KL Trader Investment Research Articles

Author: kltrader   |   Latest post: Thu, 20 Sep 2018, 09:25 AM


1Q18 Results Wrap - Latest Stock Picks!

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Malaysia’s 1Q18 reporting season has recently wrapped up, with results mostly in-line. Macquarie Equities Research (MQ Research) provides a summary in its report released last Thursday (14 Jun), with banks and transport / logistics dominating its defensive stock picks. Further, they believe that value is emerging for politically-sensitive stocks.


  • With 1Q18 GDP data showing a slowdown in domestic demand and consensus revising lower earnings per share (EPS) growth estimates ahead of 1Q18 reporting, a relatively muted reporting season was as anticipated. MQ Research’s preferred sectors i.e. banks and transport / logistics, were outperformers and dominate stock picks per Table 1 below, where MQ Research favours defensive positioning through the first 100 days transition period of the new government. For investors looking to bottom-fish, MQ Research flags valuation ranges for politically-sensitive stocks such as CIMB, Gamuda, AirAsia, MyEG, Genting (M) and small-mid cap construction.


  • 1Q18 – meeting moderated expectations: reflective of a sharp slowdown in domestic demand growth, to 4.1% (4Q17: 6.2%), and the chilling effect on consumption and investment in the run-up to elections (GE14, on 9th May), consensus KLCI EPS growth forecasts were moderating pre-reporting, and are now 3.9% and 6.7% for 2018 and 2019, respectively, vs. 6.1% and 6.9% post-4Q17 reporting. Re Macquarie coverage, forecast 2018/19 earnings growth is a higher 5.4% and 7.7%, respectively, though having moderated from post-4Q17 reporting’s 9.5% and 9.0%, respectively.
  • Key stock EPS/ratings adjustments: following sharp, post-GE14 share price declines and encouraging results, MQ Research has upgraded their ratings for AMMB and Gamuda to Neutral (N) (from Underperform); Westports has been upgraded to Outperform (from N) ahead of visible catalysts i.e. tariff hike, rising volumes. MQ Research reduces BAT to Underperform (from N), on weak results vis-à-vis overly-bullish expectations of a speedy rollback of the illicit market.
  • KLCI target underscores value emerging: while MQ Research has moderated KLCI earnings growth expectations, target price (TP) lift from the rolling forward valuation bases to CY19 means MQ bottom-up 12mth KLCI target is relatively unchanged at 1,953 (previously 1,936) – coupled with post-GE14 underperformance and a market dividend yield of 3.5%, 12mth total shareholder return (TSR) is 14.5%. The KLCI is now also at the bottom of its 5-year trading range on both price-earnings (PE) and price-book (PB).


  • 1Q18 GDP stats and results support MQ Research’s preference for exporters (Inari, Top Glove), banks (MAY, RHB, HLBK) and consumer (MyNews), with Sapura Energy (SAPE) a new mid-cap pick. MQ Research sees value among politically-sensitive stocks i.e. ECRL project continuity reducing earnings risk re Econpile, AQRS and HSS, all of which are below bear case valuation; also, CIMB is now near bear case valuation while Telekom (>5% yield) is at worst case valuation.

Source: Macquarie Research - 18 Jun 2018

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