Tuesday, June 05, 2012

Best Headline: Q1 Earnings

Posted on the Business Times version this morning.

  • 'Malaysia Q1 corporate earnings within expectations'

    Published: 2012/06/05

    Analysts say there were letdowns from companies in the plantation, oil-and-gas, transport, steel and gaming sectors

    MALAYSIA'S corporate earnings in the first quarter, though largely within expectations, were weaker than the previous quarter, prompting analysts to turn cautious and lower their growth expectations for the year.

    Analysts said there were letdowns from companies in the plantation, oil-and-gas, transport, steel and gaming sectors but positive surprises from those in the financial and insurance sector.

    "Despite elements of seasonality in the just-concluded reporting season, there was a greater number of earnings misses among the big caps," said OSK Research.

    OSK noted that its upgrade-to-downgrade ratio for companies in the quarter slipped to 0.5 times - implying two downgrades in earnings for every upgrade - from the previous quarter's high of 0.9 times.

    "The downgrades appear to be more apparent among the big caps (three downgrades for every upgrade), indicating that analysts are turning more cautious going into the second half of this year, with potential delays in holding the general election and the protracted woes in the eurozone," it said in a report yesterday.

    Three months ago, the outlook had seemed more bullish, buoyed by expectations of a rosier economic outlook.

    RHB Research said corporate earnings remained weak in the first quarter in tandem with the moderating economic growth.

    Of the 108 companies that the research house tracks, 53.7 per cent reported earnings within its expectations, 30.6 per cent below expectations and 15.7 per cent above.

    "Indeed, this set of results was slightly worse than the previous results reporting season where 29.2 per cent of the earnings were below our forecasts and 22.1 per cent above our expectations," it said.

    It cut its 2012 earnings growth forecast of the FBM KLCI stocks in its coverage to 10.7 per cent, compared with 12.2 per cent two months before.

    "Overall, top line growth was weak, given the slowing economic growth that has translated to weak sales and utilisation rates for some companies under our coverage.

    "This, coupled with the continuing trend of higher costs, resulted in falling margins for many companies under our coverage," it said.

    The weaker corporate earnings growth momentum, coupled with a slowing economy and uncertainties over how Europe's debt crisis will pan out, means the stock market will likely be stuck in a range-bound trading pattern until new catalysts emerge.

    "We believe the market pullback that we have seen thus far may not be over and we expect the market to mire in a correction and consolidation mode at least until after the new Greek election on June 17," RHB said.

    OSK said there were enough reasons for investors to stay defensive while positioning for rebound trades in the event of a sharp pullback in the local market.

    Still, it believes the upcoming listing of two major initial public offerings, namely Gas Malaysia Bhd and Felda Global Ventures Holdings Bhd, should provide near-term catalysts and support for the FBM KLCI.
I really wonder how Business Times decided that 'Malaysia Q1 corporate earnings within expectations' was the best fitting headline describing Q1 corporate earnings.

Anyway, this was posted on Sun Daily Business yesterday: http://www.thesundaily.my/news/397059
  • Q1 corporate results disappointing Posted on 4 June 2012 - 05:37am

    PETALING JAYA (June 4, 2012): The season for reporting first-quarter 2012 earnings ended last week, with disappointing corporate results and lukewarm assessments of the year ahead.

    Alliance Research Sdn Bhd said the Q1 results showed that the much-hoped-for earnings improvement in 2012 remained a pipe-dream as 34% of stocks monitored by it reported earnings below consensus estimates, a marked increase over the 24% negative earnings surprises for the fourth-quarter 2011 earnings season.

    The percentage of results coming in within expectation also fell from 56% to 49%, while the percentage of positive earnings surprises dipped from 20% to 17%, it said in a report last Friday.

    "Q1 earnings season was a disappointment on two counts. Firstly, negative earnings surprises have increased given widespread earnings disappointment seen in the automotive, aviation, gaming, plantation, shipping and timber sectors.

    "Secondly, the nascent earnings upgrade momentum since beginning of 2012 has reversed course with consensus earnings for the FBM KLCI being cut by 0.8% for 2012 and 0.4% for 2013, led by the plantation and gaming sectors," said Alliance.

    Despite a recent rebound in the benchmark FBM KLCI, the research firm believes the respite may be short-lived given overwhelming headwinds such as a heightening concern over the eurozone debt crisis as well as the impending 13th general election (GE). The FBM KLCI has rebounded by 3.2% since hitting a recent low of 1,532.46 points on May 18.

    "We believe the stock market will consolidate in Q3 before staging a recovery in Q4 when there is more clarity on whether Greece will trigger a global credit crunch by exiting the eurozone, the extension of fiscal and monetary easing policies in US which are expiring by mid-2012, and the political landscape in Malaysia post-GE," said Alliance.

    Its end-2012 FBM KLCI target remains unchanged at 1,630 points, which is pegged to a mean price-to-earnings valuation of 15 times. The FBM KLCI closed 7.08 points lower at 1,573.59 on Friday.

    "We are maintaining our sector calls as we continue to overweight banking, construction, consumer, gaming, oil and gas (O&G), and retail REIT which are beneficiaries of resilient domestic consumption and government spending," it said.

    Meanwhile, the sectors which had contributed to negative earnings surprises in Q1 were automotive due to weak demand, aviation due to high fuel cost, gaming due to poor luck factor and higher costs, plantation on lower production due to tree stress, shipping due to low rates and weak demand, and timber due to low prices.

    Meanwhile, the oil and gas sector has been a mixed bag, with fabricators posting positive earnings surprises and vessel players, negative earnings surprises.

    "The only clear-cut outperforming sector was consumer with firm demand growth almost across the board," said Alliance.


    lmenwe said...

    To me it is a piece of crap!!!! It is a vehicle of the gov!!!! Tons of misleading news! There are tons of criticism on high speed bullet train between KL and Singapore yet they are able to twist it around and make it look viable! No matter from which perspective Felda's is over value but they are able to write something to show that it will be a high flyer! I wonder how a plantation counter with 53% of tree need to be replanted and soften CPO price and demand can be a high flyer after it was listed? They keep on assure that it will have a better performance than Bumitama! Come on Bumitama's tree profile is way too young, it have ample of unplanted land reserve and at the time it was listed CPO price is still high.

    Mun Wai said...


    I have a brilliant idea to share :)

    Since there are so many analysts in town with different views. And the journalists seem to have difficulty in getting the best headline. How about we be good and help out a bit.

    Now, let's set a simple standard. Benchmark all research houses against one chosen house. Only have 2 grades, "om par" or "below par". Cannot have "above par" because the chosen one is king of all. No one is higher.

    Next, which house will be the benchmark ? You choose or I choose?

    How do you think ? This is a super brilliant solution, yes ?

    Moolah said...

    Mun Wai: If my understanding is not flawed, I don't think I read a report from any research house that said boldly that the Q1 earnings was within expectations.

    Anyway, as stated in the Business Times artilc, the ever perma-bull house like OSK had noted that it had 'two downgrades for every upgrade' and RHB flat out said that corporate earnings remained weak.

    So how did Business Times decided that 'Malaysia Q1 corporate earnings within expectations' was the best header given what it had writen?

    Mun Wai said...

    Could the author of the article be so "precised"to expect weak corporate earnings in Q2, and hence the generally weaker earnings reported were indeed WITHIN the author's expectations :P

    I repent. Am I allowed to twist & turn in this manner.