KLCI Target Raised To 1,622 Points To Reflect Earnings Revision Of 4Q21 Results Season

CGS CIMB has raised the year-end 2022F KLCI target to 1,622 points (from 1,612 pts) based on 12M forward P/E of 14.5x (1.5 s.d. below its historical 3-year moving average mean P/E of 16.2x).

It said that upgrade in our 2022 KLCI target is to reflect the earnings revisions post 4Q21 results season.

Reviewing the 4th quarter results, it said that the ratio of companies posting results above our expectations rose to 40% in the 4Q21 results season (3Q21: 31%), while the ratio of underperformers fell to 23% (3Q21: 33%). K

It said that the key takeaways from 4Q21 positive earnings surprises came from agribusiness and banking sectors; the EMS, media, and oil and gas sectors posted weaker-than-expected earnings; and 4Q21 core net profit rose 17% qoq due to lower losses from Sapura Energy and Capital A, and higher earnings from Genting group, auto, and palm oil players.

We project 1Q22F to benefit from the sharp rise in commodity prices (CPO, crude oil) due to the ongoing Russia-Ukraine war and higher consumer spending due to pent-up demand, as well as the Chinese New Year.

The stockbroking firm has added Petronas Chemical and Malaysia Airports added to top three picks (replacing QL Resources and Inari) and keeps Hong Leong Bank as our top three picks.

It said that it added Petronas Chemical Group as it is a beneficiary of rising oil prices due to the ongoing Russia-Ukraine war. “MAHB is our preferred pick for the international border reopening theme. Hong Leong Bank is our pick as recovery and rate hike beneficiary,” it said

It said that it expects the KLCI to remain range-bound as the market weighs the positives coming from record-high commodity prices and recovery play from borders reopening against a potential short-term squeeze in profit margins of corporates due to rising electricity, raw material, labour costs, and rate hike.

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