KENANGA ANNUAL REPORT 2018

16 KENANGA INVESTMENT BANK BERHAD GROUP MANAGING DIRECTOR’S MANAGEMENT DISCUSSION AND ANALYSIS The IB division was the Principal Adviser, Sponsor, Underwriter and Placement Agent for the Initial Public Offering (“ IPO ”) of Binasat Communications Berhad and Nova Wellness Group Berhad in 2018. The two (2) IPOs on the ACE Market of Bursa Securities have raised a total of RM103 million. The IB division also advised on the reverse take-over of Widad Group Berhad into Ideal Jacobs (Malaysia) Corporation Berhad during the year. For the division’s Islamic banking activities, the Skim Perbankan Islam recorded a PBT and Zakat of RM13.2 million, an increase of RM5 million relative to the previous year. The team was also awarded second (2 nd ) Runner Up, Best Islamic Participating Organisation at the Shariah Investing Fair 2018 organised by Bursa Malaysia. Outlook Going into 2019, the IB division remains cautiously optimistic, and will continue to deliver innovative, relevant and value-added solutions to its clients. It will strive to advise on more merger and acquisition exercises and tailor-make solutions for its clients. Treasury The Treasury division recorded a higher PBT of RM1.95 million, relative to the PBT of RM1.35 million from the year before. The increase was largely due to improved numbers in trading and investment income from its fixed income portfolio. For the year under review, the Treasury division continued its efforts to grow its retail depositor base. Total RNID issued as at year end stood at RM44 million. Its LCR remained above 120%, well beyond the regulatory requirement of 100% which took effect on 1 January 2019. Outlook 2019 remains a challenging year for the interest rates and foreign exchange markets, which is likely to impact both consumer and business confidence levels. The Treasury division will continue to minimise cost of borrowing through cross-divisional collaborations within the Kenanga Group. This will serve to further expand its depositor base and at the same time, ensure a stable funding pro le. Segmental Review: Investment Management Kenanga Investors Group’s (“ KIG ”) PBT grew to RM2.24 million for the Financial Year Ended 31 December 2018 from a loss of RM0.78 million in 2017. This was due to contributions from retail channels, as well as, improved performance in the private wealth segment despite the volatile market conditions. As at 31 December 2018, its assets under administration stood at RM7.86 billion due to contributions from retail and its private wealth arm which has been growing steadily, and also third (3 rd ) party assets under administration of RM921 million from its partnership business. Our Wealth Management (“ WM ”) department in 2018 contributed a revenue of RM2.18 million to various divisions within the Group through sales from its wealth managers and KIG. However, as a whole in 2018, WM registered a loss of RM2.21 million compared to RM1.15 million in 2017 due to the soft market conditions. As we continue to focus on realigning the WM business to support the Group’s and external parties’ various products, and on reducing the unit operational cost, we expect the division to continue promoting the various group initiatives in rolling out products to its retail and mass affluent market. Collectively, our Investment and WM units have shown promising results despite the volatile market and the continued uptrend augurs well for the Group as we diversify our market segments and channels. Combined efforts from the units ended the year with a PBT of RM33,000 for the Financial Year Ended 31 December 2018, compared to a loss of RM1.93 million in the previous financial year. KIG obtained its licence from Securities Commission Malaysia (“ SC ”) to provide full-fledged financial planning activities in January 2018. It is working closely with WM and product partners to launch this new business initiative to further complement its portfolio management platform for retail and mass affluent markets. Currently through WM, they have over twenty-five (25) established product partners from insurance, wills and trust to asset management firms which enable them to provide a holistic financial planning service to various segments of clients. KIG is also in the midst in obtaining its Financial Advisory licence from BNM. There were also new product launches during the year, with the introduction of the Kenanga Growth Fund Series 2 (“ KGFS2 ”) at the end of May, a follow- up to the highly successful Kenanga Growth Fund (“ KGF ”). Since the launch, the total fund size of KGFS2 has grown to RM77 million and it is expected to keep growing in 2019. KGFS2 shares a similar investment strategy as its predecessor KGF,