20/05/2025

BIZ & FINANCE TUESDAY | MAY 20, 2025

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Malaysian Paper

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MARKETS/FROM THE BROKERS

SUNBIZ presents extracts of a selection of commentaries and research reports received from stockbrokers on counters that could be of interest to investors.

DISCLAIMER: The information is extracted from stockbrokers’ commentaries and research reports and do not represent the views or opinions of Sun Media Corporation Sdn Bhd. It is not a solicitation, recommendation or an offer to buy or sell the equities featured. Sun Media Corporation shall not be liable or responsible for any consequences resulting from usage of the information.

[ Compiled by SunBiz Team

Ringgit gains against dollar after US credit rating downgrade THE ringgit ended higher against the US dollar yesterday, supported by a weaker US Dollar Index (DXY) which fell 0.71% to 100.376 following a downgrade of the United States government’s sovereign credit rating. At 6pm, the local note rose to 4.2870/2945 versus the greenback from Friday’s close of 4.2900/2980. Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the decline in the DXY was due to populist measures by President Donald Trump’s administration, which are likely to compromise the US government’s ability to contain the widening budget gap and ballooning debt. “While Moody’s Rating has maintained its assessment of the US dollar’s special status as a global reserve currency, the current tariff shocks may have resulted in traders and investors reassessing such a proposition. “However, this is a structural issue that may require a longer time horizon,” he told Bernama. At the close, the ringgit traded lower against a basket of major currencies. It depreciated versus the Japanese yen to 2.9596/9650 from Friday’s 2.9470/9527, eased vis-à-vis the euro to 4.8344/8429 from 4.8022/8112, and went down against the British pound to 5.7420/7521 from 5.7018/7125 previously. The local note was mixed against its Asean peers. It appreciated vis-à-vis the Philippine peso to 7.69/7.71 from 7.71/7.73 last Friday, but decreased against the Singapore dollar to 3.3135/3195 from 3.3041/3105, and declined against the Thai baht to 12.9630/9924 from 12.9003/9318.

Investment banks expect 25 bps cut in OPR in second-half 2025 KUALA LUMPUR: Investment banks expect Bank Negara Malaysia (BNM) to lower the Overnight Policy Rate (OPR) by 25 basis points (bps) in the second half of 2025 (2H’25) amid softer first quarter (Q1) growth and tariff disruptions Public Investment Bank Bhd said the earlier 100 bps reduction in the Statutory Reserve Requirement (SRR) is expected to serve as a timely liquidity buffer, allowing BNM to maintain a data dependent stance amid elevated external volatility. Should the 90-day tariff suspension lapse without renewal, raising Malaysia’s effective tariff exposure to 24%, the investment bank anticipated a more front-loaded policy response, comprising two 25 bps OPR cuts in 2H’25. “This would be intended to mitigate negative spillovers on trade performance, investment activity and broader economic sentiment. “With three scheduled policy meetings remaining this year – July 9, Sept 4 and Nov 6 – the window for calibration remains open, though timing will depend on incoming data and developments surrounding global trade negotiations,” it said in a note yesterday. Meanwhile, Hong Leong Investment Bank said the projection was made in view of external uncertainties and modest inflationary environment. As for Standard Chartered (StanChart), it continued to expect BNM to cut the policy rate by 25 bps in July, with more cuts (beyond 25 bps) in 2025 likely if data deteriorates by more than expected. The bank has lowered its 2025 GDP growth forecast to 4.2% from 5% previously on weaker-than-expected Q1 GDP growth and tariff disruptions. – Bernama

Exchange Rates

FOREIGN CURRENCY

SELLING TT/OD

BUYING TT

BUYING OD

1 US Dollar

4.3670 2.8130 3.3600 3.1230 4.8890 2.5800 3.3600 5.8160 5.2620 3.6670 60.9500 67.1600 56.4400 5.1900 0.0275 3.0120 43.2100 1.5800 7.9300 121.0800 117.6500 25.0800 1.5000 46.1700 13.7300 120.2500 N/A

4.2320 2.6980 3.2630 3.0380 4.7290 2.4840 3.2630 5.6300 5.0350

4.2220 2.6820 3.2550 3.0260 4.7090 2.4680 3.2550 5.6100 5.0200

1 Australian Dollar 1 Brunei Dollar 1 Canadian Dollar 1 New Zealand Dollar 1 Singapore Dollar 1 Sterling Pound 1 Swiss Franc 100 UAE Dirham 100 Bangladesh Taka 100 Chinese Renminbi 100 Danish Krone 100 Hongkong Dollar 100 Indian Rupee 100 Indonesian Rupiah 100 Japanese Yen 100 New Taiwan Dollar 100 Norwegian Krone 100 Pakistan Rupee 100 Philippine Peso 1 Euro

113.9800 3.4140 58.3700 61.7900 53.6200

113.7800 3.2140 61.5900 53.4200 4.6700 0.0199 2.9050 39.5100 1.2800 7.2700 114.7400 111.4900 22.4500 1.1800 41.8100 11.7700 N/A N/A

4.8700 0.0249 2.9150

N/A

39.7100 1.4800 7.4700 114.9400 111.6900 22.6500 1.3800 42.0100 12.1700

100 Qatar Riyal 100 Saudi Riyal

100 South Africa Rand 100 Sri Lanka Rupee 100 Swedish Krona

100 Thai Baht

Source: Malayan Banking Bhd/Bernama

Gamuda Bhd Buy. Target price: RM4.95

PIE Industrial Bhd Buy. Target price: RM5.10

Maxis Bhd Hold. Target price: RM3.70

May 19, 2025: RM4.26

May 19, 2025: RM4.57

May 19, 2025: RM3.68

Source: Maybank Investment Bank

Source: Maybank Investment Bank

Source: Maybank Investment Bank

PIE’S Q1’25 core earnings rose 83% YoY to RM16 million, accounting for 17% of both our and consensus full year estimates, broadly in line with our expectations given the anticipated earnings rebound. Revenue climbed 14% YoY to RM272m, driven by EMS (+17% YoY) and raw wire & cable (+2% YoY) segments, as material shortages eased. This was partially offset by a 9% YoY decline in wireharness sales. Meanwhile, gross profit margin expanded 1.7ppts to 8%, lifting core net profit margin by 2.2ppts to 6%. PIE’s Q1’25 revenue rose 8% QoQ to RM272 million, led by a 10% QoQ increase in EMS sales, partially offset by weaker raw wire & cable (-2% QoQ) and wireharness (-4% QoQ) contributions. Core profit climbed 28% QoQ to RM16 million, supported by stronger revenue, better product mix margins, and lower admin and distribution costs. However, the 5 sen DPS declared for the year came in below our expected 40% dividend payout ratio for the year, implying to a payout of 20%. We continue to like PIE for its growth prospects, exposure to global supply chain shifts, strong relationships with leading MNCs, and parental ties to Hon Hai/Foxconn. There are several risk factors affecting our earnings estimates, target price and rating for PIE such as: i) revenue concentration risk is notable, with its top two customers accounting for over 60% of total business in 2023; ii) exposure to fluctuations in the USD/RM exchange rate; iii) potential delays or shortages in critical inputs, including raw materials and labour; iv) unfavourable trade policies such as tariffs. BUY with RM5.10 TP. – Maybank Investment Bank, May 19

GAM has proposed to acquire 336 acres of land near Gamuda Cove for RM248.7 million or RM17 psf. The 3 parcels of leasehold land measuring 336 acres are located south of Gamuda Cove and adjoining Paya Indah Discovery Wetlands. To put things into perspective, the earlier Gamuda Cove land was acquired in CY14 for RM12 psf (vs. RM17 psf for latest acquisition). Gamuda Cove is GAM’s most successful township in Malaysia, contributing 31% to FY24A Malaysian property sales (16% of FY24A total property sales). The proposed acquisition is expected to be completed by Q2’26 (Q3’26 or Q4’26). GAM plans to develop these proposed lands as an extension of Gamuda Cove with an estimated GDV of RM2.2 billion over 11 years. It expects margins from this phase to be higher than the existing one as the heavy upfront investments in placemaking and infrastructure have been completed. Thus, this extension can be developed with lower capex. Assuming 15% PBT margin, we estimate that the proposed land can accrete RM250 million (4sen/shr) to net profit over its development period and 2sen/shr to our RNAV TP assuming 8% WACC. GAM intends to finance this proposed acquisition via cash. We estimate its end-FY26 net gearing to erode by 2ppts to 57%, still below its self-imposed cap of 70%. Pending completion of this acquisition, our earnings estimates are unchanged. Gamuda has carved a niche in highly technical tunnelling works. Its capabilities have enabled it to clinch key infra projects and gain above-industry average E&C margins. Completed infra projects include KVMRT 1&2, Ipoh-Padang Besar EDT, SMART, LDP, SAE, SPRINT, SSP3 and Sg S’gor Dam. BUY with RM4.95 TP. – Maybank Investment Bank, May 19

MAXIS’ Q1’25 net profit of RM371 million (+5% YoY, +16% QoQ) was 25% of both our and consensus full-year forecasts respectively. The QoQ growth was due to a base effect, as Maxis recorded elevated expenses (direct and staff) in Q4’24. A 4 sen DPS (unchanged YoY) was declared in the quarter, in line with our expectations. In Q1’25, total service revenue was down by 3.4% QoQ, with lower ARPUs across both prepaid and postpaid (due to seasonality and EBITDA-neutral changes in revenue treatment for Maxis’ device protection program) being partly offset by sequentially higher subscribers. Enterprise revenue trended lower QoQ (higher project deliveries in Q4’24), offsetting a slight increase in home fibre revenue. Opex was lower QoQ on as direct expenses (device cost) and staff cost normalised, resulting in EBITDA margin expanding by 4.7ppt QoQ to 40.3%. For FY25, management is maintaining its guidance for flat to low-single digit EBITDA growth from low-single digit increase in service revenue, and