While we thought we had factored in most of the negative factors into our forecasts, the recent set of quarterly results still appear weaker than expected. We saw a "disappointment ratio" of 38.5%, which is at the higher end of the historical range. Post results, we have revised our FY15E/FY16E core net profit growths to 0.9%/4.7% from 1.4%/6.0% previously. However, as the revisions are marginal in nature, we maintain our end-2015 and end-2016 Index Targets of 1,715 and 1,775, respectively. Our view remains unchanged. We believe this is a range-trading market and we continue to advocate a Range-Trading Strategy - S.O.S. around 1,700/20 while B.O.W. in support zone of 1,645/10. As for Top Picks, we still comfortable with ARMADA (OP, TP: RM1.17), KIMLUN (OP, TP: RM2.05), MAYBANK (OP, TP: RM9.74), PESTECH (OP, TP: RM7.43), PHARMA (OP, TP: RM6.95), PWROOT (TRADING BUY, TP: RM2.58), TAANN (OP, TP: RM5.70) and TM (OP, TP: RM7.33). However, we may review BJTOTO (OP, TP: RM3.72), MPI (OP, TP: RM9.71) and TOPGLOV (OP, TP: RM10.60). Note that we have recently downgraded SLP (TP: RM1.87) from OP to MP.

Challenging environment remains. Again, while we thought we had factored in most of the negative factors into our forecasts, the recent set of quarterly results still appear weaker than expected. Out of the 130 stocks under our coverage, 61 and 19 of them performed within and above expectations for result announcements between September 2015 and November 2015, respectively. In other words, 50 of them, or 38.5%, still reported lower-thanexpected results (see Figure 1-3 for details). While the “disappointment ratio” is 1.5 percentage points below last year's ratio of 40%, the ratio is still deemed to be registered near the higher end of the historical range of 24.6%-40.0% since the results reporting quarter of 4QCY13.

Inevitably, we saw market consensus starting to revise down net profit estimates for these 130 stocks. Based on our estimates, FY15E/FY16E numbers saw downward revisions of 20.4%/5.4% on average. Note that the revision number in FY15E could be skewed by ANNJOO (UP, TP: RM0.61) that saw a negative revision of 786%. Excluding this figure, FY15E earnings should only be revised by 6.6%. Based on Bloomberg data, since the beginning of early-Sep15 until end-Nov15, FY15E/FY16E earnings estimates for these stocks were lowered by 8.2%/3.6%, on average, as well. Consensus target price, on the other hand, has also been revised down marginally by 0.1%, on average (see Figure 4-6 for details).

In a nutshell, the just-concluded 3Q15 results season saw (i) Automotive, (ii) Building Materials, (iii) Consumer Retail, (iv) Gaming, (v) Oil & Gas and (vi) Telco sectors delivering weaker-than-expected results. The other 2 major sectors; namely (i) Banks and (ii) Plantations sectors were also less exciting as expected. (i) Gloves and (ii) Power Utility, on the other hand, delivered better than expected results. As for other sectors, they were mostly within expectations or mixed in nature (Please refer to Figure 7 for brief results comments and outlook of sectors under our coverage).

No immediate re-rating catalyst. All in all, it is clearly seen that the recent results season has failed to provide any strong rerating catalyst to the local equity market. Zooming into our FBMKLCI Earnings Universe, we have revised our FY15E/FY16E core net profit growths to 0.9%/4.7% from 1.4%/6.0% previously. As of end-Nov15, market consensus has also adjusted FBMKLCI FY15E/FY16E earnings growth estimates to 1.2%/7.0% (from 2.2%/7.0% in late-Sep15). Despite our fine-tuning of earnings estimates, our end-2015 and end-2016 Index Targets remain unchanged at 1,715 and 1,775. Our targeted PER multiples and earnings growth estimates are shown in the following tables. 

Source: Kenanga Research - 2 Dec 2015