Below expectations.Steel players under our coverage came in below ours and the consensus estimates given a softer average selling price and higher operating costs attributable to the sluggish international market coupled with the continued overcapacity issue on the global steel market, especially in China in 2012. As for retail companies' 4Q12 results, they came in broadly in line with the street and our expectations except for PARKSON and PADINI, which missed ours and the consensus numbers. We believe that this could be due to the global economic uncertainty and the slowdown in consumer spending. In addition to that, fierce competition, pricing competitiveness and higher marketing cost also had a further negative impact on the overall retail companies' earnings. The education sector, on the other hand, generally posted disappointing FY12 results as well due largely to higher costs. As expected, the plantation sector's results were also generally below the consensus estimates due to the low average CPO price of RM2189/mt recorded in 4Q12. Among the big caps, earnings disappointments were also seen in SIME, IOICORP and KLK due to the lower earnings from their plantation divisions. Technology companies also reported subdued 4QCY12 results with four out of the six stocks under our coverage coming in below our expectations. The disappointment was on the back of flattish revenue growth amid the global economic uncertainties as well as thinner margins as a result of higher operating costs. Major downgrades by us here were on MPI,UNISEM,NOTIONand JCY, which reported net losses in 4QCY12.

Above expectations.Developers' results meanwhile were c.60% above estimates due to higher billings and lumpy land sales recognitions. It appeared that developers that exceeded sales were the ones with overseas earnings,strong Johor project drivers and/or en bloc sales offerings.

Weaker earnings going forward? Our FBMKLCI's FY12A, FY13E and FY14F core net profit growth rates are now estimated at 12.0%, 3.2% and 9.4% respectively in contrast to the consensus FBMKLCI's historical, current and next year growth rates of 14.4%, 0.2% and 8.9% respectively. While the numbers seem to vary, the trend in the earnings estimates is clear‐cut, which is on a lower path in 2013.

Lower index target?We are maintaining our year‐end FBMKLCI Target Index at 1,700 pending our final review. However, there is a risk of a mild downward revision, say to 1,690, in our target above in our forthcoming Quarterly Investment Strategy.

Source: Kenanga