PETALING JAYA: Weak steel prices, albeit starting to show signs of recovery, will continue to pose a challenge to Hiap Teck Venture Bhd
’s near-term profitability, says Hong Leong Investment Bank (HLIB) Research.
The group imports, exports and deals in steel products, metal hardware and building materials.
For its fourth quarter ended July 31, 2024 (4Q24), Hiap Teck’s net profit rose by 11% year-on-year (y-o-y) to RM47.5mil. This brought the 2024 full year (FY24) figure to RM115.9mil.
HLIB Research said the results had beat its expectations. The showing accounted for 114.5% of the research firm’s estimate, due mainly to a better-than-expected contribution from joint-venture firm Eastern Steel Sdn Bhd (ESSB).
HLIB Research remains positive on the group’s longer-term prospects. This is supported by the pending rollout of mega infrastructure projects and robust private sector job flows in Malaysia. It also sees rising capacity utilisation at ESSB’s new blast furnace, which will boost its contribution to Hiap Tecks bottom line.
Additionally, the scheduled completion of ESSB’s hot rolled coil plant – expected by the fourth quarter – will enhance the group’s product offerings in both domestic and export markets.
Hiap Teck owns a 27.3% stake in ESSB.
“We continue to like Hiap Teck for its healthy balance sheet with net gearing at 0.34 times as at July 31 and the multi-year growth potential in ESSB’s earnings.
“This is supported by its continuous efforts in enhancing cost efficiencies and major capacity expansion,” HLIB Research added.
The research house maintained its “buy” rating on Hiap Teck with an unchanged target price of 52 sen a share based on seven times FY25 core earnings per share of 7.5 sen. In the notes accompanying its 4Q24 earnings, Hiap Teck cautioned about the challenging global steel market.
