Comprehensive Analysis of Malaysian Stock Market Companies

Date: Monday, 25 November 2024

Broker: UOB Kay Hian Securities (M) Sdn. Bhd.

Bumi Armada Berhad: Navigating Towards New Highs

Bumi Armada Berhad, a prominent FPSO and offshore marine services owner, has once again delivered an impressive performance in 3Q24. The company’s profit surprised positively, driven by better-than-expected associate income despite FPSO Armada Sterling V incurring losses. The aggressive depreciation policy did not deter Bumi Armada from upgrading its forecasts by 13-37%, signaling a robust outlook.

The market is expected to look beyond legacy issues such as the incoming Kraken impairment in 4Q24. Sentiment remains buoyed by merger rumors and potential contract wins outside the FPSO space. The firm’s revenue for 3Q24 stood at RM551.9 million, showcasing a year-on-year growth of 5.2%. The EBITDA for the quarter was RM356 million, aligning with the quarterly average.

The firm order book saw adjustments from RM10.1 billion to RM9.5 billion quarter-on-quarter, reflecting strategic moves in the FPSO space. Additionally, Bumi Armada’s environmental, social, and governance (ESG) updates highlight a commitment to carbon reduction and safety, with improved diversity and charitable initiatives.

Recommendation:

UOB Kay Hian has upgraded Bumi Armada to a “BUY” with a target price of RM0.65, citing consistent positive earnings surprises and the tail-end of legacy impairments.

Affin Bank: Riding the Wave of Provision Writebacks

Affin Bank’s 3Q24 results reveal a net profit of RM146 million, marking a 45% year-on-year increase. This growth is underpinned by a net provision writeback of RM69 million. However, without this writeback, earnings would have contracted due to negative operating jaws. The 3Q24 earnings rose by 23% quarter-on-quarter, driven by a 24% increase in revenue and a significant rise in provision writebacks.

The bank’s gross impaired loans ratio fell to 1.74%, supported by write-offs and recoveries. However, net interest margin (NIM) pressure remains a concern, declining to 1.31% in 3Q24. Affin Bank’s current NIM trend trails behind its full-year target of 1.60%.

Recommendation:

UOB Kay Hian maintains a “SELL” recommendation with a target price of RM2.39, citing concerns over valuation and the Sarawak State Government’s proposal to become a major shareholder being largely priced in.

SFP Tech Holdings: On Track for a Record Year

SFP Tech Holdings is poised for a record year, having reported a core net profit of RM15 million for 3Q24. The company’s strategic shift towards high-value-add equipment modules and complex piece part fabrication has yielded positive results. The 9M24 revenue improved by 16% year-on-year, driven by stronger sales in China related to the FEOL semiconductor segment.

SFP Tech’s strategy involves integrating services by securing full assembly businesses, supported by a healthy order book of RM94 million as of mid-August 2024. The group aims to capture new opportunities in the semiconductor wafer fabrication space through its subsidiary, SFP Integration.

Recommendation:

UOB Kay Hian recommends “BUY” with a target price of RM0.98, based on a 35.0x 2025F PE and the promising growth trajectory in the semiconductor production equipment segment.

Traders’ Corner: Focus Point Holdings and Sealink International

Focus Point Holdings: The stock is recommended as a “Technical BUY” on breakout, with a potential return of 20.6%. The share price has been consolidating around RM0.765, with a target price of RM0.995.

Sealink International: Also recommended as a “Technical BUY,” with a potential return of 29.2%. The stock has seen positive momentum with a target price of RM0.42.