KUALA LUMPUR (Feb 19): Shares of Seng Fong Holdings Bhd (KL:SENFONG) fell nearly 10% on Wednesday in relatively active trade after a sharp decline in the natural rubber processing company’s quarterly results.

Seng Fong fell as much as nine sen or 9.74% to an intraday low of 86 sen. The stock closed at 88 sen, giving the company a market capitalisation of RM635.06 million. Some 2.98 million shares changed hands, more than six times the average trading volume in the past three months.

The results also disappointed Apex Securities, the sole research house covering the stock. Core net profit for the first six months accounted for only a little over one-third of Apex Securities’ full-year forecast, prompting the research house to slash its estimates and target price.

The shortfall was largely due to lower production and slimmer gross profit margin affected by “timing mismatches” between materials purchasing and delivery, the research house noted, as it kept its “buy” call on the stock.

“We note that fluctuating rubber raw material prices may temporarily affect margins,” Apex Securities said. “However, prices have [been] relatively stable in recent months, suggesting an expected rebound in upcoming quarterly earnings”

Shares of Seng Fong have declined more than 10% since the start of 2025 as global prices of natural rubber, its main raw material, rose on the back of supply chain disruptions and adverse weather in key production countries.

Apex Securities now expects Seng Fong to record a lower net profit of RM55.8 million for the year ending June 2025 and slashed its target price to RM1.41 from RM1.90 previously.

The research house also moderated its valuation expectations as “we believe that the current weak market sentiment, fluctuating raw material prices, and the ongoing automation machine installation will result in short-term uncertainty to profitability margins.”

Investors should nevertheless still buy the stock and accumulate on weakness, Apex Securities said.

“Our confidence in the group’s long-term prospects remains underpinned by capacity expansion, and we view the stock as a defensive play during current weak market sentiment due to its stable quarterly dividend distribution, potentially offering a yield of approximately 5%,” it added.

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