In a note today, the research house included aluminium products producer Press Metal Aluminium Holdings Bhd and Malayan Cement Bhd (LMC) as its top picks within the sector.

It said LMC was in an advantageous position to capitalise on the upswing of construction and real estate developments in Peninsular Malaysia.

“LMC’s earnings surprised the street yet again, at 111% and 122% of our and the consensus full-year estimates (respectively), thanks to an improvement in sales volumes, and higher average selling prices of both domestic cement and ready-mixed concrete,” it said.

Malayan Cement, formerly known as Lafarge Bhd, is the largest cement manufacturer in Malaysia. After the acquisition of YTL Cement’s entire cement and ready-mixed concrete operations in 2021, it now has five integrated cement plants.

On the aluminium sector, RHB IB noted Press Metal’s financial performance in the second quarter ended June 30 (Q2 FY2023) fell short of both market consensus and its own forecasts.

This was mainly attributed to reduced aluminium prices, even though raw material costs (carbon anode and alumina), had decreased.

“Cahya Mata Sarawak Bhd’s earnings disappointed again, due to its loss-making road maintenance and phosphate divisions,” it added.

Nonetheless, it said the mid- to long-term demand for cement is set to increase, driven by infrastructure initiatives like the Kuala Lumpur-Singapore High-Speed Rail (HSR), Johor Bahru-Singapore Rapid Transit System (RTS), Bayan Lepas Light Rail Transit (BLLRT), and Mass Rapid Transit 3 (MRT3), indicating a potential surge in construction projects on the peninsula.

“Key sector downside risks include a decline in LME aluminium prices, decelerating global economic growth, higher-than-expected raw material costs, lower-than-expected cement average selling prices (ASPs) and lower-than-expected cement production,” it added.