KENANGA ANNUAL REPORT 2018

15 ANNUAL REPORT 2018 GROUP MANAGING DIRECTOR’S MANAGEMENT DISCUSSION AND ANALYSIS A+ Credit Rating In 2018, we have maintained the credit rating of A+ from Malaysian Rating Corporation Berhad (“ MARC ”). We will continue to strive for higher ratings by continuing to improve our financial performance. OPERATIONAL HIGHLIGHTS Segmental Review: Equity Broking The Equity Broking (“ EB ”) division was impacted by the turbulent stock market. Investor sentiments turned cautious, with majority staying on the side-lines as they adopted a wait-and- see approach, following the General Election in May 2018. Amidst market volatility, EB increased its market share to 8.9%, a marginal improvement from the year before. However, the division was affected by provisions from its margin financing segment which resulted in a Loss Before Tax (“ LBT ”) of RM13.5 million. During the year, the division continued to drive innovations and further improve its offerings for its growing client base. Invesk, a mobile application which provides stock market insights, was enhanced with a new dashboard which now includes information on our unit trust fund prices, Retail Negotiable Instruments of Deposit (“ RNID ”) published rates, as well as, Hong Kong and Singapore market data. Amongst the many accolades garnered throughout the years, EB’s market leadership continues to be recognised at the annual prestigious Bursa Excellence Awards 2018. This year, EB won in the categories of Best Institutional Equities Participating Organisation (Second (2 nd ) Runner Up), Best Retail Equities Participating Organisation (Second (2 nd ) Runner Up) and Best Remisier (First (1 st ) Place). Outlook While 2019 will continue to be challenging, EB expects market share to remain rm and earnings growth to come from the margin nancing segment due to the liberalisation of margin nancing rules announced by the government in 2018. Segmental Review: Investment Banking and Treasury The Investment Banking (“ IB ”) and Treasury divisions as a whole registered a PBT of RM22.45 million, an increase of 14% from the year before. Investment Banking For the year ended 31 December 2018, the IB division recorded a PBT of RM20.50 million, 12% higher relative to the PBT of RM18.35 million of the year before. This was mainly due to higher net trading and investment gain, net interest income, placement fees, underwriting fee income, as well as, fees on loans and advances. During the year, the IB division advised GFM Services Berhad on the issuance of an Islamic medium term note (“ IMTN ”) of RM165 million in nominal value (“ Sukuk ”), under its maiden IMTN programme of RM300 million in nominal value. The Sukuk has been rated AA3, stable by RAM Rating Services Berhad. In addition, the IB division advised Sunway Berhad on the issuance of two (2) tranches of perpetual Sukuk worth RM200 million each under a RM5 billion programme. The perpetual Sukuk programme marked Sunway Group’s first (1 st ) perpetual securities issuance for capital management objectives. It was the largest perpetual Sukuk deal in Malaysia for 2018 and won the Islamic Finance News Deal of the Year 2018 award.