0.

85

August 12, 2019

Leong Hup International (LHIB MK)

BUY
Issues profit warning Share Price MYR 0.85
12m Price Target MYR 1.08 (+27%)
Previous Price Target MYR 1.37

Still a good regional play; BUY with 20% lower TP Company Description
Consumer Discretionary

The company is an integrated poultry player with

What has negatively surprised us is that poultry ASPs have been much
operations across Malaysia, Singapore, Indonesia,
weaker than we expected, particularly in Malaysia, offsetting the
Vietnam and the Philippines
increase in production volume. Taking LHIB’s profit warning into account,
we have cut our FY19-21E net profit by 20-24% ahead of its 2Q19 results
release and lowered our TP by 20% to MYR1.08. Commodity price
Statistics
volatility aside, the group’s regional expansion is bearing fruit, as borne
52w high/low (MYR) na/na
out by the growth in production volumes, and LHIB is still one of
3m avg turnover (USDm) 2.6
Malaysia’s better regional plays, in our view. BUY maintained.
Free float (%) 27.4
Issued shares (m) 3,650
Expects significantly lower YoY net profit
Market capitalisation MYR3.1B
Management cautions, in a Bursa announcement, that the group will USD741M
record significantly lower YoY net profit in 2Q19, largely as a result of Major shareholders:
the drop in average selling prices (ASPs), particularly in Malaysia. LHIB’s Emerging Glory 52.8%
ASP for day-old-chicks (DOC) in Malaysia was MYR1.21/DOC in 2Q19 (low Clarinden Investments 9.0%
of MYR0.90), down 39% YoY from MYR1.97/DOC in 2Q18. The ASP for na na
Malaysia

Malaysian broilers was MYR3.99/kg in 2Q19 (low of MYR2.60/kg), down Price Performance
1.15 105
15% YoY from MYR4.68/kg in 2Q18.
1.10 100
Sales volume, nevertheless, rose
1.05 95
Management highlighted that overall 2Q19 sales volume for feed, DOCs,
1.00 90
broilers and eggs increased YoY by 13.9%, 8.1%, 10.7% and 5.9%,
respectively. Feed growth was strong, led by capacity expansion in 0.95 85

Malaysia and Vietnam, in 2018. Operating costs were stable but with 0.90 80
falling ASPs, overall margins contracted in 2Q19.
0.85 75
May-19 May-19 Jun-19 Jun-19 Jul-19 Jul-19 Aug-19
Cut forecasts and TP Leong Hup Int'l - (LHS, MYR)
Leong Hup Int'l / Kuala Lumpur Composite Index - (RHS, %)
Taking into account the profit warning, we have cut our net profit
forecasts by 24%/21%/20% for FY19/20/21E on expectations of lower -1M -3M -12M
operating margins. To note that Malaysia’s DOC and broiler ASPs Absolute (%) (10) na na
rebounded by about 32% in July 2019 from the average in 2Q19 and Relative to index (%) (6) na na
should provide some support to earnings in 2H19, if sustained. Assuming Source: FactSet
constant ASPs, we expect capacity expansion to drive topline growth into
FY21. Our revised TP of MYR1.08 remains pegged to the regional peer
average FY20 PER of 17x.

FYE Dec (MYR m) FY17A FY18A FY19E FY20E FY21E

Revenue 5,501 5,747 6,137 6,600 7,094
EBITDA 583 655 696 764 836
Core net profit 193 225 197 232 266
Core EPS (sen) 5.3 6.2 5.4 6.3 7.3
Core EPS growth (%) 5.5 16.8 (12.5) 17.8 14.9
Net DPS (sen) 0.0 0.0 1.6 1.9 2.2
Core P/E (x) na na 15.8 13.4 11.7
P/BV (x) na na 1.8 1.7 1.5
Net dividend yield (%) na na 1.9 2.2 2.6
ROAE (%) 15.4 15.0 13.0 12.9 13.5
ROAA (%) 4.4 4.8 3.8 4.0 4.2
EV/EBITDA (x) 9.0 8.4 7.8 7.3 6.8
Net gearing (%) (incl perps) 103.0 108.3 79.1 73.6 66.4
Consensus net profit - - 247 272 319
MKE vs. Consensus (%) - - (20.2) (14.7) (16.7)

Desmond Ch'ng, ACA Jade Tam

[email protected] [email protected]
(603) 2297 8680 (603) 2297 8687

THIS REPORT HAS BEEN PREPARED BY MAYBANK INVESTMENT BANK BERHAD PP16832/01/2013 (031128)
SEE PAGE 7 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS
Leong Hup International

Fig 1: Regional and domestic peer comparisons

Stock Shr px * Mkt cap PER PER P/B P/B 2-yr EPS 2-yr ROAE ROAE Net
(x) (x) (x) (x) CAGR PEG (%) (%) yield (%)
(Local) (MYR) CY19F CY20F CY19F CY20F (%) (x) CY19F CY20F CY19F
Leong Hup 0.85 3,103 15.5 13.2 1.8 1.6 2.4 6.6 13.3 13.1 1.9

CP Foods ^ 27.75 31,668 19.0 17.7 1.4 1.3 (6.6) (2.9) 7.4 8.2 2.4
CP Indo 4,940 23,321 22.8 19.3 3.8 3.4 (3.9) (5.8) 17.2 17.4 2.0
Japfa Ltd 0.49 2,667 10.3 8.2 0.8 0.7 (11.1) (0.9) 7.0 9.0 2.3
Japfa Comfeed 1,565 5,283 10.5 9.2 1.7 1.5 (3.9) (2.7) 16.1 17.2 3.1
GFPT 18.50 3,074 16.3 14.3 1.7 1.6 25.0 0.7 10.7 10.9 1.7
Regional wtd avg 66,013 19.2 17.0 2.3 2.0 (4.2) (4.6) 11.7 12.1

Source: Bloomberg, Maybank KE

August 12, 2019 2

Leong Hup International

Key risk factors

Obtaining proper business certifications

Leong Hup is still in the midst of obtaining the relevant Certificate of Complete
and Compliance (CCC) for the right to occupy any building or part thereof for all
its 137 farms and hatcheries in Malaysia. Similarly, in Indonesia, local regulations
require a Certificate of Feasible Function for the right to occupy and utilise a
building, but as of Mar 2019, 70 of the buildings under Malindo Group had yet to
obtain proper land use certification. Without proper compliance to certification
requirements, Leong Hup’s Malaysian and Indonesian operations are at the risk of
being halted and possibly receiving penalties.

Interruptions in breeding stock supply

Leong Hup imports its entire Broiler breeding stock (GPS DOCs) from its suppliers,
Cobb-Vantress and Aviagen. Given the limited number of breeders available
worldwide, Leong Hup’s supply of GPS DOCs could be disrupted if either Cobb-
Vantress or Aviagen are unable to supply GPS DOCs for commercial reasons or
because of an adverse event impacting their own businesses; this, in turn would
slow Leong Hup’s supply of parent stock (PS) DOCs for its breeding business,
ultimately causing delays to its entire supply chain.

Livestock disease outbreak

An outbreak of livestock disease (e.g. Avian Influenza) in any of the group’s
operating countries could be detrimental to profitability, as all the birds within
an infected area must be culled to ensure that the virus remains in the
containment zone. Additionally, any disease outbreak could affect consumer
sentiment, decreasing demand for poultry food products for an extended period
of time. Leong Hup does not have insurance coverage against losses resulting
from livestock disease as such policies are scarce and not customary in its
country of operations.

Raw material price volatility

Corn and soybean meal are commodities heavily used in the feedmill business.
Leong Hup imports the majority of both its corn and soybean meal requirements.
Hence, as both corn and soybean meal are traded on the international market, it
is vital for management to monitor fluctuations in prices and availability to
manage its raw material costs.

Dependence on foreign workers

Poultry farming is labour intensive. As at 30 Jun 2018, 49.8% of Leong Hup’s
employees in Malaysia were foreign workers from Indonesia, Nepal and
Bangladesh, while 56.6% of its employees in Singapore were from Malaysia, China
and Indonesia. Day-to-day operations may be disrupted should there be any
changes in labour regulations or difficulties in recruiting foreign workers.

Interests of controlling shareholder

Emerging Glory is a controlling shareholder and through its ability to influence
the election of Leong Hup’s Directors, will have control over matters concerning
the group. There is no guarantee that its interests will remain aligned with those
of other shareholders of the group.

August 12, 2019 3

Leong Hup International

FYE 31 Dec FY17A FY18A FY19E FY20E FY21E

Key Metrics
P/E (reported) (x) na na 15.8 13.4 11.7
Core P/E (x) na na 15.8 13.4 11.7
P/BV (x) na na 1.8 1.7 1.5
P/NTA (x) na na 1.9 1.7 1.6
Net dividend yield (%) na na 1.9 2.2 2.6
FCF yield (%) na na nm 1.2 3.3
EV/EBITDA (x) 9.0 8.4 7.8 7.3 6.8
EV/EBIT (x) 13.7 12.0 11.3 10.5 9.7

INCOME STATEMENT (MYR m)

Revenue 5,501.4 5,746.6 6,136.9 6,600.3 7,093.9
Gross profit 912.6 1,005.8 1,031.3 1,112.6 1,200.3
EBITDA 583.1 654.6 696.0 763.9 835.6
Depreciation (189.1) (189.9) (208.7) (227.8) (244.0)
Amortisation (10.0) (7.2) (7.2) (7.2) (7.2)
EBIT 384.0 457.5 480.1 528.9 584.4
Net interest income /(exp) (92.2) (109.5) (116.8) (126.7) (134.5)
Associates & JV 0.5 0.6 0.6 0.7 0.7
Pretax profit 292.3 348.6 363.9 402.9 450.5
Income tax (44.9) (101.8) (81.9) (90.7) (101.4)
Minorities (54.8) (60.6) (85.3) (80.7) (83.0)
Reported net profit 192.6 186.2 196.7 231.6 266.1
Core net profit 192.6 224.9 196.7 231.6 266.1

BALANCE SHEET (MYR m)

Cash & Short Term Investments 502.4 458.9 704.5 934.7 1,219.3
Accounts receivable 564.0 649.2 695.9 750.8 804.1
Inventory 516.8 575.6 655.3 667.8 753.2
Reinsurance assets 0.0 0.0 0.0 0.0 0.0
Property, Plant & Equip (net) 2,045.8 2,216.8 2,420.4 2,592.9 2,749.1
Intangible assets 106.5 97.3 97.0 96.7 96.4
Investment in Associates & JVs 1.6 1.7 1.7 1.7 1.7
Other assets 740.3 834.5 928.2 986.9 1,048.5
Total assets 4,477.5 4,834.0 5,503.0 6,031.3 6,672.4
ST interest bearing debt 1,419.1 1,326.6 1,465.4 1,633.0 1,800.6
Accounts payable 242.2 248.9 310.6 290.8 355.1
Insurance contract liabilities 0.0 0.0 0.0 0.0 0.0
LT interest bearing debt 774.4 1,044.3 1,030.3 1,145.5 1,260.7
Other liabilities 400.0 449.0 433.0 456.0 480.0
Total Liabilities 2,835.5 3,068.6 3,239.5 3,525.1 3,896.8
Shareholders Equity 1,185.6 1,301.8 1,714.5 1,876.6 2,062.9
Minority Interest 456.4 463.6 548.9 629.6 712.6
Total shareholder equity 1,642.0 1,765.4 2,263.4 2,506.2 2,775.6
Total liabilities and equity 4,477.5 4,834.0 5,503.0 6,031.3 6,672.4

CASH FLOW (MYR m)

Pretax profit 292.3 348.6 363.9 402.9 450.5
Depreciation & amortisation 199.1 197.1 215.9 235.0 251.2
Cash taxes paid (44.9) (101.8) (81.9) (90.7) (101.4)
Other operating cash flow 0.0 0.0 0.0 0.0 0.0
Cash flow from operations 405.5 289.0 335.5 436.2 501.1
Capex (281.8) (397.1) (412.0) (400.0) (400.0)
Free cash flow 123.7 (108.1) (76.5) 36.2 101.1
Dividends paid (459.7) (50.0) (59.0) (69.5) (79.8)
Equity raised / (purchased) 0.0 (0.0) 275.0 0.0 0.0
Change in Debt 562.8 178.1 124.7 282.8 282.8
Other invest/financing cash flow (137.4) (63.6) (18.6) (19.4) (19.4)
Net cash flow 89.4 (43.5) 245.6 230.2 284.7

August 12, 2019 4

Leong Hup International

FYE 31 Dec FY17A FY18A FY19E FY20E FY21E

Key Ratios
Growth ratios (%)
Revenue growth 4.6 4.5 6.8 7.6 7.5
EBITDA growth (9.8) 12.3 6.3 9.8 9.4
EBIT growth (14.6) 19.1 5.0 10.2 10.5
Pretax growth (15.8) 19.3 4.4 10.7 11.8
Reported net profit growth 5.5 (3.3) 5.6 17.8 14.9
Core net profit growth 5.5 16.8 (12.5) 17.8 14.9

Profitability ratios (%)

EBITDA margin 10.6 11.4 11.3 11.6 11.8
EBIT margin 7.0 8.0 7.8 8.0 8.2
Pretax profit margin 5.3 6.1 5.9 6.1 6.4
Payout ratio 0.0 0.0 30.0 30.0 30.0

DuPont analysis
Net profit margin (%) 3.5 3.2 3.2 3.5 3.8
Revenue/Assets (x) 1.2 1.2 1.1 1.1 1.1
Assets/Equity (x) 3.8 3.7 3.2 3.2 3.2
ROAE (%) 15.4 15.0 13.0 12.9 13.5
ROAA (%) 4.4 4.8 3.8 4.0 4.2

Liquidity & Efficiency

Cash conversion cycle 57.8 60.8 63.1 63.1 63.1
Days receivable outstanding 35.7 38.0 39.5 39.5 39.5
Days inventory outstanding 41.7 41.5 43.4 43.4 43.4
Days payables outstanding 19.6 18.6 19.7 19.7 19.7
Dividend cover (x) nm nm 3.3 3.3 3.3
Current ratio (x) 1.1 1.2 1.3 1.4 1.4

Leverage & Expense Analysis

Asset/Liability (x) 1.6 1.6 1.7 1.7 1.7
Net gearing (%) (incl perps) 103.0 108.3 79.1 73.6 66.4
Net gearing (%) (excl. perps) 103.0 108.3 79.1 73.6 66.4
Net interest cover (x) 4.2 4.2 4.1 4.2 4.3
Debt/EBITDA (x) 3.8 3.6 3.6 3.6 3.7
Capex/revenue (%) 5.1 6.9 6.7 6.1 5.6
Net debt/ (net cash) 1,691.1 1,912.1 1,791.2 1,843.8 1,841.9
Source: Company; Maybank

August 12, 2019 5

Leong Hup International

Research Offices
REGIONAL MALAYSIA SINGAPORE THAILAND
Sadiq CURRIMBHOY WONG Chew Hann, CA Head of Research Neel SINHA Head of Research Maria LAPIZ Head of Institutional Research
Regional Head of Research & Economics (603) 2297 8686 [email protected] (65) 6231 5838 [email protected] Dir (66) 2257 0250 | (66) 2658 6300 ext 1399
(65) 6231 5836 • Strategy • Strategy • Industrials [email protected]
[email protected] • SMID Caps – Regional • Strategy • Consumer • Materials • Services
Desmond CH’NG, ACA
CHUA Su Tye Teerapol Udomvej, CFA
WONG Chew Hann, CA (603) 2297 8680
(65) 6231 5842 [email protected] (66) 2658 6300 ext 1394
Regional Head of Institutional Research [email protected]
• REITs [email protected]
(603) 2297 8686 • Banking & Finance
• Healthcare
[email protected] Luis HILADO
LIAW Thong Jung Ekachai TARAPORNTIP Head of Retail Research
(603) 2297 8688 [email protected] (65) 6231 5848 [email protected] (66) 2658 5000 ext 1530
ONG Seng Yeow • Telcos • Transport
• Oil & Gas Services- Regional [email protected]
Regional Head of Retail Research
(65) 6231 5839 LAI Gene Lih, CFA Sutthichai KUMWORACHAI Deputy Head
ONG Chee Ting, CA (66) 2658 5000 ext 1400
[email protected] (65) 6231 5832 [email protected]
(603) 2297 8678 [email protected] [email protected]
• Technology • Healthcare
• Plantations - Regional • Energy • Petrochem
ECONOMICS
Thilan WICKRAMASINGHE Surachai PRAMUALCHAROENKIT
Mohshin AZIZ (65) 6231 5840 [email protected]
Suhaimi ILIAS (603) 2297 8692 [email protected] (66) 2658 5000 ext 1470
Chief Economist • Banks • Consumer [email protected]
• Aviation - Regional • Petrochem
Malaysia | Philippines | China • Auto • Conmat • Contractor • Steel
(603) 2297 8682 SZE Jia Min
YIN Shao Yang, CPA (65) 6231 5845 [email protected] Suttatip PEERASUB
[email protected] (603) 2297 8916 [email protected] (66) 2658 5000 ext 1430
• Consumer
• Gaming – Regional • Media [email protected]
CHUA Hak Bin • Media • Commerce
Regional Thematic Macroeconomist INDIA
TAN Chi Wei, CFA Termporn TANTIVIVAT
(65) 6231 5830 (603) 2297 8690 [email protected] Jigar SHAH Head of Research (66) 2658 5000 ext 1520
[email protected] • Power • Telcos (91) 22 4223 2632 [email protected] [email protected]
LEE Ju Ye • Strategy • Oil & Gas • Automobile • Cement • Property
WONG Wei Sum, CFA
Singapore | Thailand Jaroonpan WATTANAWONG
(603) 2297 8679 [email protected] Neerav DALAL
(65) 6231 5844 (66) 2658 5000 ext 1404
• Property (91) 22 4223 2606 [email protected]
[email protected] [email protected]
LEE Yen Ling • Software Technology • Telcos • Transportation • Small cap
Linda LIU (603) 2297 8691 [email protected] Thanatphat SUKSRICHAVALIT
Singapore | Vietnam • Glove • Ports • Shipping • Healthcare Vishal PERIWAL (66) 2658 5000 ext 1401
(65) 6231 5847 (91) 22 4223 2605 [email protected]
[email protected] Ivan YAP [email protected] • Media • Electronics
(603) 2297 8612 [email protected] • Infrastructure Sorrabhol VIRAMETEEKUL
Dr Zamros DZULKAFLI • Automotive • Semiconductor • Technology
(603) 2082 6818 Head of Digital Research
Kshitiz PRASAD (66) 2658 5000 ext 1550
[email protected] Kevin WONG (91) 22 4223 2607 [email protected]
(603) 2082 6824 [email protected] [email protected] • Food, Transportation
Ramesh LANKANATHAN • REITs • Consumer Discretionary
(603) 2297 8685 • Banks Wijit ARAYAPISIT
[email protected] Adrian WONG, CFA (66) 2658 5000 ext 1450
(603) 2297 8675 [email protected] INDONESIA [email protected]
FX • Constructions
• Strategist
Isnaputra ISKANDAR Head of Research
(62) 21 8066 8680 Kritsapong PATAN
Saktiandi SUPAAT
Jade TAM [email protected] (66) 2658 5000 ext 1310
Head of FX Research
(603) 2297 8687 [email protected] • Strategy • Metals & Mining • Cement [email protected]
(65) 6320 1379
• Consumer Staples • Chartist
[email protected] Rahmi MARINA
Mohd Hafiz HASSAN (62) 21 8066 8689 VIETNAM
Christopher WONG
(603) 2082 6819 [email protected] [email protected]
(65) 6320 1347 LE Hong Lien, ACCA
• Building Materials • Small & Mid Caps • Banking & Finance
[email protected] Head of Institutional Research
Aurellia SETIABUDI
Amirah AZMI (84 28) 44 555 888 x 8181
Tan Yanxi (62) 21 8066 8691
(603) 2082 8769 [email protected] [email protected]
(65) 6320 1378 [email protected]
• Media • Plantations • Strategy • Consumer • Diversified
[email protected] • Property
Janni ASMAN LE Nguyen Nhat Chuyen
Fiona LIM TEE Sze Chiah Head of Retail Research (84 28) 44 555 888 x 8082
(603) 2082 6858 [email protected] (62) 21 8066 8687
(65) 6320 1374 [email protected]
[email protected]
[email protected] • Oil & Gas
Nik Ihsan RAJA ABDULLAH, MSTA, CFTe • Cigarette • Healthcare • Retail
STRATEGY (603) 2297 8694 Luthfi RIDHO QUAN Trong Thanh
[email protected] (62) 21 8066 8690 (84 28) 44 555 888 x 8184
Sadiq CURRIMBHOY [email protected] [email protected]
Global Strategist • Economics • Banks
(65) 6231 5836 NGUYEN Thi Ngan Tuyen
[email protected] PHILIPPINES Head of Retail Research
Minda OLONAN Head of Research (84 28) 44 555 888 x 8081
Willie CHAN
(63) 2 849 8840 [email protected]
Hong Kong | Regional • Food & Beverage • Oil&Gas • Banking
(852) 2268 0631 [email protected]
[email protected] • Strategy • Conglomerates TRUONG Quang Binh
Katherine TAN Deputy Head of Retail Research
FIXED INCOME (63) 2 849 8843 (84 28) 44 555 888 x 8087
[email protected] [email protected]
Winson PHOON, ACA • Banks • Conglomerates • Ports • Rubber Plantation • Tyres & Tubes • Oil & Gas
(65) 6812 8807
[email protected] Luis HILADO TRINH Thi Ngoc Diep
(65) 6231 5848 [email protected] (84 28) 44 555 888 x 8208
Se Tho Mun Yi • Telcos [email protected]
(603) 2074 7606 • Technology • Utilities • Construction
[email protected] Romel LIBO-ON
NGUYEN Thi Sony Tra Mi
(63) 2 849 8844 (84 28) 44 555 888 x 8084
[email protected]
[email protected]
• Property
• Port Operation • Pharmaceutical
Kayzer LLANDA • Food & Beverage
(63) 2 849 8839 NGUYEN Thanh Lam
[email protected] (84 28) 44 555 888 x 8086
• Utilities [email protected]
• Technical Analysis

August 12, 2019 6

Leong Hup International

APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES

DISCLAIMERS
This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation
of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions
or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different
methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns
may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does
not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek
financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.
The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its
subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such.
Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives” ) shall not be liable for any direct, indirect or consequential
losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior
notice.
This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”,
“forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such
forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to
differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims
any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of
unanticipated events.
MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or
invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or
other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in
the material presented in this report. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report to the extent
permitted by law.
This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or
manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect.
This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where
such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such circumstances as may be permitted by applicable law.
The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional
disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report.
Malaysia
Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations
apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.
Singapore
This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no
obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising
from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore
Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law.
Thailand
Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of Maybank Kim Eng Securities (Thailand)
Public Company Limited. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) accepts no liability whatsoever for the actions of third parties in this respect.
Due to different characteristics, objectives and strategies of institutional and retail investors, the research reports of MBKET Institutional and Retail Research Department may differ in
either recommendation or target price, or both. MBKET Retail Research is intended for retail investors (http://kelive.maybank-ke.co.th) while Maybank Kim Eng Institutional Research is
intended only for institutional investors based outside Thailand only.
The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and
Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the
public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside
information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. MBKET does
not confirm nor certify the accuracy of such survey result.
The disclosure of the Anti-Corruption Progress Indicators of a listed company on the Stock Exchange of Thailand, which is assessed by Thaipat Institute, is made in order to comply with the
policy and sustainable development plan for the listed companies of the Office of the Securities and Exchange Commission. Thaipat Institute made this assessment based on the information
received from the listed company, as stipulated in the form for the assessment of Anti-corruption which refers to the Annual Registration Statement (Form 56-1), Annual Report (Form 56-2),
or other relevant documents or reports of such listed company. The assessment result is therefore made from the perspective of Thaipat Institute that is a third party. It is not an assessment
of operation and is not based on any inside information. Since this assessment is only the assessment result as of the date appearing in the assessment result, it may be changed after that
date or when there is any change to the relevant information. Nevertheless, MBKET does not confirm, verify, or certify the accuracy and completeness of the assessment result.
US
This third-party research report is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended)
only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All
responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. This report is not directed at you if MKE is prohibited or restricted by any
legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material
concerning investments to you under relevant legislation and regulations. All U.S. persons receiving and/or accessing this report and wishing to effect transactions in any security mentioned
within must do so with: Maybank Kim Eng Securities USA Inc. 400 Park Avenue, 11th Floor, New York, New York 10022, 1-(212) 688-8886 and not with, the issuer of this report.

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Leong Hup International

UK
This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Conduct Authority and is for
Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any
inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the
individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own
independent tax advisers.
DISCLOSURES

Legal Entities Disclosures

Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938- H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of
Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This report is distributed in Singapore by Maybank KERPL (Co. Reg No 198700034E) which is
regulated by the Monetary Authority of Singapore. Indonesia: PT Maybank Kim Eng Securities (“PTMKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is
regulated by the Financial Services Authority (Indonesia). Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of
Finance and the Securities and Exchange Commission. Philippines: Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities
and Exchange Commission. Vietnam: Maybank Kim Eng Securities Limited (License Number: 117/GP-UBCK) is licensed under the State Securities Commission of Vietnam. Hong Kong: KESHK
(Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of
India Limited and the Bombay Stock Exchange and is regulated by Securities and Exchange Board of India (“SEBI”) (Reg. No. INZ000010538). KESI is also registered with SEBI as Category 1
Merchant Banker (Reg. No. INM 000011708) and as Research Analyst (Reg No: INH000000057) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID
27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Conduct Authority.

Disclosure of Interest
Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may
have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to
those companies.

Singapore: As of 12 August 2019, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.

Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore,
Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have
interests and/or underwriting commitments in the securities mentioned in this report.

Hong Kong: As of 12 August 2019, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.

India: As of 12 August 2019, and at the end of the month immediately preceding the date of publication of the research report, KESI, authoring analyst or their associate / relative does not
hold any financial interest or any actual or beneficial ownership in any shares or having any conflict of interest in the subject companies except as otherwise disclosed in the research
report.
In the past twelve months KESI and authoring analyst or their associate did not receive any compensation or other benefits from the subject companies or third party in connection with the
research report on any account what so ever except as otherwise disclosed in the research report.
MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the
entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned
or a related investment and may receive compensation for the services provided from the companies covered in this report.

OTHERS
Analyst Certification of Independence
The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s
compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.
Reminder
Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and
assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and
forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a
structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.

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Leong Hup International

Historical recommendations and target price: Leong Hup International (LHIB MK)

25 Jun
Buy : RM1.4
1.2

1.1

1.1

1.0

1.0

0.9

0.9

0.8
May-19 Aug-19
Leong Hup International

Definition of Ratings
Maybank Kim Eng Research uses the following rating system
BUY Return is expected to be above 10% in the next 12 months (excluding dividends)
HOLD Return is expected to be between - 10% to +10% in the next 12 months (excluding dividends)
SELL Return is expected to be below -10% in the next 12 months (excluding dividends)

Applicability of Ratings
The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only
applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment
ratings as we do not actively follow developments in these companies.

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Leong Hup International

 Malaysia  Singapore  London  New York

Maybank Investment Bank Berhad Maybank Kim Eng Securities Pte Ltd Maybank Kim Eng Securities Maybank Kim Eng Securities USA
(A Participating Organisation of Maybank Kim Eng Research Pte Ltd (London) Ltd Inc
Bursa Malaysia Securities Berhad) 50 North Canal Road PNB House 400 Park Avenue, 11th Floor
33rd Floor, Menara Maybank, Singapore 059304 77 Queen Victoria Street New York, New York 10022,
100 Jalan Tun Perak, London EC4V 4AY, UK U.S.A.
50050 Kuala Lumpur Tel: (65) 6336 9090
Tel: (603) 2059 1888; Tel: (44) 20 7332 0221 Tel: (212) 688 8886
Fax: (603) 2078 4194 Fax: (44) 20 7332 0302 Fax: (212) 688 3500

Stockbroking Business:  Hong Kong  Indonesia  India

Level 8, Tower C, Dataran Maybank,
Kim Eng Securities (HK) Ltd PT Maybank Kim Eng Securities Kim Eng Securities India Pvt Ltd
No.1, Jalan Maarof 28/F, Lee Garden Three, Sentral Senayan III, 22nd Floor 1101, 11th floor, A Wing, Kanakia
59000 Kuala Lumpur
1 Sunning Road, Causeway Bay, Jl. Asia Afrika No. 8 Wall Street, Chakala, Andheri -
Tel: (603) 2297 8888
Hong Kong Gelora Bung Karno, Senayan Kurla Road, Andheri East,
Fax: (603) 2282 5136
Jakarta 10270, Indonesia Mumbai City - 400 093, India
Tel: (852) 2268 0800
Fax: (852) 2877 0104 Tel: (62) 21 2557 1188 Tel: (91) 22 6623 2600
Fax: (62) 21 2557 1189 Fax: (91) 22 6623 2604

 Philippines  Thailand  Vietnam  Saudi Arabia

Maybank ATR Kim Eng Securities Inc. Maybank Kim Eng Securities Maybank Kim Eng Securities Limited In association with
17/F, Tower One & Exchange Plaza (Thailand) Public Company Limited 4A-15+16 Floor Vincom Center Dong Anfaal Capital
Ayala Triangle, Ayala Avenue 999/9 The Offices at Central World, Khoi, 72 Le Thanh Ton St. District 1 Villa 47, Tujjar Jeddah
Makati City, Philippines 1200 20th - 21st Floor, Ho Chi Minh City, Vietnam Prince Mohammed bin Abdulaziz
Rama 1 Road Pathumwan, Street P.O. Box 126575
Tel: (63) 2 849 8888 Bangkok 10330, Thailand Tel : (84) 844 555 888 Jeddah 21352
Fax: (63) 2 848 5738 Fax : (84) 8 38 271 030
Tel: (66) 2 658 6817 (sales) Tel: (966) 2 6068686
Tel: (66) 2 658 6801 (research) Fax: (966) 26068787

 South Asia Sales Trading  North Asia Sales Trading

Kevin Foy Andrew Lee
Regional Head Sales Trading [email protected]
[email protected] Tel: (852) 2268 0283
Tel: (65) 6636-3620 US Toll Free: 1 877 837 7635
US Toll Free: 1-866-406-7447

Indonesia London
Iwan Atmadjaja Greg Smith
[email protected] [email protected]
(62) 21 8066 8555 Tel: (44) 207-332-0221

New York India

James Lynch Sanjay Makhija
[email protected] [email protected]
Tel: (212) 688 8886 Tel: (91)-22-6623-2629

Philippines
Keith Roy
[email protected]
Tel: (63) 2 848-5288

www.maybank-ke.com | www.maybank-keresearch.com

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