{"id":30557,"date":"2023-03-06T13:49:39","date_gmt":"2023-03-06T05:49:39","guid":{"rendered":"https:\/\/umedic.com.my\/Stagging2025\/?p=30557"},"modified":"2023-04-05T10:04:19","modified_gmt":"2023-04-05T02:04:19","slug":"corporate-malaysia-earnings-momentum-waning-in-4q","status":"publish","type":"post","link":"https:\/\/umedic.com.my\/Stagging2025\/corporate-malaysia-earnings-momentum-waning-in-4q\/","title":{"rendered":"Corporate Malaysia earnings momentum waning in 4Q"},"content":{"rendered":"<div class=\"navigation-top pb-20 pt-20\">\n<div class=\"d-sm-flex justify-content-between\">\n<p class=\"editor-info\"><time datetime=\"2023-03-06\">Monday, March 6th, 2023&nbsp;<\/time>at&nbsp;<a href=\"https:\/\/themalaysianreserve.com\/category\/business\/\" rel=\"category tag\">Business<\/a>&nbsp;|&nbsp;<a href=\"https:\/\/themalaysianreserve.com\/category\/corporate-malaysia\/\" rel=\"category tag\">Corporate Malaysia<\/a>&nbsp;|&nbsp;<a href=\"https:\/\/themalaysianreserve.com\/category\/news\/\" rel=\"category tag\">News<\/a><\/p>\n<\/div>\n<\/div>\n<section class=\"single-post-content clearfix\">\n<div class=\"dable-content-wrapper\">\n<p class=\"p1\"><em><span class=\"s1\">Sectors that are heavily dependent on migrant workers, however, reported easing constraints<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/em><\/p>\n<p class=\"p2\"><span class=\"s1\"><b>by RUPINDER SINGH<span class=\"Apple-converted-space\">&nbsp;\/ pic TMR FILE<\/span><\/b><\/span><\/p>\n<p>article from <a href=\"https:\/\/themalaysianreserve.com\/2023\/03\/06\/corporate-malaysia-earnings-momentum-waning-in-4q\/\">https:\/\/themalaysianreserve.com\/2023\/03\/06\/corporate-malaysia-earnings-momentum-waning-in-4q\/<\/a><\/p>\n<p class=\"p3\" data-kiosked-context-name=\"kskdUIContext_01gv2exh99qrmj3hg23snhdwkq\"><span class=\"s1\"><b>The <\/b>recently concluded fourth quarter (4Q) earnings season saw an almost flat set of results. However, one research house observed that corporates\u2019 cautious outlook is already being reflected in net earnings downgrades for 2023.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\" data-kiosked-context-name=\"kskdUIContext_01gv2exh99qrmj3hg23snhdwkq\">RHB Investment Bank Research (RHB Research) noted that as in preceding quarters, rising costs have made tangible dents on margins and bottom lines.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">\u201cThe broader operating environment is likely to worsen before improving, and this points to market volatility in the quarters ahead.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">\u201cFollowing the earnings downgrades, we commensurately cut our end-2023 FTSE Bursa Malaysia KLCI (FBM KLCI) target to 1,590 points (from 1,660 points),\u201d RHB regional research head Alexander Chia said in a recent research note.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">For the December quarter, RHB Research noted that six sectors namely, automotive, media, healthcare, utilities, rubber products and basic materials were deemed to have disappointed.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">This, it said, was offset by three sectors \u2014 banks, non-bank financials (NBFIs) and transport while other large-cap sectors were in line with its estimates.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\" data-kiosked-context-name=\"kskdUIContext_01gv2exh99qrmj3hg23snhdwkq\"><span class=\"s1\">It noted that sectors that are heavily dependent on migrant workers reported easing constraints, with the plantation and construction sectors\u2019 results coming within estimates.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">\u201cThe misses-to-beats ratio crept higher to 1.0 (from 0.8 in the last two preceding quarters) after 27.4% of earnings beat, offset by 27.4% that missed.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">The financial year 2023 (FY23) earnings within our coverage universe were slashed by 3.5% with the biggest cuts coming from banks, oil and gas (O&amp;G), and gloves,\u201d Chia said.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">Of the FBM KLCI stocks that RHB Research covers, Chia noted that there were five beats and seven misses.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">\u201cMore importantly however, is the 4.1% and 5% cut in FY23 and FY24 earnings estimates,\u201d he said.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">He said the heavy-weight banking sector saw forecasts down by 3%, mainly from net interest margin (NIM compression) and revised his view on petrochemical prices, which are likely to be more sluggish than previously anticipated.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\" data-kiosked-context-name=\"kskdUIContext_01gv2exh99qrmj3hg23snhdwkq\"><span class=\"s1\">\u201cTogether with cuts in earnings forecasts from basic materials, utilities, telecommunications and automotive, FY23 recurring earnings were lowered by RM2.8 billion,\u201d said Chia, adding that while there are some upside risks from the banks writing back excess provisions going forward, that is not yet the base case as of now.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s2\"><b>Tailwinds For Equity Markets<\/b><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">On strategy, Chia said Research still expects the maturing monetary tightening cycle, cresting US inflation, a resilient US economy, a resurgent China and reduced domestic political risks to act as tailwinds for equity markets.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">Adding to these positives, Chia said are the easing of regulatory risks as fears of punitive new taxes failed to materialise in the recently re-tabled Budget 2023.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">While equity markets will be buffeted by volatility from softer macro-economic and corporate data points, Chia said market weakness should be seen as opportunities to gradually deploy cash hoards to add equity positions for the medium term.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">Chia said for ward valuations are not especially demanding with the FBM KLCI now at just 13.7 times of FY24 price-to-earnings ratio and earnings growth is now just at 4%.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\" data-kiosked-context-name=\"kskdUIContext_01gv2exh99qrmj3hg23snhdwkq\"><span class=\"s1\">He said robust fundamentals are a key investment consideration, and thus the research house retains a \u2018Preference\u2019 for large-cap value stocks.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">RHB Research is \u2018Overweight\u2019 on banks, O&amp;G, gaming, basic materials, NBFIs, healthcare, auto and property.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">According to Hong Leong Investment Bank Research (HLIB Research), the aggregate core earnings for corporate Malaysia under its coverage universe in 2022 was flattish.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">For the recently concluded 4Q22 results season, it said that out of the 118 stocks under its coverage, 42% came in within expectations, 31% below and 27% above.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">When stacked against consensus, the research firm noted that 44% were inline, 29% below and 28% above.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">\u201cIn comparison to the preceding quarter (such as 3Q22), there was an increase in disappointments (25% to 31%), while results that exceeded expectations saw a slight decline (28% to 27%).<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\" data-kiosked-context-name=\"kskdUIContext_01gv2exh99qrmj3hg23snhdwkq\"><span class=\"s1\">\u201cConsequently, from a ratio perspective (% of results above\/ below), this decreased quarter-on-quarter from 1.14 times to 0.89 times. A similar trend was also witnessed for consensus, with the ratio declining from 1.43 times to 0.97 times, it said.<\/span><\/p>\n<p data-kiosked-context-name=\"kskdUIContext_01gv2exh99qrmj3hg23snhdwkq\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-medium wp-image-30558\" src=\"https:\/\/umedic.com.my\/Stagging2025\/wp-content\/uploads\/2023\/03\/IBM-KLCI-600x500-1-300x250.jpeg\" alt=\"\" width=\"300\" height=\"250\"><\/p>\n<p class=\"p3\"><span class=\"s1\">HLIB Research said notable results misses came from building materials due to company-specific reasons, gloves (all in the red due to weak average selling price and volume), media (softer advertising expenditure and higher newsprint cost), healthcare (non-hospital ones namely Pharmaniaga Bhd and UMediC Group Bhd) and REITs (office-based ones).<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">On the other hand, it noted that positive results surprises stemmed from the construction sector and to a lesser extent the banking segment.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">HLIB Research estimates that aggregate core earnings for its coverage universe slipped 4.6% on a quarterly basis largely dragged by Petronas Chemicals Group Bhd and Tenaga Nasional Bhd but rose 7.9% on a yearly basis.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">For the 12 months of 2022, it said the aggregate core earnings is estimated to have inched up 2.5% with most companies seeing earnings recovery.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p4\"><span class=\"s1\"><b>Another Rate Hike on The Table for the US<span class=\"Apple-converted-space\">&nbsp;<\/span><\/b><\/span><\/p>\n<p class=\"p3\" data-kiosked-context-name=\"kskdUIContext_01gv2exh99qrmj3hg23snhdwkq\"><span class=\"s1\">Moving forward, HLIB Research said while the US Federal Reserve (Fed) has dialled back on its rate hike quantum, there is now increasing probability that this may pick-up again possibly with another 50 basis points increase during the March Federal Open Market Committee or with a higher terminal rate.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">Such a scenario, it said, spells further widening in the Fed Funds Rate Overnight Policy Rate spread, which the FBM KLCI is inversely correlated to at -57%.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">\u201cWe expect the market to remain choppy until mid-year which is when the US rate upcycle would probably peak.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">\u201cIn addition, US recession probability readings continue to remain elevated but its contagion effect could be cushioned by China\u2019s timely reopening.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">\u201cDomestically, the re-tabled Budget 2023 was a relatively muted one \u2014 this isn\u2019t necessarily a bad thing as risk of \u2018market unfriendly measures\u2019 being thrown in have now subsided,\u201d it said.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">Following the earnings adjustments post-4Q22 results, HLIB Research lowered its FBM KLCI target from 1,580 to 1,560.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\" data-kiosked-context-name=\"kskdUIContext_01gv2exh99qrmj3hg23snhdwkq\"><span class=\"s1\">\u201cOur FBM KLCI earnings per share forecast is 8.4% below consensus, in part reflecting the lack of earnings clarity from an uncertain macro backdrop,\u201d it said.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p data-kiosked-context-name=\"kskdUIContext_01gv2exh99qrmj3hg23snhdwkq\">Meanwhile, Public Investment Bank Bhd (PublicInvest Research) has kept its end of 2023 FBM KLCI target unchanged at 1,650 points, as no major revisions to earnings of index-component stocks were seen in the 4Q22.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/p>\n<p data-kiosked-context-name=\"kskdUIContext_01gv2exh99qrmj3hg23snhdwkq\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-medium wp-image-30559\" src=\"https:\/\/umedic.com.my\/Stagging2025\/wp-content\/uploads\/2023\/03\/quarter-earnings-600x784-1-230x300.jpeg\" alt=\"\" width=\"230\" height=\"300\"><\/p>\n<p class=\"p3\"><span class=\"s1\">PublicInvest Research said earnings of heavily-weighted banks and plantations were largely unchanged in 4Q, with tweaks in telecommunications (positive) and chemical\/consumer (negative) largely negating each other.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">\u201cThe 2023 and 2024 earnings baskets are anticipated to expand<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><span class=\"s1\">by 9.6% and 5.8% (respectively), the slightly more pronounced 2023 growth a result of base effects,\u201d it said.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">On the broader market, the investment bank said it remained cautious but not overly pessimistic for the remainder of the year.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\" data-kiosked-context-name=\"kskdUIContext_01gv2exh99qrmj3hg23snhdwkq\"><span class=\"s1\">\u201cThough the FBM KLCI continues to struggle to break out of its range-bound trading band, sufficient reasons warrant continued exposure in the market. However, uncertainties and resultant volatilities will be an ongoing feature.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">\u201cFundamentally, macro conditions in 2023 are not too dissimilar to that of 2022,\u201d it said.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">Moving forward, PublicInvest Research cautioned that the first half of 2023 (1H23) would remain uncertain as global economies work through the full effects of aggressive rate hikes over the last six months.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">\u201cSentiment is weak, understandably, but the market is also relatively undervalued (now more so) with the earnings picture not having been despite this quarter\u2019s apparent wobble.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">\u201cWe wouldn\u2019t be in a hurry to get into the market at this juncture, but retain sufficient optimism to suggest buying into market weakness to ride on the upside going into 2H23,\u201d it said.<span class=\"Apple-converted-space\">&nbsp;<\/span><\/span><\/p>\n<p class=\"p3\"><span class=\"s1\">Going into 2024, it said Malaysia\u2019s economic growth direction and earnings picture would depend on the severity or wear-off of the downside risks, which, at this point, is not expected to be severe.<\/span><\/p>\n<\/div>\n<\/section>\n","protected":false},"excerpt":{"rendered":"<p>Monday, March 6th, 2023&nbsp;at&nbsp;Business&nbsp;|&nbsp;Corporate Malaysia&nbsp;|&nbsp;News Sectors that are heavily dependent on migrant workers, however, reported easing constraints&nbsp; by RUPINDER SINGH&nbsp;\/ pic TMR FILE article from https:\/\/themalaysianreserve.com\/2023\/03\/06\/corporate-malaysia-earnings-momentum-waning-in-4q\/ The recently concluded fourth quarter (4Q) earnings season saw an almost flat set of results. However, one research house observed that corporates\u2019 cautious outlook is already being reflected in [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":30563,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[3],"tags":[180,205,170,202,194],"class_list":["post-30557","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-bursa-malaysia","tag-theedgemarkets","tag-umc","tag-umcg","tag-umedic-group"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Corporate Malaysia earnings momentum waning in 4Q - UMediC Group Berhad<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/umedic.com.my\/Stagging2025\/corporate-malaysia-earnings-momentum-waning-in-4q\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Corporate Malaysia earnings momentum waning in 4Q - UMediC Group Berhad\" \/>\n<meta property=\"og:description\" content=\"Monday, March 6th, 2023&nbsp;at&nbsp;Business&nbsp;|&nbsp;Corporate Malaysia&nbsp;|&nbsp;News Sectors that are heavily dependent on migrant workers, however, reported easing constraints&nbsp; by RUPINDER SINGH&nbsp;\/ pic TMR FILE article from https:\/\/themalaysianreserve.com\/2023\/03\/06\/corporate-malaysia-earnings-momentum-waning-in-4q\/ The recently concluded fourth quarter (4Q) earnings season saw an almost flat set of results. 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