DISAPPOINTING Q1 FOR BLUE CHIP STOCKS
Aggregate earnings plunge 41.7pc quarter-on-quarter to RM7.57b
THE aggregate earnings of the 30 companies that make up Bursa Malaysia’s flagship FTSE Bursa Malaysia KLCI (FBM KLCI) plunged to RM7.57 billion in the first quarter, said analysts.
This was equivalent to a 41.7 per cent quarter-on-quarter fall and a steeper 48 per cent year-on-year decline, said MIDF Research.
However, it said the aggregate earnings needed some adjustments given, among others, the big provisions by certain companies.
On this score, the aggregate normalised first quarter earnings of the 30 constituents came in higher at RM11.4 billion.
This was after adjusting for, among others, the RM3.04 billion and RM1.05 billion provisions for goodwill impairment and litigation by Sapura Energy Bhd and MISC Bhd, respectively.
MIDF Research said after neutralising the impact of non-operational items, the aggregate normalised growth in the first quarter was less negative both sequentially and on-year at -12.9 per cent quarter-on-quarter and 18.8 per cent year-on-year.
“The latest corporate earnings performance was decidedly bearish with the normalised growth figures both sequentially and onyear under heightened pressure, which were duly translated in the massive diminution of our aggregate forward earnings estimate for financial year 2020.”
Kenanga Research said the extended first quarter reporting season concluded on Wednesday on a downbeat note as the number of earnings disappointments increased over that of the previous quarter.
The research firm said 136 out of the 137 stocks it covered had released results and guidance that led to earnings downgrades by a ratio of four to one for the financial year 2020 and three to one for financial year 2021.
“Fifty-nine (44 per cent) came in within expectations, 14 (10 per cent) above and 63 (46 per cent) below.”
Kenanga Research said sectors that disappointed the most — with more than half coming in below its and consensus expectations — were media, plantations, property, sin (brewery and tobacco) and technology.
“No sector surprised pleasantly while the sin sector, traditionally counted on to deliver dividends consistently, also disappointed with the reduced or absence of interim dividends.”
Kenanga Research trimmed its financial years 2020/2021 earnings per share (EPS) forecasts for FBM KLCI to 77.2/87.8 sen from 78.5/88.4 sen, and versus the currently available Bloomberg consensus of 75.9/90.7 sen.
“With the FBM KLCI around 1,530 points, we see a six per cent downside risk as we place our year-end target at 1,422, arrived at by applying 16.2x on financial year 2021 EPS of 87.8 sen,” it said.
Meanwhile, Hong Leong Investment Bank Bhd (HLIB) said 27 per cent of companies within its coverage were expected to be in the red in the second quarter, up from 16 per cent in the first quarter and six per cent in the fourth quarter of last year.
HLIB said the deteriorating corporate results in the second quarter, alongside Malaysia’s worst on-record quarterly gross domestic product performance, should send a wake-up call.
“Domestic retail participation seems rejuvenated with retailers buying net RM6.5 billion in the first half of this year, which is already more than double last year’s RM2.4 billion.
“This year’s average retail participation is also at a decade high of 31.5 per cent,” it added.