• At about two-thirds through the 1Q2018 reporting season (68% of our stock universe having reported), corporate earnings have thus far been relatively unremarkable (Exhibit 1) – with 9%, 64% and 27% beating, meeting and missing our projections respectively. This compares with 24%, 49% and 27% for "above", "within" and "below" respectively in 4Q2017.

• Against the market consensus, the numbers have thus far been equally uninspiring with "above", "within" and "below" at 9%, 52% and 39% respectively, as compared with 18%, 51% and 31% in 4Q2017.

• Thus far, only one FBM KLCI Index-linked heavyweight has surprised to the upside, namely, Sime Darby thanks to the better showing from its car dealerships in China and heavy equipment business in Australia. On the other hand, Telekom disappointed due to a sharp contraction in voice, data and other telco services, although partly mitigated by increased internet revenue. Similarly, MISC was hurt by lower petroleum tanker charter rates and reduced earnings from its offshore production business. Meanwhile, Press Metal missed expectations due to lower-than-expected aluminium selling prices realised, higher cost of carbon anode and the ringgit’s strength.

FBM KLCI 2018 earnings growth moderates to 5.3% from 6.8%

• After factoring in the earnings changes thus far, our FBM KLCI earnings growth forecast for 2018F has been revised to 5.3% (from 6.8%), while 2019F to 7.1% (from 7.2%) (Exhibit 2).

• Meanwhile, in terms of earnings growth forecasts of "all sectors" – a broader but slightly more volatile earnings gauge encompassing the entire universe of our stock coverage – the numbers for 2018F and 2019F have been adjusted to 11.4% and 10.4%, from 15.6% and 10.6% previously (also see Exhibit 2).

Source: AmInvest Research - 28 May 2018