14/07/2025

BIZ & FINANCE MONDAY | JULY 14, 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

Ringgit likely to move between 4.24 and 4.26 against US dollar THE ringgit is expected to remain volatile this week, moving in the range between 4.24 and 4.26 against the US dollar, an analyst said. Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said apart from US tariffs, the next key question is whether the US Federal Reserve would cut interest rates. On that note, he said key data points would be the US Consumer Price Index (CPI) for June. Thus far, the inflation rate had been quite manageable during the 90-day pause period. “Obviously, the full implementation of reciprocal tariffs on Aug 1 would result in higher inflation, which could lead to the need to keep the Federal Fund Rate steady as an ideal policy decision.” Meanwhile, SPI Asset Management managing partner Stephen Innes said the ringgit is expected to trade within a narrow range ahead of the release of the US CPI, a key economic event likely to shape market direction and the Fed policy expectations. The upcoming US inflation report, due tomorrow, would be closely watched by financial markets as it could offer clear signals on the path of interest rates, he added. Innes said markets are particularly focused on the core CPI month-on-month figure, with 0.3% seen as the critical threshold. “A softer-than-expected reading could revive hopes for a September rate cut by the Fed, potentially leading to a pullback in the US dollar and offering the ringgit some relief,” Innes said. However, he cautioned that a stronger print, particularly at 0.4% or higher, would likely shift market expectations towards a more hawkish Fed, sparking renewed dollar strength. Innes projected the ringgit to trade within a tactical range of 4.2400 to 4.2650, with market positioning expected to tighten further. – Bernama

RHB Research: CPO prices to stay choppy as geopolitical risks persist KUALA LUMPUR: RHB Investment Bank Bhd (RHB Research) expects crude palm oil (CPO) prices to remain volatile due to ongoing geopolitical tensions. However, the research firm anticipates a more balanced global supply-demand outlook by 2026, with improving supply and recovering demand, supported by relatively attractive pricing. Spot CPO prices have moderated from RM4,600-RM4,800 per tonne in Q1 2025 to a low of RM3,780 in May, before rebounding to RM3,900-RM4,100 currently. The decline was primarily driven by geopolitical factors such as US trade tariffs and ongoing conflicts, which also dragged down crude oil prices. Reflecting this, the correlation between CPO and crude oil prices has strengthened notably – from -0.6 in Q1 2025 to 0.47 in April, and to 0.68 currently – highlighting the growing influence of global uncertainties on commodity markets. RHB Research has trimmed its CPO price forecast to RM4,100 per tonne for 2025 (from RM4,300), and to RM4,000 for 2026 and 2027 (from RM4,100). In contrast, it raised palm kernel (PK) price assumptions to RM3,300 for 2025 (from RM2,800) and RM3,200 for 2026-2027 (from RM2,600). Following updates to its in-house forex assumptions, the firm also adjusted earnings forecasts upward by 1.1% for FY25, and 2.0% for FY26 and FY27. RHB Research has maintained a Neutral call on Ta Ann Holdings Bhd, with a revised target price of RM3.60 (from RM3.65), implying a 5% downside. The stock trades at 9.6x FY26F P/E, near the upper end of peers, but its 8% dividend yield should offer valuation support.

Exchange Rates

FOREIGN CURRENCY

SELLING TT/OD

BUYING TT

BUYING OD

1 US Dollar

4.3160 2.8450 3.3650 3.1380 5.0430 2.6040 3.3650 5.8530 5.4430 3.6210 60.5200 69.2800 55.5300 5.1200 0.0275 2.9520 43.8000 1.5400 7.7600 119.3200 116.2800 25.1200 1.4700 46.7000 13.8000 118.8300 N/A

4.1820 2.7310 3.2660 3.0540 4.8800 2.5070 3.2660 5.6660 5.2130 3.3720 57.9700 63.7500 52.7700 4.8000 0.0249 2.8570 40.2900 1.4500 7.3100 113.2700 110.3800 22.6900 1.3600 42.5300 12.2300 112.6500 N/A

4.1720 2.7150 3.2580 3.0420 4.8600 2.4910 3.2580 5.6460 5.1980

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

112.4500

3.1720

N/A

63.5500 52.5700 4.6000 0.0199 2.8470 40.0900 1.2500 7.1100 113.0700 110.1800 22.4900 1.1600 42.3300 11.8300 N/A

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

Axiata Group Bhd Buy. Target price: RM2.90

Aeon Credit Service Bhd Buy. Target price: RM7.60

Semiconductor Neutral

JULY 11, 2025: RM5.46

JULY 11, 2025: RM2.56

Source: Maybank IBG Research

Source: Bloomberg, RHB Research

Source: SIA, TA Research

IN May 2025, the global semiconductor continued its positive momentum by recording another strong sales growth. According to the Semiconductor Industry Association, global semiconductor sales for the month reached USD59.0bn (+3.5% MoM, +27.0% YoY), marking the 19th consecutive month of YoY sales growth, supported by sustained demand for AI and high-performance computing applications. The YoY improvement was broad-based across all regions, led by the Americas (+45.2%), followed by Asia Pacific/All Other (+30.5%), China (+20.5%), Japan (+4.5%), and Europe (+4.1%). By geography, the 3.5% MoM increase in sales for May 2025 was also supported by growth across all regions, led by Asia Pacific/All Other (+6.0%), China (+5.4%), Europe (+4.0%), the Americas (+0.5%), and Japan (+0.2%) According to SEMI, global front-end semiconductor suppliers are ramping up expansion efforts to meet the soaring demand driven by generative AI applications. Although the World Semiconductor Trade Statistics forecasts continued growth in global semiconductor sales for 2025, we maintain a cautious outlook due to the prevailing uncertainties related to U.S. trade policy. Should the U.S. implement sector specific tariffs on semiconductors, it could materially impact end-market demand and corporate earnings. On the other hand, we believe the Malaysian government will remain steadfast in executing the National Semiconductor Strategy, with the goal of elevating the country’s position within the global semiconductor value chain. Overall, we maintain our NEUTRAL stance on the semiconductor sector. – TA Research, July 11

OUR simulation indicates a significant improvement to Axiata’s gearing if it hypothetically divests its entire stake in edotco. We continue to view Axiata’s overall risk-reward as being positive, with net profit recovery and balance sheet repair (increasingly gaining traction among investors in our view) being potential re-rating catalysts. Balance sheet leverage is a major overhang for Axiata in our view, with net debt to EBITDA remaining elevated at c.3.0x at end 1Q25. We do not expect a material change to Axiata’s gearing following the completion of 1) the XL-Smartfren merger and 2) the Myanmar towers divestment in 2Q25. We note Axiata’s tower arm, 63%-owned edotco, is a material contributor to Axiata’s gearing, with a standalone net debt to EBITDA of c.3.9x. Under its strategy, Axiata has classified edotco as one of its monetisable assets. The hypothetical divestment of Axiata’s entire stake in edotco would deconsolidate edotço’s borrowings while bringing in potential cash proceeds. We simulate the divestment of edotco at 7-12x EV/EBITDA, which implies potential proceeds of c.MYR3.2b-8.3b. By our estimates, Axiata’s net debt to EBITDA would drop from c.3.0x pre-divestment to c.0-1.6x. Axiata would likely use any proceeds to pare down its holding company debt, which could potentially accrete earnings in our view. Our earnings forecasts are unchanged, and has reflected the deconsolidation of XL post-merger. Associate CelcomDigi is the largest contributor to both Axiata’s earnings and SOP. Reiterate BUY with an unchanged RM2.90 SOP-based TP. – Maybank IBG Research, July 11

AT Aeon Credit Service’s 1QFY26 results briefing, management was optimistic over a slow and steady improvement in credit costs ahead, and is retaining its modest 12% ROE guidance for the year. Although we cut our earnings estimates following the 1Q miss, our new forecasts still indicate decent ROEs of 14-17%, which is higher than management’s target for FY26. As such, we think its current sub-1x P/BV remains attractive. The near-peak credit cost in 1QFY26 was partly seasonal in nature, reflecting a marginally softer collection ratio for D0 customers (ie not past due) due to festivals and public holidays. The seasonal factor should wear off in 2Q, and ACSM is also stepping up collection efforts for such customers through early communication. On the elevated write-offs, we gather that this arose from the personal finance and used car portfolios - management recently revised its credit underwriting criteria for these segments, especially for the younger (ie youths) and lower-income customers. On the whole, management aims to bring the write-off run rate down to MYR150m per quarter (1QFY26: MYR192m), while aiming for full year credit costs to at least match - if not improve upon - the 3.9% recorded in FY25 (1QFY26: 5.0%). Aeon Bank is slated to launch its first business banking propositions in 3QFY26, comprising payroll accounts and cash management solutions among others. Its target market for these products will be merchants currently operating within the Aeon Living Zone. Elsewhere, ACSM is keen to grow in the civil servant salary-deductible financing space, although it intends to avoid the more saturated segments (eg education and healthcare) and focus on areas such as agriculture and fisheries. Keep BUY, new RM7.60 TP from RM8.10. – RHB Research, July 11