KUALA LUMPUR (Sept 7): Kenanga Research has maintained its “overweight” rating on the building materials sector, mainly anchored by its "outperform" call on Press Metal Aluminium Holdings Bhd, while long steel producer Ann Joo Resources Bhd and cable support system manufacturer United U-Li Corp Bhd will continue to be weighed down by high-cost inventories.
In a note on Wednesday (Sept 7), the research house said the sector’s 2QCY22 earnings performance (against expectations) did not show improvement against the previous quarter on falling average selling prices (ASPs).
“While aluminium prices may continue to ease in 2HFY22, the downside will be capped given the supply constraints in the global market as European producers cut production amid skyrocketing gas prices.
“The same cannot be said for steel prices due to the slowdown in China on intermittent lockdowns arising from Beijing’s strict zero-Covid policy and the property debt crisis.
“This means steel product producers like Ann Joo and United U-Li will continue to face margin pressures,” it said.