Hiap Teck’s sequential performance to be hindered

HLIB Research lowered its core net profit assumptions for Hiap Teck Venture for the financial year ending July 2025 (FY25) and FY26 by 19.2% and 6.8%.

PETALING JAYA: Hiap Teck Venture Bhd’s trading and downstream segments are likely to be affected in the third quarter ending April 30 for financial year 2025 (3Q25) by uncertainties resulting from recent policy developments, according to Hong Leong Investment Bank (HLIB) Research.

These could disrupt international trade dynamics resulting in increased market volatility, thereby hindering sequential performance improvements, said HLIB Research.

However, the commissioning of the group’s part-subsidiary Eastern Steel Sdn Bhd’s hot rolled coil (HRC) plant has been smooth and the unit cash conversion cost will be brought down significantly by approximately 30%, upon hitting optimum capacity utilisation, targeted by June 2025.

HLIB Research lowered its core net profit assumptions for Hiap Teck Venture for the financial year ending July 2025 (FY25) and FY26 by 19.2% and 6.8%, mainly to account for lower earnings before interest and tax margin assumptions for the group’s trading and downstream segments.

This more than offset contribution from the newly commissioned HRC plant.

After revising for earnings and rolling forward its valuation base year from FY25 to mid-FY25 to FY26, the research house is maintaining its “buy” rating on the stock with a lower target price of 38 sen a share.

The adjusted target price is based on seven times revised mid FY25-FY26 core earnings per share of 5.4 sen. Hiap Teck’s share price closed at 25 sen yesterday, down 15 sen.

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HLIB Research said the sequential performance improvement for Hiap Teck Venture at both trading and downstream segments in 3Q25 are supported by lower input costs, seasonally stronger demand, arising from the absence of festive holidays, it said.

This also includes sustained earnings improvement at the scaffolding business as evidenced by the recent award of large scale infrastructure projects, including the Penang light rail transit (LRT) Segment 1 and the LRT3 reinstatement.