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AmInvest Research Reports

Author: AmInvest   |   Latest post: Fri, 21 Jan 2022, 10:43 AM

 

Strategy - A decent 3Q2021 but uncertainty has increased

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Highlights

A decent quarter (25% outperform; 20% underperform and 55% in line)

  • The recently concluded 3Q2021 reporting season was a relatively decent quarter. The number of companies which exceeded expectations outnumbered underperformers – 25% of the stocks under our coverage registered earnings that came in above expectation while 20% of them underperformed. More than half or 55% of these companies reported earnings which met expectations.

Plantation and Banking Sectors Outperform

  • The plantation sector outperformed as six out of the seven companies we cover posted results that beat expectations. This was achieved on the back of higher-than-expected operating profit margins. Sector net profit surged by over 30% YoY in 9M2021 underpinned by robust palm product prices. The average CPO price realised of the companies in 9M2021 was close to our average CPO price assumption of RM3,500/tonne for the full year. Comparing 3Q2021 against 2Q2021, average CPO price realised improved. Average realised CPO prices of the companies in our coverage ranged from RM3,502/tonne to RM4,244/tonne in 3Q2021, which were 4%–20% higher QoQ.
  • The banking sector also did well with three outperformers. CIMB’s 9M21 normalised earnings were above expectations, accounting for 82.5% of our estimates largely due to lower-than-expected opex and provisions. RHB Bank’s 9M21 core earnings beat expectations, making up 83.7% of our projection due to higher-than-expected total income with strong Islamic banking income. Meanwhile, Alliance Bank’s 6M22 earnings came in better than our expectation at 69.1% of our estimate due to lower-than-expected opex and provisions.

P Property Sector Disappoints

  • Three out of the six property companies that we cover registered lower-than-expected earnings. S P Setia, Sime Darby Property and UEMS missed expectations due to weaker-than-expected property investment contributions and weaker-thanexpected overseas performance.

Three New Names in Our Top 10 BUY Calls

  • We refresh our top picks, adding Inari Amertron (Inari), Malaysian Pacific Industries (MPI) and Apex Healthcare. We like Inari due to its role as a proxy for the growth of 5G through its RF business, which is set to benefit from the expected increase in demand for 5G smartphones going into FY22. For MPI, it is set to benefit from the expected strong growth in the electric vehicle (EV) space with a strong net cash position of RM914mil as at 30 Sep 2021. As for Apex Healthcare, it has positioned itself well to benefit from these megatrends – ageing population, public health education advancement and steady healthcare expenditure increase.

2022 FBM KLCI Target of 1,600

  • We introduce our end-2022 FBM KLCI target of 1,600 points. We have rollover our target PE to 2022 earnings. Our Target Forward PE is unchanged at 15.6x which is pegged at -0.5 standard deviation (SD). The discount is to reflect the negative earnings growth projected for total FBMKLCI component earnings in 2022 and a higher stamp duty for share transaction which will affect trading volume. For 2022, we expect FBMKLCI earnings to decline by 3.5% due to lower earnings projection for gloves and plantation sector. Despite positive earnings growth expected from the banking and oil and gas sector in 2022, these are not enough to offset the decline in gloves and plantation sector. We also expect prosperity tax to reduce 2022 earnings in almost all FBMKLCI stocks.


 

Source: AmInvest Research - 2 Dec 2021

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Labels: INARI, MPI, AHEALTH

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ahbah For 2022, we expect FBMKLCI earnings to decline by 3.5% due to lower earnings projection for gloves and plantation sector.

Despite positive earnings growth expected from the banking and oil and gas sector in 2022, these are not enough to offset the decline in gloves and plantation sector.

We also expect prosperity tax to reduce 2022 earnings in almost all FBMKLCI stocks.
02/12/2021 5:30 PM
calvintaneng Ahbah

Aminvest is a lousy judgment on palm oil

Having said their 6 of their 7 coverage on palm oil out performed Aminvest should upgrade palm oil

Instead it said plantation sector will decline

What kind of no head no tail coverage by Aminvest ?

Say palm oil outperformed
And then said plantation decline ?

Why does Aminvest think palm oil will decline ?

Contrary to Aminvest Simedarby plant expects Cpo to trade above Rm4200 till 1st qtr of 2022 which is still very good as cpo production cost only Rm2000 or less

THAT MEANS PALM OIL COMPANIES WILL STILL MAKE MORE THAN 100% PROFIT
03/12/2021 9:13 AM
oskchoon Andy Hall, ILO charged forced labour allegations on EMS industries, first victim Ataims, then now VS, next shouks be SKP... trade cautiously on Monday morning..
03/12/2021 11:17 AM
investor2021trading Read: Andy Hall Can BE Sued!

Andrew Jonathan Hall (born 30 October 1979 in Spalding, Lincolnshire, England) is a migrant worker and labour rights activist and researcher, formerly based in South East Asia.

In early 2013 Hall was sued by Natural Fruit Company following the publication of the Finnwatch report "Cheap Has a High Price".

The president of Natural Fruit, Wirat Piyapornpaiboon, commented on the ruling outside the Court house to international media, saying, "No foreigner should think they have power above Thai sovereignty!
03/12/2021 11:56 AM


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