22/07/2025

BIZ & FINANCE TUESDAY | JULY 22, 2025

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M’sian economy set for steady growth in H2’25: Kenanga IB

KUALA Kenanga Investment Bank Bhd (Kenanga IB) expects Malaysia’s economy to maintain steady growth in the second half of 2025 (H2’25) led by services and construction, particularly following final government approval for the Mass Rapid Transit Line 3 mega infrastructure project. In a research note yesterday, the bank said the outlook is supported by advanced GDP estimates for the second quarter of 2025 (Q2’25), which were in line with its projections, reflecting sustained growth in services despite continued contraction in mining and a slowdown in manufacturing. “However, prolonged commodity weakness and persistent tariff risks will continue to weigh on overall growth. That said, we maintain our 2025 GDP growth forecast at 4.3% (2024: 5.1%),” it said. Last Friday, the Department of Statistics Malaysia reported that the economy is forecast to grow by 4.5% in the Q2’25 based on advance GDP estimates, slightly outpacing the 4.4% growth recorded in the previous quarter. Robust domestic demand is expected to drive growth despite LUMPUR:

a slowdown in external demand. “We expect H2’25 to be a challenging period given tariff risks and external uncertainties, particularly following the recently revised US tariff of 25% on Malaysian exports,” it said. However, on a positive note, the securities firm views the tariff implementation date as a moving goalpost, given Trump’s open stance on negotiations, which could provide extended support for exports. It said that domestic growth, supported by both spending and investment, will be underpinned by labour market reforms such as wage hikes, policy rate cuts amid low inflation, higher foreign tourist arrivals, and renewed investment momentum. – Bernama outlook weakens KUALA LUMPUR: Malaysia’s trade performance in June fell short of expectations, underscoring the growing fragility in global demand and commodity markets. Exports contracted for a second consecutive month, slipping 3.5% year on-year to mark an 18-month low. Kenanga Investment Bank Bhd said this missed both house and consensus estimates, weighed down by weaker shipments to key markets including Singapore, China, and Japan, alongside soft demand for petroleum-related products. Electrical and electronic (E&E) exports, which account for over 40% of total shipments, also slowed sharply to 1.3%, reflecting a broader cooling after peaking in April. While agriculture exports surged 17.5%, they were insufficient to offset the declines in mining and manufacturing, Kenanga noted. “June’s numbers were disappointing and suggest that external trade is losing momentum faster than anticipated,” said the investment bank. “We had expected some front-loading ahead of potential tariffs, but that did not materialise.” Imports also slowed markedly, rising just 1.2% compared to 6.6% in May, driven by a sharp moderation in capital goods and re-exports. The trade surplus widened to RM8.6 billion, though it still fell short of expectations. Despite the near-term weakness, Kenanga said Malaysia is maintaining its 2025 export growth forecast at 3.1%, amid hopes that E&E demand— particularly from 5G and AI applications—will provide modest support. However, uncertainty over global tariffs, continued commodity weakness, and competitive regional tariff structures remain key risks, it said. With services and construction expected to underpin economic momentum in the second half, Malaysia’s GDP growth forecast for 2025 remains at 4.3%, Kenanga said. Exports fall again, trade

over commodity shipments, along with weaker-than expected pre-tariff front-loading,” it said. The bank also noted that demand for electrical and electronics (E&E) products is expected to remain resilient, supported by new product launches and growing demand for 5G and artificial intelligence (AI) adoption, although overall growth is likely to be modest. Despite external demand uncertainties, CGS International Securities Malaysia Sdn Bhd projects resilient domestic economic activity and is maintaining its 2025 GDP growth forecast of 4.2%. “Looking at both GDP and trade data, we suspect that the softening growth in Q2’25 may mark the start of tariffs and

o Driven by services and construction, despite global trade risks and tariff uncertainties

negotiations are contributing to further ambiguity, especially as Malaysia’s tariff rates remain higher than those of Indonesia’s (19%) and Vietnam’s (20%). Kenanga IB shared that exports grew 3.8% in H1’25 compared with 5.4% in January-May, slightly above its full-year forecast. However, growth slowed to 3.4% in Q2’25 (Q1’25: 4.3%). “June’s underperformance reflects continued volatility in external trade, with short-term prospects clouded by uncertainty

global headwinds. Meanwhile, Kenanga IB said it is maintaining its 2025 exports forecast at 3.1% (2024: 5.7%), amid ongoing US President Donald Trump’s tariff policies and weak commodity exports. “While US trade tensions have eased following the recent deal, uncertainty persists, particularly if major economies retaliate. This could disrupt global trade and weigh on Malaysia’s growth outlook,” it said. Additionally, the bank said the ongoing US-Malaysia trade

Southern Cable in line to win MRT3 deals: Apex Securities The MRT3 Circle Line, spanning 51km with 31 stations, will begin construction in 2027 and is expected to be fully operational by 2032. – BERNAMAPIX

KUALA LUMPUR: Southern Cable Group Bhd is well-positioned to secure a substantial share of the MRT3 cable supply package, building on its strong track record in MRT2, comprehensive product range, and established market leadership. In a recent report, Apex Securities Bhd estimated that, assuming a cable supply package valued at RM600 million, with 60% market share and a blended gross profit margin of 15%, Southern Cable could generate RM54 million in gross profit from MRT3— equivalent to 25% of the research firm’s FY25 forecast. “This would provide a meaningful uplift to earnings visibility over the medium term,” Apex said. The MRT3 project has received

multiple from 15x to 17x to reflect Southern Cable’s improving earnings visibility and robust growth outlook. “Valuation remains attractive, with a price/earnings-to-growth (PEG) ratio of 0.4x, based on our projected EPS compound annual growth rate (CAGR) of 33.9% for FY24–27. “Our revised target price of RM2.14, up from RM1.72, is based on a 17x FY26 EPS of 12.6 sen, and supported by a three-star ESG rating. “We maintain a ‘Buy’ call on Southern Cable. We remain positive on the company, given its position as a proxy for Malaysia’s rising power demand, growing need for high voltage power cables, and export exposure to the US market,” Apex Securities concluded.

estimated at around RM550 million, according to market sources. “Given the comparable scale of MRT3, we estimate the cable supply package to be valued at RM600 million,” Apex added. In light of MRT3 and other infrastructure rollouts such as the Penang LRT, Apex Securities has revised its earnings forecasts upward by 9.5% for FY26 and 18.5% for FY27. The research firm noted that cable orders for large infrastructure projects are typically distributed across multiple packages and subcontractors. This results in staggered purchase orders, rather than a single lump-sum entry in Southern Cable’s order book. “We raise our price-earnings (PE)

final approval from the Transport Ministry, enabling the land acquisition process to begin. The project is targeted for completion by end-2026. The MRT3 Circle Line will span 51km, comprising 31 stations. Construction is scheduled to begin in 2027, with full operations expected by 2032. In rail infrastructure projects, cable supply contracts are usually split across several key work packages including power supply systems, signalling and control systems, track works, and station components. As a reference point, MRT2, which spans 52.2km with 36 stations, has a total project cost of RM56.9 billion. Cable supply contracts for MRT2 were