With financial results from 54 more companies out of the 138 that we cover yet to be released (due to the automatic one-month deadline-extension to June as allowed by Bursa Malaysia in consideration of MCO-related disruptions), the prognosis based on the 84 announced earnings results thus far does not look encouraging. Out of these 84 companies following reviews, earnings downgrades overwhelmed upgrades by a ratio of 4 to 1. It would be safe to say for now that by the end of June when the remaining results are released, FY20E EPS of the FBMKLCI would bereduced by at least 7% to 78.5 sen and by 8% to 88.4 senforFY21EEPS. These figures pale in comparison with FY19EPS of 95.2 sen. For now, our end-2021 target for the FBMKLCI is reduced from 1,439 to 1,406. We shall finalise the target upon the completion of the earnings season by end June.

Deep cuts to several FBMKLCI constituents’ FY20 EPS: As at end of May, 84 out of 138 companies in our research coverage have announced their results. So far, 40 (48%) came in within, 34 (40%) below, and 10 (12%) above, our expectations. Of the 26 FBMKLCI component stocks that have announced results, 9 (35%) were within, 13 (50%) below and only 4 (15%) were above. 13 of the FBMKLCI components’ forecast earnings were slashed, some severely while only 3 were raised. Notable severe cuts were CIMB (-28%), AXIATA (-25%), SIMEPLT (-34%), PETDAG (-48%), GENTING (-40%), GENM (-39%)and AIRPORT (- 68%) which outweighed upgrades in MISC (+32%), HARTA (+56%) and TOPGLOV (+103%).

Downgrades overwhelmed upgrades 4 to 1: Of the 84 stocks that have announced results, the team have cut forecasts for 43 stocks with just 11 upgrades (where rubber gloves stood out as the only one sector where all stocks’ earnings were raised). Sectors for which results are glaringly missing as at 31 May are automotive (only 2 of 6 announced), building materials (none of 4), construction (3 of 10), property (5 of 12) and technology (2 of 6). Those that have made the results announcements are rubber gloves (4 of 4), sin (3 of 3) and telecommunications (5 of 5).

Source: Kenanga Research - 1 Jun 2020