20/06/2025

BIZ & FINANCE FRIDAY | JUNE 20, 2025

20

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

Construction sector seen maintaining earnings growth KUALA LUMPUR: Earnings in the construction sector are expected to remain on an upward quarter-on-quarter (q-o-q) trajectory in the second quarter of 2025 (Q2’25), supported by increased construction site activities following 1Q 2025 festive breaks, according to CIMB Securities Sdn Bhd. The research firm said order book visibility is also improving, supported by the gradual rollout of big-ticket public projects and the potential award of up to six large-scale data centre facilities, each estimated to be worth around RM2 billion, over the next two to three quarters. “Nevertheless, the expanded sales and services tax (SST) scope could re-ignite near-term uncertainties concerning the margins of ongoing non-residential construction jobs of lower value,” it said in a note. CIMB Securities added that the sector is likely to see minimal impact, as contractors are expected to pass on the new tax charges under newly awarded construction contracts. To mitigate the issue of double taxation for existing construction projects, the research firm said business-to business exemptions are expected to be provided, ensuring that SST levies are imposed only at a single stage in the construction process. “For ongoing government-related contracts, we do not expect contractors to face any key issues in repricing their contracts to adjust for the SST levies. “Nevertheless, we believe that the situation is less clear-cut for existing non-residential private sector contracts, for which we estimate that about 40–50% of total project cost could be subject to SST levies,” it added. – Bernama

Ringgit slips against US dollar on global outlook concerns THE ringgit continued to end lower against the greenback yesterday, weighed down by emerging concerns over the global financial outlook, a dealer said. At 6pm, the local note slid to 4.2590/2625 versus the US dollar from Wednesday’s close of 4.2500/2550. Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the ringgit depreciated to as low as RM4.2633 during the morning session as the US Federal Open Market Committee (FOMC) members were reluctant to cut rates excessively in light of concerns over higher inflation risk in the second half of 2025. “This was reflected in their latest quarterly forecast of Personal Consumption Expenditures Price Index (PCE) inflation, which is expected to reach 3% for 2025 versus the actual figure of 2.1% in April 2025,” he told Bernama. He added that sentiments will remain guarded as the market participants are wary of the potential escalation of the Israel-Iran conflict. Conversely, the ringgit traded higher against a basket of major currencies at the close. It rose against the British pound to 5.7164/7211 from 5.7218/7285 at the close on Wednesday, gained vis-à-vis the euro to 4.8868/8908 from 4.8888/8945 on Wednesday and appreciated versus the Japanese yen to 2.9286/9312 from 2.9322/9359 previously. The ringgit was also higher against its Asean peers. It advanced versus the Indonesian rupiah to 259.5/259.9 from 260.5/260.9 on Wednesday, strengthened against the Singapore dollar to 3.3072/3102 from 3.3074/3115 on Wednesday, and was up vis-à-vis the Thai baht to 12.9966/13.0513 from 13.0240/0449 previously.

Exchange Rates

FOREIGN CURRENCY

SELLING TT/OD

BUYING TT

BUYING OD

1 US Dollar

4.3210 2.8200 3.3550 3.1470 4.9580 2.6060 3.3550 5.7970 5.3070

4.1880 2.7060 3.2570 3.0630 4.7980 2.5100 3.2570 5.6140 5.0810

4.1780 2.6900 3.2490 3.0510 4.7780 2.4940 3.2490 5.5940 5.0660

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

118.9700 3.6040 60.4600 68.1300 55.6000 5.0800 0.0274 2.9830 15.7000 44.3700 1.5500 7.6600 119.8000 116.3900 24.8300 1.4800 46.1100 13.7700

112.8200 3.3570 57.9200 62.7100 52.8400

112.6200 3.1570 57.9200 62.5100 52.6400

4.7700 0.0248 2.8880

4.5700 0.0198 2.8780

N/A

N/A

40.8200 1.4500 7.2100 113.7200 110.4900 22.4300 1.3600 42.0100 12.2100

40.6200 1.2500 7.0100 113.5200 110.2900 22.2300 1.1600 41.8100 11.8100

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

Technology Overweight

Top Glove Corp Bhd Hold. Target price: RM0.71

Scientex Bhd Neutral. Target price: RM3.50

June 19, 2025: RM0.715

June 19, 2025: RM3.31

Source: Company, Phillip Capital Research forecasts

Source: Bloomberg

Source: Company data, RHB

NEAR-TERM visibility remains clouded by lingering demand uncertainty. Management noted a progressive recovery in US orders since March 25, driven by front-loading restocking activity ahead of potential tariff headwinds. However, orders were briefly put on hold in April 25, as customers adopted a cautious stance amid policy uncertainty, but have resumed in May 25. Management also highlighted that US-bound deliveries have experienced delays due to reduced vessel availability as shipping capacity was reallocated to accommodate higher Chinese export volumes during the 90-day tariff moratorium. As the US accounts for just 20% of Top Glove’s sales, and sales volume is improving in other markets, we expect the overall earnings impact to be marginal, despite continued ASP pressure. Top Glove is running at utilisation rate of 60% against an annual installed capacity of 95 billion pieces. Management aims to raise utilisation to 70% by end FY25, contingent on sustained recovery in glove demand. Sales volume for 1H’25 stood at 19 billion pieces, with the full-year sales target of 40 billion pieces likely to be reviewed after July 25 once there is better clarity on the outcome of the US tariff policy. ASP recovery remains under pressure as competition from Chinese manufacturers intensifies, particularly in non-US markets. With growing restrictions limiting access to the US market, Chinese manufacturers have redirected excess supply to other non-US markets, such as Europe, where products are priced lower to gain market share. Based on our latest channel checks, China’s export share in the US market has declined to 25%, down from 40% a year ago. HOLD with RM0.71 TP. – Phillip Capital Research, June 19

SCIENTEX posted a Q3’25 net profit of RM129.7 million (+2% QoQ, +1% YoY), bringing 9M’25 core earnings to RM384.9 million (-3.4% YoY). This is broadly in line with expectations, at 73% and 72% of our and Street’s full-year estimates, as we expect it to chalk seasonally stronger numbers from the property segment in Q4’25. It declared a DPS of 6 sen for the quarter (Q3’24: 6 sen), which translates to a 9M’25 core payout ratio of 24%. The packaging segment’s operating profit fell 41% YoY in Q3’25 despite just a 6% YoY slip in revenue. This was mainly due to the challenging environment for the industrial packaging sub-segment, as capacity expansion in the market resulted in lower realised ASPs. As a result, this segment’s core operating margin thinned to 5.6% in Q3’25 (Q3’24: 8.9%). This brought 9M’25 operating profit to RM107.6 million (-38% YoY). On the property side, revenue and operating profit rose 6.6% and 9.2% YoY due to the higher construction progress and strong take-ups from new launches. Management believes the packaging market will remain challenging in the near term, especially for the industrial sub segment, with a rebound anticipated in CY26 – offset by returning demand for consumer packaging. Note: The consumer packaging sub-segment roughly makes up 45-50% of total packaging revenue. On the property business, we are optimistic that Scientex is on track to achieve its property launch target of more than RM2 billion for FY25. Hence, we continue to expect the property segment to be the main earnings contributor in the coming quarters. NEUTRAL with RM3.50 TP. – RHB Research, June 19

SECTOR results were largely in line with expectations, with five companies meeting projections and one outperforming estimates. However, three players had numbers that missed expectations, due to slower order recognition, margin compression, and FX impact. The sector’s aggregate core PATAMI showed YoY contractions of 12.8% YTD and 26.1% for Q1’25. Most players booked declining earnings, except for Coraza Integrated Technology (Coraza), which maintained its revenue despite margin pressures from ASP erosion, pre-opening expenses, and higher costs. Post results, we cut our aggregated forward earnings forecast for the sector by 4.5%, primarily due to downward revisions for Pentamaster and Unisem (M) (UNI). Engineering support players continue to book robust revenue growth – seen as a precursor to growth in automated test equipment or ATE manufacturers as well as OSATs. Hence, we expect stronger numbers heading into Q2 and H2, supported by a broader recovery across the semiconductor supply chain. Our earnings growth expectations for the sector are at 2% YoY for FY25 and 40% YoY for FY26. Order and revenue trends remain constructive, supported by a sector recovery and potential front loading activities, despite the ongoing uncertainty from US tariffs. Most management teams have adopted an optimistic tone, on stronger loadings with the replacement cycle, new product introductions, a demand recovery, and technology advancements. These trends are further bolstered by new opportunities emerging from China Plus One and Taiwan Plus One strategies. – RHB Research, June 19