Latest news with #CGSInternationalResearch
The Star
4 days ago
- Business
- The Star
CPO prices expected to remain firm in 2025
MBSB Research expects the CPO price to average at RM4,100 a tonne in 2025. PETALING JAYA: Crude palm oil (CPO) prices remain supported by bullish fundamentals and higher demand from price-sensitive markets like Pakistan and India, despite signs of production and stock levels rising. Indonesia's plans to roll out a B50 biodiesel mandate in 2026 and call on local producers to raise sales in the domestic market are supportive of CPO prices, CGS International Research (CGSI Research) noted. 'We view the recent price support from Indonesia's biodiesel and Domestic Market Obligation measures is likely to be temporary, while ample global vegetable oil supply and sluggish demand fundamentals should continue to cap meaningful upside in CPO prices,' the research house stated in a report. It expects sustained earnings from pure upstream plantation players given current CPO is holding around the RM4,200 per tonne price level. Malaysia's CPO stock level rose to a 19-month high of 2.1 million tonnes in July as production rose 7.1% and exports eased to 1.3 million tonnes, down some 22.9% year-on-year (y-o-y). The fall in exports came despite a widening price premium over soybean oil in July at US$332 per tonne. Furthermore, MBSB Research noted that despite the July discount premium being 55% above the three-year average of US$214 per tonne, demand for CPO remained muted. It expects the premium risk to ease as fresh fruit bunches and CPO output continue to recover amid ample stock levels. It expects the CPO price to average at RM4,100 a tonne for 2025. Malaysia's CPO production is forecast to rebound in 2025, as the year-to-date production of 10.77 million tonnes is running at 4% above the 10-year January-to-July output of 10.35 million tonnes. Oilworld, a source of independent global market analyses and forecasts, is expecting the country's total production to hit 19.3 million tonnes while the US Department of Agriculture is forecasting 19.4 million tonnes output. Kenanga Research is of the view that Malaysia's 2025 CPO production will hit 19.2 million tonnes, which is above the historical 10-year average of 19 million tonnes. It expects demand supply fundamentals of the global edible oil market to support CPO prices in 2025 and 2026.
New Straits Times
5 days ago
- Business
- New Straits Times
HSS Engineers clears Baghdad Metro hurdle, stock poised for 117pct upside
KUALA LUMPUR: HSS Engineers Bhd has cleared a major hurdle in its Baghdad Metro project, removing what analysts called "a key overhang" that had dragged its share price down 47 per cent over the past year. CGS International Research maintained its "Add" call on the stock but trimmed its target price to RM1.38 from RM1.50 to factor in delays in the project. This represents an upside potential of nearly 117 per cent from Friday's close of 63.5 sen. CGS International said the stock is trading at five times its projected 2026 earnings, the lowest since 2022. It noted that HSS Engineers received the completion certificate on July 16 for the first 10 per cent milestone payment, worth about RM10 million, from the mayoralty of Baghdad. This paves the way for disbursement once the country's planning ministry approval process and United States dollar arrangements are completed. "We view this positively as this has been the key overhang for the share price," CGS International Research said in a note, adding that the payment is expected within 21 to 41 days. The milestone is expected to boost HSS Engineers' earnings in the second half of 2025 and turn operating cash flow positive in the fourth quarter, after a negative RM12.6 million in the first quarter. "With all the requirements met in order to receive this first payment, performance bond, opening of branch office and registration of local company, we expect the subsequent milestone payments to be much quicker," it added. As at June, HSS Engineers' project management consultancy work for the Baghdad Metro was 45 per cent complete and is now targeted for completion by end-2025, with construction supervision services to begin in the second half of 2026. The Baghdad Metro project accounts for about 30 per cent of the group's RM2.07 billion order book and carries a gross profit margin of between 40 and 45 per cent, above the 25 to 30 per cent margins of its other projects.
New Straits Times
5 days ago
- Business
- New Straits Times
13MP to set stage for construction boost in 2026 Budget
KUALA LUMPUR: The 13th Malaysia Plan (13MP) is poised to pave the way for the 2026 Budget to deliver a positive boost to the construction sector, said CGS International Research. It said the plan's RM430 billion in development spending, or RM86 billion a year, could trigger major infrastructure projects before the next general election in February 2028. While federal budgets have typically been a non-event for the construction sector, CGS International expects the Oct 25 Budget 2026 to be different. "In our view, the 2026 Budget will be the platform for the Prime Minister to set the tone for the rollout of key infrastructure projects prior to the next general elections which must be called by Feb 2028. "Hence, we expect his tone to change from the 2025 Budget where he said, "now is not the time to roll out mega projects"," it said in a note. CGS International believes that the firm's conviction is validated by the unwinding of subsidies and implementation of the Sales and Service Tax, giving the government additional revenues. "Also, we think the government realises construction has a strong multiplier effect given its strong correlation with gross domestic product growth," it said. Meanwhile, CGS International expects data centre (DC) awards to accelerate in the second half of 2025 (2H25) and calendar year 2026 . The firm gathered there are five DC tenders for Pearl Computing which will be awarded from third quarter (Q3) of 2025 and including the Negri Sembilan land, the number of tenders could rise to at least 13. "In the building material space like cement, there is also further evidence that the DC rollout has picked up steam with strong growth and margin expansion for MCement's ready mixed concrete division. "We believe the upside for DCs will come from the series of land purchases by Microsoft in 2023 and 2024 in Johor, as the tenders have yet to open," it said. For the next six months, CGS International believes investors should focus on visibility of contract awards and headline newsflow, and to a lesser extent on earnings delivery. In addition, the firm has maintained Overweight on the sector with its top picks including Gamuda Bhd, IJM Corp Bhd and Malayan Cement Bhd. "However, the downside risks include stiff competition in the DC space, higher foreign worker levy and material costs. "Re-rating catalysts are faster project rollouts and increased foreign direct investment," it added.
New Straits Times
6 days ago
- Business
- New Straits Times
KLCC land buy to bolster Mah Sing's landbank, near-term earnings
KUALA LUMPUR: Mah Sing Group Bhd's recent acquisition of prime freehold land in the KLCC area is expected to bolster its landbank and improve its near-term earnings, said CGS International Research. Mah Sing has proposed to acquire a 0.60-hectare (ha) prime freehold plot in the KLCC precinct from Malayan United Industries Bhd for RM260 million. This acquisition translates to a land cost of RM4,019 per square foot, which falls within the historical range of RM4,000 to RM7,000, according to the management. CGS International Research views the land deal positively but believes the announcement may not be enough to significantly lift the group's share price, given the modest impact on its revised net asset value (RNAV). "Based on a pre-tax profit margin assumption of 20 per cent and full take-up by the end of the financial year 2028 (FY28), we estimate this new redevelopment project could raise our RNAV by eight sen, or 3 per cent. "We also expect the group's net gearing to remain manageable at 19 per cent, from 0.17 times as of the end of the first quarter FY25, after the completion of the land acquisition, given its healthy operating cash flows," it said. CGS International Research said it was encouraged by the strong response to the recently launched M Grand Minori, the group's first project under its premium M Grand Series, with a gross development value of RM1.5 billion. M Grand Minori is a freehold mixed-use residential and commercial development spanning 2.42ha in Taman Pelangi, Johor Bahru. It is strategically located within three kilometres of the upcoming Bukit Chagar Rapid Transit System (RTS) station. "According to Mah Sing, the project has achieved an impressive 90 per cent take-up rate for Phase 1 of Tower A within two days of the launch. "This reflects the robust property demand in Johor Bahru, boosted by the upcoming completion of the RTS and the anticipation of accelerated economic growth driven by the Johor-Singapore Special Economic Zone. "We reiterate our 'Add' recommendation with an unchanged target price of RM1.75 on the stock, pending completion of the land acquisition, as we believe its fundamentals remain intact despite recent market concerns over its data centre venture," it added.
The Star
23-07-2025
- Business
- The Star
OPR cut is supportive of economic growth
CGS International Research is maintaining its 2025 consumer price index forecast at 2% y-o-y. PETALING JAYA: The 25 basis points (bps) cut to the overnight policy rate (OPR) to 2.75% on July 9, is growth-supportive rather than inflationary, given the benign inflation environment, according to Maybank Investment Bank (IB) Research. In a report, the research house said with the first half 2025 average inflation rate of 1.4%, its full-year 2025 inflation forecast of 2% implied upside risk to inflation in the second half of the year. 'This is due to the factoring in of the impact of the sales and service tax as well as electricity tariff review (effective since July 1), full compliance in new minimum wage (effective Aug 1, 2025), RON95 petrol subsidy rationalisation in the second half of 2025, and higher foreign labour costs with EPF contributions effective from October. 'The upside to inflation rate in the second half of 2025 may be less than expected following news that the government is delaying the rollout of RON95 petrol subsidy rationalisation to fine-tune the targeted subsidy mechanism,' the research house added. 'Prolonged delay will result in another year of sub 2% inflation rate.' Despite headline inflation coming in at a multi-year low last month, analysts said there are upside risks that might cause the inflation rate to trend higher in 2025. Headline inflation eased further to 1.1% year-on-year (y-o-y) in June, the lowest level since February 2021, from 1.2% in May. However, core inflation, which excluded items with volatile price changes, like fresh food and energy, remained unchanged at 1.8% y-o-y. UOB Global Economics and Markets Research said despite subdued inflation readings year-to-date, it anticipated headline inflation to gradually trend higher from July, ending the year with an average of 1.8%. 'This outlook is supported by potential second-round effects from the expanded SST, despite its limited direct impact, as well as low base effects from the previous year,' it said. The research house said the inflation outlook remained benign over the policy horizon, while downside risks to growth had risen, particularly from potential tariff actions and persistent geopolitical tensions. 'If these risks escalate further, a more accommodative monetary policy stance may be warranted to support domestic growth into 2026, considering that monetary policy typically takes about a year to exert its full impact on the economy. 'As such, we continue to see scope for a further 25 basis points cut in the OPR to 2.5% by end-fourth quarter 2025,' it noted. CGS International Research is maintaining its 2025 consumer price index forecast at 2% y-o-y. On the review of electricity tariffs effective this month, it said the authorities had indicated that domestic consumers are likely to see a reduction in their electricity bill by 5%, on average.
