1、 ed: KK/ sa: WMT, PY, CS Focus on economic revival E Expansionary budget to xpansionary budget to mitigate the impact of COVIDmitigate the impact of COVID- -1919 Extensive soExtensive social assistance and financial aidcial assistance and financial aid to alleviate financial burden to alleviate fina

2、ncial burden End of End of speculation on potential speculation on potential windfall tax windfall tax for for glove playersglove players EndEnd- -2020 KLCI 2020 KLCI target of 1,600 based on 18x CY21 earningstarget of 1,600 based on 18x CY21 earnings Top picks: TOPG, HART, TM, GAM, TDC, IJM, VSTop

3、picks: TOPG, HART, TM, GAM, TDC, IJM, VSI I, , MQREITMQREIT Rebuilding the economy. The first budget presented by the Perikatan Nasional government focuses on reviving the pandemic-hit economy, prioritising expenditure on healthcare, social welfare and economic sustainability to alleviate the financ

4、ial burden during the COVID-19 pandemic. The RM322.5bn (+2.5% y-o-y) total expenditure for Budget 2021 is also the largest in the countrys history. Notably, 2021 net development expenditure is expected to increase by 39% to RM68.2bn, while key operating expenses such as emoluments (+2.3%) and retire

5、ment charges (+2.0%) and debt service charges (+11.6%) will result in 4.3% growth in operating expenses, outpacing projected revenue growth of 4.2% in 2021. Unsurprisingly, the 2021 budget deficit will remain elevated at 5.4%, compared to 6% in 2020 (revised from 3.2%). As at September 2020, governm

6、ent debt accounted for 60.7% of our gross domestic product (GDP) (vs 52.5% in 2019). Improvement expected in 2021. GDP is expected to decline by 4.5% in 2020 before expanding by 6.5%-7.5% in 2021. Budget 2021 places strong emphasis on the wellbeing of the people. 2021 is expected to be a transition

7、year for the nations economic recovery. Various financial aid, subsidies, incentives have also been provided to ameliorate the impact of COVID-19. We believe this could pave the way for an improved economic environment in 2021, in tandem with our strong estimates of 24% earnings recovery for the KLC

8、I next year. In particular, the glove sector stands out in Budget 2021. The government announced that there will be a combined RM400m contribution from the four major glove companies to combat COVID-19, ending the incessant speculation of a potential windfall tax. The construction sector is a key wi

9、nner with the governments commitment and revival of two major transportation infrastructure projects Mass Rapid Transit Line 3 (MRT) 3 and High Speed Rail (HSR). Selective picks. We reiterate our end-2020 KLCI target of 1,600. Strong glove demand and rising selling prices are near-term catalysts for

10、 Top Glove Top Glove Corp Corp (TOPG)(TOPG) and HartalegaHartalega Holdings Holdings (HART)(HART). Gamuda (GAM) Gamuda (GAM) and IJM Corp IJM Corp (IJM) (IJM) are the best proxies for the revival of infrastructure projects. VS VS Industry (VSI)Industry (VSI) is a beneficiary of US-China trade divers

11、ion. We favour beneficiaries of rising data usage like Telekom Malaysia (TM) Telekom Malaysia (TM) and TimTime e dotCom (TDCdotCom (TDC). ). We also like MRCBMRCB- -Quill REIT (MQREIT)Quill REIT (MQREIT) for its attractive dividend yields. KLCIKLCI : : 1,519.641,519.64 Analyst QUAH He Wei, CFA +603

12、2604 3966 Malaysian Research Team +603 2604 3333 Market Key Data (%)(%) EPS GthEPS Gth Div YieldDiv Yield 2019A (8.6) 4.1 2020F (16.9) 3.0 2021F 23.6 3.8 (x)(x) PERPER PBPB 2019A 17.3 1.5 2020F 21.8 1.5 2021F 17.0 1.4 DBS Group Research . Equity DBS Group Research . Equity 9 Nov 2020 Malaysia Market

13、 Focus Malaysian Budget 2021 Refer to important disclosures at the end of this report STOCKS 1212- -mthmth PricePrice Mkt CapMkt Cap TargetTarget Performance (%)Performance (%) RMRM US$mUS$m RMRM 3 mth3 mth 12 mth12 mth RatingRating Top Glove 8.50 16,764 10.20 (9.4) 483.5 BUY Hartalega 18.20 15,107

14、24.80 (4.9) 235.8 BUY Telekom Malaysia 4.20 3,838 5.10 8.3 11.4 BUY Gamuda 3.69 2,246 4.60 8.2 2.2 BUY TIME dotCom 13.22 1,935 14.10 21.7 44.3 BUY IJM Corp 1.45 1,272 2.20 0.7 (31.9) BUY VS Industry 2.44 1,111 2.70 62.7 79.4 BUY MRCB-Quill REIT 0.79 204 1.10 9.8 (21.5) BUY Source: AllianceDBS, Bloom

15、berg Finance L.P. Closing price as of 6 Nov 2020 ed: KK/ sa: WMT, PY, CS Budget 202Budget 2021 1 highlightshighlights Issue / sectorIssue / sector Budget proposalsBudget proposals Impact / viewImpact / view Federal government revenue In 2021, government revenue is projected to increase 4.2% due to i

16、mproving economic growth and business prospects. Petroleum-related revenue contribution to overall revenue is expected to decrease to 16%, assuming US$42 oil price/barrel. Corporate and individual income taxes will cumulatively make up 45% of revenue; continuous fine- tuning of revenue collection in

17、itiatives to enhance revenue base. Federal government operating expenses Operating expenditure (opex) as a % of GDP will narrow to 15.1% in 2021 (2020e: 15.8%). Emoluments (35.7% of opex), retirement charges (11.7%), debt service charges (16.5%) and supplies and services (13.9%) are the largest spen

18、ding components. 12% increase in debt service charges is the key driver for the higher opex in 2021 due to higher government debt. Federal government development expenses Gross development expenditure is projected to increase by 38% to RM69bn from RM50bn in 2020. The transport sector (21.8%) is give

19、n the largest allocation. Allocation for high-impact development projects to promote economic growth and support the livelihoods of the people. Fiscal deficit Fiscal deficit is expected to narrow to 5.4% of GDP, from an expected 6.0% in 2020 (3.4% in 2019). The fiscal deficit value was revised highe

20、r to 6% from an initial 3.2% in 2020 due to additional expenditure to combat COVID-19. GDP growth Official GDP growth estimated at 6.5%-7.5% in 2021. Private consumption expected to grow 9.8%, while government investment expected to grow 17.3% in 2019. Private consumption expected to be the driver o

21、f economic growth. Social assistance Nearly RM28bn will be allocated for subsidies, aids, incentives in the form of transportation, welfare and subsidies to control the price increase of goods and services. To ease the financial burden of individuals and corporates during the pandemic. COVID-19 fund

22、 Ceiling to be raised by an additional RM20bn to RM65bn. RM17bn to be allocated for 2021. Mainly to spend on wage subsidy programme, small scale infrastructure projects, small and medium enterprise (SME) soft loans and food security. Market Focus Malaysia Strategy Page 3 Budget 2021Budget 2021 highl

23、ights (contd)highlights (contd) Issue / sectorIssue / sector Budget proposalsBudget proposals Impact / viewImpact / view Construction Sector is a key winner with the governments commitment and revival of two major transportation infrastructure projects MRT 3 and HSR. HSR is subject to further negoti

24、ations with Singapore. The Johor BahruSingapore Rapid Transit System (RTS) project will continue. Additional allocation for new projects worth RM3.8bn - i) Phase 2 of Klang Third Bridge in Selangor; ii) Central Spine Road with new alignment from Kelantan and Pahang and; iii) upgrading works for Sung

25、ai Marang Bridge in Terengganu; iv) upgrading Federal road linking Gerik, Perak to Kulim, Kedah and; v) upgrading phase of Pulau Indah, Klang ring road Phase 3; vi) Pan Borneo Sabah for package Serusop to Pituru and; vii) Cameron Highlands bypass road. RM780m allocated for five economic corridors; i

26、) Rapid transit bus transport at 3 high capacity routes and construction of busway in Iskandar Regional Development Authority (IRDA), Johor; ii) Palekbang Bridge to Kota Bharu under the East Coast Economic Region (ECER); iii) construction of infrastructure in Yan and Baling, Kedah in the Northern Co

27、rridor Economic Region (NCER); iv) industrial project in Samalaju Industrial Park under Sarawak Corridor of Renewable Energy (SCORE) and; v) Sapangar Bay Container Port (SBCP) in the Sabah Development Corridor (SDC). Extension of tax incentives for some economic corridors. RM150m for raw water trans

28、fer project from Sungai Kesang and Tasik Biru to the Jus reservoir in Malacca. RM1.2bn for affordable housing projects. Employees Provident Fund (EPF) to continue with the RM50bn Kwasa land development. In 2021, Sabah and Sarawak will receive development expenditure allocation of RM5.1bn and RM4.5bn

29、 respectively for the building and upgrading of water, electricity, road infrastructure, health and education facilities. RM2.7bn for rural infrastructure improvement. Budget 2021 was a major turning point and positive milestone for the construction sector after a long lull. As expected, most signif

30、icant is the revival of MRT 3 and HSR with an estimated combined value of RM80-90bn (MRT 3 RM21bn and HSR RM60- 70bn). This indicates the governments willingness to pump prime the economy which will benefit the large listed contractors. The next milestones to watch out for are the medium term recove

31、ry plan in December 2020 and 12 th Malaysia Plan in January 2021. This may provide more details on timeline, structure and funding. The biggest beneficiary from MRT 3 and HSR is Gamuda. For MRT 3, the MMC- Gamuda joint venture (JV) could be the front runner for a project delivery partner (PDP) role

32、or turnkey structure. We expect them to win the lucrative RM12bn tunnelling portion. For HSR, prior to General election (GE14) MMC-Gamuda were awarded the PDP role for the northern portion. The allocation for Sabah and Sarawak development expenditure is also positive and will be timely for the upcom

33、ing Sarawak elections. Key Industrialised Building System (IBS) tax beneficiaries are Gamuda and Kimlun. Our other picks are IJM and Sunway Construction. Market Focus Malaysia Strategy Page 4 Budget 202Budget 2021 1 highlights (contd)highlights (contd) Issue / sectorIssue / sector Budget proposalsBu

34、dget proposals Impact / Impact / viewview Property Full stamp duty exemption on instruments of transfer and loan agreements for first time home buyers extended until December 2025; limit raised to RM500k. 5-year extension of stamp duty exemption on loan agreements and instruments of transfer to resc

35、uing contractors and original house purchasers of abandoned housing projects. RM1.2bn allocation to provide affordable housing under government agencies. Collaboration between government and financial institutions to provide Rent-to-Own Scheme. . Positive initiatives to boost home ownership but unli

36、kely to resolve the supply glut issue. Tourism / Aviation 500 jobs for Orang Asli and local communities to become tour guides in all national parks. RM35m for the Malaysia Healthcare Travel Council (MHTC). Special RM1,000 grant for traders, taxi drivers, e-hailing drivers and tour guides in Sabah Hu

37、man Resource Development Fund (HRDF) levy exemptions for six months, applicable to companies in the tourism sector and those still affected by COVID-19. To sustain tourist hotspots, RM50m is allocated for the maintenance and repairs of tourism facilities all over the country. RM20m has also been all

38、ocated to improve infrastructure and promote Cultural Villages in Terengganu, Melaka, Sarawak and Negeri Sembilan. Proposals are domestic driven to support the tourism sector affected during the COVID-19 outbreak. Although this may help the industry, re-rating catalysts could only emerge after the r

39、eopening of international borders. Telecom RM1.5bn will be allocated for Program Jaringan PRIHATIN to ease the financial burden of the Bottom 40% (B40) income for internet access. Starting in 1Q21, about 8m people from the B40 group will receive RM180/person in the form of telecommunication company

40、(telco) credits. Telcos will also provide RM1.5bn worth of free data to subscribers. RM500m is allocated in 2021 to carry out initiatives under the JENDELA initiative to improve connectivity of 430 schools in Malaysia. MCMC is also allocating RM7.4bn in 2021 and 2022 to increase broadband coverage.

41、GLC and GLIC will contribute RM150m to Tabung CERDIK to fund free laptops for 150,000 students in 500 schools. Through Bank Pembangunan, Government will undertake Industry Digitalisation Transformation Scheme worth RM1bn to spur digitalisation activities till 31 December 2023. Mildly positive for mo

42、bile operators as this might reduce involuntary churn in the near-term. RM7.4bn allocation from Malaysian Communications and Multimedia Commission (MCMC) will benefit fixed- line operators in increasing high-speed broadband coverage. Technology RM1bn package allocated to attract high value-added and

43、 technology investments. This will support research and development (R Disallow transhipment of cigarettes and re-export of cigarettes by small boats including kumpit and instead be allowed only in ISO containers; and Making cigarettes and tobacco products as taxable goods in all Duty-Free Islands a

44、nd any free zones that have been permitted retail sale of duty free cigarettes The impact to legal tobacco players such as British American Tobacco is minimal in near term because 1) as the bulk of illegal market share still comes from illicit conventional cigarettes and 2) It takes time to penetrat

45、e vape market as there is already a number of existing players in the market The effectiveness of limited transhipment activities to certain ports remain to be seen as illegal market share is still high even during the lockdown period which can be seen in 2Q20 and 3Q20 performance Market Focus Malay

46、sia Strategy Page 6 Key economic indicatorsKey economic indicators 20192019 20202020 20212021 RMmRMm % % chgchg RMmRMm % % chgchg RMmRMm % chg% chg Gross Domestic Product Gross Domestic Product (constant 2015 prices)(constant 2015 prices) 1,421,454 1,421,454 4.3 4.3 1,357,731 1,357,731 (4.5)(4.5) 1,

47、450,830 1,450,830 6.56.5- - 7.5 7.5 Agriculture 101,549 2.0 100,344 (1.2) 105,086 4.7 Mining and quarrying 101,438 (2.0) 93,568 (7.8) 97,404 4.1 Manufacturing 316,320 3.8 306,845 (3.0) 328,215 7.0 Construction 66,266 0.1 53,859 (18.7) 61,340 13.9 Services 820,069 6.1 789,379 (3.7) 844,554 7.0 Import

48、 duties 15,812 (1.2) 13,736 (13.1) 14,231 3.6 Gross Domestic Product (current prices)Gross Domestic Product (current prices) 1,510,693 1,510,693 4.4 4.4 1,439,374 1,439,374 (4.7)(4.7) 1,568,104 1,568,104 8.68.6- - 9.6 9.6 Federal Government FinanceFederal Government Finance Revenue 264,415 13.5 227,270 (14.0) 236,900 4.2 Operating expenditure 263,343 14.0 226,720 (13.9) 236,540 4.3 Current balance 1,0721,072 550550 360360 Development expenditure 52,570 -4.9 49,000 (6.8) 68,200 39.2 COVID-1