With around two-thirds of our Malaysian stock coverage with quarters ended Feb/March having reported 1Q23 results, the stats are looking dismal.
Maybank Investment Bank’s Malaysia and Regional Head of Equity Research Anand Pathmakanthan (pic, below) said while 52% of results have been in-line with expectations, only 8% were above while a high 40% came in below expectations.
In this light, Maybank IB has upgraded Carlsberg (to BUY; potential upside to group revenue and operating margins may flow through once in-bound tourism improves and internal inventory costs decline on lower commodity ASPs), RCE Capital (to BUY; positively surprised by raising its DPR policy to 60-80%, from 20-40%, with dividend yield now >6%) and YTL Power (to BUY; extended strong PowerSeraya performance and Wessex’s tariff hike taking effect next quarter; potential beneficiary of RE exports longer term).
Notable downgrades are Berjaya Food (to SELL; disappointed on lower operational margins from increases in raw material and labour costs, with cost environment to remain high even as room to pass on costs has reduced), Bumi Armada (to SELL; the positives of sustained de-gearing, improving cashflows and monetization of non-core assets are now more than priced in, with a catalytic BOO FPSO project win remaining elusive) and Swift Logistics (to HOLD; this is the third consecutive earnings miss with risks building re uptake rate for warehouse capacity expansions and pressure on volumes handled and rev/unit for the container haulage and freight forwarding segments.
Among the major KLCI component sectors were Telco (c.11% weighting) reported 1Q23 core profits rising 13% QoQ but declining 15% YoY, principally on CelcomDigi integration costs and weak op co. performances at Axiata.
Plantations (c.8%) have mostly reported and undershot weak expectations, with an especially dismal performance by Sime Darby Plantations on a combination of lower CPO prices, poor yields and low productivity of newly-hired harvesters.
Banks (c.41%) have just started to report, with Public Bank and RHB Bank sharing worse-than-expected NIM (32-46bps NIM contraction vs. 4Q22 due to deposit competition and falling CASA) but better-than expected credit costs. In sum, there appears downside risk to our post-4Q22 (early-March) research coverage 2023E earnings growth forecast of +13.6%, with post-1Q23 reporting revisions likely to see this figure decline towards the high-single digits, with corresponding downside for current end-2023 KLCI target of 1,660 (14x fwd. PER).
