Saturday July 21, 2012
Q2 results to be within expectations
By YVONNE TAN
THE second quarter is expected to yield corporate results within analyst expectations with hardly any surprises thrown in.
“We think most will perform within expectations, the gloves sector may be the one sector which will surprise on the upside on lower latex prices and stronger demand,” Kenny Yee, head of research at BIMB Securities Sdn Bhd says.
That said, the sector that could perform below expectations is the construction sector as the flow of projects has not been as strong as earlier anticipated, Yee notes.
Bursa Malaysia Bhd got the ball going on the latest earning season when it reported its second quarter earnings on Wednesday. The stock exchange operator’s results came in within analyst estimates at RM37.95mil, up 6.3% from a year ago.
Companies have until end of August to report their earnings for the April to June period.
For now, BIMB Securities which remains “neutral” on the market is not expecting to make any fresh earning cuts or upgrades on any particular sector but will keep an eye on the banking sector, which may see some impact from the responsible lending guidelines issued by Bank Negara for banks since the beginning of this year, according to Yee.
While loans growth in May improved 40 basis points to 12.5% year-on-year compared with a 12.1% growth a month earlier, loan approvals for residential and non-residential properties continued to moderate in that month.
BIMB Securities is keeping its 10.2% year-on-year corporate earnings growth projection for this year, for now.
UOB KayHian’s research head Vincent Khoo, meanwhile, shares the same view that there will be no surprises in the second quarter, bearing in mind that the first quarter was disappointing especially in the steel, plantation, and oil and gas sectors.
The disappointing results were largely attributed to factors like the monsoon season and write-downs.
Such disappointment in the first quarter results which were weaker than the previous quarter had caused analysts to revise downwards their earnings growth projections.
UOB KayHian cut its 2012 corporate earnings growth projection to 9.9% from 13%.
“We think that no more downward revisions are necessary for now... any new cuts or upgrades are likely to be stock-specific, rather than sector-specific,” Khoo says.
RHB Research, in analysing the first quarter results, had said that it was slightly worse than the previous results reporting season where 29.2% of the earnings were below its forecasts and 22.1% above its expectations.
It then cut its 2012 earnings growth forecast of the FTSE Bursa Malaysia KLCI (FBM KLCI) stocks in its coverage to 10.7% compared with 12.2% earlier.
Kenanga Investment Bank head of research Chan Ken Yew’s view on the second quarter results does not differ from his counterparts.
“No major surprises, we had already revised downwards our earnings projection last quarter, earnings this quarter should be within expectations,” Chan says.
The banking sector could possibly exceed expectations, he says.
Chan has predicted a 18% growth in corporate earnings this year.
As for the stock market, UOB KayHian’s Khoo says the current uptrend could be sustainable for “a while”. “However, it will only be a matter of time before the debt problems in the eurozone come haunting us again.”
The 30-stock gauge, the FBM KLCI, has gained about 3% since the beginning of this month, helped by bits of positive news flow from overseas markets.
However, unless and until a solid solution comes to fruition in the Eurozone crisis, market traders and investors are likely to face more volatility in days and weeks to come.