This article first appeared in Capital, The Edge Malaysia Weekly on July 20, 2026 - July 26, 2026

OVERWEIGHT

KENANGA INVESTMENT BANK RESEARCH (JULY 15): We keep our “overweight” call on the plastic packaging sector. Elevated oil prices in the second quarter of 2026, arising from the Middle East conflict since February 2026, have resulted in resin prices rising by about 80% or more on average. Historically, higher resin prices would translate to better operating profit for the plastic packaging sector, given a cost-plus business model.

Kenanga expects Brent crude oil prices to average at US$80/bbl in 2026, and US$74/bbl for 2027, with the view that oil prices are unlikely to fall to their pre-conflict level even if the Middle East conflict de-escalates.

Since our previous sector report, concerns over supply shortages have emerged that have not only stoked increased orders from existing customers, but also led to some plastic packaging producers receiving enquiries from new buyers whose previous suppliers declared force majeure. Players could thus gain market share.

Typically, there will be about one-to-two-month lag between a purchase order and recognising revenue upon delivery. Hence, the inventory gains and the potential margin expansions from higher average selling prices will mostly be reflected in the upcoming 2Q2026 results.

We maintain our “outperform” call on Thong Guan Industries Bhd (KL:TGUAN) (target price: RM1.73) and BP Plastics Holding Bhd (KL:BPPLAS) (TP: 87 sen) as our sector picks, of which we have sole coverage. Meanwhile, we take this opportunity to downgrade Scientex Bhd (KL:SCIENTX) (TP: RM3.91) from “outperform” to “market perform” following share price action.

We like Thong Guan, given its growth momentum in the F&B segment, and its aggressive push into overseas markets with environmentally-friendly, high-performing products. At the current valuation, Thong Guan is trading at a discount of close to 20% to its 10-year historical forward PER of around nine times.

We like BP Plastics for its success in securing several reputable bread brands in Malaysia as clients, and its ability to pass through higher resin costs underpinned by its quality stretch films-centric business model.

Meanwhile, we remain cautiously optimistic on SLP Resources Bhd (KL:SLP) (TP: 90 sen, outperform) on the potential impact from the recent reduced tourist arrivals in Japan alongside weak trading liquidity.

Target price: RM1.18 ADD

CGS INTERNATIONAL RESEARCH (JULY 13): We initiate coverage on YTL Hospitality REIT (KL:YTLREIT) with an “add” rating and a DDM-based target price of RM1.18. We like YTLREIT for its compelling combination of defensive yield and visible FY26F-28F DPU (distribution per unit) growth, underpinned by a portfolio of premium hospitality assets strategically located across Malaysia, Australia and Japan.

Our target price implies an attractive FY6/27F dividend yield of 7.8%, representing a 4.3% yield spread against the 10-year Malaysian Government Securities (MGS). 

We believe investors’ cautious stance stems from 60% of FY25 net property income (NPI) coming from master lease assets with limited rental growth and concerns over earnings volatility from Australian assets due to fluctuations in occupancy, room rates and the foreign exchange rate. These concerns overlook YTLREIT’s improving growth profile, supported by scheduled rental step-ups, ongoing developments, potential sponsor asset injections and continued tourism recovery, while master leases continue to provide resilient earnings. As investors gain visibility in YTLREIT’s DPU growth trajectory and the value of its premium hospitality assets, we see room for lower valuation discount.

Target price: RM2.32 BUY

MAYBANK INVESTMENT BANKING GROUP RESEARCH (JULY 13): Our recent engagement with Critical Holdings Bhd (KL:CHB) reaffirmed our positive view on its successful transformation into an integrated engineering, procurement, construction and commissioning (EPCC) main contractor specialising in the semiconductor industry, underpinned by its success in securing its largest contract of RM722 million from a renowned US-based multinational corporation expanding in Kulim Hi-Tech Park. Successful execution would enhance its credentials for larger-value projects.

CHB’s outstanding order book increased to a record high of RM1.1 billion, providing strong earnings visibility over FY27 to FY28. CHB remains keen to further grow its order book. CHB’s current tender book stands at RM1 billion, with 90% focused on the semiconductor industry involving 10 to 20 tenders, including an EPCC tender estimated at over RM100 million.

We believe CHB’s successful transition into an EPCC contractor comes at an opportune time, coinciding with the ramp-up in semiconductor MNC capex up cycle to support capacity expansion through both brownfield and greenfield projects. We reiterate our “buy” call with an unchanged target price of RM2.32 based on an unchanged 16 times FY27 PER.

Target price: RM2.06 BUY

TA SECURITIES RESEARCH (JULY 10): Insights Analytics Bhd (KL:IAB), which listed on the ACE Market in October 2025, is a Malaysian water technology and intelligent asset management solutions provider that has evolved from a Sarawak-focused infrastructure contractor into an integrated technology partner spanning smart water management, IoT-enabled asset monitoring and digital twin deployment.

IAB is the only listed Malaysian entity offering integrated pure-play exposure to digital water solutions and non-revenue water (NRW) reduction, a positioning that has gained structural relevance as Malaysia’s water sector enters a sustained investment cycle.

We initiate coverage on IAB with a “buy” recommendation. Applying a target PER of 18 times to IAB’s calendar year 2027 (CY27) EPS, with an ESG premium of 3%, we derive a fair value of RM2.06 per share. Looking ahead, we anticipate a stronger earnings outlook, underpinned by forecast revenue growth, the commercialisation of its high-margin digital twin platform, and 25 contracted service level agreement (SLA) base extending to FY31, providing a recurring revenue base. Key risks include execution risk on the digital twin growth runway and talent acquisition constraints in Sarawak.

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