Broker: Maybank Investment Bank Berhad
Date of Report: June 8, 2025
Malaysia Market Outlook 2025: Sector Winners, Stock Picks, and Earnings Trends Revealed
Market Overview: A Challenging First Quarter, but Recovery in Sight
The first quarter of 2025 proved to be a subdued period for Malaysian equities, with market sentiment turning cautious due to soft corporate earnings and sectoral underperformance. Even the banking sector, typically a stalwart of stability, reported more earnings misses than usual. The KLCI’s earnings growth forecasts have been moderated to 2.5% for 2025 and 7.7% for 2026, reflecting these headwinds. Despite these challenges, there remain pockets of opportunity—particularly in domestic-driven sectors like consumer, REITs, renewable energy, and healthcare, which are expected to recover in the second half of the year.
KLCI Target Revised Down: Valuations, Scenarios, and Key Picks
The year-end 2025 KLCI target is now set at 1,660, lowered from 1,700.
This is based on a 14.4x 2026E PER, which is -0.5SD below the 10-year mean, reflecting anticipated market volatility and tariff uncertainties.
The base case assumes further tariff de-escalation and positive negotiation outcomes.
Bear case: If 2026 earnings growth falls to 5% and PER to 13x, the KLCI could drop to 1,450.
Extreme bear case: 12x PER and 0% earnings growth could see the KLCI at 1,300.
Sector Rating Shifts: Where the Opportunities Lie
Sector outlooks were revised as follows:
- Downgraded to NEUTRAL: Banks, Oil & Gas (O&G)
- Upgraded to BUY: Tenaga Nasional (TNB)
- Remain POSITIVE: Consumer, Construction, Healthcare, REITs, Renewable Energy
- Remain NEGATIVE: Petrochemicals, Gloves
Performance Review: More Misses Than Beats in 1Q25
28% of companies under coverage missed expectations, 15% beat, and 55% were in line.
No sector clearly outperformed; banks and gaming were mostly below expectations.
Universe earnings contracted 2.4% YoY and 0.8% QoQ.
Plantations saw YoY growth but a 10% QoQ decline, mainly due to weaker downstream operations.
Transport, construction, and O&G sectors recorded >20% QoQ earnings growth.
Sector Deep-Dive: Winners, Losers, and Key Insights
| Sector |
1Q25 Outlook |
Key Companies / Picks |
Comments |
| Automotive |
NEUTRAL |
– |
Seasonal TIV weakness, subdued 2Q expected, recovery in 2H25 driven by new launches and promotions. Risks: fuel subsidy reforms, competition. |
| Aviation |
POSITIVE |
CAPITALA |
Mixed results; CAPITALA beat on higher ancillary income, AAX missed on maintenance costs. 2Q25 could be seasonally softer, but weaker USD and jet fuel prices provide support. |
| Banks |
NEUTRAL |
PBK, AMM |
Loan growth slowed to 4.4% YoY; net interest margins slipped, core operating profit up just 1% YoY. Earnings cut by 5%/4% for 2025/26. |
| Construction |
POSITIVE |
GAM |
Mixed results; domestic contracts and data centers remain growth drivers. Gamuda and Sunway Construction highlighted. |
| Consumer |
POSITIVE |
AEON, MRDIY, PAD |
Festive spending boosted 1Q25. Notable gross profit improvements. AEON’s retail strong, property management to drive medium-term growth. |
| Gaming |
NEUTRAL |
– |
GENM, GENT below expectations. EBIT recovery QoQ. GENM bid for New York casino license is a potential catalyst. |
| Gloves |
NEGATIVE |
– |
US tariff uncertainty, China capacity risk. SELL on HART, KRI, TOPG. |
| Healthcare |
POSITIVE |
KPJ |
In-line results, sequential revenue/EBITDA declines due to festive seasonality. 2H25 expected to see pent-up demand. |
| Media |
NEUTRAL |
– |
Both ASTRO and MPR missed on higher tax rates and weak adex sentiment. Challenging outlook with upcoming tariff hikes and subsidy rationalizations. |
| O&G |
NEUTRAL |
Dialog, BArmada |
Mixed results; Velesto outperformed, BArmada missed. Lower oil majors’ capex and OPEC policies may affect job flows. |
| Petrochem |
NEGATIVE |
– |
Core net profit dropped 122% YoY; product spreads declining, operational disruptions. 2QCY25 expected weaker. |
| Plantation |
NEUTRAL |
SDG, SOP |
Mixed results, upstream contributions strong, but downstream margins weak. Sector call Neutral. |
| Ports & Shipping |
NEUTRAL |
– |
Results within expectations, soft container demand offset by land transport growth. Tariff hikes may provide support. |
| Property |
NEUTRAL |
ECWI, SPSB, ECW |
In-line, seasonally weak. More launches planned 2H25. Data center theme may have peaked; expanding recurring income assets. |
| REITs |
POSITIVE |
SREIT, CLMT |
Retail REITs resilient; hospitality saw seasonal softness. Industrial demand strong. Asset acquisition to drive 2H25. |
| Renewable Energy |
POSITIVE |
SOLAR |
Solarvest outperformed peers. Robust orderbook, strong execution, earnings visibility through FY28. |
| Tech – EMS |
POSITIVE |
ATECH |
Broadly in line, some earnings declines due to seasonality. Positive on supply chain diversification and IoT/auto modules. |
| Tech – Semicon |
NEUTRAL |
FRCB |
Earnings largely in line. Medium-term headwinds possible: margin pressures, capex deferrals, muted OSAT growth. |
| Tech – Software |
POSITIVE |
ITMAX |
MYEG, RAMSSOL beat forecasts, ITMAX in line, CTOS missed. Digital adoption tailwinds expected to continue. |
| Telcos |
NEUTRAL |
TM |
Mixed results, only Tenaga posted YoY earnings growth. Gas utilities in line. |
| Utilities |
NEUTRAL |
TNB, YTLP |
Mixed results, Tenaga only one with YoY earnings growth. YTLP and Malakoff missed expectations. |
Stock Upgrades and Downgrades: Key Calls and Earnings Revisions
Earnings were downgraded for 33% of companies that reported, and upgraded for only 12%.
Major upgrades to BUY: Capital A, Sunway Construction, MR D.I.Y. Group, and Tenaga Nasional.
Downgrades to HOLD: Sime Darby, RHB Bank, Wasco, Sime Darby Property, MISC.
Downgrades to SELL: Tan Chong Motor, Tambun Indah.
Top Stock Picks: Large Caps and Small-Mid Caps
- Large Caps: Public Bank (PBK), AMMB Holdings (AMM), YTL Power (YTLP), Tenaga Nasional (TNB), Gamuda (GAM)
- Mid-small Caps: KPJ Healthcare (KPJ), Frontken Corp (FRCB), ITMAX System (ITMAX), Aurelius Tech (ATECH), AEON Co. (M) (AEON), Solarvest (SOLAR), Sunway REIT (SREIT)
Valuation Table: Top BUY Picks
| Stock |
Bloomberg Code |
Mkt Cap (USD m) |
Price (MYR) |
Target Price (MYR) |
Upside (%) |
2025E P/E |
2026E P/E |
2025E Div Yield (%) |
2026E Div Yield (%) |
| Public Bank |
PBK MK |
19,546 |
4.26 |
5.05 |
18.5 |
11.4 |
10.8 |
5.2 |
5.6 |
| AMMB Holdings |
AMM MK |
4,191 |
5.35 |
6.05 |
13.1 |
8.8 |
8.9 |
5.6 |
5.6 |
| YTL Power |
YTLP MK |
6,878 |
3.51 |
4.20 |
21.6 |
11.5 |
11.7 |
2.0 |
2.0 |
| Tenaga Nasional |
TNB MK |
19,566 |
14.20 |
15.50 |
12.2 |
17.5 |
15.6 |
2.9 |
3.2 |
| Gamuda |
GAM MK |
6,501 |
4.77 |
4.95 |
5.5 |
27.5 |
20.7 |
1.7 |
2.3 |
| KPJ Healthcare |
KPJ MK |
2,942 |
2.75 |
3.24 |
19.8 |
27.4 |
23.7 |
1.9 |
2.2 |
| Frontken Corp |
FRCB MK |
1,477 |
3.92 |
5.10 |
31.0 |
38.0 |
32.5 |
0.8 |
1.0 |
| ITMAX System |
ITMAX MK |
894 |
3.68 |
4.50 |
22.8 |
40.2 |
28.9 |
0.5 |
0.7 |
| Aurelius Tech |
ATECH MK |
333 |
3.39 |
3.73 |
13.5 |
19.1 |
17.7 |
3.1 |
3.4 |
| AEON Co. (M) |
AEON MK |
461 |
1.39 |
2.00 |
46.7 |
11.7 |
10.8 |
2.9 |
2.9 |
| Solarvest |
SOLAR MK |
310 |
1.74 |
2.28 |
32.0 |
23.7 |
16.9 |
0.0 |
1.5 |
| Sunway REIT |
SREIT MK |
1,684 |
2.08 |
2.13 |
7.6 |
19.4 |
18.7 |
4.6 |
4.8 |
Dividend Yield: Defensive Strategy Amid Volatility
– Defensive stocks are preferred amid market volatility, especially in REITs, banks, and utilities. – Eco World International offers the highest dividend yield among coverage. – Bermaz Auto and MBM Resources also feature sustainable yields despite a NEUTRAL sector view.
Detailed Company Analysis: Key Takeaways for Major Stocks
- Public Bank (PBK): Strong asset quality, proactive funding cost management, benefits from LPI Capital acquisition. Management overlays should keep credit costs low. Overhang from family stake sale concerns seen as overblown.
- AMMB Holdings (AMM): Focus on business banking and cost management, aiming for higher dividends.
- YTL Power (YTLP): Remains attractive with AI compute launch on track for 3Q25. Wessex Water’s recovery and positive progress in AI/data center business are key catalysts.
- Tenaga Nasional (TNB): Upgraded to BUY. Factoring in MYR10bn contingent capex improves FY26E earnings forecasts. Finalization of recovery mechanism is a potential catalyst for outperformance.
- Gamuda (GAM): Data center theme intact, despite underperformance in last results. Domestic contracts and enabling works for hyperscalers are key positives.
- KPJ Healthcare (KPJ): Focused on Malaysian market, upside from delayed DRG roll-out and medical tourism. Sequential earnings decline in 1Q25 was seasonal; 2H25 expected stronger.
- Frontken Corp (FRCB): Robust near-term outlook for semicon segment. O&G segment was a drag, but semicon remains a growth driver.
- ITMAX System (ITMAX): Leading B2G “smart city” integrator, strong EBITDA margin expansion as margin-dilutive projects wind down. High PER justified by growth prospects.
- Aurelius Tech (ATECH): Growth trajectory supported by global supply chain diversification and IoT/auto expertise.
- AEON Co. (M) (AEON): Resilient retail outlook, medium-term growth from mall expansions. Property management segment to support future earnings.
- Solarvest (SOLAR): Sector standout in renewable energy, robust orderbook, recurring revenue, strong execution.
- Sunway REIT (SREIT): Robust retail performance, strong growth from recent acquisitions and asset enhancement initiatives. Diversified portfolio and higher yields viewed positively.
Market Valuation and Financial Metrics: 2025-2026
| Year |
KLCI PE (x) |
Universe PE (x) |
KLCI Earnings Growth (%) |
Universe Earnings Growth (%) |
| 2024E |
14.4 |
15.1 |
9.2 |
11.7 |
| 2025E |
14.1 |
14.6 |
2.5 |
3.6 |
| 2026E |
13.1 |
13.5 |
7.7 |
8.3 |
Sector Weightings: Where to Focus
POSITIVE: Aviation, Construction, Consumer, Healthcare, REITs, Renewable Energy, Technology (EMS & Software) NEUTRAL: Automotive, Banks, Gaming, Media, Oil & Gas, Plantation, Ports & Shipping, Property, Telco, Technology (Semicon), Utilities NEGATIVE: Gloves, Petrochem
Conclusion: Defensive Positioning with Selective Growth Plays
The Malaysian equity market enters the remainder of 2025 with tempered expectations but clear pockets of opportunity. Defensive yield stocks in REITs, banks, and utilities are favored amid volatility, while select growth names in consumer, renewable energy, construction, and technology offer upside. Key stock picks remain largely intact, with new additions in Tenaga and Sunway REIT reflecting evolving sector dynamics.
Investors are encouraged to focus on resilient, dividend-paying names and to watch for catalysts in the second half of 2025, particularly as tariff uncertainties and global macro headwinds play out.
