PETALING JAYA: Hiap Teck Venture Bhd
is poised to benefit from the impending rollout of mega infrastructure projects and robust private sector job flows in Malaysia.
Hong Leong Investment Bank (HLIB) Research remained optimistic on the prospects of the company based on those factors, as well as rising capacity utilisation at its 27.3%-owned joint venture (JV) unit Eastern Steel Sdn Bhd’s (ESSB) new blast furnace, which will boost its contribution to Hiap Teck’s bottom line.
In addition, the research house expects demand for steel products in China to pick up, as the weak sentiment may have bottomed.
As it is, HLIB Research is positive on Hiap Teck following better-than-expected results for the third quarter ended April 30, 2024 (3Q24).
The research house said the results surpassed its expectations, accounting for 91.7% of full-year estimates, due mainly to a better contribution from ESSB.
HLIB Research said its 3Q24 core net profit of RM46.2mil rose 3.4 times quarter-on-quarter and 2.3 times year-on-year (y-o-y).
This brought its nine-month financial year 2024 total sum to RM78.6mil versus a core net loss of RM4mil previously.
It added that Hiap Teck’s 3Q24 core net profit more than doubled to RM46.2mil from RM19.9mil a year ago due to weaker performance at the trading segment (arising from lower average selling prices) which was more than mitigated by improved sales volumes at the downstream segment and improved JV contribution.
On a year-to-date basis, it managed to return to the black mainly due to increased sales volumes at both the trading and downstream segments, improved margins at the downstream operations amidst stabilised steel prices, and improved contributions from ESSB.
HLIB Research is maintaining its earnings forecast for now with an upside bias, pending updates from management as well as a “buy” rating with an unchanged target price of 52 sen.
