Comprehensive Analysis of Malaysian Equities Broker Name: UOB Kay Hian Date of Report: January 20, 2025 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 1. Gamuda Berhad Recommendation: Buy Current Share Price: RM 4.24 Target Price: RM 5.55 Upside Potential: 30.9% Gamuda is a top rebound candidate, with its share price falling 20% from this year’s high. The company’s earnings growth trajectory is independent of the AI/DC narrative, which makes it an attractive investment. Currently, 7% of Gamuda’s order book and 5% of its FY25 profit before tax (PBT) are DC-related, ensuring limited exposure to risks stemming from AI regulation uncertainties. Its PE ratio of 16.7x for 2025 is coupled with a projected return on equity (ROE) of 9.4%. 2. Inari Amertron Recommendation: Buy Current Share Price: RM 2.73 Target Price: RM 3.40 Upside Potential: 24.5% Inari Amertron remains resilient, with its business largely unaffected by the AI/DC narrative. The company is expected to record steady net profit growth from RM 320 million in 2023 to RM 332 million in 2025. Despite a high PE ratio of 31.2x for 2025, its strong ROE of 12.7% and dividend yield of 3.7% make it an appealing investment. 3. IJM Corporation Recommendation: Buy Current Share Price: RM 2.60 Target Price: RM 3.25 Upside Potential: 25.0% IJM Corporation’s earnings are only moderately tied to the AI/DC space, with 5% of its current order book and 2025 PBT linked to data centers. The company’s focus on diversified projects ensures a stable growth trajectory, with net profit expected to rise to RM 565 million by 2025. Its PE ratio is projected at 16.8x for 2025, with a dividend yield of 3%. 4. Eco World Development (ECW) Recommendation: Buy Current Share Price: RM 1.81 Target Price: RM 2.37 Upside Potential: 30.9% Eco World Development is a key rebound play, with its share price declining 15.8% from this year’s high. Land sales to Microsoft are expected to contribute significantly to revenue by 2QFY25. The company’s valuation reflects a PE of 12.5x for 2025, and its ROE is forecasted at 8.2%, making it a compelling investment opportunity. 5. Mah Sing Group Recommendation: Buy Current Share Price: RM 1.40 Target Price: RM 2.29 Upside Potential: 63.6% Mah Sing Group stands out with the highest upside potential. Despite a 25.1% drop from this year’s high, the company’s robust land sales revenue, coupled with joint ventures, is expected to significantly boost its net profit in 2025. Its PE ratio for 2025 is forecasted at 10.4x, with a strong dividend yield of 4.2% and ROE of 8.8%. 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.
1. Gamuda Berhad Recommendation: Buy Current Share Price: RM 4.24 Target Price: RM 5.55 Upside Potential: 30.9% Gamuda is a top rebound candidate, with its share price falling 20% from this year’s high. The company’s earnings growth trajectory is independent of the AI/DC narrative, which makes it an attractive investment. Currently, 7% of Gamuda’s order book and 5% of its FY25 profit before tax (PBT) are DC-related, ensuring limited exposure to risks stemming from AI regulation uncertainties. Its PE ratio of 16.7x for 2025 is coupled with a projected return on equity (ROE) of 9.4%.
2. Inari Amertron Recommendation: Buy Current Share Price: RM 2.73 Target Price: RM 3.40 Upside Potential: 24.5% Inari Amertron remains resilient, with its business largely unaffected by the AI/DC narrative. The company is expected to record steady net profit growth from RM 320 million in 2023 to RM 332 million in 2025. Despite a high PE ratio of 31.2x for 2025, its strong ROE of 12.7% and dividend yield of 3.7% make it an appealing investment.
3. IJM Corporation Recommendation: Buy Current Share Price: RM 2.60 Target Price: RM 3.25 Upside Potential: 25.0% IJM Corporation’s earnings are only moderately tied to the AI/DC space, with 5% of its current order book and 2025 PBT linked to data centers. The company’s focus on diversified projects ensures a stable growth trajectory, with net profit expected to rise to RM 565 million by 2025. Its PE ratio is projected at 16.8x for 2025, with a dividend yield of 3%.
4. Eco World Development (ECW) Recommendation: Buy Current Share Price: RM 1.81 Target Price: RM 2.37 Upside Potential: 30.9% Eco World Development is a key rebound play, with its share price declining 15.8% from this year’s high. Land sales to Microsoft are expected to contribute significantly to revenue by 2QFY25. The company’s valuation reflects a PE of 12.5x for 2025, and its ROE is forecasted at 8.2%, making it a compelling investment opportunity.
5. Mah Sing Group Recommendation: Buy Current Share Price: RM 1.40 Target Price: RM 2.29 Upside Potential: 63.6% Mah Sing Group stands out with the highest upside potential. Despite a 25.1% drop from this year’s high, the company’s robust land sales revenue, coupled with joint ventures, is expected to significantly boost its net profit in 2025. Its PE ratio for 2025 is forecasted at 10.4x, with a strong dividend yield of 4.2% and ROE of 8.8%.
