Q1 within expectations
But investors remain defensive on headwinds from Greece and Spain
PETALING JAYA: The first quarter results for Malaysian corporate earnings this year largely came within market expectations.
However due to upcoming events such as the Greece elections on June 17, the possibility of a Spain bailout, and the technical violation of the US markets last Friday, investors have plenty of reasons to stay defensive.
OSK Investment analyst Jeffrey Tan said: “There were major disappointments in the steel, plantation, and oil and gas sectors but positive surprises in financials and or insurers.”
A similar number of companies under OSK’s coverage underperformed, at 31% in 1Q12 versus 32% in 4Q11, and 34% in the quarter before that.
The percentage of outperforming companies fell 3% to 14% from the previous quarter. There were more disappointments among the big caps, with 27% missing the estimated forecast, against 17% in the preceding quarter.
However, among the small caps, more companies had beaten estimates at 20%.
Positive surprises from the bigger players were from Malayan Banking Bhd (Maybank) and JCY International Bhd, while the negatives were Malaysia Airlines, Genting Bhd and MISC Bhd.
Maybank exceeded OSK’s expectations with an annualised first quarter ended March 31, trumping the consensus and its full-year forecasts by 9% and 11% respectively. Maybank posted a 17.9% year-on-year jump in net profit to RM1.35bil in 1Q12, supported by sustained revenue growth across all business pillars.
Disappointments in the steel, plantation, and oil and gas sectors were caused by industry-specific issues and the macro-economic environment, while the financials and insurers sectors were positive given its defensive earnings.
In the plantation sector, only two out of the eight companies under OSK’s coverage were in line with forecasts.
The remaining six underperformed due to weaker-than-expected production and increase in input cost such as fertiliser prices and wages. Tan said some of the higher-thannormal costs will normalise in the June quarter as less fertiliser application will be needed, having mostly been done in the March quarter. However, he expects some effects of the weak production to continue.
Based on Kenanga Research’s coverage, research head Chan Ken Yew saw a mild downgrade in consensus financial year 2012 earnings by 0.1% post result season compared with higher downgrades of 1.2% and 5.3% in previous quarters 4Q11 and 3Q11 results season.
“Nonetheless, sectors such as education, technology and transportation had performed way below market expectations while utilities performed better than expected,” Chan said.
Although the three technology companies under Kenanga’s coverage posted mix 1Q12 results due to lower sales in the Europe segment, the results were within Kenaga’s expectations in their top lines, but underperforming in their bottom lines.
“We are expecting earnings growth rates to rebound to the region of 20% to 30% in 2013 due to increasing consumer demand in electronics devices.
In the automotive sector, Chan said most automotive companies, namely UMW Holdings Bhd, MBM Resources Bhd and Tan Chong Motor Holdings Bhd recorded lower earnings sue to stricter lending enforcement. “However, we do expect some rebound in sales in the coming quarters due to the pent-up demand from last year coupled with the aggressive new launches,” he said.