PETALING JAYA: Hiap Teck Venture Bhd
’s performance is expected to improve in the fourth quarter of this year, supported by firmer steel prices and better sales in its trading and manufacturing segments.
In a report, Hong Leong Investment Bank (HLIB) Research said it would maintain its “buy” rating on the company with an unchanged target price of RM0.35.
“Following the recent share price retracement, we believe the stock’s risk-reward profile has become even more compelling,” it said.
According to HLIB Research, Hiap Teck’s joint venture, Eastern Steel Sdn Bhd (ESSB), is also likely to strengthen, driven by higher steel prices and a recovery in sales volumes following the timing-related shipment delays in the previous quarter.
It said the closure of the Strait of Hormuz did not impact ESSB’s exports, adding that the company’s export shipments were routed via the Red Sea, avoiding the Strait of Hormuz altogether.
This was evident as the company continued to see strong export activity to Italy and Turkiye, which made up more than 50% of its total sales volume during the quarter.
“That said, management reiterated that ESSB remains committed to gradually increasing its domestic sales with a target of 50% of total sales volume over the medium term, leveraging its unique position as Malaysia’s sole domestic producer of hot-rolled coils or HRC,” it noted.
Additionally, the development of ESSB’s industrial park in Terengganu is on track to be completed by the end of this year, which should further support the company’s strategy of increasing its exposure to the domestic market.
Meanwhile, HLIB Research said ESSB’s contribution to Hiap Teck declined 23.8% quarter-on-quarter to RM28.3mil.
The weaker performance was mainly attributable to an 8.2% decline in sales volume – mainly due to timing differences in deliveries, although this was partly offset by higher margins, driven by improved selling prices.
“Consequently, Hiap Teck’s core earnings declined 13.3% quarter-on-quarter during the quarter, although the impact was partially cushioned by narrower losses at its trading segment,” the research house said.
The research house noted that it will maintain its forecast as the weaker third-quarter results were mainly down to timing.
For its third quarter ended April 30, 2026, Hiap Teck’s net profit plunged to RM5.38mil from RM34.28mil in the previous corresponding period, while revenue rose to RM399.92mil from RM344.84mil a year earlier.
In a Bursa Malaysia filing last month on its third-quarter performance, Hiap Teck said the global steel market remained challenging amid continued supply-demand imbalances, subdued steel prices and evolving trade policies.
Citing the World Steel Association’s Short Range Outlook issued in April 2026, Hiap Teck said global steel demand is expected to grow marginally by 0.3% in 2026, reflecting a more cautious outlook amid geopolitical uncertainties and softer economic activity in certain regions.
“Recent tensions in the Middle East, including the conflict involving Iran and concerns over potential disruptions to shipping routes through the Strait of Hormuz, have further heightened market uncertainty and contributed to volatility in energy and freight costs.
“Meanwhile, elevated Chinese steel exports continue to exert pressure on regional steel prices despite increasing trade protection measures adopted by various countries.”
The company said it will emphasise on cost optimisation, among others.
