The building material sector players will benefit from stable Average Selling Prices (ASPs) and more manageable costs that can lead to margin normalisation, according to Kenanga Research.
Analysts have reiterated their OVERWEIGHT rating on the sector despite weak demand visibility.
As reported, metal prices should stay firm supported by ongoing supply consolidation which should in turn stabilise steel prices and reduce earnings volatility for steel product manufacturers.
Locally, the demand for ferrous metals and value-added products are well driven by the roll-out of major local infrastructure projects.
Significant growth prospects are anticipated for water pipe manufacturers on the back of revival of water infrastructure projects.
Positive developments include three water pipeline projects by PBA Holdings worth RM189m over the next two years, alongside Sarawak’s allocation of RM1.08b for water pipe upgrades.
Analysts’ top sector picks are Press Metal Aluminium Holdings Berhad with a target price of RM5.80, and Engtex Group Berhad with a target price of RM0.81.
As at 5pm Tuesday, Press Metal’s stock closed at RM5.05 whereas Engtex’s counter closed at RM0.67. (Stock updates from www.klsescreener.com).
Press Metal is a globally-integrated aluminium producer with the largest presence in Southeast Asia.
Engtex’s operations cover wholesale and distribution of pipes, valves, fittings, plumbing materials, steel products, general hardware and construction materials in Malaysia.
Sumber: Business Today
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