Latest news with #CIMBResearch
The Star
9 hours ago
- Business
- The Star
Fresh catalysts needed to spur local bourse
CIMB Research lowered its end-2025 FBM KLCI target to 1,560 points from 1,657 points. PETALING JAYA: The market may remain listless for the time being in the absence of fresh catalysts, say analysts. Compared with the markets in the United States and Europe, investors in the local market appeared to be more cautious amid continued suspense on the US trade talks front. Stocks in the United States appeared to be on a risk-on mode – they reportedly churned out their best month in May with the Dow Jones Industrial Average jotting a 3.9% gain while the Nasdaq Composite was 9.6% higher. Fund flow data for the previous week also indicated that foreign investors withdrew a net RM1.02bil from Malaysian equities. The increase in net selling from the previous week was in line with what is happening in the region where foreign investors had been selling down their holdings amid growing anxieties over economic uncertainties. iFast Capital's assistant research manager Kevin Khaw said the local market's direction would be determined by the developments and the eventual outcome of the US tariff negotiations. 'We think the possibility of an extension of deadline is unlikely despite the fact that we are approaching July, the end of the 90-days grace period,' Khaw told StarBiz. He also expected foreign funds to maintain their neutral stance on risk and might not aggressively buy into the local market. 'They will possibly tilt towards a wait-and-see approach, given the current tariff uncertainties alongside elevated US treasury yields. 'Having said that, we are not expecting foreign funds to revisit Malaysia as long as there is no increased certainty on the US-tariff front,' Khaw said. In terms of fundamentals, the medium to large capitalised stocks provided viable opportunities for investors. 'Valuation-wise, we are only approaching the pre-Liberation day levels, hence it is not considered as lofty. 'In a shorter term, we have revised the earnings estimate of Malaysian equities downwards due to the looming uncertainties, from the tariff impact and forthcoming subsidy removal,' Khaw added. 'On the other hand, we think the potentially stronger ringgit will encourage fund flows, under the assumption that the dollar to ringgit level is maintained at a stable RM4 to RM4.20, as a stronger ringgit often signals economic stability and sound macroeconomic management.' Meanwhile, CIMB Research had revised its earnings forecasts for the FBM KLCI down by 5.6% for both 2025 and 2026 on widespread underperformance in the recent first quarter earnings season. It had also lowered its end-2025 FBM KLCI target to 1,560 points from 1,657 points, based on an unchanged price-to-earnings (P/E) multiples of 14.7 times. 'The KLCI is trading at a 12-month forward P/E of 12.7 times with attractive dividend yields of circa 4.2%, but the upside may be capped by downside risks ahead,' it said. They include a potential imposition of a default 10% US import tariffs with the end of the tariff reprieve on July 9, potential hike in the sales and service tax, petrol subsidy revamp and higher electricity tariffs that are expected in July, it added.
The Star
6 days ago
- Business
- The Star
TNB positioned for growth amid energy shift
CIMB Research sees steady dividend yields of 3.5% to 3.9% over 2024 to 2026. PETALING JAYA: Tenaga Nasional Bhd (TNB) appears well positioned for sustained earnings growth, underpinned by a robust capital expenditure programme and continued regulatory support. Despite some short-term fluctuations in electricity demand, analysts believe the utility giant's prospects remain compelling, particularly as it stands to benefit from Malaysia's accelerating energy transition and data centre expansion. Maybank Investment Bank Research (Maybank IB) noted that TNB's first-quarter results for 2025 were in line with expectations, as the group recorded a shortfall in regulated revenue due to a lower realised tariff and softer demand – shortfalls that will be recovered through the Industry Fund. 'The eventual finalisation of the recovery mechanism is a potential re-rating catalyst,' it said, raising its earnings forecast for 2026 and 2027 by 3% and 7%, respectively, on the back of RM10bil in contingent capital expenditure (capex) under Regulatory Period 4. Maybank IB upgraded its call for TNB to 'buy' with a target price of RM15.50. Hong Leong Investment Bank (HLIB) Research highlighted a slight decline in overall power demand in Peninsular Malaysia but emphasised that the commercial segment showed strong growth, driven by data centres, business and accommodation services. 'We expect TNB to leverage the full potential of strong electricity demand (mainly driven by data centre development), given the higher capex allocation of RM42.8bil to increase the regulated asset base substantially,' it said. HLIB Research maintained its 'buy' call on TNB with an unchanged target price of RM16.20. CIMB Research likewise kept its 'buy' stance with a target price of RM15.80, noting that core earnings per share (EPS) rose 18% quarter-on-quarter and 7% year-on-year on lower non-fuel costs and interest expenses. 'Given the in-line earnings, we maintain our core EPS forecast and target price of RM15.80,' it said. CIMB Research sees steady dividend yields of 3.5% to 3.9% over 2024 to 2026 while flagging downside risks, including potential cost overruns and delays in contingent capex spending. CGS International Research viewed TNB as a critical enabler of the country's National Energy Transition Roadmap, in addition to being an indirect play on the data centre theme in Malaysia.
The Star
22-05-2025
- Business
- The Star
Inari in search growth prospects amid challenges to RF segment
PETALING JAYA: Inari Amertron Bhd is looking for growth beyond its flagship radio frequency (RF) division as the outlook for this is subdued. Analysts have come out cautious post a briefing on the company's third quarter ended March 31, 2025 (3Q25) performance, which came in below expectations. Inari's normalised net profit for 3Q25 fell 11.5% year-on-year to RM57.9mil, while revenue was down 11.3% to RM308.3mil. This was due volume loading weakness across all business segments. Inari Amertron is the biggest semiconductor player locally. It is one of US-based Broadcom Inc's top third-party packaging and testing services providers in the thriving wireless segment. CIMB Securities Research said during the briefing, Inari indicated a subdued growth outlook for RF content gains tied to next-generation smartphone launches in the second half of 2025. "Any potential upside in RF value is expected to be driven more by market share gains from competitors and the introduction of new processes, rather than new socket wins. "We also gather that RF utilisation slipped to around 65% in 3Q25, down from 75% in 2Q25. Nonetheless, the group expects similar volume loadings in 4Q25," the research firm said in a report. According to CIMB Research, Inari is targeting financial year 2025 (FY25) revenue of RM1.35bil (based on mid-point guidance), implying flat quarter-on-quarter sales in the final quarter. Additionally, Inari does not foresee any front-loading activities boosting near-term utilisation, as its key RF customer is maintaining a steady volume loading forecast for the upcoming quarters. Despite challenges in the RF segment, Inari remains optimistic with growth prospects to be driven by memory module, power management, and automotive MCU testing programmes. "We expect these initiatives to contribute between RM80mil and RM100mil in revenue, making up about 6% of total FY26 sales. Inari's first memory product has already entered high-volume manufacturing, achieving a high yield rate and improved throughput, which bodes well for future contributions. "For example, the group expects to raise its memory module production volume by 33% in 4Q25F Additionally, the company is actively working to secure qualifications for new products in the coming quarters, further strengthening its diversification efforts," added the research firm. It is also working to optimise production at its 55%-owned China-based subsidiary, Yiwu Semiconductor International Corp by expanding its product portfolio to include advanced packaging solutions tailored for the domestic market. CIMB Research has kept its Buy call and RM2.20 target price on the stock. On the other hand, Maybank Investment Bank (Maybank IB) Research is maintaining its Hold stance, citing muted near-to-medium term prospects. It said a "significant positive shift in demand is needed for us to re-rate the stock". The research firm said plans to move up the value chain in its sensor business which should bode well for future prospects. "Its existing key customer in the segment has plans to aggressively grow into new generic sensor segments and redesignate some China-for-China products to Imari. However, its Yiwu factory has yet to yield positive new product initiative results with management alluding that its facility there may undergo restructuring to enhance yield," said Maybank IB Research, which has a RM2 target price on the stock. Shares of Inari was trading at RM1.87 at the time of writing, down 13.43% in the past five days.
The Star
20-05-2025
- Business
- The Star
Heavy equipment set to be a boon for Sime Darby
PETALING JAYA: Sime Darby Bhd 's unit Sime Darby Industrial (SDI) is emerging as a key growth engine, fuelled by its strong performance in Australia, rising capital expenditure in mining, strategic commodities diversification and growing contribution from high-margin after sales and rental services. According to CIMB Research, SDI accounts for 63% of the group's revenue with solid profit before interest and tax (PBIT) margins and a potential stand-alone valuation of RM10bil to RM12bil. The research house recently visited Sime Darby's industrial and motor-vehicle operations in Brisbane and Mackay, Australia that revealed valuable insights into key revenue drivers and long-term growth opportunities in the Australian market. Australia remains one the group's most important growth engines, contributing 53% of Sime Darby's core PBIT and 33% of revenue in its financial year 2024 ended June 30 (FY24) . Within the industrial division, Australian operations accounted for 77% of SDI's revenue and 87% of its core PBIT in FY24, up from 60% and 67%, respectively, in FY19. SDI is one of the world's top two dealers for Caterpillar heavy equipment and has delivered strong growth, driven by its Australian operations, rising spending for mining, and strategic acquisitions. A key contributor to margin expansion is the growing share of higher-margin after sales and rental services, which now account for 63% of revenue and deliver two to three times the margin of equipment sales. 'The segment provides annuity-like returns, supported by a growing installed base and multiple machine rebuild cycles,' noted CIMB Research. 'We estimate SDI could be worth RM10bil to RM12bn, based on a trailing 2024 price-earnings ration of 15 times to 18 times, representing between 69% and 82% of Sime Darby's current market capitalisation of RM14.7bil. In our view, a re-rating is warranted, underpinned by SDI's strong fundamentals, resilient earnings and attractive margin profile.' With accelerating digitalisation, expanding aftermarket penetration, and infrastructure-driven tailwinds, CIMB Research said SDI presents a compelling industrial pure play with monetisation potential. The research house reiterated a 'buy' call on Sime Darby with an unchanged target price of RM3. 'Our growth outlook is underpinned by resilient performance from the industrial segment, a turnaround in its China operations, and improved cost optimisation following the integration of UMW Holdings Bhd ,' it added. The stock also offers attractive dividend yields of 7% and 7.3% for 2025 and 2026, respectively, based on an average dividend payout of 70%.
The Star
20-05-2025
- Business
- The Star
Latest MRCB project win lifts order book closer to RM6bil
PETALING JAYA: The announcement that Malaysian Resources Corp Bhd (MRCB) has been awarded the contract to build the Shah Alam Sports Complex brings the property and construction company's order book closer to the RM6bil target for this year, analysts say. The contract from Menteri Besar Selangor Inc (MBI) was announced last Friday. The project value of RM2.94bil exceeded the company's earlier guidance of RM1.5bil as the scope of work has widened and takes MRCB's order book to RM5.4bil. Analysts at Hong Leong Investment Bank Research (HLIB Research) and CIMB Research have maintained their 'buy' calls on the stock, with target price of 67 sen and 83 sen, respectively. HLIB Research said MRCB's total year-to-date order book far exceeded its assumption of RM4bil for this year and now expects the order book to rise to RM6bil with core profit after tax and minority interest tweaked by minus 0.9% for this year and 2.5% for 2026 while expecting earnings of RM88.7mil for 2027. The research house said management anticipates a pre-tax profit margin of 5% from the project with financing costs baked into the contract value. Terms of payment for the 48-month project would be through a land swap not exceeding RM200mil subject to agreement, with the remainder in cash. MRCB's management shared that the payment would be on deferred basis. HLIB Research said the deferred payment would likely result in the company having a higher net gearing that currently stands at 0.27 times. It said MRCB would likely manage its balance sheet through asset disposals to free up cash while there could be the potential conversion of the KL Sentral redevelopment project later this year that may boost the order book to beyond the RM10bil mark. CIMB Research said, given the highly specialised nature of the project, the contract could fetch a fairly attractive operating margin of between 5% and 8% minus financing costs with minimal execution risk given MRCB's track record. Construction is scheduled to begin in November for a targeted completion in 2029. The research house said that the three-fold increase in the contract value comes with a far lower funding risk as most of the construction work would be paid in cash apart from the 7% to be paid through a land swap versus the initial value to be paid entirely through a land swap. The research house said MRCB also has sufficient balance-sheet headroom and the option to monetise non-core assets if needed. CIMB Research said, despite MRCB's year-to-date project wins meeting 90% of the company's order book target of RM6bil, it was maintaining its earnings forecasts for now pending the detailed design and project specifications expected in six months time.
