Introduction to Malaysia’s Equity Landscape

The Malaysian equity market has experienced a challenging start to the year, with the FBMKLCI recording a significant 5.3% year-to-date (YTD) decline. While this correction was anticipated, the magnitude of the drop was more severe than expected. However, UOB Kay Hian identifies emerging trading opportunities as the FBMKLCI valuation has fallen below its assessed trough range. This report highlights key rebound plays and deep dives into specific companies poised for recovery.

Market Overview: Factors Influencing Declines

The FBMKLCI’s price-to-earnings (PE) ratio has dropped to an 11-month low of 13.2x, marking -2.25 standard deviations (SD) below the 10-year mean. The Malaysian market has underperformed its ASEAN peers due to several global factors, including:

• The “Trump effect” with cautious investor sentiment ahead of the US president-elect’s policies.
• Rising US treasury yields, which recently breached the 4.8% mark.
• The Biden administration’s AI chip export restriction proposal, which has created uncertainties in the tech and data center (DC) sectors.

Despite these challenges, investor sentiment is expected to improve as markets price in pragmatic US trade policies, potential easing of treasury yields, and the possibility of resolutions to global conflicts like the Russia-Ukraine war.

Top Rebound Picks: Detailed Company Analysis

Other Notable Recommendations

• MY E.G. Services: BUY with strong results expected in the next earnings release.
• RGB International: BUY with significant growth potential, especially after a sharp sell-down.
• VS Industry: BUY with a forecasted 2025 PE ratio of 12.9x and a ROE of 9.3%.

Companies with AI/DC Exposure

Some companies under coverage have significant exposure to AI and data center-related revenues, which could be impacted by regulatory uncertainties:

• NationGate Holdings: 78-80% of 2024-25 revenue tied to AI GPU/CPU services, with 50% of clients being non-US entities.
• Sunway Construction: 40% of 2025 PBT linked to data center-related contracts.
• Eco World: Land sales to Microsoft to contribute 15% of 2025 revenue.
• Mah Sing: Land sales expected to contribute 14% of 2025 revenue.
• IJM Corporation: Limited exposure at 5% of 2025 PBT.
• Gamuda: Limited exposure at 5% of FY25 PBT.

Conclusion

While the Malaysian equity market has faced significant challenges, the current correction presents substantial opportunities for investors. UOB Kay Hian’s top rebound picks—Gamuda, Inari Amertron, IJM Corporation, Eco World Development, and Mah Sing—offer attractive risk-reward profiles and robust growth potential. Investors are encouraged to capitalize on these opportunities while being mindful of the regulatory landscape.