This article first appeared in Capital, The Edge Malaysia Weekly on September 29, 2025 - October 5, 2025

NEUTRAL

CIMB SECURITIES (SEPT 24): According to the Malaysia Retail Industry Report (September 2025) prepared by Retail Group Malaysia (RGM), national retail sales contracted by 3% year on year (y-o-y) in 2Q25, underperforming earlier projections of 1% growth. While RGM had already anticipated a y-o-y decline in 2Q25 owing to the earlier timing of Hari Raya festivities, the weakness was sharper than expected. This was attributed to: (i) higher cost of living and weaker household purchasing power; (ii) elevated retail prices of many non-essential goods and services; and (iii) more cautious spending behaviour among urban consumers. RGM has revised downwards its 2025 retail sales growth rate to 2.7% from 3.1% to reflect the weaker-than-expected 2Q25 retail sales.

The steepest declines came from department stores (-16.5% y-o-y), personal care (-11.4% y-o-y) and fashion and accessories (-8% y-o-y), reflecting softer discretionary demand. In contrast, mini-markets, convenience stores and co-operatives were among the few segments that posted positive y-o-y growth, alongside speciality retail stores (+5% y-o-y). We attribute this divergence of consumer priorities to downtrading towards daily necessities, supported in part by government cash handouts under the MySara programme. Companies under our coverage that are part of the MySara programme are: (i) 99 Speed Mart Retail Holdings Bhd (KL:99SMART) (“buy”; TP: RM2.80); (ii) Mr D.I.Y. Group (M) Bhd (KL:MRDIY) (“buy”; TP: RM2.15); and (iii) MyNews Holdings Bhd (KL:MYNEWS) (“buy”; TP: 73 sen).

RGM projects retail sales growth of 2.6% y-o-y for 3Q25F, although performance is expected to be uneven across the nine retail subsectors. Four subsectors are forecast to record positive y-o-y growth, while five are expected to contract. Growth will be led by mini-markets, convenience stores and co-operatives (+9.3% y-o-y), supported by consumer downtrading trends and government cash handouts. The fashion and fashion accessories segment (+5.7% y-o-y) is also expected to expand. Beyond 3Q25F, RGM is now projecting Malaysia’s retail sector to grow by 3.5% y-o-y in 4Q25F.

We reiterate our “neutral” call on the consumer sector. The sector is trading at 27.4 times one-year forward PER, close to 0.25 standard deviation below its five-year mean (29.2 times). We continue to advocate positioning towards defensive, mass-market players that benefit from downtrading and resilient demand.

Target price: RM16.74 REDUCE

CGS INTERNATIONAL (SEPT 24): The government announced on Sept 22 that each Malaysian citizen aged 16 and above with a valid driving licence is eligible to purchase up to 300L per month of RON95 at a subsidised price of RM1.99 per litre from Sept 30, 2025, regardless of income level. The monthly quota of 300L per person is generous, in our view, and most Malaysians will not exceed that quota. As a result, we do not expect fuel consumption by the average Malaysian to be negatively impacted by the introduction of the volume quota.

We reiterate “reduce” because the government’s crackdown on unauthorised purchases of subsidised diesel in Sabah and Sarawak caused Petronas Dagangan’s (KL:PETDAG) sales volumes to decline by 2% y-o-y in 1Q25 and by 1% y-o-y in 2Q25, which puts our assumption of flat volumes in FY25-FY27F at risk. A potential derating catalyst is even more downward pressure on sales volumes from 4Q25F onwards upon the start of NRIC checks on purchases of subsidised RON95. Upside risks include the potential for stronger-than-expected jet fuel sales during the Visit Malaysia Year 2026 tourism promotion campaign, or widespread abuse of citizen NRICs by non-entitled purchasers to buy subsidised RON95. 

Target price: RM2.60 BUY

PHILLIP CAPITAL (SEPT 24): We recently organised a site visit to Binastra’s (KL:BNASTRA) Johor office and EXSIM Group’s Johor sales gallery, which reaffirmed our confidence in the visibility of its key clients’ project pipeline in Johor. To better position itself for the potential RM3.3 billion pipeline, the group has set up a new office and deployed 30% of its workforce to Johor. To date, RM600 million worth of contracts have been secured, with the remaining RM2.7 billion expected to be progressively rolled out over FY26 to FY27E. EXSIM has three upcoming developments in Johor Bahru with a combined gross development value (GDV) of RM8.3 billion.

Binastra is well positioned to benefit from Maxim Global Bhd’s (KL:MAXIM) upcoming project, which is slated for soft launch following the recent completion of its showroom and expected to translate into a RM800 million main construction package by end-CY25. The group remains active in tendering for data centre opportunities, focusing on smaller-scale DC projects valued at RM200 million to RM500 million. Management has reiterated its internal order book replenishment target of RM4 billion to RM4.5 billion for FY26, with RM1.6 billion secured year to date.

Target price: RM2.40 HOLD

AMINVESTMENT BANK (SEPT 23): We view Solarvest’s (KL:SLVEST) collaboration with Brookfield CTF Asia Holdings (BF) of Canada positively as it would allow Solarvest to own more renewable energy (RE) assets without stretching its net gearing. With a foreign partner, this also means Solarvest would be able to bid for larger large-scale solar (LSS) packages that require at least 51% Malaysian ownership. The issue is the identification of projects that would be injected into the 51:49 special purpose vehicle or completely owned by Solarvest.

Assuming a value of RM3.5 million/mw and based on an equity shareholding of 51%, the potential engineering, procurement, construction and commissioning (EPCC) order book from the 1,500mwp would be about RM2.7 billion in total. Assuming this is spread over five years, the order book per year would be roughly RM536 million. Based on an EBIT margin of 10% and a progress billing of two years, this would come up to RM27 million per year.

Our target price of RM2.40 per share is based on a CY2027F PER of 23 times, which is the five-year average. We have raised Solarvest’s FY26F net profit by 3.5% and FY27F net earnings by 16.8% to account for a stronger EPCC order book and recurring income from the sale of electricity.

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