Broker: UOB Kay Hian
Date of Report: 4 August 2025

Malaysia Stock Market: Top Alpha Picks and Sector Insights for August 2025

Overview: Outperformance Amid a Summer Lull

UOB Kay Hian’s latest Malaysia strategy report highlights a robust portfolio performance for July 2025, with Alpha Picks delivering a 5.6% return against the FBMKLCI’s -1.3%. The outperformance was driven by strong bets on construction, building materials, and semiconductor-related stocks, further buoyed by Malaysia’s positive US trade deal and a “summer lull” in Western equities. As we move into August, the investment landscape is shaped by sector rotation, reporting season, and several key catalysts both domestically and abroad.

Sector Performance Recap: July 2025

• Winners: Construction (+5.1%), Building Materials (+3.7%), Property (+2.9%), Renewable Energy (+10.3%), and Semiconductor Technology (+6.0%)
• Losers: Utilities (-8.2%), Banking (-2.8%), Healthcare (-2.4%), Glove Manufacturing (-7.3%), Tech-Software (-6.6%)

The construction and technology sectors, particularly renewable energy and semiconductors, led gains, while utilities, banks, and healthcare lagged. Non-KLCI segments such as renewable energy and select oil and gas subsectors posted notable advances.

Alpha Picks Portfolio: July Performance and August Strategy

The July Alpha Picks portfolio produced an average return of 5.6%, outperforming the benchmark. Top contributors included Hume Cement Industries (+13.8%), Coraza (+12.9%), IJM Corp (+9.2%), and Gamuda (+8.1%). Only Zetrix AI (-7.4%) and Duopharma Biotech (-1.5%) posted negative returns.

For August, UOB Kay Hian’s Alpha Picks are calibrated for anticipated catalysts such as the US trade deal, the Western “summer lull,” and Malaysia’s reporting season. The picks for August 2025 are:

• Coraza Integrated Technologies
• Eco World Development
• Gamuda Berhad
• Hume Cement Industries
• IJM Corp
• Inari Amertron
• RHB Bank
• Zetrix AI

Nationgate Holdings and VS Industry are also highlighted as key onshoring beneficiaries.

Key Recommendations Table

Detailed Alpha Pick Analyses

Coraza Integrated Technologies

• Order Momentum: Outstanding orderbook at RM80m, a 10% increase over last quarter, driven primarily by semiconductor industry demand.
• Growth Strategy: Ongoing investments in advanced equipment and capacity expansion, with new facilities targeted to be operational by 4Q24 and 4Q25.
• Financials: Consistent year-on-year revenue improvements over the last four quarters.
• Target Price: RM0.66 (25x 2026F PE, a 25% discount to the sector mean PE of 34x).
• Share Price Catalysts: Strong earnings from key customers, new customer acquisitions, and a milder impact from tariffs expected within 6-9 months.

Eco World Development

• Sales Momentum: Achieved RM1.06b in property sales for Mar-May 2025 (+14% yoy); 7MFY25 sales reached RM3.0b (70% of full-year forecast).
• Growth Prospects: Commercial and residential segments drove gains; 84% of township residential sales came from homes priced above RM650,000.
• Gearing and Cash Flow: Net gearing to remain elevated near-term due to land acquisitions and new project launches, but strong cash generation from mature projects and land sales (~RM1.3b) supports stable dividends.
• Upcoming Launches: EBP7, Eco Radiance, and Eco Botanic 3 to drive sales in FY26.
• Target Price: RM2.39 (35% discount to RNAV of RM3.67; implies 1.4x FY26F P/B and 16.2x FY26F PE).
• Share Price Catalyst: Strong take-up from upcoming launches in 2HFY25.

Gamuda Berhad

• Data Centre Projects: DC pipeline remains robust, with ongoing and new tenders valued at RM10b-14b, despite US AI policy changes.
• Orderbook Strength: Current orderbook at RM34.6b (3QFY25), with potential to reach RM40b-45b by year-end, and possibly exceed RM50b in a bull scenario.
• Property Segment: FY24 property sales hit RM5b (+22% yoy); FY25 target raised to RM6b (+20% yoy), aided by strong local launches and Vietnam projects.
• Australia Expansion: Overseas projects (mainly in Australia) account for 86% of FY24 construction revenue. Actively pursuing A\$25b in renewable project tenders over the next two years.
• Valuation: Forward PE of 17x (below the KLCI ex-financials average of 22x); target price RM5.55 (22.0x FY26F PE, 1.5SD above historical mean).
• Share Price Catalyst: Award of large-scale infrastructure and renewable projects, expected in 2025.

Hume Cement Industries

• Near-Term Outlook: Penang LRT and Johor RTS projects (combined RM16-19b construction cost) to drive cement demand, especially Penang LRT (RM13b project).
• Long-Term Growth: MRT3 infrastructure (RM50b total cost) expected to generate RM7.5-10b in cement demand.
• Dividends: 9MFY25 DPS of 10 sen (vs FY24 DPS of 8 sen), 3.2% net yield. Strategic review of non-core assets may further boost payout.
• Valuation: Target price RM4.05 (15x 2026F PE, below the sector’s pre-2017 mean).
• Share Price Catalyst: Commencement of Penang LRT; 1-2 quarter timeline.

IJM Corporation

• Earnings Outlook: Strong expected growth in FY26-27, supported by new contracts such as the New Pantai Expressway extension and potential Nusantara government housing project (~RM1.0b).
• International Strategy: Expansion in the UK, focusing on faster turnaround projects and monetising assets as needed. The acquisition of a 50% stake in JRL Group is expected to yield synergies and future opportunities.
• Valuation: Target price RM3.15 (2025F PE of 19.6x, in line with five-year mean).
• Share Price Catalyst: Potential award of large contracts from a robust tender pipeline in the next 1-2 quarters.

Inari Amertron

• Stock Performance: -34% YTD due to concerns over smartphone demand and US-China trade tensions, but RF segment utilization remains healthy at 65-70%.
• Growth Initiatives: Expansion into advanced packaging platforms for AI, server, networking, and industrial applications. Strong collaboration with technology partners and commercialization of new product lines expected soon.
• Valuation: Target price RM2.36 (30.0x FY26F PE, at 7-year mean). Ex-cash FY26F PE is 18.7x (-1SD below mean).
• Share Price Catalysts: Earnings delivery from main customers, new customer acquisition, and less severe impact from tariffs over 6-9 months.

RHB Bank

• Credit Quality: Net credit cost at 17bps in 1Q25 remains within guidance; loan loss coverage at 76.9% (115.7% including regulatory reserves).
• Non-Interest Income: Expected upside in 2Q25 due to deferment of FVOCI securities gains, with further gains likely as MGS yields fall.
• Capital Management: Strong CET1 ratio of 16% enables potential for higher cash dividend payout (projected 65%, 7% yield).
• Valuation: Target price RM7.30 (0.95x 2025 PBV, 9.5% ROE), with current valuations at an attractive 0.80x P/BV.
• Share Price Catalysts: Stronger non-interest income and lower net credit costs anticipated within 2-3 months.

Zetrix AI

• AI/Blockchain Initiatives: Leading the China-ASEAN AI Lab via a partnership with Beitou IT Innovation. The lab at Zetrix Tower will drive foundational AI development for Malaysia and ASEAN, creating revenue from cross-border AI solutions and data services.
• My Digital ID Superapp: Integrates with government databases for Single Sign On (SSO) and is being used by key agencies and commercial partners. Monetization via registration and subscription fees.
• ZTrade Growth: Cross-border trade facilitation services with China’s customs process about 15,000 transactions/month, with plans to expand into Malaysia’s National Single Window for trade.
• Financial Forecast: Estimated annual revenue potential of RM650m+ from ZTrade services and 4.5m-5.0m Zetrix coin sales at US\$12 each, translating to RM200m-220m pre-tax profit for 2024-25.
• Valuation: Target price RM1.46 (15x 2025F PE, -0.5SD below five-year mean).
• Share Price Catalysts: Official rollout of My Digital ID Superapp and World ID services.

Sector Performance Table: July and YTD 2025

Key Economic and Corporate Events: July 2025

• Tenaga Nasional received a RM5.05b tax bill after a Federal Court ruling.
• IHH Healthcare is expanding into Indonesia and Vietnam to offset rising regional costs.
• AirAsia is close to concluding talks with strategic investors as it completes restructuring.
• MACC raided a NationGate unit over alleged scrap metal smuggling.
• Zetrix AI (formerly MyEG) directors fined by Bursa Malaysia over misleading announcements.
• Gamuda-PKNP JV appointed for Penang-Perak Water Infrastructure Project.
• Sunway Construction employee investigated by MACC over subcontractor dealings.
• S&P Global Manufacturing PMI rose to 49.3 in June, the highest since February.
• Bank Negara Malaysia cut OPR by 25bps to 2.75%.
• Malaysia secured a lower 19% US tariff after initially facing 25%.
• Foreign exchange reserves increased to US\$120.6b by end-June.
• June exports fell 3.5% yoy amid lower oil and gas deliveries to China.
• 2Q25 GDP growth (advance estimate) at 4.5% vs 4.4% in 1Q25.
• Government announced a one-off RM100 cash handout for basic goods purchases.
• PM Anwar Ibrahim tabled the 13th Malaysia Plan.
• US administration announced new restrictions on AI chip shipments to Malaysia and Thailand to prevent semiconductor smuggling into China.
• RM63b in semiconductor investments secured under the National Semiconductor Strategy as of March 2025.
• RM144.4b in data centre investments approved from 2021 to Mar 2025.

Conclusion: Navigating Opportunities in Malaysia’s Evolving Market

Despite sectoral volatility and global headwinds, Malaysia’s market offers selective opportunities for investors. UOB Kay Hian’s Alpha Picks leverage robust sector trends, positive trade developments, and strong earnings momentum across construction, property, banking, and technology. Investors should monitor upcoming catalysts such as infrastructure project rollouts, new technology launches, and earnings surprises for optimal positioning in Malaysia’s dynamic market.