Latest news with #CIMBResearch
The Star
3 days ago
- Business
- The Star
REITs draw positive attention with ESG efforts
CIMB Research highlighted that Sunway Real Estate Investment Trust (Sunway-REIT) is a strong contender for F4GBM Index inclusion by year-end. PETALING JAYA: Malaysian real estate investment trusts (REITs) are expected to gain further traction in the sustainability space, with increasing potential for enhanced representation in the FTSE4Good Bursa Malaysia (F4GBM) Index in the coming review cycle this December. This momentum reflects the sector's growing alignment with environmental, social and governance (ESG) standards. CIMB Research highlighted that Sunway Real Estate Investment Trust (Sunway-REIT) is a strong contender for F4GBM Index inclusion by year-end. 'Our assessment indicates that Sunway-REIT is on track for potential inclusion in the F4GBM Index in December,' the research house said in a recent note. In the June review, Sunway-REIT joined Axis-REIT and Capitaland Malaysia Trust (CLMT) in attaining ESG Grading Band 4 – the second-highest tier – marking the highest number of REITs achieving this level in the last six cycles. Despite this, Sunway-REIT was not added to the index at that point as it was not a constituent of the FTSE Bursa Malaysia Emas Index as of end-May due to previously low liquidity. However, a turnaround in liquidity saw Sunway-REIT re-enter the FBM Emas Index following the June semi-annual review, paving the way for potential inclusion in the December F4GBM Index review. CIMB Research recommended 'hold' on Sunway-REIT with a target price of RM2.11. According to the research house, 'Only companies that are constituents of the FBM Emas Index as of the end of May are eligible for consideration in the June F4GBM Index review, while companies added thereafter are only eligible in the December review.' The REIT sector's weightage in the F4GBM Index has risen to 1.7% from 1.1% last December, following the inclusion of 19 new companies in the update last month. Among these were CLMT, KIP-REIT and YTL Hospitality-REIT, bringing the total number of REIT constituents to seven out of 160. 'To qualify for inclusion in the F4GBM Index, companies must achieve a minimum ESG score of 2.9 out of five,' CIMB Research noted. Based on its analysis, CLMT likely qualified due to liquidity, while YTL-REIT and KIP-REIT earned their spots through improved ESG performance. Still, five of the 10 largest REITs by market capitalisation – which represent 93% of the sector's total market capitalisation – remain absent from the index, including KLCC-REIT and IGB Commercial-REIT, mainly due to liquidity issues. Al-Aqar Healthcare-REIT was excluded for failing to meet the minimum ESG score. 'Overall, we are positive on the gradual progress made by REIT players in enhancing their ESG practices, as reflected by the increasing number of constituents in the F4GBM Index,' CIMB Research stated. The research house emphasised that further ESG gains lie within the environmental pillar, particularly in reducing carbon emissions and boosting energy efficiency. 'A key area for improvement is the reduction of carbon emissions through greater adoption of renewable energy or improving energy efficiency,' it said. REITs were encouraged to consider subscribing to Tenaga Nasional Bhd 's Green Electricity Tariff programme, which was revised this month to offer a more accessible flat rate of five sen per kilowatt-hour. KIP-REIT was singled out for retrofitting efforts across seven malls through a performance-based partnership that is expected to deliver energy savings of 15%. 'Sustainability-linked financing embeds pre-agreed sustainability performance targets into financing terms, directly linking borrowing costs to the achievement of ESG outcomes,' CIMB Research added, citing Sunway-REIT's RM3.4mil in savings from 2021 to 2023 as an example. With tenants increasingly favouring green-certified spaces and cost-effective financing tied to sustainability metrics, Malaysian REITs are positioned to benefit from continued ESG integration in the long term.
The Star
3 days ago
- Business
- The Star
Gamuda's latest job win to exceed order-book target
CIMB Research said the NPWSS project provides Gamuda with the base to rebuild its water-related recurring earnings streams. PETALING JAYA: Gamuda Bhd 's latest contract win offers recurring income and a turnkey contract role and helps its total order book exceed its target for 2025. CGS International (CGSI) Research estimates the engineering and construction group's order book for the year could stand at about RM47bil, above its in-house target of RM40bil to RM45bil, after it secured a potential RM5bil worth of water treatment and distribution infrastructure jobs in Kerian, Northern Perak, in a joint venture with Perbadanan Kemajuan Negeri Perak (PKNPk). The project is part of the broader Northern Perak Water Supply Scheme (NPWSS), which aims to transfer 1.5 million litres per day (mld) of raw water from Sungai Perak to the Bukit Merah Dam. Meanwhile, 500 mld of the supply will be allocated to address the immediate irrigation needs of Northern Perak, with the balance to be made available to meet the domestic and industrial demands of Perak. Excess treated water will be sold to Penang. Analysts think the contract win offers Gamuda not just engineering opportunities as the turnkey contractor but also recurring income over some four decades as the developer of NPWSS. CGSI Research noted a PKNPk-Gamuda JV (50:50) will undertake this project on a privatisation basis with a minimum 40-year operation period and take its year-to-date job wins to RM23.4bil. 'Gamuda estimates the pre-tax margin for the project to be around 10% to 12%, within the range of its Malaysian infrastructure projects. 'This will be positive for improvement in its construction margin trajectory, where we expect a more meaningful recovery in financial year 2026 (FY26). 'This is when its local projects (39% of order book as of June 2025) move away from the shallow part of the S-curve recognition,' the research house stated in a report on the company. It added the award could be seen as a signal that the government may look to expedite project flows. Furthermore, CGSI Research maintained its 'add' call on the stock with a sum-of-parts (SOP) derived target price (TP) of RM6 a share. RHB Research, however, believes any formal awards pertaining to the NPWSS project will likely take place next year. Hence, it has made no changes to its earnings estimates for Gamuda, as there were no changes in its order book while awaiting further details such as tariffs, project tenure and approval from the relevant authorities related to the NPWSS project. It made no changes to its 'buy' call on Gamuda nor to its SOP-derived TP of RM5.86 a share. CIMB Research said the NPWSS project provides Gamuda with the base to rebuild its water-related recurring earnings streams following the disposal of its 40% stake in Syarikat Pengeluar Air Selangor Sdn Bhd several years ago. It kept its 'buy' recommendation on Gamuda with an unchanged TP of RM5.50 a share.
The Star
3 days ago
- Business
- The Star
REITs in good stead for F4GBM Index inclusion
PETALING JAYA: Malaysian real estate investment trusts (REITs) are expected to gain further traction in the sustainability space, with increasing potential for enhanced representation in the FTSE4Good Bursa Malaysia (F4GBM) Index in the coming review cycle this December. This momentum reflects the sector's growing alignment with environmental, social, and governance (ESG) standards. CIMB Research highlighted that Sunway Real Estate Investment Trust (Sunway REIT) is a strong contender for F4GBM Index inclusion by year-end. 'Our assessment indicates that Sunway REIT is on track for potential inclusion in the F4GBM Index in Dec 2025,' the brokerage said in a recent note. In the June 2025 review, Sunway REIT joined Axis REIT and Capitaland Malaysia Trust (CLMT) in attaining ESG Grading Band 4 — the second-highest tier — marking the highest number of REITs achieving this level in the last six cycles. Despite this, Sunway REIT was not added to the index at that point as it was not a constituent of the FTSE Bursa Malaysia EMAS Index as at end-May 2025 due to previously low liquidity. However, a turnaround in liquidity saw Sunway REIT re-enter the FBM EMAS Index following the June 2025 semi-annual review, paving the way for potential inclusion in the December 2025 F4GBM Index review. CIMB Research recommended 'hold' on Sunway REIT, with a target price of RM2.11. According to CIMB Research, 'Only companies that are constituents of the FBM EMAS Index as at end-May are eligible for consideration in the June F4GBM Index review, while companies added thereafter are only eligible in the December review.' The REIT sector's weightage in the F4GBM Index has risen to 1.7% from 1.1% in December 2024, following the inclusion of 19 new companies in the June 2025 update. Among these were CLMT, KIP REIT, and YTL Hospitality REIT , bringing the total number of REIT constituents to seven out of 160. 'To qualify for inclusion in the F4GBM Index, companies must achieve a minimum ESG score of 2.9 out of 5,' CIMB Research noted. Based on its analysis, CLMT likely qualified due to liquidity, while YTL REIT and KIP REIT earned their spots through improved ESG performance. Still, five of the 10 largest REITs by market capitalisation — which represent 93% of the sector's total market cap — remain absent from the index, including KLCC REIT and IGB Commercial REIT, mainly due to liquidity issues. Al-Aqar Healthcare REIT was excluded for failing to meet the minimum ESG score. 'Overall, we are positive on the gradual progress made by REIT players in enhancing their ESG practices, as reflected by the increasing number of constituents in the F4GBM Index,' CIMB Research stated. The brokerage emphasised that further ESG gains lie within the environmental pillar, particularly in reducing carbon emissions and boosting energy efficiency. 'A key area for improvement is the reduction of carbon emissions through greater adoption of renewable energy or improving energy efficiency,' it said. REITs were encouraged to consider subscribing to Tenaga Nasional Bhd 's Green Electricity Tariff programme, which was revised in July 2025 to offer a more accessible flat rate of five sen per kilowatt-hour. KIP REIT was singled out for retrofitting efforts across seven malls through a performance-based partnership that is expected to deliver energy savings of 15% post-capex recovery. 'Sustainability-linked financing embeds pre-agreed sustainability performance targets into financing terms, directly linking borrowing costs to the achievement of ESG outcomes,' CIMB Research added, citing Sunway REIT's RM3.4mil in savings from 2021 to 2023 as an example. With tenants increasingly favouring green-certified spaces and cost-effective financing tied to sustainability metrics, Malaysian REITs are positioned to benefit from continued ESG integration in the long term.
The Star
6 days ago
- Business
- The Star
Cautious outlook for oil and gas industry
PETALING JAYA: The oil and gas sector is currently facing multiple headwinds that are likely to weigh on near-term performance and sentiment, says CIMB Research, which has maintained a 'neutral' stance on the industry. It said challenges on the immediate horizon include unstable oil prices driven by a deceleration in global economic activity and the resultant muted demand for crude oil and petrochemical products. The potential implementation of higher US tariffs may further suppress already fragile trade flows and external demand, while rising supply pressures from an anticipated increase in output by the Organisation of Petroleum Exporting Countries may exacerbate the downside risk to oil prices. In addition, the research house pointed to regulatory uncertainty stemming from the ongoing dispute between Petroliam Nasional Bhd (PETRONAS) and Petroleum Sarawak Bhd (Petros) over the role of gas aggregation in Sarawak. This may lead to a recalibration of PETRONAS' capital expenditure (capex) and operating expenditure commitments. Furthermore, unplanned operational disruptions at Petronas Chemicals Group Bhd (PetChem) facilities are expected to exert sustained pressure on the sector, resulting in weaker earnings momentum, delayed project execution and a more cautious investment sentiment across the value chain. 'We expect earnings weakness in the sector to persist into the second quarter of this year (2Q25), with core net profit projected to decline by 8.8% quarter-on-quarter (q-o-q), before rebounding by 24.1% q-o-q in 3Q25. 'Bumi Armada Bhd is likely to record a sharp decline of 42% from the previous quarter, owing to a 70% reduction in the daily charter rates for the floating production storage and offloading (FPSO) vessel Kraken under a revised agreement that became effective in April. 'Three PETRONAS-linked companies are also expected to post weaker earnings in 2Q25,' the research house said in a report to clients yesterday. Focusing on PetChem, CIMB Research projected the company to report a 5% q-o-q decline in 2Q25 earnings, weighed down by ongoing operational issues at its plants in Kertih in Terengganu and Gurun in Kedah, and continued downtime at the Pengerang Petrochemical Petrochemicals Complex in Johor since February. Likewise, the research house said it expects MISC Bhd 's core net profit to fall 24.9% q-o-q, largely owing to the absence of the one-off gain from FPSO Bunga Kertas booked in 1Q25. Concurrently, it said Petronas Dagangan Bhd 's earnings were forecast to decline 18.1% q-o-q, impacted by lower margins in its commercial segment amid volatility in jet fuel prices and higher product costs. 'That said, the overall weakness in the sector is expected to be partially offset by earnings recovery from Yinson Holdings Bhd and Dayang Enterprise Holdings Bhd . 'Overall, we project sector core net profit to contract by 6.3% year-on-year, setting a new decade-low earnings base. 'The downtrends, which has persisted since 2021, is largely attributed to a weaker order book, margin compression from weaker product spreads, cost provisions, and intermittent operational disruptions,' said CIMB Research. It added that PETRONAS' 1H25 financial results and capex update, expected by end-August or early September, would be key, although early signs point to downside risk for FY25 capex for the national oil and gas company, driven by delayed project rollouts amid volatile oil prices and regulatory conflict with Petros over gas distribution rights in Sarawak. CIMB Research pointed out that sentiment has been dampened by PETRONAS' cost rationalisation measures, including a downsizing plan impacting up to 10% of its 50,000 employees, alongside a hiring and promotion freeze through end-2026 that signals a more cautious approach to capital management. 'Based on news reports indicating a possible 30% impact on revenue, our back-of-the-envelope calculation suggests that PETRONAS' FY25 capex could be trimmed by up to RM6bil. 'This implies a possible downward revision to the RM44bil to RM54bil range, based on the national oil company's earlier guidance of maintaining annual capex between RM50bil and RM60bil.' For reference, CIMB Research reported that PETRONAS spent RM54.2bil in FY24, and that the likelihood of deferred work orders and potential contract renegotiations could negatively affect project timelines, earnings visibility, and profit margins of oil and gas companies that are dependent on PETRONAS contracts, such as Dayang and Dialog Group Bhd . Given its cautious sector outlook, CIMB Research is keeping a selective stance, continuing to favour MISC and Dialog, which it believes are well-positioned to deliver sustained outperformance over the medium term. Its target price for MISC is RM9.19 and RM2.50 for Dialog.
The Star
26-06-2025
- Business
- The Star
Muted impact on firms
PETALING JAYA: The mandatory Employees Provident Fund (EPF) contribution for foreign workers will have little impact on most businesses for now, except for those with heavy reliance on foreign labour. The impact will be greater if such companies also operate in price-sensitive markets where cost pass-through is limited. Sectors that would be most affected are plantation, gloves, technology and construction, according to CIMB Securities Research. 'Overall, we view the mandatory 2% EPF contribution as mildly negative for corporate earnings. 'We expect the earnings impact from higher labour costs – alongside the recent expansion of the sales and service tax – to be reflected progressively in the results for the second half of 2025, with a more pronounced full-year effect in 2026,' stated the research house. Starting with October's wage, foreign workers and their employers must each contribute 2% of the monthly pay to the EPF. CIMB Research foresees the initial cost impact to likely be manageable. 'However, pressure may build if the contribution rate for foreign workers is gradually increased in line with that of Malaysian workers,' it said in a note. The advantage of this EPF plan, according to economist Geoffrey Williams, is that it is being rolled out at a 'very low rate and very low cost'. This avoids imposing substantial additional cost pressures on businesses, at a time when many industry players are complaining about margin compressions. On the flip side, however, the 2% EPF contribution will hardly benefit the foreign workers, said Williams. 'The employees will save virtually nothing, the EPF will have millions of extra members but most will have virtually no savings and employers will have minimal extra costs. 'For example, for a foreign worker on a minimum wage of RM1,700, the new scheme will cost RM34 per month (employer's portion). For employers complaining of higher costs due to this, they need a reality check. If they cannot afford RM34 per month, they do not have a viable business model.' As for those with large numbers of foreign workers, Williams urged them to reduce dependency on low-wage workers if such employers feel that the cumulative cost of 2% contribution is too high. 'Employ Malaysians or invest in technology,' he said. The EPF announced that this mandatory contribution will apply to all foreign workers in Malaysia – excluding domestic helpers – who possess valid passports and work permits issued by the Immigration Department. Previously, the EPF contributions for foreign workers were voluntary. This policy change should not come as a surprise to the market, as it was first announced in Budget 2025. Under the revised framework, foreign workers will be allowed to withdraw their EPF savings upon returning to their home countries, provided their work permits have expired and there is evidence that their permanent employment has ended. With the new mandatory policy, CIMB Research said the EPF stands to benefit from higher annual contributions. 'Based on an estimated 2.5 million foreign workers earning an average monthly salary of RM2,000, the combined 4% contribution from employers and employees could generate approximately RM2.4bil in additional annual contributions to the EPF.' Meanwhile, the Small and Medium Enterprises Association of Malaysia (Samenta) national president Datuk William Ng described a 2% contribution as 'reasonable' and not something that Samenta would object to. He also told StarBiz that most SMEs which engaged foreign workers did not have a large number of such workers. 'In fact, we are more concerned over the availability of these funds to the workers upon them ceasing to work in Malaysia. 'Ideally, they should be able to withdraw the fund in its entirety upon termination of their employment and such funds allowed to be repatriated to their home country to repay loans, build houses and any other uses they may deem fit,' he said.
