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KUALA LUMPUR (March 4): Malaysian contractors and building materials companies may face margin pressure from rising costs amid escalating conflict in the Middle East, CIMB Securities said.
Construction firms may face renewed margin risks if supply chain is affected, while building materials manufacturers could face renewed pressures from input cost volatility such as coal, scrap, and fuel with protracted geopolitical uncertainties, the research firm flagged in a strategy note.
“As for our top picks, we are turning more defensive in view of recent US-Israel attack and US tariff uncertainties,” CIMB Securities said.
The research house lowered its end-2026 FBM KLCI target to 1,754 points, from 1,772 points previously, following the conclusion of the February earnings season, and to reflect its more defensive stance.
The US-Israel military campaign in Iran that started over the weekend is now adding to the worries of investors already on edge from renewed concerns over US tariffs, overshadowing improvements in corporate earnings.
More than one in four firms covered by CIMB Securities beat expectations, up from 21% in the September-end reporting period, while only 19% underperformed, down from 27% previously. Companies in healthcare, technology, banking and transport sectors accounted for half of the outperformers.
For strategy, CIMB Securities is downgrading two plantation and building materials sectors to ‘neutral’ from ‘overweight’ due to limited upside following the recent rally and lower palm oil price projections.
The research house also added relatively more defensive stocks—KPJ Healthcare Bhd (KL:KPJ), Mr DIY Group (M) Bhd (KL:MRDIY), ViTrox Corporation Bhd (KL:VITROX) and Public Bank Bhd (KL:PBBANK)—to its list of top picks.
Other picks include Telekom Malaysia Bhd (KL:TM), Gamuda Bhd (KL:GAMUDA), Hong Leong Bank Bhd (KL:HLBANK), UEM Sunrise Bhd (KL:UEMS), RHB Bank Bhd (KL:RHBBANK), Tenaga Nasional Bhd (KL:TENAGA), Malaysian Pacific Industries Bhd (KL:MPI), Westports Holdings Bhd (KL:WPRTS), Axis Real Estate Investment Trust (KL:AXREIT) and Pavilion Real Estate Investment Trust (KL:PAVREIT).
For small- and mid-cap names, CIMB Securities added Insights Analytics Bhd (KL:IAB), Duopharma Biotech Bhd (KL:DPHARMA), Life Water Bhd (KL:LWSABAH) and KIP Real Estate Investment Trust (KL:KIPREIT) to the top picks list, alongside KJTS Group Bhd (KL:KJTS), HI Mobility Bhd (KL:HI) and MBM Resources Bhd (KL:MBMR).
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