Latest news with #RM28.9
Focus Malaysia
3 days ago
- Business
- Focus Malaysia
Big Three builders set to dominate DC jobs as cost pressures shift demand to Malaysia
THE KLCON index waded through a volatile first half (1H). Despite the sell-down, the sector staged a strong recovery rally of 29% from the bottom. 'We attribute the resilience to rescinded GPU restriction rules, Big Tech capex reaffirmation, healthy contract awards and good earnings performance in 1Q reporting,' said Hong Leong Investment Bank (HLIB). As at time of writing, year-to-date (YTD) contract awards have amounted to RM28.9 bil translating to a 39.5% growth year-to-year (YoY). Several notable large scale contracts that have anchored awards this year are: (i) Penang LRT Segment 1 to SRS (60% Gamuda) – RM8.3 bil (ii) KSSC redevelopment to MRCB – RM2.94 bil (iii) LRT3 VO to MRCB – RM2.47 bil. In 1H25 total DC related contracts awarded came in at RM3.3bn (-31% YoY), a slower pace when compared to a frenetic pace achieved in 1H24. Nevertheless, we attribute the temporary slow-down in 1H to timing considering that multiple hyperscale DC tenders were called during this time. Rather than seeing the impact to DC pipeline from GPU related uncertainties, from what we gather tariff induced construction costs inflation in US (CBRE: 3-5% inflation for commercial projects) led to slight reprioritisation of DC pipeline towards cheaper countries including MY. DCs aside, 2H could see more action coming from Penang LRT (subcontracts and systems package) while sizable EM road projects such as SSLR and NCH may materialise. As for the commercial segment (including residential projects sitting on commercial plots), lack of clarity on SST treatment could drag on opportunities in 3Q25 as launch plans may see deferral until SST treatment is clearer. As at time of writing, YTD contract awards have amounted to RM28.9 bil translating to a 39.5% growth YoY. Several notable large scale contracts that have anchored awards this year are: (i) Penang LRT Segment 1 to SRS (60% Gamuda) – RM8.3 bil. (ii) KSSC redevelopment to MRCB – RM2.94 bil. (iii) LRT3 VO to MRCB – RM2.47 bil. In 1H25 total DC related contracts awarded came in at RM3.3 bil (-31% YoY), a slower pace when compared to a frenetic pace achieved in 1H24. 'Nevertheless, we attribute the temporary slow-down in 1H to timing considering that multiple hyperscale DC tenders were called during this time,' said HLIB. Rather than seeing the impact to DC pipeline from GPU related uncertainties, from what we gather tariff induced construction costs inflation in US led to slight reprioritisation of DC pipeline towards cheaper countries including MY. DCs aside, 2H could see more action coming from Penang LRT while sizable EM road projects such as SSLR and NCH may materialise. As for the commercial segment, lack of clarity on SST treatment could drag on opportunities in 3Q25 as launch plans may see deferral until SST treatment is clearer. We are foreseeing a DC award cycle in 2H to be driven by multiple award decisions for DC tenders placed in 1HCY25 – this includes five multi-billion RM tenders for one US based hyperscaler. For the DC segment, we take a 'big is better' view anticipating further inroads to be made by sector's big three (Gamuda, SunCon & IJM) riding on competitive advantages such as balance sheet strength, track record (safety & execution) and integrated structure. Recent news reports of potential AI chip curb on Malaysia is concerning but remains unconfirmed, lacking actionable details. In our view, Malaysian contractors are reliant on US/Western hyperscaler names for sizable DC jobs thus mitigating uncertainties to a certain extent – to this end exemptions might be possible and remains our base case. Recent removal of SST exemption for the construction sector (from 0% to 6%) should in general be a manageable development considering most forms of contracts provide for additional costs increase as a result of changes in law (SST revision qualifies under this). Meanwhile, the continued exemption for government & residential projects will narrow range of exposed projects mainly to non-residential construction projects (28% of construction work value in 2024). Nevertheless, these projects are adequately covered by contract. Recent removal of SST exemption for the construction sector (from 0% to 6%) should in general be a manageable development considering most forms of contracts provide for additional costs increase as a result of changes in law (SST revision qualifies under this). Meanwhile, the continued exemption for government & residential projects will narrow range of exposed projects mainly to non-residential construction projects (28% of construction work value in 2024). Nevertheless, these projects are adequately covered by contract clauses, in our view. We see limited impact on DC segment considering FIDIC style contracts while insatiable demand for capacity could mitigate impact of higher build costs. We retain our OVERWEIGHT sector call anticipating sustained contract flows in 2H anchored by DCs, infra rollout and still buoyant private sector sentiments. In our view, contractors broadly can still add to orderbook from the DC segment as well as infra projects. Valuations at current levels still provide room for upside. —July 11, 2025 Main image: Linkedin
New Straits Times
23-05-2025
- Automotive
- New Straits Times
Analyst reaffirms DRB-Hicom forecasts after profit rebound
KUALA LUMPUR: Public Investment Bank Bhd (PublicInvest) has maintained its earnings forecasts for DRB-Hicom Bhd after the group returned to profitability in the first quarter ended March 31, 2025 (1Q25), driven by stronger sales and improved cost efficiency. "The results were in line with our estimates but fell short of consensus, representing 22.6 per cent and 19.3 per cent of full-year forecasts, respectively," the research house said in a note. PublicInvest reaffirmed its 'Neutral' call on the counter with an unchanged sum-of-parts-based target price of RM0.84. DRB-Hicom posted a net profit of RM17.7 million for the quarter, reversing three consecutive quarters of losses. Excluding non-recurring items, core net profit is estimated at RM28.9 million, reflecting a stronger underlying performance. The improvement was supported by better cost control and healthier sales across most business segments, underscoring the group's operational turnaround. Looking ahead, PublicInvest cautioned that heightened competition, particularly from competitively priced Chinese carmakers, could pressure margins and pose challenges to earnings growth. It also noted that Malaysia's automotive sector is expected to normalise in 2025 after a record-setting year in 2024. The Malaysia Automotive Association reported a five per cent year-on-year decline in total industry volume for the first four months of the year, with full-year sales projected to ease 3.5 per cent to 780,000 units. PublicInvest said the anticipated softer demand is partly due to the easing of order backlogs and a potential increase in excise duties for completely knocked-down vehicles. Other contributing factors include the rollout of targeted RON95 fuel subsidies, and the introduction of a high-value goods tax.
