PETALING JAYA: Kenanga Research is taking a cautious stance on the plastic packaging sector in the near term.
The research house attributed its stance to uncertainty in global trade depressing demand, regional competition, and cost pressures in the sector.
Plastic packaging continues to face multiple headwinds including higher operating costs, intense competition and currency fluctuations, the research house said.
It said visibility for the sector is also poor for this year and next due to global trade uncertainty and risk of slower economic activity.
“Demand for premium, thin-gauge or nano packaging film remains encouraging, but even so, average selling prices are facing pressures from both competitive pricing and ringgit appreciation,” Kenanga Research said.
The research house said any slowdown or decline in global trade volumes is likely to dampen overall demand for plastic packaging materials.
We maintain our conservative sector-wide valuation approach, as we do not foresee a near-term re-rating for the sector due to lack of guidance on earnings recovery,” the research house said.
