PETALING JAYA: TA Research expects the outlook for Ann Joo Resources Bhd
to improve following the proposed disposal of its upstream steel business, although the broader steel market is likely to remain challenging amid persistent Chinese overcapacity and weak property demand.
“While domestic demand may improve gradually on infrastructure and government-led projects, intense pricing competition and margin pressure are likely to persist, particularly in upstream steel segments,” the research house said in a note to clients yesterday.
Following the proposed disposal of Ann Joo Steel Bhd, the upstream operations have been classified as discontinued, leaving the downstream steel business as the main focus of Ann Joo’s continuing operations.
On a pre-disposal basis, Ann Joo’s revenue for the first half (1H26) of the financial year ending December (FY26) fell 19.9% year-on-year (y-o-y) to RM858.6mil, mainly due to weaker sales volumes and softer average selling prices across its product categories.
However, its core net loss narrowed substantially to RM32mil from RM147.1mil a year earlier, helped by improved operating margins and tighter cost controls.
The improvement was more evident when looking solely at continuing operations. Revenue rose 5% y-o-y to RM518.2mil in 1H26, while core earnings increased 18% to RM115.8mil, supported by stronger downstream steel contributions and better operating margins.
TA Research said that Ann Joo’s results were within expectations and revised its earnings forecasts to reflect only the downstream business, projecting core earnings of RM129.3mil, RM135.4mil and RM146.3mil for FY26, FY27 and FY28 respectively.
For the second quarter of 2026 (2Q26), the company’s continuing-operations revenue was RM253.4mil, down 4.3% quarter-on-quarter, but up 2.9% y-o-y.
The company’s core profit stood at RM54.8mil, representing a 10.2% decline from the preceding quarter, but a 49.8% increase from 2Q25.
The research house raised its target price on the company to 59 sen from 54 sen, based on a lower target price-to-book multiple of 0.37 times compared with 0.5 times previously.
Nevertheless, it maintained a “hold” recommendation, saying the reduced valuation multiple was warranted by the increasingly difficult steel-sector environment.
TA Research said Ann Joo’s proposed upstream disposal should allow investors to focus more clearly on its downstream operations, but continued pricing pressure means a more cautious valuation remains appropriate.
