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New Straits Times
4 days ago
- Business
- New Straits Times
Solarvest's Brunei project could generate RM100mil via JV, says HLIB
KUALA LUMPUR: The solar project secured by Solarvest Holdings Bhd in Brunei is expected to deliver up to RM100 million in value to its 49 per cent-owned joint venture, according to Hong Leong Investment Bank (HLIB Research). Solarvest secured a 25-year power purchase agreement (PPA) through its 34 per cent-owned joint venture (JV), Seri Suria Power (B) Sdn Bhd. The agreement, inked with Brunei's Department of Electrical Services, will see the JV build, own and operate a 30 MWac ground-mounted photovoltaic (PV) plant atop a remediated landfill in Kampong Belimbing, Kota Batu. Commercial operations are expected to begin by the end of the calendar year 2026, with construction scheduled to start in the third quarter of 2025. Seri Suria Power is a partnership between Solarvest and local entities Khazanah Satu Sdn Bhd — a Bruneian government investment arm under the Finance Ministry — and Serikandi Oilfield Services Sdn Bhd, an energy and infrastructure service provider. HLIB Research said in a note the engineering, procurement, construction, and commissioning (EPCC) scope is expected to deliver between RM80 million and RM100 million in value to Solarvest's 49 per cent-owned EPCC JV, expanding its existing RM1.2 billion order book. "Capital expenditure for the plant is projected at B$35 million (about RM116 million) and should have minimal balance sheet impact considering equity funding required from Solarvest amounts between RM7 million and RM10 million. "Meanwhile, our preliminary project internal rate of return estimation could come in the 'high single digit' range – a reasonable figure, in our view," the firm said. HLIB Research added Solarvest's management aims to grow its order book beyond RM2 billion in the financial year ending March 2026 (FY26), supported by domestic clean energy initiatives such as LSS5, MyBeST, LSS6 and the CRESS programme. The group's tender pipeline remains robust at 5.86 gigawatt-peak (GWp), with battery energy storage systems (BESS) also emerging as a key growth area. HLIB Research maintains a "Buy" rating on Solarvest with an unchanged target price of RM2.25, based on a sum-of-parts valuation comprising a 25 times price-to-earnings multiple for its EPCC business and discounted cash flow for its recurring income assets. Key risks to the outlook include execution delays, political uncertainties and potential fluctuations in material and labour costs.
The Star
13-06-2025
- Business
- The Star
Expansion, new orders to lift VSI's earnings despite trade uncertainty
CIMB Research cut its earnings per share forecasts by between 10% and 20% for FY25 to FY27. PETALING JAYA: Analysts remain divided on the outlook for electrical and electronics manufacturing company VS Industry Bhd (VSI) following the release of its results for the third quarter of its financial year ending July 31 (3Q25), which came in below expectations. VSI posted net profit of RM23.77mil and revenue of RM909.41mil for the quarter. This was down from RM54.42mil and RM1.01bil in the same quarter a year ago. The results came in below CIMB Research's expectations, accounting for 49% of its full-year estimate and 52% of consensus. The year-to-date earnings declined 42% year-on-year and was said to be mainly due to weaker demand, higher labour costs in Malaysia, and start-up expenses from its new operations in the Philippines. Given the ongoing demand uncertainty amid subdued consumer sentiment and possible tariffs, CIMB Research cut its earnings per share forecasts by between 10% and 20% for FY25 to FY27. 'Near-term order flows from Malaysia and Singapore will remain dependent on evolving consumer sentiment and clarity on US tariffs following the end of the 90-day grace period in early July,' CIMB Research said. Following its earnings revision, CIMB Research maintained a 'hold' call on VSI with a lower target price of 79 sen, adding that the discount appropriately captures the heightened earnings risks. Hong Leong Investment Bank Research (HLIB Research) also flagged concerns about the group's earnings visibility. HLIB Research reported that VSI's core profit after tax and minority interest of RM69.6mil for the nine months of its current financial year (9M25) was 26.3% lower, meeting only half of its full-year forecast. 'While we anticipate some frontloading activity from US-exposed customers in 4Q25, we see downside risk to management's FY26 guidance given potential inventory adjustments and an uncertain order environment after frontloading,' HLIB Research said. Despite this, the research house pointed to a potential earnings boost from the ramp-up of the group's Philippines operations and a newly secured contract from a big customer. HLIB Research maintained its 'hold' rating on VSI with a lower target price of 72 sen, from 86 sen.
The Star
11-06-2025
- Business
- The Star
Southern Cable robust earnings momentum intact
PETALING JAYA: Southern Cable Group Bhd is expected to maintain its strong earnings momentum into the remainder of the financial year ending Dec 31, 2025 (FY25), backed by robust demand, high production utilisation and a healthy order book. For the first quarter ended March 31, 2025 (1Q25), the group had posted a net profit of RM27.4mil and a revenue of RM390.81mil. This was up from RM14.07mil and RM312.03mil, respectively, in the same quarter of the previous year. Hong Leong Investment Bank (HLIB) Research said the group kicked off FY25 on a strong note, citing its 1Q25 core profit after tax of RM29.1mil which had surpassed its expectations and accounting for 29% of its initial full-year forecasts. The earnings outperformance was mainly driven by the faster-than-expected commissioning of an additional 3,000km per year cable manufacturing capacity. HLIB Research noted that Southern Cable continues to guide for strong cable demand from Tenaga Nasional Bhd (TNB), data centres and solar, while also indicating no disruption to the delivery schedule for its US clients despite the announcement of reciprocal tariffs. 'Demand for cables remains robust, with the expanded 3,000km per year capacity now largely taken up, as reflected by the strong 90% utilisation rate in 1Q25. 'Supported by a robust RM1.32bil order book and over RM1bil in tenders, management expects this buoyant utilisation to persist,' said the research house. Notably, the group is transitioning to a new long-term contract with TNB in the next quarter, which is expected to yield slightly better margins due to improved pricing terms. In the export segment, it was noted that early discussions suggest that US customers are prepared to absorb the tariff with no impact towards the group's margins. HLIB Research projects US sales to remain steady at RM30mil per quarter throughout FY25, meeting the full-year target of at least RM100mil. Meanwhile, the launch of the stock's new USE-2/RHW-2 low-voltage aluminium power cable has been delayed to 4Q25 due to certification delays. 'We believe the launch of this product will serve as a key catalyst, potentially enabling Southern Cable's US sales to exceed the RM30mil quarterly run-rate,' it added. On the expansion front, the remaining 2,000km per year capacity is expected to come online by end-FY25. The group's new polyvinyl chloride plant is also slated for commissioning in the second half of the year, while construction is ongoing at its Lot 21 and Lot 22 facilities, which are expected to contribute from the second half of FY26. Reflecting the strong outlook, HLIB Research has raised its earnings forecasts for FY25 to FY27 by 8%, 7% and 17% respectively. The research house has a 'buy' rating on the stock with a raised target price of RM1.69 apiece, adding that it believes Southern Cable is well-positioned to capture further market share amid growing infrastructure and energy demand.
The Star
11-06-2025
- Business
- The Star
CPO prices to remain under short-term pressure
PETALING JAYA: Analysts expect crude palm oil (CPO) prices to remain under pressure in the mid to short-term given the rising inventory and higher output trends. The latest Malaysian Palm Oil Board's palm oil statistics for May revealed that palm oil stocks surged to 1.99 million tonnes, up 6.6% month-on-month and 13.5% year-on-year. Production for the month under review also hit an eight-month high at 1.77 million tonnes. Hong Leong Investment Bank Research (HLIB Research) in a report said the palm oil stock level will likely remain near the two million tonne mark this month. 'This is as seasonally higher crop yields and subdued festive-driven demand are expected to be offset by potentially stronger demand from India, following its recent decision to reduce the import duty on CPO to 10% from 20%,' the research house added. HLIB Research, which is 'neutral' on the sector given the absence of clear demand catalyst, said, 'We maintain our 2025 to 2026 CPO price assumptions of RM4,000 per tonne and RM3,800 per tonne, respectively, with the view that continued output recovery particularly from Indonesia will continue to cap palm oil prices over the near-to-medium term.' For exposure, the research house's top picks are SD Guthrie Bhd with a target price of RM5.17, Johor Plantations Group Bhd at RM1.35 and IOI Corp Bhd at RM4.24. Meanwhile, RHB Research is still 'overweight' on the sector with planters' earnings likely to continue to grow this year, on higher CPO and palm kernel prices. The research house firm said it made no changes to its recommendations after the reporting season for the first quarter of this year (1Q25) as the earnings results were mostly within expectations. RHB Research noted 11 planters under its coverage turning earnings in line with forecasts, while three underperformed. Its top picks within the sector include Johor Plantations, Sarawak Oil Palms Bhd , Bumitama Agri Ltd, PP London Sumatra Indonesia and SD Guthrie Bhd. In Malaysia, RHB Research expects palm oil output should continue ramping up towards the peak season, while demand should also improve, as 'CPO prices are currently within historical discounts versus its competitors'. MIDF Research said in a note to clients: 'We anticipate that the CPO prices will remain stabilised, hovering within the range of RM3,900 to RM4,200 per tonne. 'This is typically in line with seasonal production trends, as the pollination period ends in March and palm oil output is expected to recover – potentially leading to an increase in closing stock levels.' The research house said that the sector's top-line will continue to rise for the first half of this year, in line with higher average CPO price assumptions. 'However, margins are likely to remain under pressure due to the persistent elevated cost of production, caused by the higher locked in fertiliser costs from the second half of last year, coupled with elevated external fresh fruit bunch (FFB) purchase expenses amid low mills utilisation rates,' it added. MIDF Research has maintained a 'neutral' call on the sector at this juncture. While the CPO prices are expected to remain under pressure, it expects production is likely to perform, leading to a ceteris paribus performance for 2025. 'Therefore, we foresee only a handful of players likely to benefit from elevated CPO prices. 'Hence, we recommend avoiding smaller players with significant exposure to external FFB purchases as these factors could risk their CPO production, particularly during the current biological tree rest environment,' the research house noted. Instead, MIDF Research suggested focusing on larger players such as IOI with a target price of RM4.42, SD Guthrie at RM5.43 and Genting Plantations Bhd at RM6.10, whose CPO procurement, which are over 50% from their own estates offers more stability in realising CPO prices. TA Research in a report said its CPO price forecast is unchanged at RM3,800 per tonne for this year. It reiterated a 'hold' call on SD Guthrie, Kuala Lumpur Kepong Bhd and Kim Loong Resources Bhd , while maintaining a 'buy' call on United Malacca Bhd and TSH Resources Bhd .
New Straits Times
11-06-2025
- Business
- New Straits Times
HLIB starts coverage on Southern Cable with positive outlook
KUALA LUMPUR: Hong Leong Investment Bank (HLIB Research) has initiated full coverage on Southern Cable Group Bhd, highlighting the company's solid operational performance over the past two years, growing institutional interest and bright earnings outlook. The firm raised the earnings estimates for Southern Cable for financial years 2025, 2026 and 2027 (FY25/FY26/FY27) by 8.0 per cent, 7.0 per cent and 17 per cent, respectively. It stated that the notable increase in the FY27 sales forecast primarily reflects the anticipated contribution from the company's Lot 21 and Lot 22 production facilities. Concurrently, HLIB Research initiated a "buy" call and a higher target price of RM1.69 per share from RM1.55 previously, based on a multiple of 18 times fully diluted FY25 earnings per share (EPS) of 9.4 sen. The firm said Southern Cable's current order book stands at RM1.32 billion, equivalent to 0.98 times FY24 revenue coverage. This includes RM792 million in long-term contracts with utility companies, with the rest made up of purchase orders. "Demand for cables remains robust, with the expanded 3,000 km per year production capacity now largely taken up, as reflected by the strong 90 per cent utilisation rate in the first quarter of the financial year 2025 (1QFY25). "Supported by a robust RM1.32 billion order book and over RM1 billion in tenders, management expects this buoyant utilisation to persist," the firm said. HLIB Research added that the company expects strong utilisation to continue, backed by its RM1.32 billion order book and over RM1 billion in tenders. For Tenaga Nasional Bhd sales, management anticipates maintaining a similar run rate in the next quarter. This period will also see a key transition from the old 1+1 long-term contract to a new one, expected to support slight margin improvements from better pricing. In the private sector, order enquiries for medium-voltage and high-voltage cables remain strong, driven by demand from data centre and East Coast Rail Link (ECRL) projects. In the solar segment, the group is currently fulfilling projects under the Corporate Green Power Programme (CGPP), with fifth large-scale solar (LSS5)-related demand expected to pick up in the second half of this year. HLIB Research also said that Southern Cable's sales in the United States continue as usual, with no disruptions expected despite the recent announcement of reciprocal tariffs. As one of the customer's top three suppliers, early discussions have indicated that the US customer is prepared to absorb the additional tariffs — reportedly as high as 24 per cent — without impacting Southern Cable's margins. Meanwhile, the remaining 2,000 km a year capacity expansion planned for FY25 will come online by end-FY25, following the installation of new lines. With regards to the new polyvinyl chloride plant, installation is currently underway, with commissioning scheduled for 2HFY25.
