Key stocks to watch in 2025

LAST week, StarBiz 7 polled seven brokerages for their projections on the FBM KLCI in 2025. This week, we turn our attention to their top stock picks for the year and the reasoning behind the recommendations.

Against the backdrop of a dynamic economic environment and evolving market trends, the brokerages have identified stocks that combine defensive attributes, growth prospects and appealing dividend yields.

While the overall market outlook remains cautious, their recommendations reflect a careful balance of resilience and optimism. Key themes include dividend stability and opportunities in emerging growth sectors.

Let’s dive into the analysts’ watchlists and explore their strategies for navigating 2025.

Front-runners

Among the standout favourites, YTL Power International Bhd has earned a spot on the top stock pick lists of several brokerages, including CIMB Research, Hong Leong Investment Bank (HLIB) Research, Maybank Investment Bank (Maybank IB) Research and TA Research.

Analysts view YTL Power’s diversified portfolio, which includes power generation and data centres (DCs), as a critical factor that positions the company well to ride the energy transition wave and capitalise on the growing demand for the DC infrastructure, driven by digitalisation and cloud computing trends. Target prices for the counter range from RM4.70 to RM7, reflecting optimism about its robust earnings growth and strategic investments.

According to TA Research, YTL Power is a key local proxy to artificial intelligence (AI) data centres.“YTL Power offers strong value proposition in the AI data centre space being one of the first Nvidia partner to utilise the GB200 GPU chips outside the United States,” it explains, adding that it expects the group’s earnings to gradually improve over the financial year ending June 30, 2026 (FY26) to FY27, as contribution from AI data centres gradually kick in.

CIMB Research concurs, projecting YTL Power’s core earnings per share (EPS) to reach record highs in FY26–FY27, as its AI data centre business starts to ramp up and contribute materially from FY26.

In addition, TA Research points out, YTL Power’s UK-based unit, Wessex Water, has returned to the black following its annual tariff adjustment in April 2024 and as cost and inflationary pressures ease, in line with easing inflation in the United Kingdom.

Gamuda Bhd is another consistent pick across brokerages, with target prices set between RM10.50 and RM12.31. The construction and infrastructure giant is expected to benefit from large-scale projects and international expansion. HLIB Research, RHB Research and Maybank IB Research highlight the company’s strong order book and resilient margins, among other reasons, for picking Gamuda.

“We like Gamuda on the back of its accelerating contract wins as it digests a high certainty pipeline, while recent successful penetration into the Australian renewable energy space (pumped hydro including), would unlock long term stream of mega project opportunities,” HLIB Research says.

“Gamuda’s increasingly integrated approach to the burgeoning DC space could spring more upside surprises,” it adds.

Maybank IB Research notes that catalysts for Gamuda are strong engineering and construction order-book replenishment and property pre-sales.

“With infrastructure and development projects moving towards the public-private partnership model in terms of financing, engineering and construction players with strong balance sheets will have an upper-hand,” it points out, highlighting that Gamuda’s latest net gearing was 0.39 times at end-October 2024.

According to CIMB Research, Gamuda’s order book could hit a record RM40bil to RM45bil by the first quarter of 2025, driven by the Penang light rail transit, Ulu Padas hydro and Australian renewable energy projects, as well as data centre developments, while its joint venture with Dagang Nexchange Bhd could boost the company’s digital infrastructure ambitions.Banking growth

The financial sector also takes centre stage.

CIMB Group Holdings Bhd is a favourite, appearing in recommendations by MIDF Research, Maybank IB Research, Phillip Capital Research, and TA Research. Target prices vary slightly, from RM9.11 to RM9.68, as analysts point to CIMB’s improving asset quality, cost controls, and regional growth opportunities.

“We see potential for another special cash dividend, supported by CIMB’s solid 14.5% Common Equity Tier 1 (CET1). CIMB Niaga and Singapore are expected to offset domestic net interest margin (NIM) pressures and loan shortfalls, particularly as the easing policy rate cycle is projected to expand the group NIM by four basis points to 2.42% in 2025.

“The easing of funding pressures may potentially enhance loan volumes, which is crucial for CIMB’s funding-led strategy,” Phillip Capital Research says.

Maybank IB Research also notes: “CIMB’s operations in Indonesia and Singapore are strong contributors, while a turnaround of CIMB Thai would enhance earnings.”

Similarly, AMMB Holdings Bhd sees strong support, with a target price range of RM6.30 to RM6.80.

Analysts underscore AMMB’s strategic initiatives to boost returns and streamline operations.

“AMMB’s focus on proactive funding cost management and business banking operations should contribute to growth momentum, while its push for higher dividend payouts should drive interest,” Maybank IB Research highlights.

Meanwhile, Malayan Banking Bhd (Maybank), Public Bank Bhd and Hong Leong Bank Bhd stand out for their defensive qualities and attractive dividend yields.

The target prices for Maybank hover around RM12, while that for Public Bank range from RM5.16 to RM5.36. For HLBB, the range is between RM22.76 and RM25.30.

MIDF Research highlights the fact that banks are direct beneficiaries of economic growth.

“The earnings performance of the banking sector is closely tied to the performance of the economy, being its backbone.

“Economic activities create demand for financial services such as productive loans for businesses, consumptive loans and transactional deposits,” it explains.

MIDF Research has projected a growth of 4.6% in Malaysia’s gross domestic product (GDP) in 2025.

“We expect that banks’ net interest income growth will remain robust due to stable net interest margin and sturdy loan growth; normalisation of non-interest income growth; operation expenditure to come in at a more contained level; and asset quality to continue improving with no stress expected,” the brokerage states.

As such, its expectation is that for 2025, the earnings of banks would see robust growth. For banks under its coverage, in particular, growth could reach 7% year-on-year.

Healthy outlook

The healthcare sector’s potential remains robust, with IHH Healthcare Bhd making its way into multiple top picks. With target prices of up to RM9.10, RHB Research and CIMB Research cite IHH’s strategic expansion and resilient earnings as primary drivers.

“IHH is poised for growth, driven by stronger margins in India and Greater China, with lower earnings sensitivity to Malaysia’s minimum wage hike owing to its global diversification and premium market positioning,” CIMB Research states.

RHB Research is also upbeat on IHH’s strategic plan for both organic and inorganic growth over the mid to long term.

“The group’s expansion target of 4,000 beds by 2028 primarily in the developing markets (Malaysia and India) provides an opportunity to tap into regions where quality healthcare is scarce.

“We maintain our positive view on IHH’s long-term prospects as we like the group’s solid execution strategy, reputable regional footprint across key regions driven by its strong brand awareness, inelastic demand for healthcare services, and focus on affluent clientele which should provide earnings resiliency,” RHB Research notes.

KPJ Healthcare Bhd also garners attention, with Maybank IB Research setting a target price of RM2.60, supported by its growing network of hospitals and focus on operational efficiency.

“KPJ is slated to launch its 60-bed hospital in Kuala Selangor by the first half of 2025, which will boost its supply-base to match growing demand. Beyond FY25, KPJ has guided for a gradual bed capacity expansion of around 16% over three years, to land at 5,000 beds by FY28, keeping its top rank in terms of bed capacity in Malaysia,” Maybank IB Research says.

It also notes that KPJ is expected to benefit significantly from the growth of medical tourism in Malaysia.

“Medical tourism remains a low-hanging fruit for revenue uplift. Favouring the pure-Malaysian players, KPJ stands to be the biggest beneficiary of medical tourism,” it states.

Rise in spending

Consumer stocks, particularly in the food and beverage segment, also draw interest.

Farm Fresh Bhd is noted by CIMB Research, RHB Research, and TA Research, with target prices between RM2.11 and RM2.36. Its growth trajectory, supported by increasing demand for fresh dairy products, makes it a compelling pick.

“Farm Fresh offers strong growth prospects (three-year earnings per share compounded annual growth rate of 31.2%), driven by capacity expansion, new product categories, regional growth, and lower input costs, with attractive valuations at 21% below its historical mean,” CIMB Research notes.

RHB Research states: “We like Farm Fresh, premised on its relentless top line growth, underpinned by new product launches and multiple expansion plans whilst its margin growth should be sustained on easing input costs and more favourable foreign exchange rate.”Leong Hup International Bhd, with a target price of 90 sen from MIDF Research, also appeals due to its robust poultry business and regional market presence.

MIDF Research points out that companies like Leong Hup will continue to thrive, benefiting from robust demand for everyday necessities. In addition, it says, reduction in input costs will boost margins, positioning Leong Hup well to capitalise on cost efficiencies.

TA Research notes that Leong Hup is expected to benefit from a stronger ringgit this year.

“The fluctuations in the ringgit and raw material prices will impact Leong Hup’s earnings in 2025, as raw materials account for 70% to 80% of a poultry player’s costs.

“Our in-house forecast is for the ringgit to strengthen to RM4.10 per US dollar in 2025 compared with RM4.55 per US dollar in 2024. Based on our sensitivity analysis, every 5% change in the ringgit would affect the bottom line by 8%.

“Additionally, the group is set to benefit from lower input costs,” TA Research highlights.

Overall, the brokerage expects Leong Hup’s pre-tax margin to expand in the short term on lower input costs.