Latest news with #MaybankIBResearch
The Star
a day ago
- Business
- The Star
Corporate 2Q earnings expected to reflect external challenges
PETALING JAYA: Malaysia's upcoming second-quarter (2Q) earnings season is expected to be relatively muted, with overall corporate performance continuing to reflect challenges from external uncertainties, particularly the ongoing US-Malaysia tariff negotiations. While earnings growth may remain soft, the reporting cycle begins against a backdrop of stabilising macroeconomic indicators and fewer forecast revisions compared to the previous quarter. As such, Maybank Investment Bank (MaybankIB) Research believes the worst of the earnings downgrades may now be behind. 'The 2Q25 results season may yet be another unexciting one but at least one with fewer earnings downgrades in our view,' the research house said in its latest strategy note. MaybankIB Research has forecast a modest 2.5% earnings growth for the FBM KLCI in 2025, primarily weighed down by the banking sector. It anticipates a stronger rebound in 2026 with a projected growth of 7.7%. The brokerage's base case target for the FBM KLCI stands at 1,660, pegged to 14.4 times 2026 estimated price-to-earnings ratio (PER), representing -0.5 standard deviation of the 10-year mean, amid continued market volatility and uncertainty over trade policy. 'Our base case assumes further de-escalation in trade tensions and favourable outcome from tariff negotiations,' the report noted. Conversely, in a bearish scenario where earnings growth moderates to 5%, the index could dip to 1,450 based on 13 times PER. Despite a softer external environment, Malaysia's domestic economic fundamentals appear encouraging. The research points to robust consumer activity, a sustained investment cycle, and signs of resilient private demand as cushioning the impact of weaker exports, particularly in May and June. 'The 2Q25 real GDP growth advanced estimate of 4.5% year-on-year, with a rebound quarter-on-quarter from 4.4% in 1Q25, suggests a steady growth momentum and indicates external headwinds due to US tariffs are being mitigated by domestic tailwinds,' it said. Inflation has also cooled to 1.1% in June, while the labour market remains firm with the unemployment rate steady at 3%. MaybankIB Research attributed rising disposable incomes—fuelled by civil servant pay hikes, minimum wage increases, and a surge in Employee Provident Fund contributions—as supportive of its positive stance on the consumer, real estate investment trusts (REITs), and construction sectors. Sector-wise, consumer, construction, healthcare, REITs, and renewable energy remain MaybankIB Research's key overweights, with minimal changes to its top stock picks apart from Solarvest Holdings Bhd , which has outpaced its target price. 'We expect some positive momentum for construction, healthcare, property and, more selectively, the oil and gas and utilities sectors,' the research added. The technology sector may face near-term weakness, but MaybankIB Research noted that most of the necessary earnings downgrades have already been made. 'From our channel checks, we expect most sectors are likely to deliver flattish earnings with few surprises,' it said. Notably, while plantation firms may post weaker quarterly numbers due to lower crude palm oil prices, some could benefit from disposal gains and forex tailwinds. The recent 25-basis-point cut to the overnight policy rate, announced in July, is expected to have a limited impact on second-quarter bank earnings. 'We had already factored this rate cut into our bank forecasts; we stay 'neutral' on banks,' MaybankIB Research stated.
The Star
30-06-2025
- Business
- The Star
Oil prices may not stay elevated even with Mideast tensions
PETALING JAYA: While a ceasefire has been agreed between Iran and Israel, analysts have already contemplated how a potential closure of the Strait of Hormuz by Iran would affect oil supply and crude oil prices. The Strait handles about 20% of the world's oil transit and around 25% to 30% of global liquefied natural gas (LNG) exports. Countries like Saudi Arabia, the United Arab Emirates, Iran, Kuwait, Iraq and Qatar rely heavily on the strait to export oil and gas, which are crucial to their national budgets. Maybank Investment Bank Research (Maybank IB Research) said in a note, should the strait be actually closed, there could disruptions in the supply of oil that put pressure on its forecast of Brent crude oil at US$67 per barrel for this year and its 'neutral' rating for the oil and gas sector. Its top picks in the sector are Dialog Group Bhd and Bumi Armada Bhd . 'Crude prices could rise in the short term, depending on how long the closure lasts. During previous periods of tension, oil prices did not stay elevated for long, as there were no supply disruptions. 'Iran itself exports oil via the Strait of Hormuz. Closing the Strait would potentially hurt its own economy, isolate it diplomatically and may invite retaliation. 'Based on our findings, we understand that the strait has never been completely closed to shipping, although it has been threatened many times historically during the Iran-Iraq Tanker War in the 1980s, the European Union (EU) and US imposed sanctions on Iran in 2011, and when the US withdrew from the Iran nuclear deal and imposed sanctions in 2018 to 2019. 'Despite tensions in the past, the strait remained open,' the research house said. On June 22 Iran's Parliament approved a resolution that would allow for the closing of the Strait of Hormuz. However, this is only the first step. The final decision lies with the Supreme National Security Council, Iran's top security body. Maybank IB Research said that, without the authorisation, Parliament's approval alone is not enough. 'So far, we understand that no formal order has been issued by the Council, but we believe that the closure of strait remains a possible option, albeit remote,' it noted.
The Star
10-06-2025
- Business
- The Star
Stable yields to support performance of REITs
Maybank IB Research remained positive on REITs. PETALING JAYA: The outlook for Malaysian real estate investment trusts (REITs) is becoming more challenging even as yields remain stable amid rising unit prices, analysts say. This is also despite the KL REIT Index gaining 0.9% against Bursa Malaysia's benchmark FBM KLCI's 8.2% loss over the five months to May. Analysts said that the expanded Sales and Service Tax (SST), which will come into effect on July 1, would have an impact on REITs as it would require them to them to impose an 8% service tax (unless specific lessee exemption criteria are met), raising operating costs for tenants. Revisions to Malaysia's SST include targeted increases for non-essential goods and an expansion of the services tax to six new categories: leasing or rental services, construction, financial services, private healthcare, education, and beauty services. While the aim of revising the SST is to broaden the tax base with minimal impact on the majority of Malaysian consumers, specific business sectors, particularly REITs and financial services, are expected to bear a more direct and potentially adverse impact, analysts said. CGS International Research said while REITs with prime assets would remain resilient due to strong tenant profiles and footfall, weaker properties may face tenant attrition. 'In this regard, REITs with lower-quality portfolios may be compelled to provide rental support, which could weigh on earnings and distributions,' the research house said. Maybank Investment Bank Research (Maybank IB Research) remained positive on REITs, with its top pick being Sunway-REIT. The research house said retail and industrial REITs remained resilient, but office REITs face challenges despite long leases and stable occupancy. It added that domestic REITs offer attractive average dividend yields of between 5.6% and 6.1% or a healthy spread of between 208 and 258 basis points against the 3.5% for current 10-year Malaysian Government Securities (MGS). 'We see room for spread compression should Bank Negara initiate an overnight policy rate cut in the second half of this year that would benefit REITs with higher floating-rate debt exposure,' Maybank IB Research said, adding that this would support valuation upside and lower financing costs for growth-oriented REITs. It noted that the managements of various REITs maintained a cautiously optimistic outlook but flagged a few concerns such as the potential 8% service tax that could limit their ability to raise rents, as well as the potential increase in electricity tariffs and broader economic uncertainty such as subsidy rationalisation for RON95 petrol and international trade tensions. MIDF Research, which downgraded REITs to 'neutral' from 'positive', said most of the positives have been priced in. 'Going forward, we expect REITs to continue registering earnings growth. However, we expect moderate earnings growth going forward from a normalised base in 2024. 'Besides, the yields of REITs under our coverage tapered to 4.6% following the increase in unit prices of REITs recently,' the research house said. It expects its top pick, Pavilion-REIT, with an unchanged target price of RM1.69, to see its earnings supported by a rental revision for Pavilion KL Mall, while Pavilion Bukit Jalil's performance remains stable. MIDF Research said that the KL REIT Index was resilient in the first five months of the year following a gain of 11.4% last year in comparison to the KLCI, as investors flocked to defensive investments. However, the research house said the increase in unit prices have also narrowed the yield spread versus 10-year MGS, which makes them less attractive to investors.
The Star
09-06-2025
- Business
- The Star
Fundamentals remain strong for banks this year
PETALING JAYA: Analysts closely monitor the financial performance of banks because they serve as a vital barometer of the broader economy's health. However, after the recently concluded reporting season for results from the first quarter of this year (1Q25), differing views have emerged. Hong Leong Investment Bank Research (HLIB Research) has an 'overweight' call on the sector, viewing the Kuala Lumpur Finance Index's 7% decline year-to-date as a strategic opportunity to build positions ahead of an anticipated market recovery in the second half of this year. 'Our conviction is underpinned by a confluence of compelling fundamentals. Chief among them is an attractive valuation at 1.04 times forward price-to-book. The other factors are robust 5.4% dividend yield offering downside support, and defensive earnings resilience backed by substantial pre-emptive provisions,' said HLIB Research in a report. It expects sector net interest margins (NIMs) in 2Q25 to hold up reasonably well sequentially. HLIB Research said it sees three key forces shaping the landscape: fresh liquidity from the recent cut in the Statutory Reserve Requirement for banks: reduced pressure from deposit competition and a sector-wide shift toward more disciplined loan growth and funding strategies. 'This proactive stance is already visible, with banks cutting promotional fixed deposit rates between five and 15 basis points in May, ahead of a potential overnight policy rate cut, though the full margin benefit may only materialise in the second half of this year,' it added. Asset quality is expected to remain stable, supported by resilient domestic economic conditions and minimal US trade exposure, which is below 1% to 4% of total loans. 'While acknowledging risks from the secondary impacts of trade uncertainty, we believe any potential weakness will be well-contained. 'The sector is significantly more resilient than in previous downturns, primarily due to the formidable provision buffers accumulated over the past five years. This provides a robust defence, capable of absorbing any stress and cushioning the gross impaired loan ratio, which currently stands near historical lows,' said HLIB Research. On the other hand, Maybank Investment Bank Research (Maybank IB Research) said the banking sector 'saw misses when they typically have an unblemished track record', after the results season. 'The first quarter was not a pleasant one, being tilted to a negative bias. There were more misses than wins. There were no sectors that clearly outperformed and banks were mostly below expectations,' said the research house. With expectations of a weaker outlook, Maybank IB Research has downgraded the banking sector to 'neutral' from 'positive' as it anticipates modest earnings growth of 1% and 5% for this year and next, respectively, from the 5.7% and 5.5% previously forecast. Touching on some key statistics, the research house said cumulative loan growth had moderated to 4.4% year-on-year (y-o-y) as of end-March 2025 from 5.5% as of end-December 2024. NIMs slipped by an average of two basis points quarter-on-quarter (q-o-q). With lower non-interest income and negative Jaws ratio that measures the difference between the growth rate of a bank's income and expenses, the research house noted that the sector's core operating profit rose merely 1% y-o-y. Amid lower credit cost, it said core pre-tax and net profit rose at a slightly faster pace of 4% from a year ago. 'However, in light of slower economic growth ahead, we have trimmed our bank earnings forecast by 5% and 4% for 2025 and 2026, respectively, and now forecast 2025 and 2026 net profit growth of 1.1% and 5%, respectively.'
The Star
03-06-2025
- Automotive
- The Star
Tan Chong forecast to stay in low gear for now
PETALING JAYA: With the challenges it is facing expected to persist, Tan Chong Motor Holdings Bhd has been downgraded to a 'sell' rating by Maybank Investment Bank Research (Maybank IB Research). The research house expects the automotive group to record losses for this financial year (FY25) despite its return to the black with a RM4.14mil net profit in the first quarter of financial year ended March 31 (1Q25). Revenue for 1Q25 declined slightly by 2% year-on-year to RM553mil, mainly due to continued weakness in the sales of Nissan vehicles, which fell by one-fifth to 1,811 units from a year ago. On a positive note, operations in other regions like Vietnam, Cambodia, Laos and Myanmar posted growth, which partially offset the domestic sales decline. However, Maybank IB Research expects challenges in the group's automotive segment to persist, underpinned by weak product appeal and intensifying competition. 'While, we maintain the stock's 38 sen target price based on 0.1 time FY25 book value, we have downgraded our call to 'sell', as we believe downside risks have increased following the recent rally in the share price.' Meanwhile, MIDF Research said Tan Chong's efforts to expand its product portfolio may not translate to meaningful volume contributions from the newer marques in the near term as building brand awareness will likely take time. Thus, it expects the group to stay loss-making. MIDF has a 'sell' rating and 34 sen target price on the stock. Hong Leong Investment Bank Research (HLIB Research) expects some improvement in coming quarters, driven by the recent appreciation of the ringgit. Still it is cautious about the group's outlook because of stiff market competition despite the new launches planned. According to HLIB Research, the launch of new Kicks sport utility vehicle last December is expected to improve group sales in Malaysia. Tan Chong has also started exporting the Serena multi-purpose vehicle to Thailand and recently signed a collaboration agreement with SAIC GM Wuling Automobile to locally assemble the Tan Chong-branded TQ Wuling Bingo electric vehicle (EV), an affordable entry-level compact EV targeting value-driven and urban commuters. 'Management also expects improvements in the Vietnam market, following increasing the introduction of new GAC models into the market. 'Nevertheless, we remain cautious about the group's domestic market outlook, due to the ongoing stiff competition in various segments, as both national marques and non-national original equipment manufacturers introduce new attractive models. 'Recent ringgit appreciation is expected to improve the cost structure of its Malaysia operations' said HLIB Research. The research house has a 'hold' rating on the stock, with a higher target price of 42 sen from 35 sen.
