CTOS focuses on cost cuts, Asean expansion
The company's second quarter of financial year 2025 (2Q25) results released last Friday came in below market expectations.
However, most analysts believe the worst may be over in terms of share price valuation given the decline year-to-date, the more conservative financial estimates made by the company's management following its 2Q25 results, and the ongoing growth in its Asean customer base, as well as the offering of new products.
RHB Research has cut earnings assumptions for CTOS for this year to 2027 by 26.5%, 26.4% and 24%, respectively, after factoring in slower growth across all segments and margin assumptions.
While maintaining a 'buy' call on the stock, the research house revised its target price to RM1.16 from RM1.49.
'Management has lowered its multi-year internal growth outlook to provide a new baseline guidance.
'While the plateauing growth trajectory may keep investors at bay, its valuation has reverted to a palatable level,' RHB Research said.
Hong Leong Investment Bank (HLIB) Research said that despite 2Q25 results coming in below market expectations, the decline in share price means that the stock's risk-reward profile has become more balanced.
'Overall, we are still optimistic that Asean continues to be an under-penetrated market, and CTOS is well-positioned to capitalise on the region's compelling growth potential,' the research house said.
'Broadly, management is focused on phasing out less profitable products and optimising costs in order to restore gross profit margins back to the 70% range from the current 67%.
'Furthermore, CTOS aims to deepen its penetration into the large corporate segment, an area where it is lagging,' HLIB Research said.
The research house retained a 'hold' call on the stock with the target price lowered to 89 sen from RM1.10.
Maybank Investment Bank Research (Maybank IB) also revised the company's 2025 to 2027 earnings down by between 27% and 31% to reflect the weaker-than-expected margins and muted earnings visibility.
The research house also downgraded the rating for CTOS to a 'hold' from a 'buy' and lowered the target price to 92 sen from RM1.30.
Maybank IB said there could be a rerating potential after 2026 as cost rationalisation efforts and client wins should drive growth. It added that the search for a new chief executive officer 'is ongoing, with a candidate currently in the final stages of evaluation'.
It said the company's management has guided for a 27% cut in this year's earnings.
CIMB Research, which downgraded the stock to a 'hold' from a 'buy', has lowered its target price on CTOS to 90 sen from RM1.30.
The research house said the valuation was also based on the company's sluggish earnings growth outlook and the structural shift in its earnings profile in view of the unfavourable sales mix weighted towards lower-margin products and a higher tax rate beyond October 2026.
CTOS's pioneer tax status is set to expire in November 2026.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Barnama
34 minutes ago
- Barnama
Thailand Sets Up One-stop Service Centre To Help Exporters Weather US Tariffs
BUSINESS BANGKOK, Aug 13 (Bernama) -- Thailand has established the Ministry of Commerce One Stop Service (MOC OSS) Centre to assist Thai businesses in responding to United States (US) tariff measures, offering comprehensive trade services ranging from tax advisory to market expansion to help reduce export costs. Deputy Government Spokesperson Anukool Pruksanusak said the initiative aims to drive forward the 'Reliable Commerce' policy, with the government serving as a dependable partner for Thai entrepreneurs at all levels — from small and medium-sized enterprises (SMEs) to large corporations. 'The government is prepared to support entrepreneurs in every dimension — both proactive and reactive — to stand alongside Thai businesses, enabling them to adapt and maintain their competitiveness in global markets,' he said in a statement published on the Royal Thai Government website on Wednesday. Anukool said the establishment of the OSS Centre is just one of several measures the government has put in place to address the impact of the US's 19 per cent import tariff. At present, the OSS Centre brings together 12 agencies providing services on-site. He said there are also plans to invite other ministries and organisations, including the Ministry of Finance, Ministry of Agriculture and Cooperatives, Federation of Thai Industries, Thai Chamber of Commerce, and the SMEs Association, to further expand service coverage. 'The OSS Centre is designed to be a comprehensive support hub for entrepreneurs, offering services ranging from tax advisory and remedial measures to information provision, business cost-reduction strategies, and the creation of new global market opportunities — enabling businesses to adapt swiftly to changing circumstances,' he said. According to a presidential order issued by the White House on July 31, Thailand, along with four other ASEAN member states – Malaysia, Cambodia, the Philippines, and Indonesia – will be subject to the same 19 per cent tariff, effective Aug 1. The new rate replaces the 36 per cent tariff announced in April, bringing Thailand's tariff treatment more in line with that of other regional economies.
New Straits Times
3 hours ago
- New Straits Times
Malaysia records 95.1pct TVET graduate job placement rate
KUALA LUMPUR: Malaysia now records a 95.1 per cent job placement rate for Technical and Vocational Education and Training (TVET) graduates, who are also now included under the expanded minimum wage framework, Deputy Prime Minister Datuk Seri Ahmad Zahid Hamidi said today. He said this reflects that skills training is finally aligning with job opportunities. "53.56 per cent of the country's secondary school leavers in 2024 chose TVET as their first option, marking a significant shift in national education trends. "There are now more than 430,000 students enrolled nationwide, and applications to national TVET institutions have surpassed 200,000," he said at the opening of the Asean TVET Conference (ATVET) 2025 at the World Trade Centre Kuala Lumpur (WTCKL). Zahid, who chairs the National TVET Council, said the government's transformation agenda aims to ensure training remains relevant to market needs, inclusive across all communities, and coordinated under a single national vision. "When I was entrusted by Prime Minister Datuk Seri Anwar Ibrahim in 2023 to chair the National TVET Council, I knew this was more than just a policy role," he said. He said Malaysia's TVET ecosystem is being positioned as a regional hub for training and certification, with efforts to attract students from other Asean countries while maintaining opportunities for Malaysians. "Our goal is not just to produce skilled workers, but to make Malaysia a credible reference centre for TVET in Asean," he said. Zahid highlighted Malaysia's international collaborations, from 5,125 industrial placements in China, to partnerships with the Mohamed bin Zayed University of AI in Abu Dhabi, and skills exchanges with Japan, Germany, and Australia. "In this era, the success of one nation in TVET is no longer enough. "Our workforce is increasingly regional, and our challenges are shared. This is why Malaysia proposed the establishment of an Asean TVET Certification & Excellence Hub. "We have gone to the world to strengthen our agenda, ensuring our talent is globally competitive," he said. These TVET reforms form part of a national mission to propel Malaysia into the world's top 20 of the Global Innovation Index and to create 1.2 million high-value jobs in manufacturing and the digital economy within the next five years. In June, Zahid said Malaysia was forging strategic partnerships with international educational institutions and industry players, including those from the United Kingdom, to develop a regionally recognised certification and a centre of excellence for TVET. The two-day conference is jointly organised by the Human Resource Development Corporation (HRD Corp) and the Skills Development Fund Corporation, in collaboration with the International Labour Organisation (ILO) and Asean. Held under the Asean Year of Skills (AYOS) 2025, the conference brings together over 1,000 delegates, including policymakers, industry leaders and educators, to address skills gaps, share best practices, and explore strategies for future-ready workforce development. Also present at the opening ceremony were Human Resources Minister Steven Sim, Human Resources Ministry secretary-general Datuk Azman Mohd Yusof, HRD Corp chairman Datuk Abu Huraira Abu Yazid, and HRD Corp chief executive officer Dr Syed Alwi Mohamed Sultan. Key discussion areas include strengthening regional collaboration within Asean, bridging skills gaps, aligning TVET with industrial transformation, and breaking barriers to make TVET more inclusive for women, youth, and marginalised communities.
The Sun
3 hours ago
- The Sun
Petronas Chemicals posts RM1.08b net loss in Q2 2025
KUALA LUMPUR: Petronas Chemicals Group Bhd (PCG) posted a net loss of RM1.08 billion in the second quarter ended June 30, 2025 (2Q 2025) from a net profit of RM777 million in 2Q 2024. The integrated chemicals producer said the net loss was due to lower earnings before interest, tax, depreciation and amortisation (EBITDA), impairment of assets at Perstorp Holding AB and unrealised foreign exchange loss from revaluation of shareholders' loan to Pengerang Petrochemical Company Sdn Bhd (PPCSB) and finance expenses arising from adjustments of timing of payment for trade payables at PPCSB. Its revenue fell by 17 per cent to RM6.44 billion from RM7.73 billion previously, mainly due to lower sales volumes, the strengthening of the ringgit against the US dollar and lower product prices. PCG recorded a lower plant utilisation rate of 77 per cent compared to 89 per cent in the corresponding quarter due to feedstock supply disruption at PC Fertiliser Kedah as well as higher plant repair and maintenance activities during the quarter, resulting in lower production volume. For the six month period, PCG also recorded a net loss of RM1.10 billion from a net profit of RM1.45 billion year-on-year, while revenue slipped by seven per cent to RM14.09 billion against RM15.23 billion previously. The lower revenue is largely due to foreign currency translation following the strengthening of the ringgit against the US dollar and lower average product prices. Managing director/chief executive officer Mazuin Ismail said the 2Q 2025 presented several operational challenges, both internal and external, that impacted its plants' performance. Internally, he said PCG proactively shut down PC Ethylene for vessel wall rectification without significantly affecting its commitments to customers. 'We also decided to proactively scale back operations at PC Aromatics due to unfavourable economics. 'On the external front, our plant at PC Fertiliser Kedah was affected by the feedstock supply disruption following the gas pipeline incident at Putra Heights. The disruption has been resolved and operation has been fully restored in June 2025,' he said in a statement. Looking ahead, while market conditions remain challenging, we are confident that our strong fundamentals combined with the initiatives currently underway will continue to strengthen our resilience,' Mazuin added. PCG has declared a first interim single-tier dividend of three sen per ordinary share for the financial year of 2025. The dividend amounting to RM240 million is payable on Sept 10, 2025. - Bernama
