PETALING JAYA: The valuations of several basic materials-related stocks appear to be bottoming out and trading below their mean levels, making them an attractive re-entry point for investors, says RHB Research.
The research house has maintained an “overweight” call on the sector.
RHB Research continues to favour Press Metal
Aluminium Holdings Bhd – driven by the still-elevated aluminium prices – and TMK Chemical Bhd’s robust earnings growth, led by the proposed acquisition of Chemical Company of Malaysia Bhd (CCM).
On Press Metal, RHB Research said in a note to clients that the current price discount is appealing, given the still-elevated aluminium prices that are expected to remain high in financial year 2026 (FY26) to FY27.
“We believe there is more upside to the stock at this juncture, in addition to its robust earnings growth forecast in FY26 (profit after tax and minority interest margin: 16.4%).
“Additionally, as we believe aluminium prices are heading towards a new normal – above US$3,000 per tonne – we think this warrants a potential re-rating for the stock, pushing the valuation higher than the historical mean,” it said.
RHB Research noted that the near-term tightness remains intact.
“However, we have to monitor the medium-term balance as the Middle East production recovers and additional capacity from Indonesia and China comes onstream,” it said.
The research house expects aluminium prices to remain elevated throughout the fourth quarter of 2026 (4Q26) and into 1Q27 supported by low inventories, constrained Chinese capacity and resilient electrification demand, before moderating as incremental supply comes onstream.
As for TMK Chemical, the research house noted that its share price has retreated from a high of RM3.14, likely due to concerns over higher-than-expected share dilution from the CCM acquisition.
RHB Research said the recent weakness is an attractive re-entry point.
“We think the current valuation does not fully reflect TMK Chemical’s stronger earnings profile following the CCM acquisition, which would position it as Malaysia’s largest chlor-alkali producer, and the structural growth opportunity from Lynas’ expansion,” it added.
Hence, the research house believes TMK Chemical warrants a re-rating, given the robust earnings growth and continued improvement in its margins.
Meanwhile, based on a recent conversation with representatives from Malayan Cement Bhd, RHB Research said it saw stable average selling prices in FY26.
RHB Research expects these to remain largely similar year-on-year in FY27, as management is keeping its RM20 per tonne rebate unchanged for now.
“Based on our estimates, every US$10 per tonne increase in coal prices could reduce earnings by 5% to 6% per annum and lower the earnings before interest and taxes margin by 130 basis points, assuming minimal cost pass-throughs.
RHB Research will continue to monitor the increase in Indonesian coal prices as it believes Malayan Cement’s recent share price weakness has largely reflected the cost pressures.
The stock has declined by 38% from its peak of RM8.70, the research house noted.
“We view the current level as appealing, given Malayan Cement’s position as Malaysia’s largest cement producer, which provides superior economies of scale and cost competitiveness versus smaller players,” it said.
RHB Research noted that its earnings estimates on Malayan Cement are 3% to 9% below the consensus figure, providing some buffer should coal prices remain elevated.
The research house’s top picks under the basic materials sector include Press Metal with a target price of RM9.80, and TMK Chemical at RM3.60.
