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New Straits Times
12 hours ago
- Business
- New Straits Times
SST expansion sends ripple effects across key sectors
KUALA LUMPUR: The expanded Sales and Service Tax (SST), projected to generate RM10 billion in annual government revenue, is set to create ripple effects across industries, according to RHB Investment Bank Bhd. The firm said while essential goods and services remain exempt, the broader tax net is likely to create both opportunities and challenges for key sectors such as plantations, consumer goods, property and real estate investment trusts (Reits). "On balance, the SST expansion appears to be a carefully calibrated move. It shores up public finances with limited impact on the average consumer, but the sectoral implications could be material in certain pockets of the economy," it said in a note. Among the sectors expected to face headwinds is the glove manufacturing industry, which continues to grapple with tight margins amid an oversupplied post-pandemic market. "The expanded SST will increase glove production costs by approximately 25–30 US cents per 1,000 pieces. This puts further strain on producers at a time when competition remains intense, and cost pass-through remains challenging," it said. A temporary relief has been introduced via a grace period until Dec 31, during which the Customs Department will withhold enforcement of the new tax on latex imports. The plantation sector also faces pressure, particularly among downstream players, as palm kernel oil (PKO), a key processed output, will be subject to a five per cent SST. While crude palm oil and fresh fruit bunches (FFB) are exempt as agricultural produce, PKO is categorised as a manufactured product and thus taxable. RHB Investment said this could affect companies such as Sime Darby Plantation Bhd, IOI Corp Bhd and Kuala Lumpur Kepong Bhd, although the precise earnings impact remains unclear due to limited disclosure on internal versus external sourcing of PKO. Meanwhile, Reits are expected to absorb the new eight per cent SST on leasing and rental income with manageable short-term impact, as landlords are likely to pass on the tax to tenants. "However, upon the next lease renewals, upside to rental reversions may be limited, as landlords may prioritise tenant retention and maintain positive business relationships," the firm said. In view of this, the research house said it prefers industrial Reits, which are typically backed by long-term master leases with multinational corporations. In the consumer sector, the impact is projected to be manageable given that exemptions cover daily essentials. Retailers with strong bargaining power may be able to offset the effects through rental negotiations. The expanded SST will also apply to inter-company leases, previously tax-exempt, potentially affecting conglomerates with extensive asset portfolios. "This change could impact how groups allocate resources across subsidiaries, especially those with large asset portfolios under lease-based structures," it said. Despite uneven impacts across sectors, the firm remains optimistic about the broader economic outlook. It noted that the additional RM10 billion in expected revenue can serve as an effective pump-primer to stabilise and drive the domestic economy. It said the SST expansion also signals the government's ongoing commitment to steady public finance reform, amid global trade frictions and geopolitical volatility. "It's a good time to gradually accumulate quality names, particularly those with pricing power and minimal tax exposure," it added, recommending a cautious but selective investment stance focused on domestic-centric stocks.
Barnama
13 hours ago
- Business
- Barnama
RHBIB Remains Upbeat On Binastra Corp's Prospect
KUALA LUMPUR, June 20 (Bernama) -- RHB Investment Bank Bhd (RHBIB) remains upbeat on Binastra Corporation Bhd's prospects, projecting earnings to grow at a compound annual growth rate (CAGR) of 132 per cent for three financial years (FYs) between 2025 and 2028. In a research note today, the investment bank said this will largely be in tandem with its anticipated order book growth, backed by the expansion of its key clients beyond the Klang Valley. It said Binastra has clinched RM997 million in new jobs for year-to-date (YTD-FY2026) versus its internal job win target of RM4 billion (FY2025 job replenishment: RM3.1 billion).
New Straits Times
2 days ago
- Business
- New Straits Times
Malaysia poised to benefit from US-China tech decoupling
KUALA LUMPUR: Malaysia's technology sector is well-positioned to benefit from ongoing United States-China trade tensions as global manufacturers seek to diversify their supply chains, according to RHB Investment Bank Bhd (RHB Research). The firm said the country's established semiconductor ecosystem, strong infrastructure and skilled talent base give it a competitive edge amid shifting production strategies, particularly under the "China Plus One" and "Taiwan Plus One" frameworks. "Malaysia stands to benefit from US-imposed tariffs via short-term rushed orders and long-term manufacturing reallocation activities," said analysts Lee Meng Horng and Miza Izaimi in a research note today. They said companies are increasingly mitigating geopolitical risks by relocating part of their operations to alternative locations in Asia, and Malaysia remains a top choice due to its track record and capacity. "The country's robust ecosystem, talent pool and infrastructure provide a competitive advantage," they added. RHB Research maintained a positive outlook for the technology sector despite near-term demand uncertainties stemming from excessive inventory build-up. It said the technology upcycle remains intact, with little evidence so far of major disruptions from global trade frictions. It also noted that Malaysia's position in the global semiconductor supply chain is expected to strengthen as multinational firms seek more resilient and diversified manufacturing bases. "The sector remains in an upcycle, showing minimal signs of major disruptions so far," the firm said. Despite macroeconomic uncertainties and ongoing trade challenges, RHB Research expects structural shifts in global supply chains to support Malaysia's long-term growth in high-tech manufacturing.
New Straits Times
5 days ago
- Business
- New Straits Times
RHB: Cautious outlook for Malaysia's manufacturing
KUALA LUMPUR: RHB Investment Bank Bhd (RHB Research) has maintained a cautious stance on Malaysia's manufacturing outlook for the second half of 2025 amid persistent global trade tensions and uncertainty over US tariff policy. RHB Research senior economist Chin Yee Sian warned that despite some encouraging signs of de-escalation in the US-China trade dispute following discussions between both countries, significant risks remain. "We urge caution against premature optimism. Risks may still linger after July 8, when the initial 90-day postponement of tariffs expires. "The 10 per cent US tariff on Malaysian goods—potentially rising to 24 per cent after a 90-day suspension—positions Malaysia as a direct target. "In addition, slowing growth in major economies and rising trade tensions pose significant downside risks to Malaysia's trade and growth outlook, prompting a more cautious view on manufacturing," she said in a note. In the near term, Chin expects a temporary boost in export and manufacturing activity due to front-loading by exporters seeking to get ahead of the potential tariff hikes. She pointed out that higher trading activity was observed in April and the trend could continue through May and June, providing some support to the manufacturing sector. Indeed, Malaysia's manufacturing sales rose 4.8 per cent year-on-year in April, up from 3.7 per cent in March, with support from the electrical & electronics (E&E) and food, beverages and tobacco sub-sectors. The industrial production index (IPI) also registered a 2.7 per cent YoY increase in April, though this was below both RHB Research's forecast (3.2 per cent) and Bloomberg's consensus (4.0 per cent). However, Chin cautioned that this uptick may be short-lived, as uncertainty and potentially weaker global demand could weigh on Malaysia's trade performance in the coming months, especially after the tariff pause expires in early July. She said export-heavy industries with significant exposure to the US and China, such as E&E, crude materials and machinery, are expected to be hardest hit. In contrast, domestically driven sectors like retail trade and construction are likely to remain more insulated from external shocks. On the local front, Chin said the expansion of the Sales and Service Tax (SST) from July 2 is expected to have a limited direct effect on manufacturing, as key essential items remain exempt. However, RHB Research remains vigilant to potential indirect impacts from rising business costs, particularly due to the new service tax on rental and construction services, as well as the sales tax on industrial machinery.
New Straits Times
12-06-2025
- Business
- New Straits Times
Industrial demand to ease SST impact on property sector: RHB
KUALA LUMPUR: The overall impact of the revised sales and service tax (SST) on the property sector can be cushioned by the "healthy" demand for industrial properties, said RHB Investment Bank Bhd. In a research note, the investment bank said that the protracted United States (US)-China trade war and shifting tariff policies are expected to drive more companies in the region to relocate their operations to Southeast Asia. "Sales of industrial properties as well as projects in Iskandar Malaysia remain strong year-to-date. "Hence, although property companies will likely record a slight margin compression, the demand for industrial and commercial properties should stay healthy over the medium term," it said. The Finance Ministry recently announced that the revised and expanded SST outlined in Budget 2025 will take effect on July 1, 2025. A sales tax rate of five to 10 per cent will be imposed on selected non-essential goods, while the service tax will be broadened to include sectors such as construction services, with a 6.0 per cent tax applicable to providers earning over RM1.5 million annually. Meanwhile, the bank said the imposition of SST on construction contracts and leasing income will likely have a slight impact on developers' profit margins. Given the higher construction costs, it said the industrial and commercial property prices may also be priced higher – the magnitude will depend on whether developers can fully pass on the cost increases. "In our view, demand for industrial properties should stay healthy, given the prolonged US-China trade tensions – especially with infrastructure catalysts and incentives in Iskandar Malaysia," it said. RHB Investment Bank said developers with more exposure to industrial and commercial segments will likely book higher construction costs, as contractors are expected to bake in the six per cent SST when bidding for new projects. It said industrial and commercial properties currently under construction will also see higher costs for the remaining billings for costs to be incurred. "Eventually, we expect developers to pass on the incremental costs to buyers, so new industrial and commercial property prices will likely be more expensive and market forces (demand and supply) will continue to play their role," it said.
