CIMB Investment Bank Bhd (CIMB Securities) has maintained a BUY call on Ann Joo Resources Bhd but lowered its target price to RM1.02 from RM1.26 following weaker-than-expected FY24 results. The group reported core losses of RM215 million for the financial year, widening from RM123 million in FY23, with fourth-quarter losses escalating to RM109 million from RM55 million in the previous quarter. CIMB Securities attributed the underperformance to depressed steel prices and subdued global demand, compounded by higher coke input costs and rising net interest expenses.

Despite the weak results, CIMB Securities anticipates a turnaround in FY25, projecting a core net profit of RM29 million, with further improvements to RM67 million in FY26 and RM94 million in FY27. This recovery is expected to be driven by improved procurement strategies for coke, particularly after the final delivery of high-cost coke under long-term contracts in 3Q24, alongside a gradual rollout of major domestic infrastructure projects such as the Penang Light Rail Transit (LRT).

While the recent share price correction has weighed on sentiment, analysts noted that Ann Joo is now trading at attractive forward valuations, with FY26 and FY27 price-to-earnings (PE) multiples of 9 times and 7 times, respectively. The company is also actively pursuing asset monetisation initiatives, with findings from an expression of interest (EOI) exercise for its 106-acre Seberang Prai industrial land expected by early May 2025. This land, which houses Ann Joo's main steel-making facility, forms part of the group's broader 200-acre land bank in the area.

Additionally, Ann Joo is progressing with its RM298 million electrification contract under the East Coast Rail Link (ECRL), with material procurement completed and revenue contributions commencing in the fourth quarter of 2024. The company has also moved to acquire the remaining 45% stake in Konsortium Etiqa for RM96 million, securing full ownership of a 437-acre plot in Gurun Industrial Park, Kedah.

CIMB Securities believes that the proposed 25% tariff on steel imports to the US, set to take effect on March 12, 2025, will have minimal direct impact on the local long steel industry. Chinese exports to the US remain relatively small, with only 40,000 tonnes of rebar shipped to the country in FY24, representing less than 0.1% of China's total steel exports.