 years of experience in precision tooling and Source: Company data, RHB
CNC precision machining. Key senior management personnel include
Yeoh Beng Hooi, who was appointed as CEO since 2015, after serving Ca sh Flow (MY Rm) De c - 16 De c - 17 De c - 18
as COO since 2004. Group CFO is David Khoo Chong Beng, who Cash flow from operations 47 22 39
joined since 2017. Prior to this, he was the financial controller of NTPM. Cash flow from investing activities (2) (7) (21)
Cash flow from financing activities (27) (14) (10)

Investment Case Net change in cash 12 (4) 6
Riding the big data industry trend. We believe its HDD segment will Ending balance cash 42 36 41
continue to grow, banking on higher demand for storage solutions given Source: Company data, RHB
the huge growth in data consumption as well as technological
advancements in increasing the number of components within a HDD
platform. Margins are expected to improve as demand rises for higher
grade spacers that are required for the new generation HDDs.
Besides, its non-HDD segment is expected to grow as the group
diversifies into the automotive industry, having been certified. Trading at
a forward P/E of 6-6.8x, we believe the group is greatly undervalued by
the market despite good earnings visibility and being a beneficiary of a
rising industry trend.
Fair value. Based on a target P/E range of 11-14x on FY19F-20F
earnings, we derive a fair value range of MYR2.57-3.72. The target P/E
range is still at a discount to the 5-year average P/E for its closest peers
in the HDD industry eg Notion Vtec (NVB MK, NR) and JCY
International (JCYH MK, NR), that are trading at 18-20x.
Key risks include slower adoption of related components, weaker
consumer spending, customer concentration where its biggest customer
accounts for c.65% of 2017’s revenue, and further weakening of the
USD.
12
Target: N/A
Econpile Holdings Price: MYR0.51
A Contractor Worth Piling Into
Econpile (ECON MK)

Investment Merits
Price Close
 Econpile secured MYR620m worth of new contracts in FY19 (Jun);

1.4
1.2
1.0  Competition could ease with a consolidation among piling contractors;

0.8
 Lower raw material prices could lead to improved margins.
0.6
0.4
0.2 Company Profile

0.0
Dec-17
Dec-18
Apr-18
Aug-17
Oct-17
Feb-18
Jun-18
Aug-18
Oct-18
Feb-19
Econpile is a specialist in piling and foundation works, ie bored piling,

driven piles, and jack-in piles. The company primarily serves the
Source: Bloomberg property development and infrastructure sectors. Over the years, it has
been involved in the construction of bridges, elevated highways, rail-
Stock Profile related projects, and power plants.
Bloomberg Ticker ECON MK
Net Gearing (%) 10.8 Highlights
Market Cap (MYRm) 655m Shaping up to be a better year. Econpile secured MYR620m worth of
Beta (x) 2.00 new contracts in FY19 (Jun), which exceeds its MYR500m target for
BVPS (MYR) 1.80 this financial year. This is also a better performance when compared to
52-wk Price low/high (MYR) 0.36 - 1.18 its MYR488m new jobs tally in FY18. Notable FY19 contract wins:
Free float (%) 44 MYR331m for Pavilion Damansara Heights Phase 2, MYR34m job for
Gemas-Johor Bahru Electrified Double Tracking, and MYR45m for
Mass Rapid Transit Line 2 underground works. The balance of
contracts secured comprises high-rise residential developments.
Major Shareholders (%) Econpile’s outstanding orderbook has exceeded MYR1bn.
The Cheng Eng 27.3
The piling market is consolidating. According to media reports and
Pang Sar 21.5
our channel checks, some well-known foreign piling contractors are
Norges Bank 2.3 planning to discontinue or tone down operations in Malaysia, eg UK-
based Keller and Bachy Soletanche. Meanwhile, local Bursa Malaysia-
listed piling specialist Pintaras Jaya (PINT MK, NEUTRAL, TP:
Share Performance (%) MYR2.43) is focusing on the Singapore market – which offers higher
1m 3m 6m 12m margins – while Ikhmas Jaya recently saw one of its piling contracts
rescinded on non-performance. While it may take up to three years to
Absolute 21.0 28.9 (38.8) (50.0)
see consolidation, current developments are promising, in our view.
Relative 24.7 31.4 (30.5) (38.6)
More favourable raw material prices. In our estimate, 40% of
Econpile’s COGS represents steel bars, cement, and ready-mixed
concrete. The prices of these raw materials have declined 9-30% over
Tay Yow Ken, CFA +603 9280 8682
the past 12 months. This bodes well for the company, as it is able to
tay.yow.ken@rhbgroup.com procure cheaper raw materials and earn higher margins for contracts
secured vis-à-vis when raw material prices were quoted at higher
levels.
13
Latest results. Econpile reported a net loss of MYR35m for 2QFY19, Reported net profit (MYRm) 68 81 87
with several large impairments in a kitchen-sinking quarter. Excluding
Rec urring net profit growth (%) 45.0 19.6 7.8
the one-off expenses, the company would have recorded a core net
profit of MYR9.4m – this is still a YoY decline due to a larger proportion Rec urring EPS (MYR) 0.05 0.06 0.07
DPS (MYR) 0.04 0.05 0.03
of infrastructure projects that carried lower margins. We believe
earnings could have bottomed, as Econpile is in the midst of
Rec urring P/E (x) 10 8 8
commencing higher-margin projects.
Return on average equity (%) 30 29 26
Dividend. The company does not have a formal dividend policy. P/B (x) 2.7 2.2 1.8
However, it has consistently distributed 25-30% of earnings back to P/CF (x) 15.0 18.0 27.1
shareholders. For FY18, Econpile declared a dividend of MYR0.025, Source: Company data, RHB
which translates into a yield of 5.1%.
Management. The company was founded by The Cheng Eng in 1987.
The remains as managing director and largest shareholder, with 27% of
outstanding shares. The key management team includes group CEO
Raymond Pang, executive director The Kun Ann, and senior GM
finance Bin Lay Thiam. Total liabilities 166 210 282
Investment Case Other equity 0 1 2
Reversion to mean valuations. We ascribe a target P/E of 11x FY20F Total debt 31 46 64
EPS to value Econpile, arriving at a FV of MYR0.60-0.67 (upside of Net debt (13) 9 40
43% excluding dividends). This is based on the company’s 5-year Sourc e: Company, RHB
average forward earnings P/Es. We believe that valuations should Source: Company data, RHB
revert to the mean, with Econpile exceeding its new contract target of
MYR500m in FY19. Meanwhile, we believe the easing competitive Ca sh Flow (MY Rm) De c - 16 De c - 17 De c - 18
landscape and bottoming margins should lend support for valuations to Cash flow from operations 67 79 38
revert closer to their historical average. Cash flow from investing activities (23) (32) (4)
Undemanding valuations. We believe valuations for Econpile is Cash flow from financing activities (5) (22) (19)
compelling when compared to its direct peers Pintaras Jaya and Ikhmas
Net change in cash 21 (2) (12)
Jaya, which trade at 12-13x FY20F earnings. Not only does the
company have a bigger market capitalisation, it has a higher ROE of
19%, sits in a net cash position, and has a larger institutional Source: Company data, RHB
shareholder following.
Key risks: Light Rail Transit Line 3 contract reduction due to
cancellation of stations and a cutting down in scope, longer and deeper
downturn in the property market, infrastructure jobs being delayed
further, and intensifying competition.
14
Target: N/A
Fitters Diversified Price: MYR0.49
Evolution In The Pipeline
Fitters (FIT MK)

Investment Merits
 Potential penetration of PVC-O pipes in the pipe replacement market
Price Close
0.6
0.5 by working with major players eg PAAB, Ranhill SAJ and SAINS
0.4
 Huge pipe replacement market as 42,000km of ageing asbestos-
0.3
cement (AC) pipes need to be replaced
0.2
0.1
 Other operating segments to support a strong profit base
0.0
Apr-17
Oct-17
Dec-17
Apr-18
Feb-17
Jun-17
Aug-17
Feb-18
Jun-18
Aug-18
Oct-18
Dec-18
Feb-19
Company Profile
Source: Bloomberg Fitters commenced operations in the 1970s and was listed on Bursa
Malaysia in 1994 as a fire protection specialist – engaged in the
Stock Profile manufacturing, trading and specialised installation of firefighting
Bloomberg Ticker FIT MK equipment, as well as the supply of fire safety protection products and
Avg Turnover (MYR/USD) 2.19m/0.54m services. The group has since ventured into other businesses which
include property development & construction, renewable energy &
Net Gearing (%) 30
green palm oil mill, as well as the manufacturing and distribution of
Market Cap (MYRm) 222m Hypro PVC-O pipes.
Beta (x) 0.8
BVPS (MYR) 0.78
52-wk Price low/high (MYR) 0.365 - 0.56 Highlights
Free float (%) 45.68 Proven pipe technology. The group manufactures and distributes
Hypro PVC-O pipes through its 72.3%-owned subsidiary, Molecor
(SEA). The technology originated from Spain, and is proven to be a
Major Shareholders (%) superior and cost-effective alternative to steel and other polymeric pipes
for municipal and commercial use. Compared to other conventional
Dato’ Wong Swee Yee 29.93
pipes, the PVC-O pipes have a longer lifespan (50 years), are
Dato’ IR. Leong Kok Wah 6.08 lightweight with superior strength (5x stronger than conventional PVC),
have higher hydraulic ability and are eco-friendly. The Molecor’s PVC-O
pipes already have an entrenched position globally, with an established
track record and worldwide certifications eg ISO 16422, ISO 9001 and
Share Performance (%) SIRIM Eco-Label 054.
1m 3m 6m 12m Well positioned for national pipe replacement programme. We
Absolute 18.8 (6.9) 18.8 21.8 believe the innovative technology of PVC-O pipes is on track to benefit
Relative 21.2 (2.8) 20.1 30.1 from the national pipe replacement programme as the Government is
adamant about reducing non-revenue water (NRW) in the country. One
of the reasons for the high NRW is ageing AC pipes that have been
used beyond its lifespan. The fragile and leaky AC pipes are still widely
Muhammad Syafiq Bin Mohd Salam used in the national distribution system, at c. 27% or 41,560km based
+603 9280 8867 on 2017’s statistics. Among initiatives taken to implement the NRW
muhammad.syafiq.mohd@rhbgroup.com reduction programme is the allocation of MYR1.39bn until 2020 to
change and replace the old pipes on a large scale. Currently, the
national average NRW stands at 35% and the Government aims to
reduce NRW to 31% by the end of the 11th Malaysia Plan (11MP).
State-of-the-art manufacuting plant. Fitters invested MYR120m for a
state-of-the-art PVC-O pipe manufacturing plant in Gebeng, Pahang
that was completed in May 2015.
15
The plant has a production capacity of 11,000 MT pa with three
manufacturing lines that are expandable to six lines (22,000 MT pa). It
Reported net profit (MYRm) (4) (0) 15
has the capability to produce 3-24 inch PVC-O pipes with pressure
Rec urring net profit (MYRm) (4) (0) 15
rating of 16-25 bar. The group has appointed Syarikat Logam Unitrade
Rec urring net profit growth (%) NM NM NM
as its master stockist and distributor of Hypro PVC-O pipes in Malaysia,
Rec urring EPS (MYR) (0.01) (0.00) 0.03
with commitments for MYR50m in sales for 2019. The plant is running
DPS (MYR) 0.00 0.00 0.00
at 30% utilisation rate now. Management guided that the plant would be
able to generate c.MYR150m of revenue if it is running at full capacity.
Rec urring P/E (x) NM NM 14.7
Other businesses to support earnings base. The group also Return on average equity (%) NM NM 4.3
operates a green palm oil mill for the generation of renewable energy P/B (x) 0.5 0.5 0.5
and waste treatment business. It commenced the sale of electricity to P/CF (x) 9.3 85.7 944.9
Tenaga Nasional (TNB MK, SELL, TP: MYR10.30) under the
Renewable Energy Power Purchase Agreement in Mar 2018 with a
feed-in tariff rate set at MYR0.47 per KWh. Ba la nc e S he e t (MY Rm) De c - 16 De c - 17 De c - 18
In addition, the group is involved in the property development & Total assets 611 555 587
construction business. It has an established track record for developing Total c urrent liabilities 162 140 170
high-rise properties in KL. It commenced a MYR97.8m contract to build Total non- c urrent liabilities 88 68 48
the first phase of Azalea@Taman Putra in 4Q17, and is looking to Total liabilities 250 208 218
commence a MYR81.5m contract for the second phase of Shareholder's equity 361 347 369
Azalea@Taman Putra in 2H19. Minority interest 7 4 14
Other equity 0 0 0
Total debt 174 135 127

Company Report Card Net debt 125 114 111
Latest results. In FY18, the group recorded an increase in revenue and
PBT of 15.7% and 329.2% YoY with higher contributions from the Ca sh Flow (MY Rm) De c - 16 De c - 17 De c - 18
property development and construction segment. The increase in Cash flow from operations 24 3 0
contribution reflected work done at the project management division and Cash flow from investing ac tivities 7 (10) (4)
construction contract secured in 4Q17 – Azalea@Taman Putra. Cash flow from financ ing ac tivities (19) (22) (2)
Balance sheet/cash flow. Based on its latest 4Q18 results, Fitters’ Cash at beginning of period 38 49 21
Net c hange in c ash 12 (30) (5)
current gearing stands at 30%.
Ending balanc e c ash 51 20 15
Dividend. The group has not specified a dividend policy. We are not Sourc e: Company, RHB
expecting any dividends in the near future, as the group is focused on
expanding its piping business.
Management. The group is helmed by Dato’ Wong Swee Yee – the
founder and chairman of the executive committee and a member of the
remuneration committee. He has been actively involved in the fire safety
and prevention industry since 1979. Over the past few years, he has
been the key person to diversify Fitters’ business into new areas in
property development, renewable waste-to-energy, and green palm oil,
as well as PVC-O pipes manufacturing.
Investment Case
Valuation. Pegging the stock to 10-12x FY20F P/E, we arrive at our
valuation estimate of MYR0.58-0.69. We like Fitters, as we believe its
innovative PVC-O pipes would benefit from the national pipe
replacement programme. We believe the group deserves to trade at 10-
12x P/E, in line with the five-year historical small-cap index average.
16
Target: N/A
Frontken Corporation Price: MYR0.99
A Front-Runner For Growth
Frontken Corp (FRCB MK)

Investment Merits
 Unique exposure to the semiconductor industry.
Price Close
1.2
1.0
 Beneficiary of technological complexities and miniaturisation.
0.8
0.6
 Fabricators’ capex spending in Taiwan still on a growth trend.
0.4
0.2
Company Profile
0.0
Oct-17
Apr-18
Aug-17
Dec-17
Oct-18
Feb-18
Jun-18
Aug-18
Dec-18
Feb-19
Frontken is a leading provider of surface engineering in the Asia-Pacific

region, offering services such as precision cleaning and surface
Source: Bloomberg engineering treatment for the semiconductor and oil & gas industry. Its
footprint stretches across Malaysia, Singapore, Taiwan and the
Stock Profile Philippines.
Bloomberg Ticker FRCB MK
Highlights
Avg Turnover (MYR/USD) 9m/2.2m
Net Gearing (%) Net Cash Unique exposure to the semiconductor industry. Frontken is
Market Cap (MYRm) 1,037.5m positioned higher up the semiconductor value chain as compared to
Beta (x) 1.99
other local semiconductor players in Malaysia. Its major customers
comprise logic foundries and memory semiconductor process
BVPS (MYR) 30.9
equipment players. To note, it has a market share of approximately
52-wk Price low/high (MYR) 0.345 - 1.04 90% in Malaysia and is one of the largest players in Taiwan. Its PBT
Free float (%) 46 has grown at a 3-year CAGR of 36%, owing to growth in Taiwan and
the semiconductor industry.
Beneficiary of complexity. It has spent a total of MYR48m in the last
Major Shareholders (%) two years on technology and process redesign, which led to the delivery
Dazzle Clean 27.8 of better cost efficiency and quality. This enhanced Frontken’s
Ooi Keng Thye 14.5 competitiveness, allowing it to serve clients with smaller tech nodes of
CIMB Group 4.8
<10nm since 2017. Currently, it has the capability to serve clients with
7nm nodes and should be able to service 5nm nodes in FY20. The
advancement in technology to keep up with the rising demand for
smaller and more power efficient devices will contribute to earnings
growth – as it draws higher margins from the cleaning of increasingly
1m 3m 6m 12m complex and miniature components. For FY19, the group has
Absolute 6.5 40.4 5.9 135.7 earmarked capex of MYR10m, which will be used to strengthen its
Relative 9.8 43.2 14.2 147.5 footprint in China.
Fab spending continues in Taiwan. According to US-based
Semiconductor Equipment & Materials International (SEMI), global fab
Lee Meng Horng equipment spending in FY19 is expected to dip 8% YoY in view of
lee.meng.horng@rhbgroup.com softer memory prices and as companies reshuffle their strategies in
response to the US-China trade war. On the flip side, FY19 fab
spending will be supported by optoelectronics, analogue and mixed
signal segment, as well as the foundry sector. This bodes well for
Frontken as it mainly deals with foundry players in the semiconductor
industry.
17
Latest results. In FY18, the group registered revenue and core net
profit of MYR327.2m (+10% YoY) and MYR52m (+52% YoY) Rec urring net profit growth (%) 295.6 92.3 53.0
respectively. The strong set of results was mainly driven by both its Rec urring EPS (MYR) 1.69 3.25 4.97
semiconductor and oil & gas business segments. Revenue from DPS (MYR) 0.00 0.50 1.50
Singapore, Malaysia and Taiwan grew 17.1%, 14.9% and 8.6% YoY. Dividend Yield (%) 0.0 0.5 1.6
Core earnings were buoyed by better operational efficiencies, as the Rec urring P/E (x) 55.7 28.9 18.9
group focus explores more efficient ways of cleanings parts while Return on average equity (%) 6.8 12.1 16.1
maintaining service quality. P/B (x) 3.8 3.5 3.0

P/CF (x) 0.6 0.2 0.2
Dividend. The group does not have an official dividend policy. It paid Source: Company data, RHB
out FY17 and FY18 DPS of MYR0.005 and MYR0.015, which translates
into a payout ratio of 18% and 30%. Assuming net payout of 40%, this Ba la nc e S he e t (MY Rm) De c - 16 De c - 17 De c - 18
translates into FY19F-21F yields of 2.6-3.6% pa. Total c urrent assets 217 242 278
Management. The company is spearheaded by its Chairman and Chief Total c urrent liabilities 87 109 98
Executive Officer, Mr Ng Wai Pin who was re-designated on 29 Mar Total non- c urrent liabilities 25 16 12
2018 and was appointed to the Board on 10 Apr 2006. He has over 13 Total liabilities 112 125 110
years of experience in the semiconductor space. He graduated with a Shareholder's equity 262 282 325
Law degree from the University of Auckland.
Other equity 0 1 2
Total debt 29 33 14
Investment Case Net debt Net Cash Net Cash Net Cash

Set for the future. The group has a sturdy balance sheet with net cash
of MYR119.3m, which translates into MYR0.11 per share, while Ca sh Flow (MY Rm) De c - 16 De c - 17 De c - 18
borrowings are minimal at MYR13.7m. Its balance sheet is also Cash flow from operations 44 69 63
supported by strong cash flow generation, with FCF yield of 5.6% in Cash flow from investing activities (35) (32) (7)
FY18. Looking ahead, we estimate FCF yields of >6% pa. In our view, Cash flow from financing activities 17 49 56
105 98 120
the company is set for its future expansion plans in China. Cash at beginning of period
Net change in cash (9) 29 28
Valuation methodology. Pegging the stock to a forward 2019F P/E of Ending balance cash 98 120 149
20-22x, we estimate Frontken could be worth MYR1.24-1.37 per share. Source: Company data, RHB
In the local semiconductor space, outsourced semiconductor assembly
and testing (OSAT) players trade at an average FY19F P/E of 17x,
while automated test equipment (ATE) players trade at an average
FY19F P/E of 20x. We believe Frontken should trade at a premium due
to its higher position in the semiconductor value chain and specialised
product suite. Besides that, we estimate that the group’s FY19F-21F
EPS could grow at a 3-year CAGR of 19%.
Key risks. Further slowdown in the semiconductor industry, prolonged
trade tensions, fluctuation in oil prices and FX rates.
18
Target: N/A
Guan Chong Price: MYR3.55
Chocolaty Goodness
Guan Chong (Guan MK) Investment Merits

Price Close
 Riding on growing demand for chocolate in Asia.

7.0
6.0
5.0  Strong client base and part of MNCs’ supply chain.

4.0
 Undemanding valuation, trading below 8x 2020F P/E.
3.0
2.0
1.0 Company Profile

0.0
Mar-18
Mar-19
May-18
Nov-18
Jan-19
Jul-18
Sep-18
Guan Chong is the fourth largest cocoa processor in the world with
250,000 tonnes/year capacity, providing cocoa-derived food
Source: Bloomberg ingredients.
Stock Profile Highlights

Bloomberg Ticker GUAN MK Riding on growing demand for cocoa products. Guan Chong is well-
Avg Turnover (MYR/USD) 2.36m/0.58m positioned to ride the growing demand for chocolate in Asia. Asia lags
Net Gearing (%) 83.6 in terms of chocolate consumption compared to the US and Europe, but
Market Cap (MYRm) 1,705m it has picked up the pace, in tandem with the growing middle income
Beta (x) 0.87 bracket. Booming coffee culture has also helped boost demand for
cocoa products globally.
BVPS (MYR) 1.40
52-wk Price low/high (MYR) 1.313 - 3.86 The chocolate industry is seeing more and more chocolate makers
Free float (%) 16 starting to outsource their cocoa processing operation to focus on their
core business, this also would benefit Guan Chong.
Strong customer base. Guan Chong, over the years, has been
Major Shareholders (%) building its client base, which is now spread across 70 countries. With
Guan Chong Resources 53.1
its good track record, the group is now part of the supply chain of
several MNCs, like Nestlé, Mars and Hershey’s. Stringent assessment
Misi Galakan 6.1
and years of relationship building to be part of the supply chain also
creates a barrier to entry for new players. Guan Chong’s recent
earnings breakthrough was partly due to successfully selling MNC
clients more of its downstream cocoa products eg. cocoa powder, which
Share Performance (%) helped bolster its EBITDA yield.
1m 3m 6m 12m Sales secured up to early 2020. Guan Chong has secured sales of its
Absolute (4.3) 33.1 49.5 160.4 cocoa butter for the next one year at a pre-agreed favourable ratio. As
Relative (5.0) 31.4 55.0 168.8 is the nature of the business, it will usually enter into sales agreements
with customers months before the actual delivery, with the price to be
based on a pre-determined ratio of the cocoa beans price. Together
with derivatives, this would hedge Guan Chong’s position against
Muhammad Afif Bin Zulkaplly +603 9280 8883
fluctuating cocoa bean prices, minimising downside risks.
muhammad.afif.zulkaplly@rhbgroup.com
Capacity expansion through Koko Budi. Guan Chong acquired Koko
Budi (now known as GCB Cocoa Malaysia) in 2017, giving the group
extra capacity of 50,000 tonnes/year, and bringing total capacity to
250,000 tonnes/year. Before the acquisition, Guan Chong’s plant ran at
a 96% utilisation rate. We forecast Guan Chong to utilise up to 230,000
tonnes/year in 2019 and 250,000 tonnes/year in 2020. Over the longer
term, the group plans to increase its grinding capacity, organically or
inorganically, to take advantage of the growing global demand for cocoa
products.
19
Company Report Card Total turnover (MYRm) 2,316 2,148 2,261

Latest results. Guan Chong clocked record earnings in 2018, with core
net profit of MYR189.3m (+108% YoY), mainly due to higher sales
Rec urring net profit growth (%) 18.0 276.2 99.1
tonnage and better product mix. Guan Chong is selling more cocoa Rec urring EPS (MYR) 0.05 0.21 0.41
powder compared to cocoa cake, which is a more commoditised DPS (MYR) 0.07 0.03 0.04
product. Dividend Yield (%) 2.0 0.7 1.1
Rec urring P/E (x) 64.6 17.1 8.6
Dividend. Guan Chong does not have an official dividend policy.
Historically, however, there is an upward trending of DPS, from
P/B (x) 4.0 3.5 2.5
MYR0.072 to MYR0.191 for 2016-2018 as profitability improved. Implied
P/CF (x) 13.3 (24.4) 5.9
dividend payout ratio during the period was 16.8-10.1%. Moving
forward, management guides for a lower payout ratio, as the group will Source: Company data, RHB
be reserving cash for future investment.

Management. The group is spearheaded by Mr Brandon Tay Hoe Lian, Total c urrent assets 1,062 1,153 1,259
the CEO, who also holds the majority 56% stake. He started his career Total assets 1,493 1,580 1,771
joining the family-founded business and has been with Guan Chong for Total c urrent liabilities 993 1,049 1,018
about 26 years since then. He is assisted by his cousin, Mr Alan Tay Total non- c urrent liabilities 76 51 86
How Sik, the COO of Guan Chong and Mr Hia Cheng, the CFO of Guan Total liabilities 1,069 1,101 1,104
Chong, both of which have over 25 years of experience in the industry. Shareholder's equity 424 480 667
Other equity 0 0 0
Total liabilities & equity 1,493 1,580 1,771

Investment Case Total debt 710 787 602
648 747 557
Undemanding valuation. We value Guan Chong at MYR4.80-5.76, Net debt
with FY20 earnings based on target P/Es of 10-12x – this is a slight Source: Company data, RHB
discount compared to its customers based in Malaysia, ie Cocoaland
and Apollo Food, which are trading at c.13-18x. There are limited direct Ca sh Flow (MY Rm) De c - 16 De c - 17 De c - 18
comparable companies listed in Malaysia. We like Guan Chong for its Cash flow from operations 128 (69) 289
unique position in being able to ride on Asia’s growing demand for Cash flow from investing activities 16 (66) (113)
cocoa-based products, coupled with its wide and solid customer base. Cash flow from financing activities (124) 116 (235)
Net change in cash 20 (19) (60)
Ending balance cash 48 27 (10)
20
Target: N/A
Ideal United Bintang International Price: MYR1.14
An Ideal Position In Penang
Ideal United Bintang (IUBI MK) Investment Merits

Price close
 Prime beneficiary of Penang state’s housing initiatives;

1.8
1.6
1.4  Injection of new projects to sustain earnings growth;

1.2
 FY19F-20F net profit to grow at 7% and 21%.
1.0
0.8
0.6 Company Profile

0.4
Dec-18
Apr-18
Feb-18
Jun-18
Aug-18
Oct-18
Feb-19
Ideal was formerly known as United Bintang. It was a loss-making

heavy machinery and spare parts trading company. Tan Sri Datuk Alex
Source: Bloomberg Ooi emerged as the major shareholder in late 2013, and the group
subsequently diversified into the property development business. It then
Stock Profile changed its name to Ideal United Bintang (Ideal). Its first property
Bloomberg Ticker IUBI MK project, i-Santorini was injected in 2015.
Avg Turnover (MYR/USD) 0.15m/0.04m Tan Sri Datuk Alex Ooi founded Ideal Property Group (privately held) in
Net Gearing (%) Net Cash 2002. The company has an established presence in Penang’s property
Market Cap (MYRm) 119m market, particularly in the high-rise residential segment. Currently, Tan
Beta (x) 0.86 Sri Datuk Alex Ooi holds a 54% stake in Ideal. In Apr 2018, via his
BVPS (MYR) 1.31
holding company ICT Innotech, Tan Sri made a mandatory general offer
to all minority shareholders after ICT acquired an additional 26.9% from
52-wk Price low/high (MYR) 0.55 – 1.86
Bumimaju Gaya and Lakaran Asia. The offer price was at MYR0.54 per
Free float (%) 40 Ideal share.
Major Shareholders (%) Highlights

Tan Sri Datuk Alex Ooi 54
Beneficiary of Penang state’s housing policies. Ideal is a clear
winner under the Penang State Government’s initiative to spur home
ownership and unwind the supply glut. In early 2019, the State Housing,
Town, Country Planning and Local Government Committee chairman,
Jagdeep Singh Deo announced that developers of affordable housing
Share Performance (%) are now allowed to sell 40% of units in the open market vs 30%
1m 3m 6m 12m previously, at rates that are not bound by affordable housing pricing.
20% of these can be sold to non-Penangites who are not registered
Absolute (19.4) 0.0 (36.8) 58.8
voters in Penang.
Relative (15.7) 0.2 (28.9) 69.5
At the same time, the income eligibility threshold for affordable housing
was also raised by MYR2,000 in each category. For units priced at
MYR150,000, MYR200,000 and MYR300,000, the household income
Loong Kok Wen, CFA +603 9280 8861 limit is now at MYR8,000 (from MYR6,000), MYR10,000 (from
loong.kok.wen@rhbgroup.com MYR8,000) and MYR12,000 (from MYR10,000).
Ideal is a pure, Penang affordable housing play. It currently has three
ongoing projects, namely One Foresta, Forestville and i-Santorini. I-
Santorini is located at Tanjung Tokong, with a GDV of MYR925m,
comprising 2,155 units of condominium priced below MYR400,000
each. The project is now 92% sold. Both Forestville and One Foresta
are located at Bayan Lepas, with a combined GDV of MYR1.04bn. The
take-up rate for both Forestville and One Foresta are now at c.89%.
21
Injection of new projects to sustain earnings growth. At end-2018,
Ideal announced its proposed acquisition of three projects from Tan Sri Reported net profit (MYRm) 8 16 51
Ooi and Puan Sri Phor for a total consideration of MYR191.47m. These Rec urring net profit (MYRm) 8 16 51
three projects (Imperial Grande, Amarene & Mori, and Imperial Ville) are Rec urring net profit growth (%) NM 89.0 223.8
all located at Sungai Ara/Bayan Lepas, with a combined GDV of Rec urring EPS (MYR) 0.08 0.14 0.46
MYR1.41bn. The consideration will be satisfied via the issuance of DPS (MYR) 0.00 0.00 0.00
191.47m new shares at MYR1 each to the vendor. At the same time,
Rec urring P/E (x) 15.2 8.0 2.5
Ideal also proposed a 30% private placement exercise to raise about Return on average equity (%) 11.3 18.4 35.0
MYR120-150m, depending on the issue price, with an estimated 107- P/B (x) 1.6 1.3 0.9
110m shares. Proceeds from the placement would come in handy as P/CF (x) 2.0 (2.0) (0.9)
working capital or for future acquisition of new projects. Source: Company data, RHB
Earnings momentum to continue. We expect FY19F-20F earnings to

grow at 7% and 21%, as i-Santorini and One Foresta will be completed Total c urrent assets 217 306 632
this year. Contributions from the three new projects will likely kick in Total assets 223 312 647
from 2H19 onwards. The construction for these projects is now 15-20% Total c urrent liabilities 136 189 271
completed, and hence earnings recognition should be immediate once Total non- c urrent liabilities 0 0 18
the corporate exercise is completed. Total liabilities 136 190 289

Other equity 0 0 0
Company Report Card Total liabilities & equity 223 312 647
Total debt 0 0 1
Latest results. In FY18, Ideal recorded MYR50.9m in net profit vs Net debt Net Cash Net Cash Net Cash
MYR15.7m in FY17, a record high since the first injection of its property Source: Company data, RHB
project in 2015. Unbilled sales, however, fell to MYR665.5m, as
construction works from the three existing projects progress, and the Ca sh Flow (MY Rm) De c - 16 De c - 17 De c - 18
take-up rates for these projects have already reached >90%. Cash flow from operations 64 (63) (61)
Cash flow from investing activities 0 (1) (0)
Dividend. Ideal has not been paying dividends given that the company
Cash flow from financing activities 248 1 77
is on a growth cycle. However, management did guide that dividend
payout may start, and it could be as soon as FY19F-20F given the
earnings that the company achieved in FY18. Our DPS forecasts for Ending balance cash 67 4 40
FY19-20 assume a payout ratio of around 20%.
Management. Ideal is currently under the helm of Tan Sri Datuk Alex
Ooi, who is the CEO of the company. He oversees all the property
projects and secures new businesses for the company. Meanwhile, his
spouse, Puan Sri Datuk Phor is the executive director of Ideal. She is
responsible for overseeing the overall finance, human resource and
administrative functions of the company. Mr Teoh Ee Ken is the CFO,
and he joined Tan Sri since 2010.
Investment Case
Indicative fair value of MYR1.26-1.29, based on a 20% discount to
RNAV, assuming placement prices of MYR1.15 and MYR1.30. The
20% discount to RNAV is lower compared to industry peers, given
Ideal’s positive earnings growth trajectory vs the industry’s contracting
earnings growth, plus Ideal is a proxy for Penang’s affordable housing
segment. Tan Sri Datuk Alex Ooi has established a strong foothold in
Penang, and we would not discount the possibility that Ideal could be
involved in other construction projects, which are part of Penang’s
transformation plan, going forward.
Key risks. Delays in the injection of property projects could derail our
earnings forecasts.
22
Target: MYR1.52
Kelington Group Price: MYR1.25
Getting High On Gases
Investment Merits
• Expansion into on-site gas supply and industrial gases should drive a
new leg of growth and boost margins
• Strong outstanding orderbook of over MYR358m and tenderbook of
over MYR1bn
• Net cash balance sheet
Source: Bloomberg Company Profile

Kelington Group (KGB) is primarily involved in engineering solutions
Stock Profile that ensure the safe handling of ultra-high purity (UHP) gases and
Bloomberg Ticker KGRB MK chemicals. The group also offers end-to-end process engineering (PE)
Avg Turnover (MYR/USD) 0.7m/0.2m services encompassing plant design, fabrication and maintenance. It is
Net Gearing (%) Net Cash set to disrupt the current de-facto monopoly in the manufacture and
distribution of liquid carbon dioxide (CO2) when its new gas production
facility commences in late- 2019.
Beta (x) 1.09
BVPS (MYR) 0.37
52-wk Price low/high (MYR) 0.6 - 1.34
Highlights
Free float (%) 55
Another record year in the works. New orders secured YTD (1Q19)
have surpassed MYR100m, with FY19 revenue and core earnings
projected to hit another high (FY18: MYR349m). This will be supported
by an outstanding orderbook of over MYR350m and our orderbook
Palace Star 37.1 replenishment assumption of MYR420m for the year. There could be
Sun Lead International 8.0 upside risk to our orderbook assumption if sizeable contracts are
clinched.
Singapore and domestic contracts will more than compensate for
a cautious China market. We see the deceleration in fab spending in
Share Performance (%) China as a healthy adjustment. This follows the US trade tiff and the
1m 3m 6m 12m rapid ‘plant up’ activities in recent years under the “Made in China 2025”
Absolute (1.6) 11.6 17.9 81.2 industrial blueprint, which culminated in aggressive expansion of
Relative 1.8 14.4 26.2 93.0 foundry capacities. In our view, the slowdown allows KGB to be more
selective in the size and type of projects tendered, with competition also
being less intense. Management remains upbeat on the longer-term
prospects of the China market and will be investing in a local fabrication
Jeffrey Tan +603 9280 8863 yard to cater to more sophisticated jobs. Of the outstanding orderbook,
jeffrey.tan@rhbgroup.com Singapore and Malaysia makes up 61% and 26% respectively vs 12%
from China. Fab construction spending in China is still amongst the
highest globally, at USD11.9bn in 2018 (+82.3% from 2017) according
to statistics from SEMI.
Up and coming challenger in the lucrative liquid CO2 (LCO2)
market. The new plant in Kerteh, Terengganu is slated to be
commissioned in 4Q19, marking the group’s foray into the production
and sale of LCO2.
Along with more on-site gas supply projects, the supply of LCO2 and the
23
trading of other electronic speciality gases would drive a new leg of
growth for the company and further strengthen recurring revenues. KGB
aspires to be the second largest LCO2 supplier in Malaysia, disrupting
the dominant position held by two larger manufacturers (including Linde
Rec urring net profit growth (%) 232.0 (21.2) 31.1
Malaysia). We project a ramp-up in revenue contributions from the
industrial gas business over the next few years, from MYR2m in FY19
DPS (MYR) 0.01 0.02 0.02
to MYR24-34m in FY20F-21F on the back of higher demand and
capacity utilisation.
Rec urring P/E (x) 14.1 18.3 19.9
P/B (x) 6.1 5.2 3.4
Company Report Card P/CF (x) 20.7 12.3 54.1

Latest results. KGB’s core earnings surged 31% YoY in FY18 on 11%
YoY revenue growth to reach record highs. Growth was fuelled by the
UHP segment (+74% YoY), which made up some 65% of overall
revenue (FY17: 42%). 4Q18 revenue jumped 72% QoQ, supported by
higher project billings in Singapore and Malaysia.
Balance sheet/cash flow. KGB has a healthy net cash balance of
MYR50m as at 4Q18, supported by proceeds from the share placement Shareholder's equity 67 78 119
exercise completed in 3Q18, which netted MYR17.8m. We expect the Minority interest 0 0 0
group to fund its capex via a combination of internally generated funds, Other equity 0 0 0
proceeds from the share placement and external debt. The group’s Total liabilities & equity 200 230 244
gross gearing is projected to remain at under 0.5x over the next few Total debt 25 30 17
years. Net debt Net Cash Net Cash Net Cash
ROE. KGB’s ROE fell to 21.5% in FY17 and 20.7% in FY18, from Source: Company data, RHB
31.5% in FY16 due to the expiration of a subsidiary’s pioneer status and

losses incurred, as well as the completion of the share placement Ca sh Flow (MY Rm) De c - 16 De c - 17 De c - 18
exercise. We expect ROEs to tick up going forward, underpinned by the Cash flow from operations 13 23 7
group’s expansion into the industrial gas segment and expanding Cash flow from investing activities (2) (13) (13)
margins. Cash flow from financing activities 4 5 7

Management. The group was founded by Ir Raymond Gan (CEO) and Net change in cash 15 15 1
Ong Weng Leong (COO), who collectively hold a 37% stake via Palace Ending balance cash 34 49 52
Star (as at Jan 2019). The major shareholders were formerly employees Source: Company data, RHB
of Malaysian Oxygen (MOX), which was privatised by the Linde Group
in 2007.
Investment Case
We value KGB at MYR1.52 based on DCF (WACC: 10.7%, TG: 1.5%).
This implies FY20F P/E of 16x, which is lower than the 18-20x
prospective P/Es for related semiconductor peers. We believe the
discount reflects KGB’s much smaller market capitalisation and lower
stock liquidity. Core earnings are projected to grow by a CAGR of 23%
during FY18-20F, underpinned by its robust orderbook and
incrementally stronger contributions from the industrial gas business.
Key risks for the group are weaker-than-expected orderbook
replenishment, lower-than-expected margins, and management
execution.
24
Target: N/A
Mega First Corporation Price: MYR3.85
Turbocharging For 2020
Investment Merits
 Books are clean post impairments on non-performing assets;
 Completion of hydropower project in Laos by 2020 would provide
significant earnings boost;
 Possesses 100 acres of landbank in Salak Tinggi and Malacca for
long term property development when the market improves.
Company Profile
Source: Bloomberg Mega First Corporation is mainly a utilities company with its upcoming
260MW Don Sahong power plant situated at southern Lao PDR,
Stock Profile scheduled to come online in 2020. The group is also involved in the
Bloomberg Ticker MFCB MK lime production business, with installed capacity of 1,560mt per day,
Avg Turnover (MYR/USD) 0.72/0.18m located in Perak. It is also involved in property development, with
projects being developed in Ipoh, Perak and landbank in Petaling Jaya,
Net Gearing (%) 30
Selangor.
Market Cap (MYRm) 1,529.1m
Beta (x) 0.89
BVPS (MYR) 3.41
Highlights
52-wk Price low/high (MYR) 2.99-3.99
Free float (%) 55 Starting off with clean books. The company has ceased operations
from its China power plant at Shaoxing city, Zhejiang province, China. It
has decided that it will not exercise its option to extend the JV for
another five years and made an MYR9.7m impairment in 2Q18 for staff
Major Shareholders (%) retrenchment. It has also ceased operations of the Serudong Power
Rubber Thread Ind M Sdn Bhd 24.12 Plant after the 21-year power purchase agreement (PPA) expired on 1
Fmr Llc 8.72 Dec 2017. The group has since made an MYR28m impairment loss on
Keen Capital Investment 7.95 assets and MYR14m provision for plant decommissioning.
Don Sahong hydropower to anchor earnings. The group’s 260MW
hyrdro power plant (situated in one of the major channels on the
Share Performance (%) Mekong River in southern Lao PDR) is expected to come on stream in
1m 3m 6m 12m 2020, with completion rate at close to 79% by Dec 2019. The dry test of
the first transmission turbine is expected to start by 2Q19 and we
Absolute 19.61 40.23 12.96 67.12
expect the plant to be commissioned by end-2019. Profit contribution is
Relative 18.47 38.71 17.23 74.33
expected to contribute significantly to the group’s core earnings with
MYR160m net profit pa estimated.
Resources division ready for turn in market. While the outlook for its
Lim Sin Kiat, CFA +603 9280 8879
lime products remains challenging in 2019 – due to softening regional
lim.sin.kiat@rhbgroup.com economies – the cost pressures seen in 2018 are expected to stabilise
in 2019, and we do not anticipate further downside in its 2019 resources
division earnings. Completion of Kiln 8 would enable the group to
capitalise on potential improvement in lime demand.
25
Latest results. FY18 reported profit increased 5% YoY, mainly driven
by non-cash construction profit from the Don Sahong hydro power Rec urring net profit growth (%) 0.0 20,282.0 (38.8)
project, on a higher project completion rate. Excluding impact from Don Rec urring EPS (MYR) 0.00 0.05 0.03
Sahong accounting profit, the group’s earnings improved 63%, driven DPS (MYR) 0.05 0.04 0.04
by lower investment holding losses. Dividend Yield (%) 1.3 1.0 1.0
Rec urring P/E (x) NM 73.7 122.4
Dividend. FY18 DPS was MYR0.04 per share, implying dividend Return on average equity (%) 0.0 1.7 0.9
payout of 11%. We anticipate the company to increase the payout in P/B (x) 1.2 1.2 1.1
2019, due to materially higher expected profit contribution from the P/CF (x) 12.0 13.3 37.9
hydro power plant in 2019. Source: Company data, RHB
Management. The company is majority family-owned, with the largest

shareholder Goh Nan Koh holding deemed interest of 34.49% (being
the executive chairman). The alternative director of the company is Goh Total assets 1,609 1,834 2,507
Nan Yang, Goh Nan Koh’s brother. Nevertheless, the Don Sahong Total c urrent liabilities 208 300 398
hydro power project is headed by Yeong Chee Meng, a professional Total non- c urrent liabilities 57 174 584
manager with multiple years of experience in hydro power technology. Total liabilities 265 474 971
Shareholder's equity 1,187 1,227 1,353
Other equity 0 0 0
Investment Case Total liabilities & equity

Total debt
1,609
89
1,834
221
2,507
599
Net debt Net Cash 82 468
Don Sahong project to be catalyst. Maiden contribution of the Don
Sahong hydro power plant project would be a major catalyst for the Source: Company data, RHB
company, with a significant jump in earnings anticipated. Credit risk of

the project remains low, with the Ministry of Finance of the Laos Ca sh Flow (MY Rm) De c - 16 De c - 17 De c - 18
government guaranteeing the payment from the power offtaker,
Electricite Du Laos.
We value the company based on an indicative DCF range of MYR5.10- Cash at beginning of period 198 291 139
5.70 using WACC of 9.5-8.5%. Our cost of debt assumed is more Net change in cash 93 (153) (8)
291 139 131
conservative – at 6% compared to the actual 4.63% interest rate of its Ending balance cash
debt facility – to account for higher country risk. Source: Company data, RHB
Key risks. Delays in the Don Sahong hydro power project and further
material downtrend in lime prices.
26
Target: N/A
Pentamaster Corporation Price: MYR3.51
Multipronged Growth Prospects

Pentamaster (PENT MK)
Price Close
Investment Merits
4.0
3.5  Surge in demand on the back of wider adoption of smart sensors and
3.0
Industry 4.0 revolution.
2.5
2.0  Strong growth underpinned by solid orderbook and healthy demand.

1.5
1.0  Solid balance sheet with net cash position, superior ROE.
 Trading at 14.7x 2019F P/E (discount to peers); ex-cash P/E of 8.6x.
0.5
0.0
Oct-17
Apr-18
Oct-18
Dec-18
Aug-17
Dec-17
Feb-18
Jun-18
Aug-18
Feb-19
Company Profile
Pentamaster provides automation manufacturing and technology
Source: Bloomberg
solutions. The automated equipment (AE) segment designs, develops,
and manufactures standard and non-standard automated equipment for
Stock Profile back-end testing. The automated manufacturing solution (AMS)
Bloomberg Ticker PENT MK segment deals with the design, development, and installation of
Avg Turnover (MYR/USD) 3.96m/0.97m integrated automated manufacturing solutions – while the smart control
Net Gearing (%) Net Cash solution system segment provides project management and smart
Market Cap (MYRm) 1,111.2m building solutions.
Beta (x) 1.85 Highlights
BVPS (MYR) 1.13
52-wk Price low/high (MYR) 1.7 - 3.87 Wider adoption of smart sensors. As a leader in AE for components
testing for smart sensors and ICs (integrated circuits), Pentamaster
Free float (%) 56.2
should benefit from the surge in demand for its test solutions and
handlers in years to come. According to Yole Developpement, 3D the
imaging & sensing market revolution is expected to grow exponentially
Major Shareholders (%) since the successful adoption of 3D sensing technology, such as
Chuah Choon Bin 19.7 vertical-cavity surface-emitting laser (VCSEL), Structured Light (SL) and
Kumpulan Wang Persar 10.4
Time of Flight (ToF). Besides, it is set to become a consumer market
with automotive (driver assistance systems/autonomous driving) and
Cimb Group Holdings 5.9
industrial (automation) segments also expected to experience double-
digit growth. Besides, the increase in sensing components in smart
devices and peripherals are supporting the growth despite the
Share Performance (%) slowdown in smart device shipment.
1m 3m 6m 12m
Proxy for Industry 4.0 revolution. AMS contributes about 19% of
Absolute 3.8 27.6 (6.6) 60.3 FY18 revenue, clocking a 4-year CAGR of 34%. We expect the
Relative 7.2 30.4 1.7 72.1 segment to continue its strong growth, driven by the Industry 4.0
revolution, in which automation, data exchange in manufacturing
technologies and Internet of Things are among the trends. We believe
Lee Meng Horng +603 9280 8866 the group offering of automated manufacturing processes, such as
Intelligent Automated Robotic Manufacturing Systems (i-ARMS), will
lee.meng.horng@rhbgroup.com
continue to gain traction.
Extra capacity kicks in. Earnings growth should also fuelled by the
new plant in Batu Kawan (100,000 sq ft), up and running since 2018,
mainly for the expansion of AMS for both automotive and medical
industries. The expansion of the current facility in Bayan Lepas (+20%
to 120,000 sq ft by 2019) is expected to boost the space capacity for its
AE. Meanwhile, the listing of Pentamaster International (PIL) on the
Hong Kong Stock Exchange expands its reach to China and Taiwan
markets.
27
Solid orderbook. Current orderbook stands at MYR303m (MYR267m
for AE and MYR36m for AMS), a 22% growth from FY17, despite the Reported net profit (MYRm) 27 36 57
overall expected semiconductor industry slowdown in 2019 and trade Rec urring net profit (MYRm) 27 48 61
war escalation. At a standard lead time of 3-6 months, the current book- Rec urring net profit growth (%) 167.7 76.9 28.3
to-bill ratio of 0.72 would serve as the base of growth expectations in Rec urring EPS (MYR) 0.09 0.15 0.19
2019. DPS (MYR) 0.00 0.00 0.00

Company Report Card Rec urring P/E (x)

Return on average equity (%)
41.1
25.0
23.2
26.5
18.1
17.2
P/B (x) 10.3 6.2 3.1
Latest results. In FY18, Pentamaster recorded a significant 28% YoY
P/CF (x) 63.6 32.6 14.8
rise in core net profit on the back of higher revenue (+49% YoY),
contributed by the increase in demand from both the automated
equipment and automated manufacturing solution segments, after
stripping off the non-recurring listing expense of MYR7.2m.
Dividend. Pentamaster does not have an official dividend policy and it Total assets 143 356 646
has not paid any cash dividend over the past 10 years. We believe with
the improved fundamentals and healthy cash flow generations, dividend Total liabilities 31 156 172
payout could be on the cards, to reward its shareholders in the near Shareholder's equity 108 180 356
term. Minority interest 4 20 118
Other equity 0 0 0
Management. The group is led by majority shareholder and co-founder Total liabilities & equity 143 356 646
Mr Chuah Choon Bin, who was redesignated non-executive chairman Total debt 0 4 4
since end-2017, as part of the board restructuring due to the listing of Net debt Net Cash Net Cash Net Cash
PIL in Hong Kong. With more than 30 years of experience in the Source: Company data, RHB
automation solution industry, Chuah is instrumental in bringing the
group to its present level of success. Mr Chuah Chong Ewe, an Ca sh Flow (MY Rm) De c - 16 De c - 17 De c - 18
unrelated party, has been group CEO since 2015. Prior to joining Cash flow from operations 17 34 75
Pentamaster, he was the CEO of SEAL Inc. Mr Hon Tuck Weng, the Cash flow from investing activities (6) 16 (19)
Operation Director, with over 24 years of experience in automation
solutions, oversees daily operations. Net change in cash 15 51 242
On the path to grow into a big cap. We believe FY19 will continue the
strong growth trend (4-year CAGR of 90%). This is on the back of extra
contribution from the expansion at Batu Kawan; higher demand for its
AE and AMS, fuelled by wider adoption of smart sensors; greater
component usage in smart devices and peripherals; and adoption of
Industry 4.0. We note its revenue has now exceeded that of ViTrox
(VITRO MK, NR). While they are not an exact like-to-like comparison,
trading at a 40% discount at a forward P/E of only 14.7x (ex-cash P/E of
8.6x), we believe the discount should narrow, given the solid track
record and forward earnings growth expectations. There is also the
possibility of dividend payout in the near term.
Fair value. Pegging to target 20x P/E on FY19F-20F earnings, fair
value could range MYR4.74-5.72. The target P/E is on par with the
average of bigger cap Automated Test Equipment (ATE) players in the
region. At market cap of MYR1.1bn, it is now the 2nd largest ATE player
in Malaysia, behind ViTrox. While Pentamaster trades at a premium to
its 63.1% owned PIL (1665 HK, NR), we think that it is justified, given
the stability premium in the Malaysia market and given that PIL is
relatively new and unknown in Hong Kong, where the market is filled
with more established tech names.
Key risks. Slower adoption of related components and consumer
spending. Customer concentration, in which the biggest customer
contributes about 58% of 2018 revenue. Further weakening of USD as
over 80% of sales are denominated in USD.
28
Target: N/A
QES Group Price: MYR0.245
Growing Its Portfolio
Investment Merits
 Rising adoption of fully automated equipment, a catalyst for growth;
 China as next target for growth;
 Ample room for a dividend payout;
 A growing ATE player, trading at below 12x 2019F P/E.
Company Profile
QES Group is engaged in the distribution of inspection, test and
Source: Bloomberg
measurement equipment, materials and engineering solutions. QES
also manufactures optical inspection equipment and automated
Stock Profile equipment primarily for the semiconductor segment. QES has direct
Bloomberg Ticker QES MK distribution networks in Malaysia, Indonesia, Vietnam, Hong Kong,
Avg Turnover (MYR/USD) 0.9m/0.2m Singapore, Thailand and the Philippines via its subsidiaries. Estimated
Net Gearing (%) Net Cash contributions from core industries as of FY18 are E&E (57%),
semiconductor (27%), and automotive industry (16%).
Beta (x) 2.10
BVPS (MYR) 0.12 Highlights
52-wk Price low/high (MYR) 0.17 - 0.38 Legacy equipment out, automation coming through. We believe the
Free float (%) 28 adoption of fully automated test equipment is potentially due for a run-
up, driven by technology advancement that enables easier transition
from semi-automated to fully automated OSATs. This was not
achievable previously as the cost of investing in full automation
outweighs the impending benefits. Deploying full automation for
Chew Ne Weng 33.7 assembly and test is now not only feasible, it is also crucial for future
Liew Soo Keang 26.1 profitability. As a result, we expect stronger demand for higher margin
automated products in the pipeline to drive stronger earnings in FY19F-
20F. We believe successful launching of these automated products
could potentially command 4x higher selling prices and yield superior
GPM of 25-30%, as compared to 15-20% from semi-automated ones.
1m 3m 6m 12m China as next target for growth. QES is engaged in aggressive
Absolute (1.9) 18.6 (25.0) 27.5 marketing activities in China for its products. China’s contribution to
Relative 2.4 20.6 (17.0) 39.0 revenue more than doubled in FY18, contributing MYR6.8m to revenue
(FY17: MYR2m). This is riding on the back of the ambitious “Made in
China 2025” blueprint towards achieving independence. We foresee
contribution from China to expand as a result of tapping a new market
Lee Meng Horng +603 9280 8866 and driving earnings, as the base is still low. Manufacturing contributes
lee.meng.horng@rhbgroup.com 18.3% to revenue, while contribution from China is 4% (FY17:1%).
Ample room for a dividend payout. QES has no official dividend
policy or dividend payout history. However, we note it sits on
MYR52.4m of cash (~26% of market cap) and no major expansion
plans, plus a strong balance sheet with a solid net cash position of
MYR36.8m. Excluding the remaining IPO proceeds of MYR13.1m, there
is still room for a dividend payout. We expect it to declare DPS of
MYR0.006-0.007 for FY19F-20F, which translates to a payout of
MYR4.55m-5.31m, a dividend yield of 2.5-2.9%.
29
Resilient to external headwinds. Despite the slowdown in certain
smartphone brands affecting the entire semiconductor supply chain, our
channel checks suggest that other local equipment peers are still having
strong orders towards 1H19. This leads us to believe that the sustained
Rec urring net profit growth (%) 17.4 128.0 (7.0)
strong orders could be coming from the growth in different market
segments such as automotive, adoption of technology (such as 3D
DPS (MYR) 0.00 0.00 0.00
sensing), and new modules and components related to IoT. We note
that QES has a healthy book-to-bill ratio of 1.1x, and we believe this will
Rec urring P/E (x) 15.7 9.9 13.2
sustain.
P/B (x) 4.5 3.1 2.1
Company Report Card P/CF (x) 22.0 8.7 16.2

Latest results. In FY18 core earnings came in at MYR12.9m, a 7%
decline YoY, mainly due to lower sales of distributed equipment. This
was cushioned by higher shipments of manufactured equipment.
Manufacturing segment grew 39.2% amid the ongoing US-China trade
war; this was driven by higher demand for its existing fully automated
post-wire bonding equipment.
Balance sheet/cash flow. As at FY18, QES balance sheet was sturdy Total liabilities 60 65 63
with net cash of MYR36.8m, while operating cash flow remains positive. Shareholder's equity 31 47 88
ROE moderated to 16% in FY18 from 31% in FY17, as shareholders’ Other equity 0 0 0
equity was expanded post-IPO. Total liabilities & equity 93 113 153
Total debt 24 26 16
Dividend. QES does not pay any dividends.
Net debt 14 11 Net Cash
Management. QES is helmed by group MD Mr Chew Ne Weng, who Source: Company data, RHB
oversees the overall strategic direction and management of the group.
Mr Chew has accumulated over 30 years of experience within the Ca sh Flow (MY Rm) De c - 16 De c - 17 De c - 18
engineering industry. He is joined by Mr Liew Soo Keang – the Cash flow from operations 7 17 11
executive director of the company – who is responsible for the Cash flow from investing activities (1) (8) 29
distribution division. Cash flow from financing activities (1) (4) (4)
Investment Case Net change in cash 5 6 37

The stock currently trades at 12x FY19F P/E, representing a c.42% and Source: Company data, RHB
c.35% discount to its comparable peers and industry average, which
trade at 21x and 18.6x. Additionally, stripping out the cash and cash
equivalent (MYR52.4m) would result in an ex-cash FY19F P/E of 8.7x.
We believe the cheaper P/E is not warranted, and is due to QES being
inaccurately perceived as a pure-distribution company, commanding
lower margins as compared to its peers.
Ascribing FY19F-20F P/E of 15x, justified by sustainable recurring
income, diversified market segments and well spread-out regional
subsidiaries providing deep access to the ASEAN countries, we believe
QES could be worth MYR0.32-0.37. The ascribed P/E represents a
discount to local peers due to its smaller market cap and smaller
earning base.
Key risks include short earnings visibility, automation technology
falling short of expectations, weaker-than-expected sales of
manufactured ATE and prolonged weakness in the OSAT space.
30
Target: N/A
RCE Capital Price: MYR1.62
Measured Growth, Undemanding Valuations
RCE Capital (RCE MK)

Investment Merits
 Healthy earnings growth on better NIM and lower credit costs;
Price Close
1.8
1.6
1.4  Resilient asset quality with high LLC ratio;
1.2
1.0  Undemanding valuation compared to peers.
0.8
0.6
0.4
0.2 Company Profile
0.0
Oct-17
Apr-18
Oct-18
Dec-18
Aug-17
Dec-17
Feb-18
Jun-18
Aug-18
Feb-19
RCE Capital is a provider of general financing services for consumers,

as well as processing and administration of payroll collections. The
Source: Bloomberg majority of RCE’s customers are civil servants.
Stock Profile
Bloomberg Ticker RCE MK Highlights
Measured loan growth in challenging times. RCE achieved a robust
Net Gearing (%) 212.3
3-year CAGR loan growth of 12% pa in FY15-18 (Mar), helped by
healthy consumption spending and expansion in its customer base:
Beta (x) 0.99 from 48,000 to 75,000 over the same period. Management sees
BVPS (MYR) 1.56 opportunity to further increase its customer numbers, given RCE’s small
52-wk Price low/high (MYR) 1.55 - 2.41 c.5% market share of Malaysia’s 1.6m civil servants. That said, loan
Free float (%) 30 growth has moderated to an annualised 6.2% for 9MFY19, as
management focuses on asset quality in the current challenging
economic environment. RCE expects loan growth to track system
growth over the near term. Still, we believe an increase in its loans
Major Shareholders (%) should continue to outpace the system, albeit slightly.
Cempaka Empayar SB 60.8
Asset quality resilient. RCE’s asset quality has been resilient for the
past few years, with NPL ratio at 4.3% in FY16 and 4.1% in Dec 2018.
Its LLC has improved to 180% from 163% in FY15. We believe this can
be attributed to the salary deduction scheme for civil servants. Its
wholly-owned EXP Payment unit was granted the Accountant General’s
Share Performance (%) Department of Malaysia code for the salary deduction scheme in 2012.
1m 3m 6m 12m We believe asset quality will remain healthy, given management’s
measured growth in loan assets.
Absolute (2.4) 10.9 1.9 32.5
Relative 1.0 13.7 10.2 44.3 NIM expansion on improved funding mix. RCE’s NIM has expanded
to an estimated 9% in 9MFY19 from 8.5% in FY16 – helped by active
debt and equity management. The issuance of sukuk since 2014 has
raised long-term borrowings to 61.7% of total borrowings in Dec 2018
Fiona Leong +603 9280 8886
(Mar 2016: 56%) and lowered average borrowing costs. RCE
fiona.leong@rhbgroup.com established an MYR2bn sukuk programme in Mar 2019, with funding
cost at a lower rate than the 5.51% for the MYR900m sukuk completed
in Mar 2018.
Management also reduced RCE’s net gearing ratio to 2.02x in Dec
2018 from a high of 2.39x in Mar 2017 – lower than AEON Credit
Service (M)’s (ACSM MK, NEUTRAL, TP: MYR15.40) 3.56x and MBSB
Bank’s 4.23x.
31
P rofit & Loss Ma r- 16 Ma r- 17 Ma r- 18
Company Report Card Reported net profit (MYRm) 40 79 89

Latest results. For the nine months ended 31 Dec 2018, RCE achieved Rec urring net profit growth (%) 9.3 99.5 12.3
net profit of MYR71.8m. Earnings growth of 9.4% YoY was supported Rec urring EPS (MYR) 0.12 0.24 0.26
mainly by loan growth of 4.7% YTD (Dec 2018), or an annualised 6.2%, DPS (MYR) 0.14 0.03 0.07
and 20% YoY decline in loan impairment charges with annualised credit Dividend Yield (%) 8.6 1.9 4.3
Rec urring P/E (x) 13.1 6.8 6.2
cost at 114bps vs 187bps in FY18. We estimate that NIM expanded to
Return on average assets (%) 2.8 4.9 5.0
9% vs 8.73% in FY18.
Asset quality was stable, with NPL ratio at 4.1% while LLC stood at a P/B (x) 4.8 1.3 1.1
higher 180.4% (Mar 2018: 178%). Net gearing improved slightly to Source: Company data, RHB
2.02% from 2.12% in Mar 2018.
Ba la nc e S he e t (MY Rm) Ma r- 16 Ma r- 17 Ma r- 18
Dividend. An interim DPS of MYR0.04 was paid in 2QFY19 (2QFY18:
Gross loans & financing 1,365 1,522 1,643
MYR0.03), up from MYR0.03 a year ago. Management guided for
Total assets 1,551 1,702 1,859
dividend payouts of 20-40% of net profit. Borrowings 1,029 1,214 1,298
Management. RCE is 60.78% owned by Cempaka Empayar, which is Total other liabilities 65 47 41
Total liabilities 1,094 1,261 1,340
wholly-owned by Tan Sri Azman Hashim. Two of Tan Sri’s children sit
on the board: Shah Azman (non-independent non-executive chairman – Shareholder's equity 457 441 519
appointed on 1 Apr 2015) and Shalina Azman (non-independent non-
Other equity 0 0 0
executive director – appointed on 6 Jan 2000).
Total liabilities & equity 1,551 1,702 1,859
RCE is managed by professionals: chief executive officer Loh Kam Source: Company data, RHB
Chuin was appointed on 1 Mar 2010, while chief financial officer
Johnson Yap Choon Seng has been with the company since Feb 2005. Fina nc ia l Ra tios Ma r- 16 Ma r- 17 Ma r- 18
Chief business officer Oon Hooi Khee joined RCE in Sep 2006. NIM (%) 8.59 8.53 8.73
Cost- income ratio (%) 37.0 25.1 21.9
Net gearing ratio (x) 1.89 2.39 2.12
GIL ratio (%) 7.80 7.20 7.10
Investment Case NPL ratio (%) 4.29 4.23 4.06
Loan loss coverage ratio (%) 178.0 172.2 178.0
Undemanding valuations. At current prices, RCE is trading at 1x P/BV
Credit cost (bps) 200 188 187
(Dec 2018) and a mere 5.8x annualised 9MFY19 EPS of MYR0.28. We
believe its valuation multiples are undemanding, given the company’s Source: Company data, RHB
annualised ROE of 17.7%. This is compared to AEON Credit’s FY20

(Feb) P/BV of 2x against ROE of 18.9%. We believe the stock is worth
MYR2.10-2.20 based on GGM-derived P/BVs of 1.16-1.22x.
We believe our view on RCE’s valuation is shared by management,
which has been buying back the company’s shares at prices ranging
between MYR1.40 and MYR1.64 over the past 12 months.
Key risks to our view are a sharper rise in loan impairment charges,
unexpected NIM compression, and a sharper slowdown in loan growth.
32
Target: N/A
Revenue Group Price: MYR1.20
Riding On The E-Payment Growth Trend

Investment Merits
Revenue (REVENUE MK)
1.8
Price Close  Proxy to the rising adoption of e-payment;
1.6
1.4
 Beneficiary of growth in e-commerce and tourist spending;
1.2
1.0
 Regional expansion and new product roll out;
0.8
 Trading at 23x 2020F P/E (discount to peers).
0.6
0.4
0.2
0.0
Company Profile
Mar-19
Jan-19
Nov-18
Jul-18
Sep-18
Revenue is an ACE Market-listed cashless payment solutions provider

Source: Bloomberg in Malaysia. It provides multi-channel payment solutions to local banks
and non-bank institutions, physical stores, and online merchants. The
Stock Profile company is mainly involved in the deployment of electronic data capture
Bloomberg Ticker REVENUE MK (EDC) terminals, electronic transaction processing, and solutions &
Avg Turnover (MYR/USD) 2.81m/0.69m services related to payment infrastructure.
Beta (x) 2.1 Proxy to the rising adoption of e-payments. According to Bank
BVPS (MYR) 0.14 Negara Malaysia (BNM), the bulk of payment transactions in Malaysia
52-wk Price low/high (MYR) 0.495 - 1.57 (c.80%) remain in cash. This suggests a huge potential market for e-
Free float (%) 29 payments, ie credit cards, debit cards, charged cards, and e-wallets.
From 2019 to 2022, BNM aims to almost double the number of EDC
terminals installed in Malaysia to 970,000 units from 515,000, indicating
a CAGR of 17% during this period. The potential market of 450,000 of
Major Shareholders (%) new EDC terminals over the next four years signals robust growth
Ng Chee Siong 21.6 opportunities ahead. We understand Revenue has targeted c.9k-15k of
Ng Shih Fang 21.5 EDC terminals to be rolled out in the next 1-2 years – this is on top of
Ng Shih Chiow 21.5 the current average terminal count of 19,200 as of Dec 2018.
Beneficiary of growth from e-commerce and tourist spending.

From FY15 to FY18, total transaction value under its electronic
Share Performance (%) transaction processing (ETP) segment increased to MYR1.1bn from
1m 3m 6m 12m MYR300m, a CAGR of 55%. The increase was in line with growth in
Absolute (2.4) (14.2) 4.3 N/A online purchases, as well as wider adoption in the usage of payment
Relative 1.5 (12.1) 13.5 N/A cards. Additionally, Revenue has been appointed as acquirer by
Company A to process outbound payments – via internet banking – on
its affiliate’s China online marketplace since 2013. Company A is a
leading mobile and online payment solutions company in China. IN
Lee Meng Horng +603 9280 8866 2017, Revenue was also appointed as acquirer for Alipay QR Payment
lee.meng.horng@rhbgroup.com in 2017, which enables the firm to tap into the Chinese tourist e-wallet
segment. Notably, ETP segment for e-commerce grew at a 3-years
CAGR of 55% to MYR480m in FY18.
Regional expansion. The firm is targeting to expand into Cambodia

and Myanmar, given their huge growth opportunities – the e-payment
markets there remain at an early growth stage, ie predominantly cash-
based right now. Revenue has a solid balance sheet with net cash of
MYR20m, which should provide it with a war chest for any potential
M&A.
33
New product development. Tapping into the booming e-wallet space, P rofit & Loss Jun- 16 Jun- 17 Jun- 18
Total turnover (MYRm) NA 27 35
Revenue was one of the first to introduce an all-in-one smart EDC
Reported net profit (MYRm) NA 7 7
terminal in Malaysia that accepted e-wallet payments through Quick Rec urring net profit (MYRm) NA 5 7
Response (QR) code scanning. The EDC terminals can handle mobile Rec urring net profit growth (%) NA 14.9% 39.9%
QR code payments from services like Alipay, Big Pay, Boost, Rec urring EPS (MYR) NA 0.02 0.03
Merchantrade Money, Touch ‘n Go, UnionPay QR, vcash, and WeChat DPS (MYR) NA 0.00 0.00
Pay, as well as card payments such as Visa, MasterCard, MyDebit, Dividend Yield (%) NA 0.0 0.0
Rec urring P/E (x) NA 51.6 36.9
JCB, and UnionPay. The new all-in-one digital payment platform will
Return on average equity (%) NA 31.0 30.9
enable Revenue to capture a share of multi-year growth in the e-wallet
P/B (x) NA 16.0 11.4
payment segment. Additionally, the firm also plans to offer big data P/CF (x) NA 29.0 20.3
analysis solutions to its customers via transaction data analysis. Source: Company data, RHB
Under-owned by institutional investors. We believe institutional Ba la nc e S he e t (MY Rm) Jun- 16 Jun- 17 Jun- 18
shareholdings in Revenue are only c.4-5%. From FY15 to FY17, the Total c urrent assets NA 18 27
company tripled its core PAT to MYR7.3m from MYR2m. In 1H19, Total assets NA 43 54
Revenue registered core PAT of c.MYR5m. We believe the company Total c urrent liabilities NA 18 22
should be able to meet the requirements for a transfer of listing to the Total non- c urrent liabilities NA 8 8
Total liabilities NA 26 30
Main Board by next year. This should help attract more institutional
Shareholder's equity NA 17 24
investors. Minority interest NA (0) 0
Other equity NA 0 0
Company Report Card Total liabilities & equity NA 43 54
Total debt NA 9 10
Latest results. In 1H19, EDC terminals and electronic transactions Net debt NA Net Cash Net Cash
accounted for 51% and 44% of total revenue, with the balance from Source: Company data, RHB
solutions & services. Core profit stood at MYR5m vis-à-vis FY18’s full-
year core profit of MYR7.3m. Ca sh Flow (MY Rm) Jun- 16 Jun- 17 Jun- 18
Cash flow from operations NA 9 13
Dividend. Revenue does not have an official dividend policy. Given its
Cash flow from investing activities NA (6) (5)
position in a growth industry, we expect it to continue re-investing its Cash flow from financing activities NA (4) (3)
profits in the near future. Cash at beginning of period NA 9 9
Net change in cash NA (1) 6
Management. Core founders are Ng Chee Siong (MD and CEO), Ng Ending balance cash NA 8 15
Shih Chiow (ED and COO), and Ng Shih Fang (ED and CTO). They
collectively hold a 65.3% stake in Revenue post its IPO. Each has more
than 15 years of experience in the e-payment industry.
Investment Case
Riding on the e-payment growth trend. Given that the e-payment
industry in Malaysia is in its infancy (c.80% of payments remain in cash
form), Revenue is in the best position to ride on this multi-year non-
cyclical growth trend going forward. From FY15 to FY18, its core profit
grew at a CAGR of 50% due to the ramp-up in EDC terminal
deployment and higher electronic transaction processing. We expect
this strong growth trend to continue, fuelled by BNM’s aim to double the
deployment of EDC terminals over the next four years, as well as the
change in consumer behaviour towards a cashless society.
Fair value. Pegged to a target P/E of 30-33x on FY20 earnings, fair
value could be in the range of MYR1.58-1.74. The target P/E is at a
discount to GHL Systems’ (GHLS MK, NEUTRAL, TP: MYR1.72) target
of 35x, given its larger size. While GHL remains the larger player in
terms of available touch points and earnings base, the growth prospects
for Revenue is more attractive. This is given the lower earnings base
and ramp-up in EDC terminal roll out to capture market share.
Key risks: Increasing competition and rapid developments in the
payment industry, narrowing merchant discount rates, and regulations
and security compliance issues.
34
Target: N/A
Superlon Holdings Price: MYR1.11
Beneficiary Of Extreme Weather Trend
Investment Merits
 Positive demand outlook for NBR thermal insulation, which is used for
HVACR products
 Completion of Vietnam plant to drive earnings growth
 Strong balance sheet with net cash of MYR5.8m
Company Profile
Superlon was established in 1992 and gained listing status on Bursa
Malaysia in 2007. The company is mainly involved in the manufacturing
Source: Bloomberg of nitrile butadiene rubber (NBR) thermal insulation, which is primarily
Stock Profile
used for heating, ventilation, air-conditioning and refrigeration (HVACR).
The company has three factories (in Malaysia and Vietnam) and is
Bloomberg Ticker SLON MK
supported by 200 employees.
Market Cap (MYRm) 176.2m Highlights
Beta (x) 1.74
BVPS (MYR) 0.78 Selling its products to more than 70 countries. Superlon has an
annual production capacity of 9,000 tonnes and its products are
52-wk Price low/high (MYR) 0.995 - 1.61
exported to more than 70 countries. In FY18, Superlon’s export revenue
Free float (%) 41 was MYR79.99m, representing 73% of the company’s total revenue.
Completion of Vietnam plant to drive earnings growth. We gather
that Superlon has completed its Vietnam plant in Dec 2018, with full
commissioning by end-Apr 2019. The plant has annual production
Liu Lee, Hsiu-Lin@ Jessica H. Liu 22.59 capacity of 1,500 tonnes of insulation products. The company will
KWAP 9.32 employ ~60 employees for its Vietnam plant and its products cater for
Yayasan Guru Tun Hussein Onn 4.55 Vietnam and export markets. It has invested USD4m for the plant
(USD2m for construction, USD0.6m for land and USD1.4m for
equipment). We are positive on the news, as we expect earnings to
improve in 4QFY19 (Apr) and FY20 due to higher contribution from the
Vietnam plant.
1m 3m 6m 12m
Absolute (7.5) (14.6) (2.6) (9.0) Expanding into the acoustic business. The company is venturing into
Relative (4.7) (10.9) 0.2 (0.7) the acoustic business, which provides insulation application against
noise, heat and vibration. The application is mainly for cars, although it
can also be used for music studios, buildings and construction. The
near-term focus is on mass market cars in the after sales market in
Alan Lim, CFA +603 9280 8890 Malaysia. We expect this new venture to contribute meaningfully to
alan.lim@rhbgroup.com earnings from FY21 onwards.
35
P rofit & Loss Apr- 16 Apr- 17 Apr- 18
Latest Results. In 9MFY19, Superlon reported a decline of 21% YoY in Rec urring net profit (MYRm) 16 22 14
net profit to MYR8.62m, due to lower revenue YoY by 7%. The decline Rec urring net profit growth (%) 75.1 31.6 (35.7)
in revenue was caused by unfavourable product mix. We expect a Rec urring EPS (MYR) 0.10 0.14 0.09
stronger 4QFY19 and FY20 due to contribution from its Vietnam plant. DPS (MYR) 0.04 0.06 0.04
Strong balance sheet with net cash of MYR5.8m. Superlon has cash Rec urring P/E (x) 12.9 9.0 17.5
of MYR19.9m and total debt of MYR14m as of end-3QFY19. Its balance Return on average equity (%) 19.7 24.0 10.9
P/B (x) 2.4 2.0 1.8
sheet is strong, as it is in net cash position of MYR5.8m.
P/CF (x) 8.5 13.1 39.7
Dividend. On 20 Jun 2017, Superlon announced that it will adopt a Source: Company data, RHB
dividend policy with target payout ratio of a minimum 30% of its NP. In
the past five years, the company has consistently paid dividends with a Ba la nc e S he e t (MY Rm) Apr- 16 Apr- 17 Apr- 18
payout ratio range of 37-51%. For FY18, Superlon paid dividend of Total c urrent assets 51 68 63
MYR0.035, representing a 45% payout ratio. Total assets 110 144 146
Management. The company’s Managing Director is Jessica Liu, who is Total non- c urrent liabilities 6 12 12
also its founder. She has more than 34 years of experience in the Total liabilities 20 36 28
rubber thermal insulation industry. Her two sons, Liu Han-Chao and Liu
Jeremy are executive directors in the company. Collectively, the Liu Other equity 0 0 0
family own ~32% in Superlon. Total liabilities & equity 110 144 146
Total debt 3 10 11
Net debt Net Cash Net Cash Net Cash

Investment Case
Ca sh Flow (MY Rm) Apr- 16 Apr- 17 Apr- 18
Good demand prospect for thermal insulation products. We expect
demand outlook to be bright in the HVACR industry and this should lend Cash flow from investing activities (5) (17) (7)
support for thermal insulation products. In our view, the global warming Cash flow from financing activities (5) 0 (5)
trend should lead to better demand for HVACR products. The better Cash at beginning of period 16 30 30
outlook for the construction industry in Malaysia should also have a Net change in cash 15 (0) (7)
positive effect on demand for HVACR solutions. Ending balance cash 30 30 23

Fair value of MYR1.61-MYR2.00. Pegging an FY20F P/E of 14.1x-
17.5x, we estimate that the stock is worth MYR1.61-MYR2.00. The
implied multiple is in line with the company’s 0.5-1.0SD above its 5-year
forward P/E. We believe that the premium valuation is justified due to
the positive outlook for the HVACR industry, Superlon’s strong balance
sheet and stable raw material prices in the near term.
Risks. The biggest risk is currency risk, as export revenue commands
73% of total revenue. Besides that, other risks include volatile raw
material prices – especially butadiene prices – and weaker-than-
expected demand for its products.
36
Target: N/A
Techbond Group Price: MYR0.795
A Sticky Bond
Techbond (TECHBND MK)
1.2
Price Close Investment Merits
1.0
 With >20 years of track record in the adhesives industry
0.8
 Co-develops customised product solutions for customers
0.6
0.4
 Managed to grow its topline consistently and maintained a stable
gross margin over the last three years
0.2
0.0
Jan-19
Dec-18
Feb-19
Mar-19
Company Profile
Source: Bloomberg Techbond Group is principally involved in developing and
manufacturing industrial adhesives and sealants, as well as the
Stock Profile provision of supporting products and services.
Bloomberg Ticker TECHBND MK
Net Gearing (%) Net Cash Highlights
Market Cap (MYRm) 182.9m Strong bond with customers. Techbond manufactures and supplies
Beta (x) 0.2 industrial adhesives to various industries. Approximately two-thirds of
BVPS (MYR) 0.43 revenue is derived from the woodworking industry, with most customers
52-wk Price low/high (MYR) 0.735 - 1.02 exporting furniture products to Europe and the US – markets which
Free float (%) na require stringent quality and safety standards. As such, Techbond’s
ability to obtain relevant compliance certification is essential in
developing long-standing relationships with customers, whilst creating a
barrier to entry for its competitors.
Sticky demand. Apart from generic mass market products, Techbond
Sonicbond 73.65
also co-develops customised product solutions for their customers. We
believe this results in lower risk of attrition as R&D could be a lengthy
and involved process. In addition, adhesives typically account for a
meagre 1-2% of total production cost for Techbond’s customers, hence
would be less at risk in cost-down initiatives, in our view. Techbond has
Share Performance (%) managed to grow its topline consistently (by 5-9%) and maintained a
1m 3m 6m 12m stable gross margin (c.30%) over the last three years – we believe this
trend will sustain over the longer-term.
Absolute 1.9 (14.5) N/A N/A
Relative 5.3 (11.7) N/A N/A Lining up ambitious expansion plans. The group has earmarked
c.MYR35m to expand its production capacity in Malaysia and Vietnam,
which we believe will be funded by IPO proceeds. Besides this, it is
looking to venture upstream by producing polymers, one of the key raw
Soong Wei Siang +603 9280 8865
materials for adhesives production. This will not only optimise its
soong.wei.siang@rhbgroup.com production cost but also open up a new revenue stream, and provide
Techbond with more cross-selling opportunities. The expansion drive
augurs well for the group, as it reflects management’s optimism on its
long-term growth prospects.
37
Latest results. Techbond recorded core net profit of MYR6.24m for Rec urring net profit (MYRm) 12 15 13
1HFY19 (June), after excluding a one-off charge for listing expenses of Rec urring net profit growth (%) NA 24.5 (7.8)
MYR2.3m. Out of total revenue of MYR44.1m, MYR41.5m was Rec urring EPS (MYR) 0.05 0.06 0.06
DPS (MYR) 0.00 0.00 0.00
contributed by industrial adhesives, of which MYR28.6m was from
water-based adhesives and MYR12.9 from hot-melt adhesives. Rec urring P/E (x) 15.6 12.6 13.6
Dividend. Techbond does not have a fixed dividend policy. The group
P/B (x) 4.4 2..5 2.2
intends to retain adequate reserves for future growth. P/CF (x) 19.7 16.1 11.3
Management. Techbond is helmed by Mr Lee Seng Thye, managing Source: Company data, RHB
director and founder of the group. He has been in the industrial
adhesive industry for more than 25 years. Assisting Mr Lee are the Ba la nc e S he e t (MY Rm) Jun- 16 Jun- 17 Jun- 18
executive director, Ms Tan Siew Geak who is also Mr Lee’s spouse, and Total current assets 53 61 72
Mr Ng Yeow Siang, the group finance director. 28 10 10
Total current liabilities
Total non- current liabilities 1 1 1
Investment Case Shareholder's equity

Minority interest
41
0
74
0
85
0
Other equity 0 0 0
Expansion to drive exciting growth. We are projecting a 3-year net 71 84 96
Total liabilities & equity
profit CAGR of 17% to MYR21.5m in FY21F, taking into account Total debt 1 1 0
capacity expansion and robust demand growth. Net debt Net Cash Net Cash Net Cash
Techbond could be valued at MYR1.28 assuming 15x P/E on 2020F Source: Company data, RHB
EPS. We believe the stock deserves to trade at a premium over the

Bursa Small Cap Index average of 10.7x, given its resilient business Ca sh Flow (MY Rm) Jun- 16 Jun- 17 Jun- 18
model, supported by steady earnings growth ahead, and a strong
balance sheet. Note that players in the adhesive industry are trading at Cash flow from financing activities (5) 2 (5)
average P/Es of c.17x. Cash at beginning of period NA 13 19
Net change in cash 4 6 9
38
Target: N/A
Teo Seng Capital Price: MYR1.22
Looking For Better Egg Years Ahead
Investment Merits
 Expect egg prices to remain sustainable in the near term;
 Average daily egg production to expand to 5m from 3.7m by FY22;
 Anticipate higher dividend payout on better performance and lower
loan commitments.
Company Profile
Teo Seng is involved in production of eggs, manufacturing and trading
Source: Bloomberg of paper egg trays, production of animal feed and organic fertiliser. In
FY18, its average daily egg production was about 3.7m. It
Stock Profile predominantly sells locally, although exports make up approximately
Bloomberg Ticker TSCB MK 35% of revenue, mainly to Singapore and Hong Kong.
Net Gearing (%) 52.6
Beta (x) 0.89 Ongoing capacity upgrade to drive bottomline growth. Since 2016,
BVPS (MYR) 0.93 the group has invested in an additional paper egg tray machine, a new
52-wk Price low/high (MYR) 0.735 - 1.37 feedmill plant to cater for doubling of feed production, and additional
Free float (%) 31 layer houses to cope with layer farming expansion. Subsequently, it
also invested in a second fertiliser plant, upgrading farm facilities and
automation, and a new factory cum warehouse. It targets to achieve
average daily production of 5m (from 3.7m) eggs by FY22. Assuming its
Major Shareholders (%) capacity expansion plan remains on track, margins could improve going
Emerging Glory 54.5 forward from higher production efficiency and economies of scale.
Koperasi Permodalan Felda 3.7
Anticipate better performance ahead on higher egg prices. Back in
Public Islamic Opportunities Fund 2.5 1H17, it was dragged by industry-wide oversupply of eggs that brought
down egg prices. Industry players then implemented early depopulation
of hens as a measure to reduce egg supply, which eventually led to a
Share Performance (%) rebound in egg prices. Selling prices have been relatively stable in
1m 3m 6m 12m recent months, which partially contributed to the stellar 4Q18
performance. We expect prices to be sustainable in the near term,
Absolute (5.4) 25.8 47.0 29.8
factoring in the time needed for production to pick up progressively from
Relative (1.7) 28.6 55.3 41.2
the previous early depopulation of hens.
Expect higher dividend payout on improving performance and
lower loan commitment. In view of the anticipated performance
Lim Jia Yi +603 9280 8873
improvements – coupled with the group’s efforts to pare down its net
lim.jia.yi@rhbgroup.com gearing ratio progressively to 0.53x in 4Q18 (from 0.82x in 3Q17), we
expect dividend payout ratio (DPR) to be slightly higher at 30% for
FY19F-20F.
39
Latest results. Teo Seng achieved a stellar performance in FY18, as Reported net profit (MYRm) 21 3 30
its net profit leapt over eightfold YoY, on the back of continued stable
Rec urring net profit growth (%) (49.5) (83.3) 777.5
selling prices and higher sales quantities, which was supported by
higher production efficiency from the recent upgrade in farm
DPS (MYR) 0.02 0.00 0.03
infrastructure and facilities.
QoQ wise, 4Q18 net profit doubled, mainly attributable to significant Rec urring P/E (x) 16.6 86.6 9.5
growth in revenue (+17.5% QoQ), which in turn was supported by stable Return on average equity (%) 8.7 1.4 11.5
egg selling price and higher sales quantity. P/B (x) 1.4 1.2 1.0
P/CF (x) 9.0 51.7 6.2
Balance sheet/cash flow. The group incurred capex of about MYR40m
in FY17 to upgrade existing farm facilities and equipment, which was
partially funded by bank borrowings. That said, its net gearing ratio has
been declining progressively from 0.82x in 3Q17 to 0.53x in 4Q18.
ROE. Its ROE surged to 11.5% in FY18, from 1.4% in FY17, on Total assets 468 495 536
significant improvement in earnings. We expect ROE to grow Total c urrent liabilities 150 177 178
progressively moving forward, on anticipated better performance ahead. Total non- c urrent liabilities 73 69 80
Dividend. Its dividend policy is to pay out 20-50% of PAT. Save for Shareholder's equity 246 249 278
FY17 when egg prices were bogged down by industry-wide oversupply, Minority interest 0 0 0
it has been paying above a 20% DPR. Other equity 0 0 0
Management. Mr Nam Yok San has been the Managing Director since
Total debt 150 178 175
2008 and has over 25 years of experience in layer farming business. He
Net debt 116 158 146
is responsible for overseeing the overall operations and directions of the
group. His sibling, Mr Nam Hiok Joo has been the Group General
Manager since Mar 2010, and is involved in decision making and
corporate planning for the group. At the same time, Mr Ng Eng Leng Ca sh Flow (MY Rm) De c - 16 De c - 17 De c - 18
was designated as the Group Financial Controller to lead the group’s Cash flow from operations 40 6 65
finance, costing, accounting and administration functions. Mr Lau Jui
Cash flow from financing activities 16 7 (28)
Peng has been the Executive Chairman since Aug 2013.
Fair value. Our fair value range of MYR1.65-1.76 is based on FY19F

fully diluted (FD) P/E of 14-15x, near +0.5SD from its 3-year historical
average. The ascribed valuation is still lower than the KLSE Consumer
Product Index’s forward P/E of 17x, which is -2SD from its 3-year
historical average. Our valuation is premised on higher egg prices, and
rising demand on growing consumption per capita supported by
capacity upgrade, and potential higher dividend payout. It is trading at
10x FY19F FD P/E (near its 3-year historical mean), lower than sector
weighted average of 11x, with potentially attractive 245% 2-year
earnings CAGR.
Key risks include fluctuation in supply and prices of raw materials, risk
of diseases, fluctuation in egg prices, heightened competition and
export bans on eggs.
40
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1
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to ensure the independence of this report, investors should also be aware that such Hong Kong
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covered by Research Department of RHBSHK and referred to in this research report:
2
RHBSHK hereby certifies that no part of RHBSHK analyst compensation was, is or will
be, directly or indirectly, related to the specific recommendations or views expressed
in this research report.
RHBHK had an investment banking services client relationships during the past 12
months with: -.
RHBHK has received compensation for investment banking services, during the past
12 months from: -.
RHBHK managed/co-managed public offerings, in the past 12 months for: -.
On a principal basis. RHBHK has a position of over 1% market capitalization of: -.
Additionally, please note the following:
Ownership and material conflicts of interest: RHBSHK policy prohibits its analysts
and associates reporting to analysts from owning securities of any company covered
by the analyst.
Analyst as officer or director: RHBSHK policy prohibits its analysts, and associates
reporting to analysts from serving as an officer, director, advisory board member or
employee of any company covered by the analyst.
RHBHK salespeople, traders, and other non-research professionals may provide oral
or written market commentary or trading strategies to RHB clients that reflect opinions
that are contrary to the opinions expressed in this research report.
KUALA LUMPUR JAKARTA

RHB Investment Bank Bhd PT RHB Sekuritas Indonesia
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HONG KONG BANGKOK

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SINGAPORE
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TOP MALAYSIA

SMALL CAP COMPANIES

Alexander Chia, ACA alexander.chia@rhbgroup.com (603) 9280 8889

Alan Lim, CFA alan.lim@rhbgroup.com (603) 9280 8890

Fiona Leong fiona.leong@rhbgroup.com (603) 9280 8886

Hoe Lee Leng, CPA hoe.lee.leng@rhbgroup.com (603) 9280 8860

Jeffrey Tan jeffrey.tan@rhbgroup.com (603) 9280 8863

Lee Meng Horng lee.meng.horng@rhbgroup.com (603) 9280 8866

Lim Jia Yi lim.jia.yi@rhbgroup.com (603) 9280 8873

Lim Sin Kiat, CFA lim.sin.kiat@rhbgroup.com (603) 9280 8879

Loong Kok Wen, CFA loong.kok.wen@rhbgroup.com (603) 9280 8861

Muhammad Afif Bin Zulkaplly muhammad.afif.zulkaplly@rhbgroup.com (603) 9280 8883

Muhammad Syafiq Bin Mohd Salam muhammad.syafiq.mohd@rhbgroup.com (603) 9280 8867

Soong Wei Siang soong.wei.siang@rhbgroup.com (603) 9280 8865

Tay Yow Ken, CFA tay.yow.ken@rhbgroup.com (603) 9280 8682

Chemical Company of Malaysia……………………………………………………………………………………….. 5

Chin Well Holdings………………………………………………………………………………………………………. 7

Dufu Technology Corp……………………………………………………………………………………….…………. 11

Ideal United Bintang International…………………………………………………………………………………….. 21

Mega First Corporation..………………………………………………………………………………………………... 25

Teo Seng Capital………………………………………………………………………………………………………… 39

Real Estate Services

Lee Meng Horng Alexander Chia

Top Malaysia Small Cap Companies 2019

Fitters Diversified 0.58 - 0.69 222.0 na 14.7 0.5 0.5 na na na 4.3

Top Malaysia Small Cap Companies 2019

Guan Chong Ideal United Bintang International

Mega First Corporation Guan Chong

Pentamaster Corporation Revenue Group

Frontken Corporation Dufu Technology Corp

Econpile Holdings Econpile Holdings

RCE Capital RCE Capital

Chin Well Holdings Pentamaster Corporation

Dufu Technology Corp Techbond Group

Teo Seng Capital Frontken Corporation

Kelington Group QES Group

Chemical Company of Malaysia AWC

Revenue Group Dancomech Holdings

Fitters Diversified Teo Seng Capital

AWC Superlon Holdings

QES Group Chin Well Holdings

Dancomech Holdings Chemical Company of Malaysia

Techbond Group Bioalpha Holdings

Superlon Holdings Kelington Group

Bioalpha Holdings Fitters Diversified

Ideal United Bintang International Mega First Corporation

0 1,000 2,000 0% 10% 20% 30% 40%

Source: Bloomberg, RHB Source: Bloomberg, RHB

Top Malaysia Small Cap Companies 2019

Mega First Corporation Econpile Holdings

Revenue Group Chemical Company of Malaysia

Kelington Group RCE Capital

Frontken Corporation Chin Well Holdings

Pentamaster Corporation AWC

Bioalpha Holdings Dufu Technology Corp

Superlon Holdings Superlon Holdings

Fitters Diversified Teo Seng Capital

Techbond Group Frontken Corporation

QES Group Kelington Group

Dancomech Holdings Guan Chong

Chemical Company of Malaysia Mega First Corporation

AWC Bioalpha Holdings

Teo Seng Capital Dancomech Holdings