Latest news with #CIMBSecurities
Free Malaysia Today
4 days ago
- Business
- Free Malaysia Today
Malaysian glove makers to gain as EU targets China
The European Union accounts for almost 30% of Malaysia's total glove exports. PETALING JAYA : Malaysian glove makers are likely beneficiaries of the European Union's move to exclude Chinese companies from public tenders for medical devices, including gloves, valued at over €5 million (RM24.6 million). CIMB Securities said the exclusion could result in stronger demand from EU buyers seeking alternatives to China-sourced gloves. The EU's move is a response to its finding that EU companies do not have fair access in China as Chinese tenders have been heavily biased towards local suppliers with artificially low bids, the research house said. 'This will limit Chinese companies' access to approximately €150 billion (RM738.9 billion) annually in EU public spending within this segment. 'While tenders exceeding €5 million accounted for only about 4% of total tender count in 2023, they represented around 60% of total tender value,' it said in a note today. The EU is a strategically important market for local glove manufacturers. The bloc was Malaysia's second-largest glove export market by region in 2023, accounting for an estimated 28%–30% of Malaysia's total glove exports, said CIMB. The potential increase in demand would be an added boost for the local glove sector on top of expected expansion in the US rubber-glove market, it added. However, CIMB expects any rise in EU demand for gloves from other countries, including Malaysia, to be short-term – three-to six months at best, as the EU and China have expressed willingness to negotiate. This issue would likely be a topic of discussion during the EU-China Summit scheduled for next month. 'While we anticipate potential near-term share price re-ratings for glove stocks following this announcement, we expect Chinese glove makers to pursue workarounds, such as leveraging EU-based trading partners, or exporting from manufacturing facilities outside China,' it noted. CIMB has maintained its 'neutral' recommendation on the glove sector because of persistent challenges. This includes a 'difficult operating environment' with low sales demand, and higher costs due to the recent rise in the sales and service tax and minimum wage.
New Straits Times
5 days ago
- Business
- New Straits Times
RCE Capital impairments to stay above RM30mil as civil servant bankruptcies rise
KUALA LUMPUR: RCE Capital Bhd's impairment provisions to stay above RM30 million in the financial year 2026 (FY26), as civil servant bankruptcies rise and the fallout from the "Op Sky" fraud probe continues to ripple through its loan book. CIMB Securities said while there are initial signs of moderation in impairment provisions, "management cautions it is too early to call a normalisation trend", adding that impairments in FY26 are likely to remain well above historical averages. The group's impairment losses surged to RM15 million in the fourth quarter ended March 31, 2025 (4QFY25), up 79.2 per cent quarter-on-quarter, bringing total impairment losses for the year sharply higher. The spike was attributed to increased financing disbursements, updated macro assumptions, and scam-related impairments linked to the Malaysian Anti-Corruption Commission's "Op Sky" investigation. The probe uncovered a syndicate that allegedly helped blacklisted civil servants obtain loans using forged documents. As of May 27, about RM1.96 million, or 0.1 per cent of RCE's financing portfolio, was identified as exposed and has been fully impaired. Adding to the pressure is the government's "second chance policy", which allows individuals to voluntarily declare bankruptcy in exchange for financial rehabilitation. Impairments related to bankruptcy jumped 115.2 per cent year-on-year in FY25. Consequently, CIMB Securities said RCE's non-performing financing (NPF) rose to RM95.5 million in 4QFY25, up 14.7 per cent from a year earlier, lifting its NPF ratio to 4.6 per cent, above its historical range. The firm has revised down its earnings forecasts for RCE by up to 6.1 per cent for FY26 to FY28 and lowered its dividend discount model-based target price to RM1 from RM1.23. The brokerage reiterated a "reduce" call on the stock. RCE has begun phasing out the use of the Accountant General's Department (AGD) as a salary deduction intermediary due to less favourable commercial terms, including a newly imposed five per cent profit rate cap on personal financing. Instead, the group will channel all new disbursements through its subsidiaries, Corewealth Alliance Dynamic Sdn Bhd and RCE Marketing Sdn Bhd, both of which use Angkasa's payroll deduction platform. "This transition enables RCE to retain a secure and efficient collection channel while redirecting some cost savings that were previously incurred as AGD's upfront fee. "It allows more flexible product offerings, such as competitive profit rates, cash rebates or value-added features," said CIMB Securities. RCE closed at RM1.18 on Monday, valuing the company at RM1.75 billion. The stock has declined 15.4 per cent over the past year and currently trades at a price-to-book ratio of two times, a premium to the sector average of one time. Looking ahead, the company expects a modest recovery in loan growth, supported by phased civil servant salary hikes introduced in December 2024 and January 2026. However, CIMB Securities cautioned that borrowing capacity among civil servants may already be stretched amid rising living costs and debt levels. "Coupled with intensifying competition from digital lenders like TnG Digital, Grab and Shopee, RCE's growth prospects remain constrained," it said.
Malaysian Reserve
6 days ago
- Business
- Malaysian Reserve
Bank credit costs seen rising on SME strain
CREDIT costs in the Malaysian banking sector are expected to edge higher as economic growth slows and risks mount within the small and medium enterprise (SME) segment. CIMB Securities Sdn Bhd, in its latest report on historical asset quality trends, is maintaining a 'Neutral' stance on the sector despite forecasting mild deterioration in credit metrics. 'We have reviewed our sector credit cost projections, taking into consideration the potential impact of slower growth on the SME segment and historical trends. Our assumptions indicate that sector credit costs may rise by 12 basis points (bps) on account of a possible change in probability of default assumption for the SME segment. 'However, as this is in line with our earlier assumed 15bps increase in credit costs, we are maintaining our forecasts and 'Neutral' rating,' it noted. The research house said that the SME portfolio remains under scrutiny. 'The initial segment that may face some risk is likely to be the SME segment, which currently accounts for 16.5% of total loans on average for the banks under our coverage,' it stated. 'Assuming probability of default (PD) is raised to 6% from 4.5% for the SME segment, while loss given default is maintained at 50%, this implies that the estimated credit loss (ECL) may need to be raised by 75bps for the SME segment in a slowing growth cycle. On overall basis, this translates to a 12bps increase in sector credit costs,' it explained. CIMB Securities noted that credit costs historically trend in tandem with macroeconomic cycles. 'During a normal economic cycle, credit costs usually range from 20bps to 30bps, while a good economic cycle typically leads to benign credit costs of 10bps-20bps. In a slower growth cycle, credit costs tend to climb higher than 30bps, towards the 40bps-50bps range.' The 2020 pandemic-driven recession provides a stark example. 'The most recent recession during the 2020 Covid-19 pandemic caused a significant jump in credit costs to 79bps in 2020, coinciding with a 5.5% year-on-year (YoY) decline in GDP and an 8.6% YoY drop in exports. Prior to that, during the 2008 recession, credit costs peaked at 70bps as GDP declined by 1.5% YoY and exports contracted by 10.9% YoY.' While direct trade-related loans remain low, secondary risks are a concern. 'Exports-related loans are insignificant, accounting for 1%-4.7% of total loans for banks under our coverage. We reiterate there will likely be a larger impact from secondary spillover effects on trade-related supply chain vendors and suppliers.' CIMB Securities is leaving its forecasts unchanged for now. 'We are maintaining our forecasts for now, as our latest estimate is based on broad assumptions while each bank's portfolio will have a different risk profile.' The firm retains its 'Buy' recommendations on Alliance Bank Malaysia Bhd, Public Bank Bhd and RHB Bank Bhd. 'We maintain our 'Neutral' sector rating, and retain our 'Buy' calls on Alliance Bank, Public Bank and RHB Bank, as dividend yields remain attractive at current levels,' it concluded. — TMR This article first appeared in The Malaysian Reserve weekly print edition
New Straits Times
6 days ago
- Business
- New Straits Times
Strait of Hormuz risks could push oil above US$100 per barrel, Asia most exposed
KUALA LUMPUR: The potential closure of the Strait of Hormuz could sharply escalate geopolitical tensions in the Middle East and severely disrupt global oil supply chains, with Asia facing the greatest exposure, according to CIMB Securities. The research firm underscored the strategic significance of the strait, which handles nearly 20 per cent of global oil flows. With global oil supply projected to increase by 1.5 per cent to 104.35 million barrels per day in 2025, based on US Energy Information Administration (EIA) forecasts, any disruption could lead to widespread consequences for global energy markets. "Asia is particularly exposed, with China, India, Japan, and South Korea being the top destinations for crude oil moving through the Strait of Hormuz to Asia, collectively accounting for 69 per cent of crude oil and condensate volumes transported through the strait in 2024. "Any disruption to these flows could drive a renewed surge in oil prices, with inflationary spillovers extending across global economies," it said in a note. It said crude oil prices are expected to rise amid recent geopolitical tensions, with heightened volatility likely to continue in the short term. CIMB expects Brent crude to trade around US$85 per barrel in the near term, with volatility likely to persist amid elevated geopolitical risks. "Our analysis indicates that a supply disruption of 500,000 barrels per day (bbl/day) could result in a price increase of approximately US$10 per barrel, based on historical events. "The international sanctions imposed on Iran in 2011 to 2012 led to a supply loss of 1.4 million bbl/day, resulting in a US$30 per barrel increase in crude prices during that period. That said, the current global oil market is better cushioned by available spare capacity," it added. CIMB noted that OPEC+ currently has an estimated excess capacity of 5.7 million bbl/day, with Saudi Arabia and the United Arab Emirates contributing around 4.2 million bbl/day of that total. However, it highlighted a key risk: most of this supply is transported through the Strait of Hormuz, making it particularly vulnerable. "In our view, should the proposed closure of the Strait of Hormuz materialise, the risk premium could surge, potentially pushing Brent prices above US$100 per barrel," it added. The research house highlighted Dialog Bhd as a potential beneficiary of rising oil prices, mainly due to its upstream portfolio. The company currently operates three producing assets, including full ownership of the Bayan oilfield service contract, a 20 per cent stake in the D35/D21/J4 production sharing contract, and a 50 per cent interest in the L53/48 concession in Thailand. "These assets contributed approximately 35 per cent to Dialog's financial year 2024 core net profit. We estimate that every US$10 per barrel rise in the average Brent oil price assumption will boost Dialog's financial year 2026 core net profit by 2 per cent," it said. CIMB's current forecast assumes an average Brent oil price of US$71 per barrel for 2025.
Malay Mail
6 days ago
- Business
- Malay Mail
TNB shares fall to RM14.16 after tariff update; analysts maintain ‘Buy' amid grid upgrade push
KUALA LUMPUR, June 23 — Tenaga Nasional Bhd shares trended lower in early trade today after the Regulatory Period 4 (RP4) tariff schedule revision announcement under the incentive-based regulation (IBR) framework effective July 1, 2025. At 10.10 am, TNB's share fell six sen to RM14.16 per share with 177,300 shares traded. The trading of the national utilities company's shares was halted for one hour at opening today and resumed at 10 am, said the company in a Bursa Malaysia filing today. The Energy Commission had previously announced a new average base electricity tariff of 45.4 sen/kWh, effective July 1, 2025 to Dec 31, 2027 under the RP4. TNB had said implementing the revised electricity tariff in Peninsular Malaysia is positive for the company vis-a-vis the National Energy Transition Roadmap; that the company is committed to ensuring a reliable and continuous electricity supply throughout Peninsular Malaysia. Meanwhile, Hong Leong Investment Bank Bhd (HLIB) in a note said TNB would benefit from the higher regulated asset base starting from 2025 under the new RP4-5 (2025-2030), given the urgent requirement to upgrade the grid for energy transition and to support data centre growth and renewable energy developments. It has a 'Buy' call with an unchanged target price of RM16.20. Meanwhile, CIMB Securities said the impact is likely to be neutral for TNB. 'Regardless of tariff changes, the incentive-based regulation framework provides regulatory adjustments such that TNB ultimately earns the regulatory rate of return on the regulated asset base,' it said. The investment bank maintains its 'Buy' call for TNB with key downside risks including higher-than-expected operating costs, unscheduled power station outages, and lower-than-expected spending on RP4 contingent capital expenditure. 'Under RP4, the RAB is expected to grow healthily, led by a 12 per cent higher base capex of RM26.6 billion and contingent capex of RM16.3 billion,' it added. — Bernama
