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New Straits Times
11-06-2025
- Business
- New Straits Times
CIMB: India's duty cut, low stocks seen boosting Malaysian palm oil exports
KUALA LUMPUR: India's recent decision to reduce import duties for palm oil, coupled with low edible oil stocks in the country, is likely to boost Malaysian palm oil exports in May. CIMB Securities Research said the recent correction in the crude palm oil (CPO) price has improved palm price competitiveness against soybean oil. "Palm oil currently trades at a discount of US$128 per tonne against soybean oil. "This, coupled with India's recent decision to halve the import duties on palm oil to 10 per cent with effect from 30 May, will lower the effective duty on palm oil to 16.5 per cent," it said in a note. The firm said this competitive pricing, combined with current low domestic stocks in India, is expected to lead to increased Indian palm oil purchases. Separately, CIMB Securities said the Indonesian government raised the export levy on crude palm oil to 10 per cent, effective from May 17, to raise revenue to fund its biodiesel programme and subsidise replanting. "Following the change, we expect Indonesian palm oil exports to resume in favour of refined palm products. "We project CPO prices to remain within the RM3,700–4,100 per tonne range in June, given rising exports. "Our average CPO price forecast of RM4,200 per tonne for 2025 remains unchanged," it said. Meanwhile, CIMB Securities said Malaysian palm oil stocks are expected to rise one per cent month on month (MoM) to 2 million tonnes in June 2025. The firm said Malaysian palm oil stocks rose seven per cent MoM to 1.99 million tonnes in May 2025, below its estimates but in line with consensus estimates. "The CPO production is projected to be flat owing to fewer working days, while palm oil exports are expected to increase by eight per cent MoM to 1.5 million tonnes," it said. Overall, CIMB Securities has maintained its Neutral rating on the sector, as it expects CPO prices to remain range-bound. "Our preferred pick is IOI Corp Bhd given its lower exposure to Indonesian regulatory risks, its relatively attractive valuations and the positive impact of a stronger ringgit on its US dollar debt obligations. "For investors seeking dividend yield and exposure to smaller-cap palm oil players, our preferred pick is Hap Seng Plantations Bhd owing to its undervalued assets," it added.
New Straits Times
03-06-2025
- Business
- New Straits Times
Tariff uncertainty casts shadow over Ann Joo outlook
KUALA LUMPUR: Ann Joo Resources Bhd's performance is expected to remain subdued in the second quarter of 2025 as tariff uncertainties continue to pressure the group's domestic and export sales, said CIMB Securities Research. According to the firm, the local steel industry is monitoring any indirect impact from a potential diversion of Chinese steel products. However, it noted that China exported only 40,000 tonnes of long-steel products such as rebar and billets to the United States in 2024, accounting for less than 0.1 per cent of its total steel exports. As of May 29, local rebar prices had declined to RM2,422 per tonne from about RM2,800 per tonne in November 2024, but remained 32 per cent above Chinese rebar prices, which stood at RM1,830 per tonne. Even so, the firm expects China's planned production cuts to provide support to global steel markets if implemented in the second half of the year. "On the demand side, Ann Joo's order flow visibility could improve alongside the gradual rollout of major infrastructure initiatives in Malaysia and another S$35 billion to S$39 billion worth of big-ticket awards in Singapore," it said. Meanwhile, CIMB Securities said Ann Joo's first-quarter results fell short of expectations, with core losses of RM109 million as revenue declined 18 per cent year-on-year. It attributed the weaker performance to lower selling prices and sales tonnage, amid renewed concerns over reciprocal tariffs imposed by the US administration, which have dampened sentiment in international steel markets. "We now project Ann Joo to post financial year 2025 (FY25) core losses of RM178 million and we have cut our FY25 to FY26 core profit estimates by 4-8 per cent to between RM64 million and RM87 million. "Following the earnings downgrade, we lower our target price for Ann Joo to 83 sen from RM1.02," it said, while maintaining a "Buy" call on the stock.
New Straits Times
27-05-2025
- Business
- New Straits Times
KLK's earnings set to improve as derivatives losses recede, says CIMB Securities
KUALA LUMPUR: Kuala Lumpur Kepong Bhd (KLK) is expected to register a higher second half of (2H) financial year 2025 (FY25) net profit in absence of derivatives losses, said CIMB Securities Research. The research house said KLK lowered its FY25 fresh fruit bunch (FFB) output guidance to mid-single-digit growth but remains positive about 2H prospects, supported by improved production. "This suggests that 2HFY9/25 production could account for about 52 per cent of full-year output, supporting earnings momentum, although this will be partly offset by lower current crude palm oil (CPO) prices," it said. Meanwhile, CIMB Securities said KLK recorded a 2.5 per cent year on year (yoy) decline in ex-mill CPO production costs to RM2,100/tonne in 1HFY25, driven by lower fertiliser prices. However, the firm said refining margins are expected to remain weak, the glove division is still loss-making, and gas supply disruptions have affected oleochemical plant efficiency in third quarter (Q3) FY25. "KLK shared that the RM252 million in derivatives losses in 1HFY25 was mainly related to unrealised US dollar hedges of RM143 million. "We maintain our Hold call with an unchanged target price of RM21.50," it added.
New Straits Times
25-05-2025
- Automotive
- New Straits Times
Muted growth ahead for auto sector as subsidy reforms loom
KUALA LUMPUR: The automotive sector's growth outlook is expected to remain subdued amid rising market competition, said CIMB Securities Research. The research house projected a sharper decline in total industry volume (TIV) to 760,000 units in 2025, down seven per cent year-on-year. It said the sector faces several headwinds, including the potential removal of the RON95 petrol subsidy in mid-2025. "Despite this, we anticipate resilient demand within the sub-RM100,000 segment, which remains dominated by national brands and select entry-level models from Japanese marques. "Additionally, the government's plan to retain fuel subsidies for 85 per cent of RON95 users, as outlined in Budget 2025, is expected to maintain affordability for the mass-market segment," it said in a note. In view of this, CIMB Securities expects national brands to maintain their dominance, capturing a projected 64.5 per cent market share, compared with 35.5 per cent for non-national brands in 2025. It added the removal of the RON95 petrol subsidy could accelerate the adoption of battery electric vehicles in 2025. "Among stocks under our coverage, Sime Darby Bhd is well-positioned to benefit from accelerating EV adoption, given its expanding EV portfolio across marques like BMW, Mini, Porsche, BYD, and Volvo. "However, rising competition within the EV segment, particularly from Chinese players, will likely persist. Duty exemptions for imported electric vehicle (EV) models are set to expire in 2026, after which domestic assembly will take precedence," it said. CIMB Securities has maintained its 'Neutral' rating on the sector, citing a subdued growth outlook amid intensifying market competition. While the valuation discount reflects the sector's muted earnings outlook and demand uncertainty tied to the potential removal of the RON95 subsidy, CIMB said the sector still offers attractive CY25–26 dividend yields of 6.9 to 7.1 per cent. "Sime Darby remains our top sector pick owing to its growing exposure to Australia's mining sector, attractive EV play, exposure to Malaysia's auto market leader Perodua, and potential monetisation of non-core and land bank assets," it added.
