Sectors such as construction, telco, transport, banking underperform
By PAULINE NG
IN KUALA LUMPUR
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ANALYSTS have slashed their earnings growth forecasts after corporate Malaysia turned in a third quarter performance that revealed earnings to be souring faster than expected.
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| Patchy: Malaysian corporations posted a second consecutive quarter of earnings disappointment, with a bigger number slumping in their performance for Q3 |
Malaysian corporations posted a second consecutive quarter of earnings disappointment, with a bigger number of companies slumping in their performance.
While one in four companies covered by stockbroker HwangDBS-Vickers proved to be a letdown for the second quarter, 34 per cent did not live up to expectations for the third.
That the current global financial dislocations have already exacted a toll on Malaysia Inc was reflected in the aggregate fall in net profit. In HwangDBS's universe of companies, profit fell a steep 29 per cent year on year and 30 per cent quarter on quarter.
Transport, telco, banking, and construction were significant underperformers but a number of big caps across the board were off target: Maybank (with its impairment losses on its Pakistan unit MCB), Bumiputra-Commerce (weak capital markets), TMI (losses in Bangladesh and India), MAS (higher jet fuel costs), MISC (higher operating costs), Genting (significant investment write-offs), and Tenaga (higher coal costs).
Aseambankers observed that it was not a season to be jolly, its universe of companies posting a greater letdown with 43 per cent of the 88 stocks underperforming. The stockbroker has downgraded the earnings of virtually every sector - except for consumer - and reduced its 2008-2009 market forecasts by 4.3 and 7.6 per cent respectively.
In a strategy report, it said that market earnings this year would likely expand a mere 0.9 per cent before contracting 6.4 per cent next year, but acknowledged the potential for further downside to its forecasts through to 2010 where it anticipates a 7 per cent recovery.
The drop in third quarter profits is in line with the softer economy, which in the third quarter expanded 4.7 per cent, down from 6.3 per cent three months ago.
HwangDBS is more optimistic about this year's earnings growth, pegging it at 6.7 per cent, but has projected earnings to contract 8.8 per cent next year.
Its downgrades included two blue chips - Sime Darby and Resorts World. Sime was rated a 'sell' because of its high multiples relative to the sector, while Resorts' perceived pricey related-party purchase of a 10 per cent stake in Walker Digital Gaming earned it a 'hold' from a 'buy'.
Top on Aseambankers' list of unpleasant surprises in the third quarter was budget carrier AirAsia's RM428 million (S$180 million) derivatives-related losses. Fraser & Neave's unexpected consumer defaults at its non-core property division in spite of the buoyant outlook at its Fraser Business Park project raised alarm bells, as did IOI Corporation's scrapping of plans to buy Menara Citibank which led to the forfeiting of a RM73 million deposit.
Despite the challenging economic climate, 16-17 per cent of companies covered exceeded expectations for the third quarter. Auto player Tan Chong Motors emerged as one of the bigger surprises, its sharp 40 per cent rise in net profit achieved on the back of stronger new model sales. Other 'consensus beaters' were JT International and UMW.
Any relief rallies in the last quarter are likely to be limited by the rapid deterioration in the global economic scene, but window dressing activities at year-end could provide a bit of cheer.
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