PETALING JAYA: Despite PGF Capital Bhd
facing near-term earnings headwinds from rising energy costs and delays to its new Kulim glass wool plant and Tanjung Malim housing projects, TA Research expects stronger contributions in the longer term.
According to the research firm, the increase in the automatic fuel adjustment rate, which raised electricity costs from May to August, is likely to weigh on PGF’s profit margins.
The group is also in discussions with buyers over an anticipated sharp increase in gas prices in the fourth quarter of 2026 (4Q26), following a more than 40% rise in the Malaysia reference price for liquefied natural gas.
“The discussions remain ongoing as customers assess the cost competitiveness of imports from regional suppliers.”
However, it expects PGF to partially pass on the higher costs to customers, as rising energy expenses are also affecting glass wool manufacturers across the region.
The research house lowered its financial year 2027 (FY27) glass wool capacity utilisation assumption to 40% from 50% previously, assuming full commercialisation of the new plant will only begin in FY28.
Although construction of the new plant in Kulim East has been completed, production is expected to start only in November 2026 as utility companies require more time to complete the electricity and gas installations.
“The delay has forced PGF to turn down export orders intended for this new facility,” TA Research said.
The proposed increase in the minimum wage to RM2,000 from RM1,700 could add to cost pressures, although the research house described the impact as mild, given that about 150 of PGF’s workers currently are minimum wage earners.
“The impact should be manageable as the estimated annual staff cost of RM540,000 represents only about 0.5% of cost of goods sold, even if the group is unable to pass it on to customers,” it added.
Meanwhile, PGF’s Tanjung Malim housing projects remain held back by unresolved water supply issues, which must be addressed before the group can submit its Kebenaran Merancang (planning permission) application.
TA Research said PGF had been working to resolve the issue raised by Lembaga Air Perak, although the approval process had taken longer than expected.
It expects a resolution eventually, as the issue also affects other property developers in Tanjung Malim.
TA Research lowered its FY27 to FY29 earnings projections by 1.4% to 4.5%, respectively, factoring in lower glass wool capacity utilisation and slower progress billings for the Tanjung Malim development due to delays in the project launch.
It also trimmed the sum-of-parts valuation to RM2.70 from RM2.73 previously, maintaining a “buy” call.
Despite the near-term setbacks, the research house sees potential for industrial park development in Tanjung Malim to support residential property demand.
Recently, the Perak Mentri Besar and Setia Awan directors launched the 447-acre Tanjong Malim Hi-Tech Park, which has a potential gross development value of RM1.4bil.
Phase one covers 104 acres and reportedly achieved a 50% take-up rate, with confirmed investors including Ningbo Fresh Technology and Sheentech Automotive System, TA Research said.
The industrial land was reportedly priced at RM55 per sq ft, supporting the research house’s assumption of a 40% margin for PGF’s housing project, underpinned by its low land cost of RM3 per sq ft.
Budget 2027 could further support demand by strengthening the development of the Automotive Hi-Tech Valley in Tanjung Malim as a national automotive hub.
The budget proposes tax deductions of up to RM5mil for wholly Malaysian-owned automotive vendors that relocate their operations to the area.
TA Research expects a stronger presence of automotive vendors to support housing demand in the locality.
Separately, the research house expects PGF’s export growth in the second quarter of FY27 to remain resilient, in line with Malaysia’s strong trade performance in August 2026.
PGF is expected to release its 2Q27 results by the end of this month, with TA Research projecting quarterly core profit of RM6mil to RM9mil.
This would bring its first half of FY27 core profit to around RM13.6mil to RM16.6mil, equivalent to 60% to 74% of the research house’s revised full-year earnings forecast.
