The recent Invest Malaysia 2023’s Special Series on the National Energy Transition Roadmap (NETR) provided a clear narrative and practical pathway towards driving the country’s next phase of economic growth and long-term sustainability agenda, especially Malaysia’s commitment to achieve carbon neutrality by 2050.
The transformative thinking underpinning the NETR Part 1 underscores and reinforces the laudable ambitions of the recently articulated MADANI Economy framework which emphasises the leveraging of Malaysia’s many inherent strengths to be a leading Asian economy, by becoming a competitive and world class investment destination.
Maybank Investment Bank (Maybank IB) said today (July 31) key highlights of the NETR, is that it contains 10 flagship-cum-catalytic initiatives that have a total investment value of between MYR435b to MYR1.85tr by 2050, and will be offering 23,000 high-impact jobs.
A cornerstone project is a 1GW large scale integrated RE zone (powered by solar) by UEM-INTRAMAS JV, to be the largest in ASEAN and having attracted MYR6b in foreign investments to-date.
In addition to solar power, the NETR also opens up the hydrogen gateway in Sarawak, and puts in place the framework for carbon capture, utilisation & storage (CCUS), hence laying the foundations for the development of new, high value-add GDP growth drivers.
Particularly noteworthy, Maybank IB added, is the NETR’s explicit inclusion of households via offering an income opportunity from leasing out their rooftops for solar power generation regarding its detailed, broadly income generative plans to integrate solar solutions into its township projects.
Reinforcing the MADANI Economy framework
The innovation and pragmatism demonstrated by the NETR dovetails nicely with the ambitions of the MADANI Economy, principally to develop new secular growth engines for both broad economic growth as well as the creation of high-paying jobs by building on the country’s competitive strengths such as its’ abundance of natural resources, strategic geographic location and a pioneering, world-class energy industry.
Pending policy updates such as NETR Part 2, National Industrial Master Plan (NIMP) 2030, 12th Malaysia Plan mid-term review and Budget 2024 are expected to build on the positive leading-edge tone set by NETR.
Reaffirming a positive 2H23 equity market outlook
Maybank IB remains optimistic on improved market traction over 2H23 despite still-mixed earnings guidance. Besides peaking interest rates / inflation and softening USD, China’s growth outlook is seen to stabilise and US Fed’s narrative has turned more dovish.
Against KLCI’s post-millennium forward PER low of c.12x, 2024E market earnings growth is forecast to accelerate to +13.3% (2023E: +6.5%) as ASP-driven sectors (Plantations, Gloves, Petrochem) improve while laggards like Telcos, Aviation extend on their earnings recovery.
End-2023 KLCI target is 1,520 (13x fwd. PER; +5% upside), our preference being Financials, Tech (Software, EMS) and selective SMID capitalisations.
