Latest news with #CGSIResearch
The Star
4 days ago
- Business
- The Star
Strong power demand to fuel Malakoff prospects
PETALING JAYA: The RM40mil provision Malakoff Corp Bhd made for its coal inventory in the second half of the year (2H25) may be reversed to some extent in the second half of the year should coal prices rise. The independent power producer (IPP) made the provision in its first quarter ended March 31, 2025 (1Q25) financials which resulted in its earnings for the period falling 45% year-on-year (y-o-y) to RM34mil. OUB Kay Hian (UOBKH) Research expected Malakoff to write back some of the provisioning in the later part of the year should coal prices recover. Malakoff's revenue for the quarter eased 11% y-o-y to RM2bil due to lower dispatch because of lower economic activity in Peninsular Malaysia in the period, it added. Its overall dispatch to the grid was also lower by 6% y-o-y with lower offtake for its gas-fired power plants. 'The coal-fired power plants experienced lower energy payment due to a drop in coal prices,' the research house stated in a report following the release of the IPP's 1Q25 results. UOBKH Research lowered its net profit forecast for Malakoff for financial year 2025 (FY25) by 9% to capture the RM40mil provisioning and it expected the company to post a net profit of RM276mil for the year, which would be relatively flat y-o-y. It however kept its 'buy' rating on Malakoff with a target price (TP) of RM1.08 a share. 'In arriving at our TP, we have included a 1,400MW thermal power plant win. Our blue-sky fair value is RM1.25 per share, in the event Malakoff wins two 1,400MW power plants,' it noted. CGS International (CGSI) Research said Malakoff would submit bids to extend the commercial life of expired and expiring gas power plants – GB3 (640MW), Prai Power (350MW), and Segari (1,303MW) – under the Energy Commission's recently launched tender, which closes in June. 'Management also clarified that this new tender will not impact the initial letter of notifications it has already received for two new gas-fired power plants, which are progressing toward formalisation. Construction of the group's 84MW small hydro project in Kelantan is progressing well,' CGSI Research stated. It added Malakoff had completed the acquisition of a 49% stake in E-Idaman Sdn Bhd (which gives it exposure to waste management services in Perlis and Kedah) in February, and the company contributed some RM2mil to Malakoff's 1Q25 net profit figure. CGSI Research has also maintained its 'add' call on Malakoff with a lower sum-of-parts based TP of RM1.15 a share on the belief the group's valuation remains undemanding supported by net yields of above 5.5%. 'Malaysia's energy transition drive also improve Malakoff's prospects for new plant awards, thus supporting long-term earnings,' the researc house said. Rerating catalysts include the final investment decisions on projects in the pipeline, repowering of existing power assets and recovery in its dividend payout. Risks include return of negative fuel margins and unplanned plant outages. Kenanga Research, meanwhile, cut its FY25 and FY26 earnings forecasts by 24% and 25% respectively, to reflect the provisioning impact. It, however, kept its 'market perform' recommendation on the counter with a reduced TP of 77 ssen (from 80 sen) which is supported by a decent dividend yield of above 4%.
The Star
26-05-2025
- Business
- The Star
Higher contributions from Wessex Water for YTL Power
KUALA LUMPUR: YTL Power International Bhd could see a rebound in its financial performance in its fourth quarter of its financial year ending June 30, analysts say. This was expected to be underpinned by a rise in contributions from Wessex Water in Britain as a 21% water tariff increase there takes effect. YTL Power International's nine-month year-to-date results that were announced last week were mostly below expectations, at 72% of forecasts by CGS International Research (CGSI Research) and consensus. Despite an anticipated step up in the coming quarter's contributions from Wessex Water, CGSI Research revised the group's forecast net profits for this year down by 3% as weaker volumes are expected from YTL PowerSeraya Pte Ltd in Singapore. Meanwhile, YTL Power's third quarter's results were below Maybank Investment Bank Research's (Maybank IB Research) expectations on a more pronounced tapering of PowerSeraya's earnings. The research house continued to view YTL Power's risk-reward balance favourably on undemanding valuations and potential re-rating catalysts ahead. 'We maintain our earnings estimates. Our sum of parts based target price is adjusted to RM4.18,' RHB Research said.
The Star
21-05-2025
- Business
- The Star
Positive developments in 1Q25 for Affin Bank
CGSI Research sees potential net profit growth of around 10% in 2Q25 at around RM130mil. PETALING JAYA: Affin Bank Bhd's had a decent start with a RM124mil net profit in the first quarter of financial year ended March 31 (1Q25). The performance was below consensus estimates of analysts but they note a couple of positive developments in the quarter. One is overhead costs were flattish year-on-year (y-o-y) in 1Q25 potentially due to cost savings from its early retirement scheme implemented in 4Q24. The other positive as observed by CGS International (CGSI) Research is the bank's cost of fund declined by 11 basis points y-o-y and 16 basis points from 4Q24, which led to an expansion in net interest margin (NIM) in 1Q25. The research firm sees potential net profit growth of around 10% in 2Q25 at around RM130mil, underpinned by higher net interest income and benign credit cost. 'Upgrade to 'hold' as we see Affin as one of the key beneficiaries of the recent Statutory Reserve Requirement (SRR) cut and potential overnight policy rate (OPR) cuts by Bank Negara in 2025,' CGSI Research said in a report. It expects the central bank to cut OPR by 25 basis points to 2.75% in the second half of this financial year. For every 25 basis point cut in OPR, this would raise Affin's financial year 2026 (FY26) net profit by around 3%, it projects. As for FY25 to FY27, it projects the bank's net profit to grow between 1.7% and 2.5%, taking into account the SRR cut from 2% to 1% effective May 16, 2025. The profitability estimates also factored in Affin's bonus issues which led to an issuance of 133.3 million new shares. Another positive is the bank's robust inflow of CASA (current account savings account) from Sarawak government-linked companies. According to analysts, this signals early tangible benefits stemming from the Sarawak government's strategic involvement as the bank's largest shareholder. Coupled with the anticipated implementation of the Sarawak state civil servant payroll and a strong pipeline of new corporate payroll accounts, Hong Leong Investment Bank (HLIB) Research said these underpins expectations for further NIM expansion. At the same time it noted that Affin is actively reducing reliance on expensive fixed deposits to focus on its overall deposit pricing strategy to further strengthen its NIM. Loan growth moderated to 7.1% y-o-y, falling short of management's ambitious 12% loan growth target for 2025. However, HLIB Research said the bank's management indicated a substantial loan pipeline of RM9.5bil remains. Coming to asset quality, Affin's gross impaired loan (GIL) ratio improved 10 basis points from the previous quarter to 1.84% in 1Q25. 'Despite that, mortgage GILs continued to trend upwards given pockets of stresses in that portfolio. 'Meanwhile, management highlighted that stress testing indicated that while the impact from loan exposure related to US trade is minimal, a greater adverse impact is anticipated from a broader economic slowdown instead,' said HLIB Research, which kept its 'buy' call and RM3 target price on the stock. According to analysts, the bank's management has retained its key 2025 guidance of a return on equity of 6%, loans growth at 12% and NIM of 1.55%. Valuation wise, HLIB Research said the stock currently trades at one standard deviation to its 10-year mean. 'We believe the premium is fair given the emergence of the Sarawak government as Affin's largest shareholder, presenting it with better prospects to leverage the state's growth ambitions.' However, UOB Kay Hian Research is maintaining its 'sell' call with a target price of RM2.38 despite an improving CASA mix. It thinks the value unlocking potential from the Sarawak government has been more than priced in. The Sarawak government emerged as Affin's major shareholder in Nov 2024. At the time of writing the stock was trading at RM2.71, which is close to levels it was at the start of 2025.
The Star
14-05-2025
- Business
- The Star
Westports earnings flow intact on long-term jobs
Westports reiterated its guidance for 0% to 5% volume growth in 2025. PETALING JAYA: Westports Holdings Bhd is hoping the Port Klang Terminal Handling Charge (THC) hike will take place in the second half of 2025 (2H25). However, CGSI Research believes the government may need to assess the impact of the US tariff hike on the country before giving the go-ahead. If the THC hike is indeed implemented in 2H25, as anticipated by Westports, there is upside to its financial year 2025 (FY25) earnings forecast, said CGSI Research. It was reported that the proposed 30% increase in port tariffs for container handling and storage will be implemented in phases over a three-year period. The first phase will see a 15% hike, followed by 10% and then another 5% in the subsequent phases. Westports reiterated its guidance for 0% to 5% volume growth in 2025, although it said that growth will most likely be at the bottom end of the range. CGSI Research said container volumes so far in the second-quarter 2025 (2Q25) from April to the first week of May 2025 have grown year-on-year (y-o-y) in the 0% to 5% range, with gateway and transhipment volumes both growing. UOB Kay Hian Research said Westports has yet to analyse in detail the impact of the tariffs. It is factoring in all negatives/risks and positive events with its mid-single digit volume growth target. Hong Leong Investment Bank (HLIB) Research anticipates continued earnings growth on the back of sustained continued volume growth and an anticipated tariff hike in 2025. It said the recently proposed five-year dividend reinvestment plan is expected to further enhance shareholder value. TA Research said any shock after 90 days when the US tariff pause is over on July 8 would be muted. CGSI Research has a 'hold' call on the stock with a target price (TP) of RM4.36 a share. So does CIMB Securities Research, TA Research, Maybank Investment Bank Research and UOB Kay Hian Research with target prices (TPs) of RM4.50, RM4.72, RM4.78 and RM4.40 a share, respectively. HLIB Research maintains its 'buy' call with a TP of RM5 a share, while Kenanga Research retains its 'market perform' call with a TP of RM4.40 a share. The share closed at RM4.56 in yesterday's trading. HLIB Research made minor adjustments to its FY25-FY26 earnings by a 0.6% rise and a 7.4% fall, respectively, and introduced FY27 earnings at RM938mil. TA Research fine-tuned its FY25-FY26 earnings projections lower by 2.7% to 3.2% after incorporating the audited FY24 earnings into its forecast. CIMB Securities Research said potential rerating catalysts for the stock include upcoming government-approved port tariff hikes, a recovery in transshipment cargo volumes and sustainable gateway volume growth. The potential de-rating catalysts for the stock include a delay in the new port tariff revision by the government, escalation of geopolitical risks in North Asia and the Middle East affecting trade routes, and higher fuel costs. Intra-Asia trade growth and regional realignment could partly cushion the impact of global trade uncertainties, CIMB Securities Research said. Kenanga Research likes Westports for its resilient earnings underpinned by long-term contracts with key clients such as Ocean Alliance. Its long-term growth prospect is driven by the Westports 2 expansion project, and its price competitiveness, ie, lower transhipment tariffs versus peers such as the Port of Tanjung Pelepas and Port of Singapore, the research house said.
The Star
07-05-2025
- Business
- The Star
OPR cut likely to have minimal impact on banks
In the event of an OPR cut, CGSI Research believes floating rate loans will be repriced downward immediately. PETALING JAYA: Bank Islam Malaysia Bhd and Alliance Bank Malaysia Bhd will be the hardest hit should Bank Negara decide to cut its benchmark interest rate by 25 basis points (bps) this year. This is largely because of both banks' high proportions of floating-rate loans and current accounts-savings accounts, according to an analysis by CGS International Research (CGSI Research). As for the overall banking industry, CGSI Research said a 25-bps reduction in the overnight policy rate (OPR) to 2.75% will only have a minimal negative impact on the bottom line in the financial year of 2026 (FY26). 'Based on our analysis, every 25-bps cut in the OPR will trim the total FY26 net profit of the Malaysian banking sector by only 0.2% (for full-year effect), with Bank Islam's and Alliance Bank's FY26 net profit the hardest hit by 4.1% and 2.3%, respectively. 'On the flip side, Affin Bank Bhd and AMMB Holdings Bhd could benefit from the OPR cut the most, with a positive impact on FY26 net profit of 3.3% and 1.2%, respectively, based on our analysis.' Bank Negara's Monetary Policy Committee will decide today on whether a cut in the OPR is necessary, given the global uncertainties. In the event of an OPR cut, CGSI Research believes floating rate loans will be repriced downward immediately (within one to two weeks), while fixed deposits (FD) will be repriced downward upon the maturity of the FDs (which could take up to 12 months for most FDs). The timing difference for repricing should cause banks' net interest margins to narrow immediately after the OPR cut but subsequently gradually recover as FDs continue to be repriced downward upon maturity. 'In our view, the negative impact of this is likely to be offset by potential gains in banks' fixed income securities, as OPR cuts reduce bond yields and lift bond prices.' 'We continue to be 'overweight' on Malaysian banks, premised on potential re-rating catalysts from our expectations of write-backs in management overlays and an increase in dividend payout ratios. 'The sector is also supported by an attractive dividend yield of 5.8% for 2025,' stated CGSI Research. Meanwhile, CIMB Securities has maintained its 'neutral' rating on the banking sector. However, it has 'buy' ratings on Alliance Bank, Public Bank Bhd and RHB Bank Bhd, mainly for dividend yield. 'We expect banks' share prices to trade rangebound in the next few months until there is greater clarity on the external reciprocal tariff situation,' it said in a note. CIMB Securities also pointed out that leading loan indicators were more normalised in March 2025, following the January to February 2025 Chinese New Year holiday season effect. Loan growth held steady at 5.2% year-on-year (y-o-y), but deposit growth continued to lag at 3.0% y-o-y in March 2025. Asset quality improved for the second consecutive month. Gross impaired loans improved by 1.9% month-on-month or RM629.3mil in March. Furthermore, the gross impaired loans ratio was stable at 1.42%, while loan loss coverage remained high at 91.2% in the month.
