Analyst calls for Sept 4
KUALA LUMPUR, Sept 4 — This is a selection of morning calls by local research houses for the day.
Today’s Market Preview
Our Malaysian bourse will be looking to consolidate its position in the absence of fresh market leads. The benchmark FBM KLCI could pull away a bit further from the resistance-turned-support level of 1,650 as it attempts to breach past its all-time high of 1,655.49 ahead.
While Wall Street was closed for a holiday yesterday, most European equity indices rose, paced by France (+1.2 per cent) and Italy (+1.1 per cent) as investors remained hopeful that key central banks would act to stimulate their economies.
Amid the fairly positive external environment, listed companies with new contract wins may come under the limelight on our local bourse today, such as: (a) Zelan, which has bagged a subcontract job for the engineering design and construction works for a power plant project in Johor worth RM215m; (b) KUB Malaysia, after clinching an electrical system contract for a stainless steel plant valued at RM34m; and (c) KKB Engineering, following the award of a RM74m contract to supply mild steel pipes and parts.
Earnings Review/Strategy – Weak earnings momentum; investors hopeful of global policy actions
Despite the stronger economic growth, 2Q corporate earnings growth was weaker than envisaged and has not improved from the previous results reporting season. Overall, top line growth remained weak given the persistent external headwinds and the uncertain outlook. This, coupled with the continuing trend of higher costs, resulted in falling margins for many companies under our coverage.
Sector-wise, earnings of plantation, timber, transportation, motor, semiconductor, building materials and oil & gas sectors were below forecasts, while that of banking and insurance slightly surpassed expectations.
Despite the persistent external headwinds, global equities have been holding up very well. This, in our view, is underpinned by policy actions of central banks in the developed countries, and more importantly, the unappealing returns of the alternative asset classes.
Given the stronger-than-expected Malaysia’s economic growth, and as central banks in the US and Europe are likely to step in with additional measures to bolster their economies, we are tweaking up our end-2012 FBM KLCI target to 1,690 based on 15x 2013 earnings, from 1,650 or 14.6x 2013 earnings previously. Our end-2013 FBM KLCI target is set at 1,815, based on 15x 2014 earnings.
We believe the search for yield will likely remain a key driver for market performance in the 4Q and continue to advocate a defensive strategy.
FBM KLCI – Possible End Of Consolidation Phase
Prior to yesterday’s session, the FBM KLCI had been consolidating the 14 Aug 2012 rally which created a new historic high. Thanks to last Friday’s strong US market performance, the index gapped up at the opening and ended the day with nearly 8-pt gain. Although the upside momentum was capped by the 1,655 historic high, yesterday’s market action may signal the end of the consolidation phase seen over the last two weeks.
These recommendations are solely the opinion of the respective research firms and not endorsed by The Malaysian Insider. The Malaysian Insider shall not be liable for any loss arising from any investment based on any recommendation, forecast or other information contained here.