Hiap Teck Venture Bhd is positioning itself for a gradual recovery, driven by improving performance at its associate Eastern Steel Sdn Bhd (ESSB), even as near-term challenges persist. The group’s fourth quarter for the financial year ending 31 July 2025 (4Q25) is anticipated to remain subdued, reflecting continued pressure from weak global steel prices, ongoing uncertainty surrounding US trade tariffs, and the sluggish rollout of domestic infrastructure projects.
In the third quarter of FY25 (3Q25), Hiap Teck reported a net profit of RM34.28 million and revenue of RM344.84 million, compared with RM46.82 million and RM399.68 million, respectively, in the corresponding period last year. For the cumulative nine-month period, the group recorded a net profit of RM89.41 million on revenue totalling RM1.09 billion.
The group’s core net profit declined by 42.9% year-on-year to RM47 million, primarily attributed to margin compression within its trading and downstream segments. This margin erosion stemmed from weaker selling prices and softer sales volumes, which offset the improved contribution from its 27.3%-owned associate, ESSB.
ESSB’s core earnings rose to RM71.1 million during the period, supported by increased sales volumes, which helped counterbalance lower average selling prices. The performance of ESSB is expected to remain a key driver of Hiap Teck’s earnings stability going forward.
According to Hong Leong Investment Bank (HLIB) Research, Hiap Teck’s near-term outlook remains challenging, underpinned by ongoing macroeconomic concerns in China and delays in the implementation of domestic infrastructure projects. Nonetheless, steady earnings from the scaffolding division, alongside improved output from ESSB, are projected to cushion these headwinds.
Of particular note is ESSB’s hot rolled coil (HRC) plant, which commenced operations in December 2024 and is currently operating at approximately 50% capacity. Hiap Teck aims to raise this utilisation rate to near full capacity by the end of 2025, which is expected to drive further reductions in unit conversion costs.
Reflecting the lower sales volume assumptions, HLIB Research has revised down its core net profit forecasts for FY25 to FY27 by 3.3%, 0.9% and 3.8%, respectively. Despite the near-term earnings softness, the research house has reiterated a “buy” recommendation on Hiap Teck, albeit with a reduced target price of 34 sen, based on a revised valuation of 6.5 times the forecast FY26 core earnings per share of 5.2 sen.
-The Star
