PETALING JAYA: Ann Joo Resources Bhd
’s earnings growth is expected to be undermined by persistent margin pressure from weak steel prices, a challenging operating environment amid geopolitical and financial uncertainties and the slow recovery in key end markets such as China’s property and regional construction sectors.
According to TA Research, a meaningful recovery has yet to materialise for the integrated steel player.
Ann Joo’s management recently highlighted that the group’s operating environment is likely to remain challenging, weighed down by a combination of geopolitical tensions, tighter global financial conditions, a slowing China market and tariff uncertainties.
It noted the local steel sector is expected to continue facing pressure from excess production capacity in China and other major markets, which has suppressed steel prices both internationally and domestically.
In addition, China’s ongoing property sector slowdown continues to dampen construction activity, further limiting steel demand and weighing on domestic consumption.
As a result, Ann Joo is expected to navigate a prolonged period of margin pressure, with profitability likely to remain subdued until a sustained rebound in steel demand and pricing is observed.
On the domestic front, robust infrastructure spending under the 13th Malaysia Plan totalling RM430bil should support steel demand in the medium term.
However, uncertainties over project rollouts could limit near-term visibility.
Meanwhile, the planned introduction of a carbon tax in 2026 is expected to add compliance and operating cost pressures.
However, it is also anticipated to spur investment in greener, energy-efficient steel solutions.
Given Ann Joo’s prolonged underperformance and continued weakness in steel’s average steel price, TA Research has cut the stock’s target price to 64 sen from 76 sen previously.
Accordingly, the research house has downgraded its recommendation from a “hold” to “sell” call on Ann Joo.
In a note to clients, CIMB Research maintained a “hold” call on the stock, as a stronger recovery in domestic steel prices remains unlikely in the near term.
While leaving its earnings forecasts unchanged, the research house has reduced Ann Joo’s target price to 65 sen from 75 sen previously.
This reflects uncertainties over the proposed carbon tax, as further expansion into downstream value-added steel products, electrification works and Singapore’s steel market would take some time to gain traction.
On a positive note, local steel demand should start picking up in tandem with a revival of domestic infrastructure spending from the first half of 2026 to 2027.
