Categories: MarketsNews

BIMB Securities downgraded metal stocks PMB Tech, Ann Joo downgraded to ‘Sell’

This is following both firms are facing a challenging biz environment in the near term stemming from persistent global headwinds

METAL stocks PMB Technologies Bhd and Ann Joo Resources Bhd have been downgraded to ‘Sell’ at BIMB Securities as they face a challenging business environment in the near term stemming from persistent global headwinds.

In a research note released today, the equity research house has slashed PMB Tech’s 52-week target price (TP) to RM1.11, down 62% from its earlier TP of RM3.63, as it rolls its valuation to FY24, based on price-earnings ratio (PER) of 18 times and earnings per share of 6.18 sen. The counter was trading at RM3.82 at 12.15pm today.

Commenting on its outlook, BIBM Securities said with the global silicon metal price expected to decline further in the second quarter of 2023, it anticipated a normalisation of earnings similar to the period before the production cut in China during mid-2021.

“It is noteworthy that supply chain disruptions have started to alleviate, leading to recoveries in specific sectors, including electric vehicles, solar energy, automotive and construction, as a response to the gradual reopening of economies.

“However, we maintain a cautious stance on the global economic outlook due to ongoing inflationary pressures and increasingly stringent financial conditions,” it said.

For Ann Joo, BIMB Securities has a TP of 84 sen, down from 96 sen previously. The stock was trading at RM1.19 as at 12.15pm today.

The research house said it has anticipated the bearish sentiment to continue lingering in the steel market for the remaining FY23 due to dull domestic demand, a less-than-favourable supply-demand dynamics from China, as well as challenging global economic conditions.

It said higher operating costs, such as electricity tariffs to continue to exert pressure on margins despite marginal decline in raw material prices like coking coal, scrap and iron.

“The absence of large-scale domestic infrastructure projects is also a bane. This will be added by China increasing its supply, leading to a glut condition and therefore imbalance in supply-demand dynamics. All in all, we expect a tough time to persist for Ann Joo given the less-than-favourable operating conditions,” it said.

Sector-wide, BIMB Securities said six industrial stocks under its coverage were below forecast, while the remaining two exhibited results in line with and surpassing its expectations during the quarter under review.

“We view a challenging business environment in the near term stemming from persistent global headwinds that show no signs of easing, potentially affecting weak demand. However, we also recognise that commendable strategic management approaches will help these companies sustain their growth despite the challenging circumstances,” it said.

It is maintaining a ‘Neutral’ stance on the industrial sector as it anticipated the presence of persistent downside risks despite the promising long-term prospects for businesses in this sector.

It has a ‘Buy’ call for Press Metal Aluminium Holdings Bhd (RM5.43), OM Holdings Ltd (RM2.11), Scientex Bhd (RM4) and Wellcall Holdings Bhd (RM1.74) while a ‘Hold’ call for Hextar Global Bhd (69 sen) and Kumpulan Perangsang Selangor (63 sen). — TMR / pic TMR FILE

Zukri

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