Maybank Raises KLCI Target Albeit Modestly

In its view of KLCI’s Q1 performance, Maybank IB said its core earnings of its research universe expanded YoY for the 4th sequential quarter and on strong momentum with double-digit YoY growth. 1Q24 core profits rose 20.1% YoY, contributed by almost all sectors – except Petrochems and Technology which posted lower YoY earnings. QoQ universe core profit was also higher by 13.5% – drags were Plantation, Consumer, Property and Technology which delivered weaker QoQ earnings.

Beats > misses; Const’n, Gaming, Aviation +vely surprised
For the first time since 3Q22, the ratio of earnings misses-to-beats (vis-àvis our forecasts) fell below 1.0x – at 0.7x. This ratio has been trending down since 1Q23. Core earnings of four sectors positively surprised – Construction, Gaming, Non-Bank Financials and Aviation. Prominent positive outliers were IJM, Genting, Genting M’sia, AirAsia X and CapitalA, while notable negative surprises came from Lotte Chem, IOI Corp, KL Kepong, ViTrox, Globetronics and Malakoff.
+15.6% growth in 2024E, +10.5% in 2025E

Coverage 2024E core earnings estimates are consequently uplifted by 2.5%, and by 3.2% for 2025E. The house now estimate higher +15.6% core earnings growth for its universe and +12.9% for the KLCI in 2024E (previously +13.1% and +11.4% each), while for 2025E, it now estimates +10.5% growth for our universe and +9.5% for KLCI (previously +9.9% and +8.2%). Mayank IB says it expects all sectors to deliver higher YoY earnings with the exception of Media. It also expects Gloves and Aviation to return to the black.

Raising 2024 YE KLCI target to 1,680
Based on revised earnings estimates the house raises its YE KLCI target to 1,680 (from 1,610) which it said implies 14.7x 12M fwd. PER. Besides earnings growth delivery, catalysts that will take the KLCI higher include global interest rate cuts, details of the JSSEZ which will be catalytic in terms of FDIs and infra developments; and 3) MYR strength – FX Team expects the USDMYR to end the year at 4.600. It however reiterate our cautiousness on the external environment.

Rejigging some sector weights & top BUYs; thematics
The house remains overweight on Banks, Construction, Consumer, Gaming, Gloves, O&G, Aviation, RE and Tech (Software); UW Petrochems. It has also made changes to our top BUY stock list, adding SD Guthrie, Sime Darby, Gamuda, Dialog, Top Glove, MYEG, AirAsia X and new coverage SAM Eng. In this report, we also revisit (and reiterate) three thematics introduced in the “2024 Year Ahead: Rising Momentum” report.

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