PETALING JAYA: Hiap Teck Venture Bhd
is likely to be heading into a stronger earnings stretch, but the bigger question is whether its joint venture (JV) lifeline can keep outpacing the pressure building across the global steel market.
Hong Leong Investment Bank (HLIB) Research has turned more upbeat on the group’s near-term prospects.
The research house has raised Hiap Teck’s core earnings forecasts for the financial years of 2026 (FY26), FY27 and FY28 by 12.1%, 16.6% and 12.5% respectively.
The upgrade rests largely on stronger assumptions for Eastern Steel Sdn Bhd (ESSB), the group’s 27.3%-owned JV, which is increasingly doing the heavy lifting for Hiap Teck’s earnings story.
That matters because the broader operating backdrop is still far from forgiving.
The Terengganu-based ESSB was previously reported as Malaysia’s sole manufacturer of steel slabs.
HLIB Research said global steel market conditions remain challenging, with prices still under pressure amid cautious demand and persistent supply imbalances.
It also warned that the latest Middle East conflict could trigger fresh swings in energy prices, logistics costs and trade flows, adding more instability to an industry that is already struggling to find its footing.
In that setting, Hiap Teck’s appeal is becoming less about a broad recovery in steel and more about whether ESSB can continue to shield the group from the weakness in its core businesses.
The research house said that while the latest quarterly earnings were lifted by a stronger contribution from ESSB, Hiap Teck’s trading and downstream divisions were under strain.
Despite higher sales volume, those segments saw weaker performance as average selling prices stayed soft while operating costs rose.
ESSB, by contrast, has become the standout.
HLIB Research attributed the stronger showing to improved utilisation at its hot rolled coil plant, which helped lift gross profit margin and reinforced the JV’s role as the group’s main earnings anchor. That divergence is likely to define the stock’s next phase.
HLIB Research maintained its “buy” call on Hiap Teck, although it trimmed its target price slightly to 35 sen from 36 sen.
The lower target price was due to more cautious valuation assumptions to reflect heightened geopolitical volatility.
Even so, the stock still screens as inexpensive.
At 25.5 sen, HLIB Research said Hiap Teck is trading at 3.7 times FY26 earnings and 0.28 times book value, both below its five-year historical averages of 6.7 times and 0.5 times respectively.
On March 25, Hiap Teck announced its second quarter results for FY26.
Its core earnings were recorded at RM35.3mil, which was up 5.2% quarter-on-quarter and 33.5% year-on-year.
For the first half period, core earnings stood at RM68.9mil, beating HLIB Research’s expectation at 65.5% of its full-year estimate, due mainly to better-than-expected contribution from ESSB.
An analyst told StarBiz that Hiap Teck is better placed than before, with the group seeing firmer support from ESSB.
“However, the wider steel landscape remains challenging and this could still cap upside,” added the analyst.
