PETALING JAYA: Although corporate earnings for Q4’20 delivered better-than-expected results, CGS-CIMB has cautioned on potential earnings risks in the second half of the year due to concerns over political stability.
It lowered its end-2021 FBM KLCI target to 1,699 points from 1,759 points to reflect the potential risks, as it price the market at 1.0 standard deviation discount to mean P/E.
Of the 130 companies that the research house tracked during this latest results season, the ratio of companies that posted Q4’20 results above its expectation rose to 40% against 35% reported in the previous quarter while the number of underperformers fell to 25% from 31% reported previously.
“The outperformance ratio was the highest in recent years as analysts overestimated the negative impact from Covid-19 for some companies,” it said in a report.
CGS-CIMB pointed out that the numbers suggest the ratio of companies that posted results above expectations was 1.6 times higher than those that performed below expectations.
It said the key takeaways from the Q4’20 results season include the strongest earnings revision ratio in recent history, thanks to a higher ratio of overachievers; the 15% quarter-on-quarter rise in corporate earnings reflects the continued recovery in business activities as well as higher commodity prices; and positive on higher-than-expected dividend payout from the banks (RHB, Maybank and Public Bank).
“Quarterly market earnings for companies we cover grew year on year for the second consecutive quarter in Q4’20, due mainly to stronger earnings from auto, chemicals, glove makers, plantation, technology, shipping and electronic manufacturing services (EMS) players,” said the research house.
It also noted that one of the key trends is corporate earnings rose year on year for the second consecutive quarter, a turnaround from eight successive quarters of year-on-year declines, due to strong earnings from glove makers, higher palm oil and petrochemical prices during the quarter.
On a quarter-on-quarter basis, most posted strong earnings as sales recovered from movement controls, interdistrict travelling in Q4’20.
“We now estimate KLCI’s 2020 core net profit fell at a lower rate of 7% (versus -14% previously) due to stronger glove maker, Public Bank and IHH earnings.”
For the quarter ahead, CGS-CIMB estimated corporate earnings to be mixed on the back of the reinstatement of the movement control order (MCO) from Jan 13 to March 4 for some key states as well as the ban on interstate travelling since Jan 13.
Its top picks for the market now include ATA IMS, Gamuda, MYEG, Petronas Chemicals, UMW, Berjaya Food, Mah Sing, Pharmaniaga, Star Media, WCT Holdings.
Simultaneously, it removed Dialog, Genting Plantations, Hong Leong Bank, IGB REIT, IJM Corp, KPJ Healthcare, Malaysia Airports, RHB Bank, Sime Darby, SKP Resources, YTL Corp, 7-Eleven Malaysia, Daibochi, Hap Seng Plantations, Thong Guan and Power Root from its top pick list.
It highlighted that the FBM KLCI is trading at a discount to regional PE for 2021 following the earnings revisions and its recent underperformance against regional peers.
Source: The Sun Daily
No comments:
Post a Comment