Cautious optimism in Philippine stocks
The investment banking group notes that the first-quarter (1Q25) reporting season ended on a muted note, with PSE Index constituents delivering 4.3% year-on-year (y-o-y) earnings growth – a figure that falls short of its full-year expectation of around +10%.
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The Sun
9 hours ago
- The Sun
Vietnam food body urges trade ministry to oppose Philippine rice ban
HANOI: The Vietnam Food Association has asked the country's trade ministry to challenge a move by the Philippines to suspend rice imports for two months, two sources told Reuters, with traders saying it will harm local production. The Philippines, Vietnam's biggest rice buyer, said last week that it would suspend rice imports for 60 days starting from September 1 in an effort to protect local farmers impacted by falling prices during the harvest season. 'The Philippines is Vietnam's largest rice export market and the suspension would have significant impacts on rice production in Vietnam,' said one of the sources, a trader with knowledge of the matter. The association and the Ministry of Industry and Trade didn't immediately respond to Reuters' requests for comments. Vietnam exported 2.44 million metric tons of rice to the Philippines in the first seven months of this year, accounting for 44.3% of its total rice shipments over the period, according to official customs data. Last year, the Philippine market accounted for 46.7% of Vietnam's total rice exports, with shipments in September and October higher than monthly average. Vietnam early this year signed a memorandum of understanding on rice trade with the Philippines, where rice production is often prone to flooding and typhoon risks. 'They are suspending rice imports this year to protect their farmers ahead of an expected bumper harvest,' said a second trader based in Ho Chi Minh City. The Philippines' rice production in the second quarter grew 13.9% from a year earlier, a sharp acceleration from the 0.3% growth in the first quarter. Traders said the Philippines' move to suspend rice imports will put pressure on export prices of Vietnamese rice. Vietnam's 5% broken rice RI-VNBKN5-P1 was offered at $395 on Tuesday, down by nearly 30% from a year earlier, according to data from the association. 'We fear that prices will fall further if there's the suspension,' the second trader said. - Reuters
The Star
13 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.
