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Malaysia PM Anwar Advised to Soften Stance on Israel-Hamas War for Trump - Bloomberg
https://www.bloomberg.com/news/articles/2025-02-19/malaysia-s-anwar-told-to-soften-israel-hamas-rhetoric-for-trump
Good morning 🌅
Rubber Glove Sector 🧤Thoughts post Hartalega’s warning of a storm 🌧️
Summary of the glove sector
1) Recovery is happening but slower-than-expected, 🔻
2) Market was too bullish on earnings prospects, 🔻
3) More intense pricing competition 🔻
4) Lacking near term catalyst in the sector 🔻
5) Recent share price correction in the sector have largely reflected that. 🔺
Key highlights📑
📌 In our view, Harta’s 3QFY3/25 briefing provide investors with ‘a dose of reality’ in regards to global glove demand and ASPs.
📌 While investors had earlier anticipated weak sales volume in 1QCY25, the negative surprise was that Harta shared that it does not expect sales volume in upcoming quarters (post 1QCY25) to pick-up significantly. This is assuming that all frontloaded purchases have been fully depleted by April 25 – May 25.
📌 On that note, Harta shared that it plans to ‘optimise’ its workforce to be able to cater up to 6.9bn pieces on a quarterly basis (3QFY25: 7.6bn). While it aims to utilises local workers on a part time basis to cater for any surge in glove demand, we believe this is a clear indication that it does not expect upcoming demand to be consistently robust.
📌 In our view, this can be attributed to higher competition in the non-US market as more China glove makers aggressively lower ASPs to grab market share in these areas. As a result, non-Chinese glove makers are also being competitive in US market to cater to a more premium market, leading to pressure on glove ASPs for US market.
📌 Bear in mind that we believe that Harta is the glove maker with the highest exposure to the US market (62.9% of Harta’s 3QFY25 revenue were derived from North America market). On that note, I believe that it begs the question that if Harta is expecting pricing pressure in US markets, what will be the impact for other glove makers?
📌 At this juncture, we are of the view that the competition will be stiffer for other glove makers that have a smaller exposure to US market and are more reliant to sales from a more competitive non-US market.
Action points
📌 As share price of glove makers have retraced substantially (TOPG: -13.8%. Harta: -23.2%; SUCB: -8%; Kossan: -16.2%) yesterday in reaction to the updates from Harta’s briefing , we believe that glove makers will likely be trading at range bound.
📌 This is given the lack of fresh positive catalysts in the near term. This is coupled with uncertainties looming on the operating environment especially in terms of policy changes of the US in terms of tariffs.
📌At current share price levels, only SUCB is trading below its NTA at 0.6x P/BV. In terms of trailing P/BV value, the highest in the sector is Harta (2.1x P/BV), followed by TOPG (1.7x P/BV) and Kossan (1.3x P/BV).
📌Not accounting for any short-term weakness in share price, we believe that share price of glove makers should hover around these levels. Considering the fact that the higher US tariffs is overall still positive on the Malaysian glove sector, we believe that share prices of glove companies should be higher than the levels prior to May-24 (first announcement of US tariffs on China imported gloves)
📌Note that, share price of Harta and Kossan have dipped below those levels while ,share prices of TOPG (+6.7%) and SUCB (+20%; boosted by US payment adjustment scheme) are still trading above the May-24 levels.
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Intel has biggest rally since 2020 on breakup speculation
https://theedgemalaysia.com/node/744957
S&P 500 hits all-time high in late-day advance
https://theedgemalaysia.com/node/744944
Notion Vtec (RM0.93) - 1QFY25 results well below expectations. Downgrade to Hold
1QFY25 core PATAMI of RM6.9m (-60.5% QoQ, -11.6% YoY) missed both Sam Jun Kit's and consensus' expectations, accounting for merely 11% of the full-year projections.
Shortfall was due to weaker-than-expected sales.
1Q25 core PAT was adjusted for one-off exceptional items, which included unrealised forex gain of RM11.8m, fair value changes on investments of RM868k, realised forex loss of RM5.1m, and loss on the disposal of PPE amounting to RM10k.
Dividend None declared (vs 1Q24: None)
QoQ
Top-line declined 14.4% on the back of lower sales of HDD (-19.7%) and EMS (-18.4%), while automative (+0.9%) and camera/industrial (-0.1%) segments were flat.
Weaker performance of the two main earnings anchors were due to seasonality.
As a result, core PATAMI declined by 60.5%.
YoY
Top-line revenue increased 34.3%, with notable growth in HDD (+46.7%), EMS (+80.6%), and Camera/Industrial (+69%) segments, while the Automotive segment underperformed with a decline of 28.6%.
Strong performance in HDD was primarily driven by increased spacer sales, fuelled by pent-up demand in the HDD market.
EMS growth was mainly attributed to higher orders from Customer D.
Despite higher revenue, core GP margin was lower (-4.8 ppt) due to stronger ringgit (1Q24 average: 4.72 vs 1Q25:4.45). In turn, core PATAMI declined by 11.6%.
Outlook
Sam expects weak performance to persist in the upcoming quarters, as this period typically marred by seasonally lower sales in the technology sector.
Supporting this view, Western Digital and Seagate have both recently guided for slower HDD shipments during the period due to weaker demand from cloud customers.
In the EMS segment, Sam expects some initial cost pressure as the group invests in expanding its capacity for the motor casing business.
Additionally, margins are expected to be impacted by the potential electricity price hike in 2H25 and a stronger ringgit, which our Economist projects to average at RM4.35/USD this year.
In any case, if the motor casing business is successful in its ramp-up to onboard new customers and more business flow from existing auto clients, these could provide some reprieve to bottom-line.
Forecasts
Given earnings miss, Sam lowers FY25/26/27f earnings by -34%/-31%/-25%, respectively.
Core net EPS (sen) :
FY24 a : 10.9
FY25 e : 7.6
FY26 f : 8.9
FY27 f : 10.1
Sam downgrades stock call to Hold (fr Buy) with TP of RM0.94 (RM2.98 previously) based on 13x FY25 FD PER (from 25x) to reflect the disappointment in earnings outlook and guidance.
Sam reckons near-term earnings outlook remains uncertain, with margins likely to be compressed by a stronger ringgit and rising costs, including electricity and labour.
HG's comments
Sam's concluding remarks and sharp downgrade in TP suggest a Sell call rather than Hold call.
Moomoo Breakfast US :US Morning News Call | Musk Launches Grok-3 AI Chatbot, Competing with OpenAI a...
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STI closes 0.53% higher at new all-time high after Budget 2025
https://www.theedgesingapore.com/news/singapore-economy/sti-closes-053-higher-new-all-time-high-after-budget-2025
MyEG optimistic about long-term growth, plans AI and blockchain expansion globally | The Star
https://www.thestar.com.my/business/business-news/2025/02/18/myeg-optimistic-about-long-term-growth-plans-ai-and-blockchain-expansion-globally#:~:text=Revenue%20for%20the%20quarter%20jumped,the%20sale%20of%20Zetrix%20tokens.
