ANNJOO: Wider-Than-Expected Loss on Subdued ASP, BUY Rating Maintained
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
Ann Joo Resources Berhad reported a core net loss of RM147.1mn for the first half of fiscal year 2025 (IHFY25), significantly exceeding both TA Securities’ and the broader market’s full-year loss expectations of RM73.0mn. This wider-than-anticipated loss was primarily attributed to a prolonged drag from subdued Average Selling Price (ASP) recovery, which continued to hamper the company’s margin improvement efforts.
Performance Review
On a year-on-year (YoY) basis, revenue contracted by 13.5% to RM1.1bn, driven by weaker sales tonnage and a softer ASP across all product categories. This deterioration led to a substantial widening of the company’s core net loss by 148.9%. However, a quarter-on-quarter (QoQ) analysis showed a slight improvement, with revenue inching up 1.7% due to higher sales tonnage. This translated into a narrower core net loss of RM54.0mn for the quarter, as better yields partially cushioned the ongoing impact of weaker ASP.
Following these disappointing results, TA Securities has revised its ASP assumptions lower for certain steel products. While the company recorded extraordinary items of RM142.7mn, the underlying core operational performance remained challenging.
Future Outlook and Challenges
The company anticipates that the operating environment will remain challenging. Global growth is projected to moderate between 2025 and 2026, further complicated by trade restrictions, tighter financial conditions, and policy uncertainty. Despite this, China has shown some resilience, delivering growth in line with its 5% target, though the broader steel market continues to struggle with subdued demand from the property sector.
Domestically, the 12th Malaysia Plan-rolling CAPM430bn initiative, which includes substantial infrastructure spending, is expected to underpin medium-term demand across transport, utilities, housing, and industrial upgrades. Nevertheless, uncertainties surrounding project rollouts could limit near-term visibility. Furthermore, the planned introduction of a carbon tax in 2026 is expected to introduce additional compliance and operational cost pressures. Management is maintaining a steady yet guarded stance, aiming to balance firmer pricing momentum with global volatility and evolving regulatory challenges.
Valuation and Recommendation
TA Securities maintains its Target Price (TP) at RM0.25, based on an unchanged 12x CY26 EPS, and reiterates its recommendation for Ann Joo Resources Berhad. This valuation reflects the potential for recovery despite the immediate headwinds.
