CAHYA MATA SARAWAK ANNUAL REPORT 2016

www.cmsb .com.my Section 03 P E R F O RMAN C E 2 0 1 6 Cahya Mata Sarawak Berhad 30 STRATEGIC INVESTMENTS – LISTED ASSOCIATES KENANGA INVESTMENT BANK BERHAD CMS is today the single largest shareholder of Kenanga Investment Bank Berhad and its group of companies (Kenanga Group) by virtue of a 25% equity stake in the Group. Established more than four decades ago, the Kenanga Group, which is listed on the Main Board of Bursa Malaysia Securities Berhad (Bursa Malaysia), comprises subsidiaries such as Kenanga Investors Berhad, Kenanga Deutsche Futures Sdn Bhd and Kenanga Capital Sdn Bhd. Hailed as one of Malaysia’s largest independent investment banks, Kenanga has extensive experience in equity broking, investment banking, listed derivatives, treasury, corporate advisory, Islamic banking, wealth management and investment management. For FY 2016, Kenanga turned in revenue of RM585.32 million (FY2015: RM562.99 million) while registering a PBT of RM32.54 million (FY 2015: RM18.22 million). The PBT was mainly due to higher trading and investment income, interest income and investment banking fee income negated by lower brokerage income and share of loss in an associate and joint venture for the year under review. As a testament to its business growth, the Kenanga Group continued to garner a host of awards and accolades reflecting its strong market position. At the annual Bursa Malaysia Brokers’ Awards ceremony in March 2016, the Kenanga Group was recognised for its contributions and achievements in building Malaysia’s capital market. The Group’s Equity Broking division retained its top three positions in the Best Retail Equities Broker and Best Online Broker categories for the third consecutive year. In terms of trading volume, the Kenanga Group was ranked 2 nd . The Kenanga Group also won the Lead Manager Award (Sukuk) 2015 - Programme Value Category (3 rd Placing) at the RAM League Awards 2016. In addition, the business won several international awards which included Best Investment Bank Malaysia 2016 at the Global Business Outlook Awards event and Best Investment Bank for Online Trading, Malaysia 2016 at the International Finance Magazine Awards event. The Kenanga Group’s investment management subsidiary comprising Kenanga Investors Berhad (KIB) and Kenanga Islamic Investors Berhad (KIIB) also ended FY 2016 on a positive note. As a testament to its growth, KIB’s Kenanga Growth Fund was also a proud recipient of Best Performing Equity Malaysia Fund award for the fourth consecutive year under the 5 and 10-year categories at the Lipper Fund Awards 2016 (Malaysia) event. KIB’s Kenanga Growth Fund and Kenanga Shariah Growth Fund were selected as Fundsupermart.com’s Recommended Unit Trusts under the Core Equity – Malaysia and Core Equity – Malaysia (Islamic) categories for 2015/16. This is the sixth consecutive year that the Kenanga Growth Fund and the fifth consecutive year that the Kenanga Shariah Growth Fund have been awarded in these categories. In addition, KIB was also recognised for its efforts at the Malaysia Rising Star Award while its Chief Investment Officer was named the Malaysia CIO of the Year at Asia Asset Management’s 2016 Best of the Best Awards event held in Hong Kong. Kenanga Deutsche Futures Sdn Bhd (KDF) has been at the forefront of the derivatives industry for more than a decade, securing several awards for excellence on the derivatives front. In 2016, KDF won the Best Derivatives Trading Broker (Champion) and Best Trading Broker - Equity Derivatives (Champion) at the Bursa Malaysia Broker Awards 2016 event, as well as Best Derivatives Clearing Broker (1 st Runner-Up) and Best for Capital Market Investment - Malaysia at the APAC Insider Business Awards 2016 event. 2016 was a notable year for the Kenanga Group. In a bid to expand its footprint and explore more business opportunities, Kenanga Group entered into a joint venture with Rakuten Securities, Inc., the second largest online broker in Japan, who is growing rapidly with current operations throughout Asia Pacific. Rakuten Securities is one of the main subsidiaries of Rakuten, Inc. one of the largest and most successful e-commerce and Fintech companies in the world. Rated one of the most innovative companies by Forbes, Rakuten, Inc. is an organisation that has a dynamic business model cutting across online securities broking, internet banking, online mall, online travel reservations, and includes brands such as Viber and Kobo as part of their portfolio. The Kenanga Group is collaborating with Rakuten Securities, Inc. to develop a new online broking platform, bringing new exciting digital innovations to the Malaysian online broking scene. The joint venture has received approval-in-principle for a restricted Capital Markets Services License from the Securities Commission of Malaysia, the first of its kind, to deal in listed securities and provide investment advice. KKB ENGINEERING BERHAD The Group holds a 20% equity stake in Bursa Malaysia- listed KKB Engineering Berhad (KKB) whose principal business activities are steel fabrication, hot-dip galvanizing, civil construction, LP gas cylinders manufacturing, as well as the manufacture of steel pipes and pipe specials. KKB is focusing its efforts on expanding its steel fabrication activities so that it can undertake larger and more complex projects, including those from the oil and gas sector. In line with this, KKB is leveraging on its new and modern fabrication plant that incorporates an open yard and heavy load-out jetty facility fronting the Sarawak River, as well as sizeable covered all-weather workshops. MANAGement DISCUSSION AND ANALYSIS