Wednesday August 29, 2012
Mixed season with few surprises
Behind the News by John Loh
Apart for plantations, other sectors fared relatively well in Q2
THE second-quarter results season threw up a mixed bag but few major surprises, according to industry observers.
It was, however, not as strong as envisaged, with many firms reporting earnings that were on the weaker side, said Kenanga Investment Bank head of research Chan Ken Yew.
“The second quarter was flat at best. There were improvements in certain companies both year-on-year and quarter-on-quarter but no oomph' overall,” he told StarBiz.
In short, those who had failed to meet expectations in the first half would have to spend the rest of the year playing catch in order to meet their full-year targets and estimates, he added.
Most companies on Bursa Malaysia have by now announced their earnings report cards for the April-to-June period, although a flock of blue chips ranging from diversified conglomerates YTL Corp Bhd and Genting Bhd to telco heavy hitters Telekom Malaysia Bhd, Axiata Group Bhd and Maxis Bhd are due to reveal them in the coming few days before the market closes for the National Day holiday.
A head of research at a local bank-backed investment bank opined that save for plantations, other sectors fared relatively well in the second quarter.
He added that the industries in focus over the next three months included construction and building materials, which were set to reap the fruits of large-scale infrastructure contracts dished out earlier this year such as for the 51km Sungai Buloh-Kajang line of the My Rapid Transit.
Opinions, however, diverge when it comes to how this will bode for the third quarter.
One industry observer said Malaysia's better-than-expected 5.4% gross domestic product (GDP) growth in the three months to June provided a good backdrop for continued growth, and he did not see a significant slowdown on the immediate horizon.
Several economists had raised their GDP forecasts for the country's after an expansion in manufacturing and robust domestic demand boosted growth in the second quarter.
The GDP for the first quarter was also revised to 4.9% from 4.7%, while growth for the first half of the year stood at 5.1% compared with the same period last year.
Compared with the first quarter, the GDP expanded by 3%.
Sequentially, the research head remarked that the following quarter could soften in the face of weakening trade activity.
In contrast, Kenanga's Chan said corporate earnings should improve in the third quarter as the second half of the year is traditionally the period when consumers do their year-end shopping.
Nonetheless, the prospects section in the notes accompanying the financial statements of companies may offer some clues as to how they think they will fare in the months ahead.
Using the country's two largest banking groups as a yardstick, they have stated that in spite of the challenging external environment, the developing economies in Asia and especially Asean have a better chance of staying afloat.
In a filing with the stock exchange, Malayan Banking Bhd wrote: “The global economy is forecast to slowdown with a GDP growth of 3% in 2012 from an estimated growth of 3.9% in 2011 due to the recession in eurozone and lacklustre growth in other major advanced economies.
“Asia ex-Japan, however, is expected to outperform the advanced economies with Asean growth expected to be resilient.
“The economies of the three home markets of Malaysia, Singapore and Indonesia, where Maybank group operates in, are expected to have GDP growth of 5%, 3% and 6.2% respectively.”
It said these three markets collectively contributed more than 90% to the group's income and profit. “We expect to see reasonable business growth in these three markets for the financial year ending 31 Dec 31, 2012,” it added.
“Notwithstanding the global challenges, the group expects a satisfactory financial performance for the current financial year in view of anticipated growth in key Asean markets that the group operates in.”
CIMB Group Holdings Bhd, meanwhile, said it believed it would be able to achieve its full-year financial targets although it was anticipating the global environment to slow economic growth in Asean.
“The group has seen performance improvements arising from “CIMB 2.0”, especially in the wholesale divisions, and it expects more to come.
“The group will nevertheless remain vigilant in navigating the firm through these uncertain economic times and rapidly changing regulatory environment for banks,” it said.