CIMB Research said Ann Joo’s order flow visibility could improve alongside the gradual rollout of major infrastructure initiatives in Malaysia.
PETALING JAYA: Mandated output cuts and infrastructure rollouts will help drive a recovery in Ann Joo Resources Bhd
’s earnings in the second half of financial year 2025 (2H25), despite the group’s dismal first quarter of financial year 2025 (1Q25) results.
Ann Joo’s 1Q25 results missed most analysts’ expectations, posting core losses of RM109míl on lower sales volumes and selling prices and a two-month plant shutdown.
While the group’s near term earnings will continue to drag, CIMB Research, in a report, stated it expects green shoots may emerge in 2H25.
The local steel industry is monitoring any indirect impact from a potential diversion of Chinese steel products, although China’s direct exports of long-steel products such as rebar and billets to the United States amounted to only 40,000 tonnes, or 0.1% of its total steel exports in the financial year 2024 (FY24).
“However, we expect Ann Joo’s performance to remain lacklustre in 2Q25 as tariff uncertainties continue to weigh on the group’s domestic sales and export markets,” it added.
As of May 29, local rebar prices have retraced to RM2,422 per tonne from about RM2,800 per tonne in November 2024, but are still at a 32% premium to Chinese rebar prices (RM1,830 per tonne).
On the demand side, CIMB Research said Ann Joo’s order flow visibility could improve alongside the gradual rollout of major infrastructure initiatives in Malaysia such as Penang Light Rail Transit, Pan Borneo Sabah Highway and several flood-mitigation works as well as another S$35bil to S$39bil worth of big-ticket awards in Singapore.
Given the weaker-than-expected 1Q25 results, the brokerage now projects Ann Joo to record FY25 core losses of RM178mil. It also cut its FY25 to FY26 core profit estimates by 4% to 8% to RM64mil to RM87mil.
Following the earnings downgrade, CIMB Research which maintained a “buy” call on the stock has lowered its target price (TP) to 83 sen a share from RM1.02 previously.
“We believe that most of the stock’s key negatives have already been priced in,” it added.
The key catalysts include Chinese production cuts, higher steel orders, and a potential widening of the Malaysian government’s anti-dumping investigations to include long-steel products.
Meanwhile, TA Research envisaged that headwinds will continue to persist for Ann Joo despite a potential medium-term recovery. The research house said “we have revised down our average selling price (ASP) assumptions for certain steel products across FY25 to FY27.”
Consequently, TA Research has forecast Ann Joo to post a net loss of RM92.9mil for FY25.
“However, a turnaround appears plausible, with projected net profits of RM40.1mil in FY26 and RM6mil in FY27, premised on gradual improvements in ASP and normalisation of profitability margins,” it added.
Despite China’s policy shift to reduce domestic steel production, the research house pointed out that Ann Joo remains cautious amid persistent risks of trade diversion and oversupply from Chinese producers.
Post earnings revision, the research house has downgraded the stock to a “hold” call from a “buy” with a lower TP of 76 sen per share.
