Bursa Malaysia dips as Trump's 25% tariff on Malaysia rattles investors
KUALA LUMPUR: United Overseas Bank (Malaysia) Bhd (UOB Malaysia) and Maybank Investment Bank Bhd (Maybank IB) have been appointed as joint principal advisers, joint lead arrangers, and joint lead managers for Perbadanan Bekalan Air Pulau Pinang Sdn Bhd (PBAPP)'s inaugural RM5bil Islamic Medium-Term Notes (IMTN) Programme (Sukuk Programme). Maybank IB also served as the sole sustainability structuring adviser for PBAPP's new Sustainable Finance Framework, which follows guidelines from the Securities Commission and other regional and international sustainable finance standards. In a joint statement, UOB Malaysia country head of wholesale banking Andy Cheah said the RM5bil sukuk programme will fund critical water projects to ensure long-term water security for Penang, addressing rising demand and challenges such as limited water resources and climate change. 'The sukuk programme also highlights the important role banks play in mobilising capital for sustainable financing and demonstrates how we leveraged our capabilities to deliver real change in public sector infrastructure,' he added. Maybank IB chief executive officer Michael Oh-Lau: 'Maybank is honoured to support PBAPP for the simultaneous establishment of its sukuk programme and Sustainable Finance Framework — a historic first for Penang, and one that sets a strong precedent for other state government-linked companies.' 'Malaysia's debt capital markets remain one of the most developed and liquid in the region, with over RM120bil in private debt securities issued annually coupled with a steady growth of sustainability-labelled issuances year on year. Through this sukuk programme, PBAPP is now well-positioned to benefit from deep and diverse investor liquidity, competitive pricing and greater funding flexibility over time.' Proceeds from the sukuk will fund PBAPP's Water Contingency Plan 2030 (WCP 2030), support capital and operational expenses including refinancing, and finance eligible green and social initiatives under its Sustainable Finance Framework. PBAPP is the first Penang state agency to launch both a sukuk programme and a Sustainable Finance Framework. The shariah-compliant sukuk Wakalah structure allows it to raise sustainable, long-term funding from Malaysia's capital markets. PBAPP's sukuk programme received a AAA/Stable rating from RAM Ratings Services Bhd, reflecting strong credit fundamentals. Its Sustainable Finance Framework also earned a Gold rating from RAM Sustainability for strong governance, transparency, and alignment with global standards.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Star
6 hours ago
- The Star
19% tariff rate a positive for PIE
Kenanga Research said the group is eyeing an upcoming order cycle potentially in 4Q25. PETALING JAYA: PIE Industrial Bhd , which has posted weak second-quarter (2Q25) results due to the impact of the trade diversion and US tariffs, hopes to be able to recover its lost businesses eventually. However, the outlook is challenging at the moment as the company was affected in 2Q25 due to a customer (Customer A) having preemptively diversified production to Indonesia in anticipation of potential tariff adjustments, notably since Indonesia secured a lower tariff rate of 19% ahead of Malaysia. Kenanga Research said without this impact, PIE's net profit for the first half of 2025 (1H25) would have been at approximately 38% of its full-year forecast compared to 31% currently. That said, recovery could be imminent, given that Malaysia has now also secured a 19% tariff rate. According to Kenanga Research, the group is eyeing an upcoming order cycle potentially in 4Q25 and aims to capture around one-third of the expected allocation. 'We believe the company can regain lost market share in upcoming orders, given no discernible tariff difference among countries. Additionally, while Customer A plans to establish a US manufacturing facility, management sees the higher cost as commercially unviable and expects continued reliance on Asian vendors for assembly,' it said. Meanwhile Maybank Investment Bank Research (Maybank IB) said PIE is now negotiating to reclaim the lost volumes from this particular customer, with the earliest recovery expected only by 4Q25. The group shared in an analyst briefing that prior to the tariff regime, Malaysia, Indonesia and Thailand each accounted for roughly one-third of Customer A's volume. However, Kenanga Research also notes that for now, the volumes that have already been reallocated are difficult to immediately recover from the same customer on entrenched material and resource commitments. 'PIE is still in ongoing discussions with several prospective customers exploring trade diversion opportunities from China and Vietnam. Progress was previously hampered by Malaysia's higher 25% tariff versus most competing regions. 'With the tariff now reduced to 19%, in line with neighbouring countries, talks have resumed, though the onboarding timeline remains uncertain according to management,' Maybank IB said. The research outfit retained its 'hold' rating and target price of RM3.56 for PIE, which is based on a 17 times the financial year 2026 (FY26) forecast price-to-earnings ratio (PER). Kenanga Research held its 'market perform' rating and lowered its target price to RM3.85 from RM4.60 previously, based on a rolled-forward FY26 forecast valuation base and an unchanged PER of 21.6 times.
The Star
2 days ago
- The Star
Tariff clarity likely to spur PIE orders rebound
PETALING JAYA: PIE Industrial Bhd is looking to turn the page on a subdued first half of 2025 (1H25), with analysts pointing to a potential rebound in orders following the finalisation of Malaysia's 19% tariff rate, which has restored parity with regional peers and reduced uncertainty for the group's key customers. Kenanga Research noted that 'the finalisation of Malaysia's tariff rate at 19% has lifted near-term uncertainty,' enabling PIE to resume discussions with customers, who had deferred major decisions. 'Pricing parity is expected to drive both new orders and resume previously delayed orders, particularly from its key customer,' the research house said. The group is actively engaging both existing and potential clients, with '10 potential customers from Vietnam and China' under discussion, according to Kenanga Research. Operationally, the Plant 5 expansion for PIE is on track for completion by the end of the last quarter of the year (4Q25), with a link bridge to Plant 3 scheduled for 1Q26. Plant 6 is ready for mass production of switches and awaiting qualification for server production. For 1H25 ended June 30, PIE posted a core net profit of RM24.6mil, down 3.8% year-on-year (y-o-y) and well below analysts' expectations. Maybank Investment Bank Research (Maybank IB) said earnings came in at '35% and 29% of our and consensus full-year estimates, respectively', attributing the shortfall to weaker-than-expected order loading from key customers. Revenue rose 4.9% y-o-y to RM503mil, supported by electronic manufacturing services (EMS) with a 5.5% y-o-y growth and wire harness sales, which grew 44%, but was offset by a 2% decline in raw wire and cable sales. Gross profit margin contracted to 7.1% from 8.4% a year earlier, while core net margin eased 0.4 percentage points to 4.9%. Quarter-on-quarter (q-o-q), revenue fell 15% to RM231mil in 2Q25, with EMS sales tumbling 23% as customers adopted a 'wait-and-see approach' amid the US tariff uncertainty. The weaker sales mix pushed gross margin down 2.5 percentage points to 5.8%, dragging core net profit 45% lower to RM9mil, according to Maybank IB. The brokerage firm has taken a more cautious stance, cutting its earnings forecasts for PIE for financial year ending 2025 (FY25) to FY27 by 22% to 26% and downgrading PIE to 'hold' with a lower target price of RM3.56 from RM4.70 previously. This is pegged at 17 times FY26 price-to-earnings ratio at minus 0.5 standard deviation of its five-year forward mean. 'Risks include delays in customer onboarding, muted demand visibility, high customer concentration, subdued operating leverage and persistent labour constraints,' the research house warned. Kenanga Research, however, maintained its 'market outperform' call with a target price of RM4.60, citing optimism over the post-tariff order recovery. It values PIE at 21.6 times FY25 earnings per share, a 10% discount to artificial intelligence server-related peers such as NationGate. PIE's 2Q25 performance was also hit by a RM3.6mil net foreign-exchange loss, compared with a RM2.6mil gain a year earlier. While EMS remains the dominant revenue driver, other segments showed resilience. Still, EMS pre-tax profit margins fell sharply to just 0.1% in 2Q25 from 4.9% in 1Q25, while raw wire and cable margins improved to 16% from 14.8%. Nevertheless, both research houses cited PIE's diversified and evolving client base, spanning communication devices, power tools and decentralised finance equipment – as a strength. Maybank IB also pointed to its 'ready and available production capacity of 280,000 sq ft' to serve new customers and growing exposure to supply chain diversification trends. While near-term earnings visibility remains clouded, upside catalysts include earlier-than-expected customer onboarding, large contract wins and favourable forex movements. Conversely, risks extend to order losses, labour shortages and adverse trade policies.
The Star
2 days ago
- The Star
Five 13MP pillars to watch
PETALING JAYA: As Malaysia aims to become a high-income, value-creating economy under the 13th Malaysia Plan (13MP), five key trends are expected to shape the country's economic trajectory from 2026 to 2030, according to Maybank Investment Bank Research (Maybank IB). The five areas to watch, the research house said, are: a sustained investment upcycle; improvements in workers' and household incomes; fiscal consolidation and structural reforms; a push for productivity and innovation; and legislative reforms to strengthen governance. These trends are seen as critical to achieving the 13MP's targeted gross domestic product (GDP) growth of 4.5% to 5% annually, slightly below the 5.1% average recorded under the 12MP. The plan also underscores the importance of continued reforms and economic restructuring to drive inclusive and sustainable growth. 'Our investment upcycle thesis remains a theme under the 13MP. This is in view of the RM611bil public sector-related investment allocation, namely the RM430bil federal government's gross development expenditure, RM120bil from government-linked investment companies (GLICs) and RM61bil under private-public partnership,' the research house said in a report. It said a key highlight of the 13MP is the reaffirmation and continuation of major infrastructure projects such as the Penang Mutiara light rail transit (LRT), Johor Baru's elevated autonomous rapid transit, and the Asean Rail Connectivity Project. According to Maybank IB, sustaining private consumption growth will largely be dependent on raising workers' and household incomes. However, the research house noted a lack of real wage and salary growth on a per-worker basis, limiting income gains despite rising living costs. Monthly wage distribution remains heavily skewed toward the lower end, with more than a quarter of workers earning less than RM2,000 per month, and nearly half earning below the recently adopted living wage benchmark of RM3,100 set by government-linked companies (GLCs) and GLICs. The 13MP outlines several labour market interventions to raise incomes and support medium-term consumer spending growth. These include introduction of a two-tier minimum wage, scaling up the progressive wage policy, and encouraging large private companies to voluntarily adopt decent living wage practices – as already implemented by 34 GLCs and GLICs, which have set a living wage of RM3,100 per month. Notably, the 13MP stated that a multi-tier foreign worker levy is targeted for implementation in 2026, alongside plans to reduce the 'ceiling' for foreign workers' share of the total workforce to 10% by 2030, down from 15% currently. These measures are expected to raise employer costs, necessitating improvements in productivity and efficiency. The 13MP sets an ambitious target of 3.6% annual labour productivity growth over the next five years – a recurring goal also seen in the 11MP and 12MP, noted the research house. On fiscal consolidation, Maybank IB said cutting the budget deficit-to-GDP ratio to below 3% over the next five years is crucial to achieving the federal government's debt-to-GDP ratio of 60% by 2030. For 2025, the deficit consolidation is on track, with a target of RM80bil, or 3.8% of GDP. The next main fiscal reform on the agenda is subsidy rationalisation. 'It is also worth noting that the government is incurring savings in fuel subsidies thanks to the drop in crude oil prices, as well as firmer ringgit versus US dollar,' said Maybank IB. Beyond subsidy reforms, pension system reform is another key area to watch, given the sharp rise in government retirement spending over the past two decades. The proposed reform is expected to offer new options for existing civil servants, particularly younger staff, and shift new hires from the current 'defined benefit' pension scheme to a 'defined contribution' model with improved contract terms.
