04/07/2025

FRIDAY | JULY 4, 2025

20

BIZ & FINANCE

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

Kenanga bullish on construction, cites data centres and tech capex KUALA LUMPUR: Kenanga Investment Bank Bhd remains bullish on the construction sector, given persistent demand for data centres, underpinned by continued capital expenditure from major tech firms. The investment bank said that, after a sluggish start to the year driven by concerns over the US artificial intelligence (AI) diffusion policies, sentiment in the construction sector rebounded strongly in the second quarter of 2025, buoyed by renewed confidence as global tech giants ramped up data centre investments. It said that earlier in Q1’25, concerns over the US AI diffusion rules had cast a shadow on Malaysia’s data centre development outlook, triggering a heavy sell-off in construction stocks. “We remain optimistic that the construction sector will continue its upcycle into the second half of 2025, underpinned by a robust pipeline of data centre roll-outs and the impending public infrastructure projects,” it said in a note. Kenanga Investment said that although the MRT3 timeline remains uncertain, several key projects are progressing including Penang LRT Mutiara Line Packages 2 and 3, Penang Airport expansion, and Phase 2 of the Pan Borneo Highway, Sabah-Sarawak Link Road, the Subang Airport redevelopment plan, and the Johor LRT/Autonomous Rapid Transit. It said the high-profile KL-Singapore High-Speed Rail remains a medium-term catalyst, and beyond data centres, industrial developments such as semiconductor foundries will support further private sector growth. “We maintain our assumption of average annual contract awards at RM180 billion for 2024-26,” it said. – Bernama Malaysian Economy June uptick offers hope, but Q2’25 stays modest

Ringgit ends higher, sentiment lifted by US-Vietnam trade deal THE ringgit closed higher against the US dollar yesterday, supported by improved regional sentiment following a new US-Vietnam trade deal, said SPI Asset Management managing partner Stephen Innes. At 6pm, the local note rose to 4.2195/2255 versus the greenback from Wednesday’s close of 4.2245/2305. Innes said the agreement to impose a reduced 20% tariff on Vietnamese exports, down from a previously threatened 46% has lifted risk appetite and supported regional currencies. “The markets see this as a positive sign for global trade recovery, which helped boost the ringgit,” he told Bernama. Innes also said that the weaker-than-expected US ADP jobs data, with only 33,000 jobs added in June, reinforced expectations of two US rate cuts this year, pressuring the greenback. He noted, however, that market focus might shift on tonight’s non-farm payrolls report, with consensus at 106,000. At the close, the ringgit traded mostly lower against a basket of major currencies. It shrunk against the euro to 4.9756/9827 from 4.9748/9818, and depreciated against the Japanese yen to 2.9333/9376 from 2.9316/9360. However, it appreciated versus the British pound to 5.7621/7703 from 5.7859/7941 on Wednesday. The local note traded mixed against its Asean counterparts. It improved vis-à-vis the Singapore dollar to 3.3146/3196 from 3.3167/3217, and rose against the Thai baht to 13.0211/0457 from 13.0233/0482. It slipped against the Indonesian rupiah to 260.5/261.0 from 259.9/260.5, and weakened against the Philippine peso to 7.50/7.51 from 7.49/7.51 previously.

Exchange Rates

FOREIGN CURRENCY

SELLING TT/OD

BUYING TT

BUYING OD

1 US Dollar

4.2800 2.8290 3.3600 3.1460 5.0570 2.6130 3.3600 5.8450 5.4430

4.1470 2.7160 3.2620 3.0610 4.8950 2.5180 3.2620 5.6620 5.2140 3.3250 57.5800 63.9500 52.3300 4.7700 0.0247 2.8890 40.1400 1.4400 7.2700 112.6400 109.4700 22.7700 1.3500 42.2500 12.2500 111.7300 N/A

4.1370 2.7000 3.2540 3.0490 4.8750 2.5020 3.2540 5.6420 5.1990 3.1250 57.5800 63.7500 52.1300 4.5700 0.0197 2.8790 39.9400 1.2400 7.0700 112.4400 109.2700 22.5700 1.1500 42.0500 11.8500 111.5300 N/A

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

117.8200 3.5690 60.1000 69.4800 55.0600 5.0800 0.0272 2.9850 15.9000 43.6300 1.5300 7.7100 118.6600 115.3200 25.2100 1.4600 46.3700 13.8100

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

TechStore Bhd Not Rated

Duopharma Biotech Bhd Buy. Target price: RM1.70

July 3, 2025: RM1.35

July 3, 2025: RM0.205

Source: S&P Global, TA Securities

Source: Company, TA Securities

Source: Bloomberg

MALAYSIA’s manufacturing sector continued its gradual path toward stabilisation at the close of first half 2025, supported by a softer pace of decline in both output and new orders. External demand also showed tentative signs of improvement, with new export orders moderating at a slower rate. Notably, firms reported a renewed expansion in employment, the first uptick in several months, suggesting improving sentiment on the production outlook. Reflecting these trends, the S&P Global Malaysia Manufacturing Purchasing Managers’ Index (PMI) rose to 49.3 in June 2025, up from 48.8 in May, edging closer to the neutral 50.0 mark that separates expansion from contraction. New orders moderated for the fourth consecutive month during the month, although the pace of decline was the slowest in this sequence. Firms attributed weaker sales primarily to subdued client confidence. Nonetheless, some manufacturers noted early signs of recovery in demand conditions. The slower contraction in total sales was partly driven by a milder decline in new export orders. Encouragingly, the latest drop in external demand was the softest since the current downturn began in December 2024. Reflecting the demand trend, production levels were scaled back at a gentler pace. The rate of decline was mild and marked the softest contraction in four months. At the same time, manufacturers continued to draw down post-production inventories to meet existing orders, signalling a reliance on stockpiles amid cautious production planning. Staffing levels increased marginally in June, the first rise in nine months, indicating tentative optimism among firms. The combination of a slightly larger workforce and slower demand resulted in a focus on clearing unfinished work. – TA Research, July 3

TO recap, Duopharma delivered a strong results performance in Q1’25, with revenue and net profit rising by 36.2% and 67.8% YoY to RM262.7 million and RM25.6 million, respectively. This commendable growth was broad-based, driven by all business segments — public, private, and export. The public sector’s contribution surged to 62% (from 50% in FY24), supported by a significant increase in insulin supply as Duopharma fulfilled backlogged orders ahead of the expiry of insulin agreement on 28 April 2025. Additional uplift came from hospital restocking as well following the release of a new budget by the Health Ministry. Management noted that insulin accounted for 15–20% of Q1’25 sales, notably higher than the usual 8–10%. Meanwhile, industry-wide normalisation of Active Pharmaceutical Ingredient (API) prices to pre-pandemic levels helped lifting the company’s PBT margin by 2.4 percentage points to 12.8%. We note that Duopharma’s recombinant human insulin contract has recently been extended by six months, effective from April 29 to Oct 28. Although the contract value was not disclosed, management estimates the six-month extension could worth between RM30 million and RM35 million — nearly half of the annualised value of approximately RM62.5 million, based on the original three-year contract valued at RM375.2 million (from April 29, 2022 to April 28, 2025). On a positive note, the insulin contribution for FY25 is projected to exceed the RM73 million achieved in FY24. Moving forward, we anticipate the public sector’s revenue contribution to decline to 57% in Q2’25, down from 62% in Q1’25, reflecting the normalisation of insulin supply and the elevated orders seen in Q1’25 due to seasonal factors. As a result, we expect Q2’25 performance to be weaker QoQ, but higher YoY. BUY with RM1.70 TP. – TA Research, July 3

TECHSTORE is riding the wave of Malaysia’s digitalisation push, with deep roots in the rail and government technology (tech) space. From brownfield system upgrades to greenfield mega rail projects like the Penang light rail transit (LRT), it is plugged into the right markets at the right time. A record orderbook and a RM772 million tender pipeline underpin strong earnings visibility, while its 21.4% FY24-27 earnings CAGR and undemanding 8.5x FY26 P/E make it a compelling, overlooked proxy for transport and public-sector tech spending. TechStore has established itself as a key IT solutions partner in Malaysia’s rail infrastructure, with over 60% of revenue since FY21 derived from public land transport projects. The group has delivered six out of seven key subsystems in the railway ecosystem — including rolling stock and depot equipment, signalling, power, communication, automatic fare collection (AFC), and IT maintenance management systems — for two out of three LRT lines and both mass rapid transit (MRT) lines in the Klang Valley. Its early involvement in the Johor–Singapore Rapid Transit System (RTS) Link in 2021 cements its reputation as a go-to tech integrator in a space with high barriers to entry and that is typically dominated by international players. TechStore offers strong earnings visibility, backed by an orderbook of RM109.1 million as at March 31 — equivalent to 1.75x of FY24 revenue — with at least RM57.4 million expected to be recognised over Q2’25–Q4’25. This is further supported by additional wins, including new maintenance contracts in April and a RM15.9 million job from the Home Affairs Ministry in May. With proceeds from its IPO strengthening its balance sheet and workforce, TechStore is now better equipped to take on higher-value, technically complex projects. – RHB Research, July 3