Market sentiment weighs on Bursa earnings
Kenanga Research, which has maintained a 'market perform' call on the stock with a higher target price of RM8 from RM7.80, said the ADV for 2Q25 of RM2.29bil came in below its expectations of RM3bil.
It noted that 2Q25 ADV declined 13% from 1Q25 and was a 37% decrease from the same quarter a year ago. The research house pointed to the impact on market sentiment from shifting developments on US tariffs.
'This had particularly undermined sentiment for semiconductor industries. Meanwhile, prolonged conflicts in the Middle East left mixed reactions between oil and gas counters and port operators,' it added.
It expects 2Q25 net profit of RM59mil to RM65mil, which would be 10% below 1Q25 and 23% below the same quarter a year ago on the sequentially lower ADV dragging total revenue from securities, which makes up half of total operating revenue. It has also cut forecast ADV to RM2.53bil for the financial year ending Dec 31, 2025 (FY25) from RM2.91bil previously.
'We also trim our FY26 ADV to RM2.85b (5% below RM3bil) in anticipation for uncertainties to persist. Following these adjustments we cut our FY25/FY26 earnings by 8%/3%,' it added.
Kenanga Research expects trading sentiment for the second half of the year to continue seeing weakness, with market participants being watchful of certain dates such as US Federal Open Market Committee meetings, particularly on July 30 and Sept 17 that could set the tone for US Fed movements, the Aug 1 deadline for US tariffs and Aug 15 for Malaysia's 2Q25 gross domestic product, it said, adding that other concerns were inflationary impact from the expanded sales and service tax and clarity on the RON95 subsidy rationalisation mechanics.
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Kenanga Research said the group could fully fund the latest acquisition internally. PETALING JAYA: United Malacca Bhd 's (UMB) decision to acquire the remaining 17% it does not own in Indonesia-based PT LifereAgro Kapuas (PT LAK) from PT Bank OCBC NISP TBK for US$10mil is a good deal for the planter, according to Kenanga Research. The research house said, in a report, that it made commercial sense to gain full control of a profitable and growing subsidiary. 'The acquisition is also valued fairly, hence neutral to prospective ratings and long-term positive financially as PT LAK has room to expand,' Kenanga Research added. UMB had acquired 83% of PT LAK's equity back in January 2016 for US$66.4mil. PT LAK came with Izin Usaha Perkebunan or a plantation licence for 24,585ha of agriculture land in central Kalimantan. PT Lak is divided into four estates with a palm oil mill. The land is slightly larger at 24,607ha split between Plasma smallholder scheme (10,434ha) and UMB's 'Inti' core holding of 14,173ha. Out of this, 11,419ha can be planted with oil palm. Kenanga Research said strategically, UMB would have full control over PT LAK. At about 10 times PT LAK's earnings in financial year 2025 (FY25), the valuation also looks fair to attractive. Importantly, PT LAK has capacity to grow as 3,312ha or 29% of its total plantable area of 11,419ha are still awaiting oil palm development. Out of the 8,099ha already planted, the trees are still young (10 years of age), and hence, fresh fruit bunch (FFB) yields are still low at 15 tonnes per ha, whereas the group's more matured estates typically yield 19 tonnes to 20 tonnes per ha. Meanwhile, Kenanga Research said the group could fully fund the latest acquisition internally. UMB ended its financial year 2025 with a net cash of RM151mil. 'Even after paying out RM27mil in dividends – seven sen final and six sen special dividends – the group can easily fund this acquisition of RM42mil by cash,' the research house pointed out. Furthermore, the returns from PT LAK should also exceed the rates UMB is earning from its cash deposits, it added. Meanwhile, RHB Research said firm crude palm oil (CPO) prices are also to be expected. CPO prices had eased since the recent peak in November 2024 but a global supply deficit looks set in 2025 with supply tightness likely to persist into 2026. Hence, CPO prices are expected to stay firm with an average CPO price of RM4,000 per tonne expected for UMB over FY26-FY27, the research house explained. Kenanga Research, which has maintained an 'outperform' call on the stock with a target price of RM6, said 'we see deep value at current levels'. The risks to Kenanga Research's call include adverse weather, softer CPO prices and the rising cost of labour, fertiliser and fuel.
