KUALA LUMPUR (Dec 3): Analysts have revised their earnings forecasts for Malaysian stocks and trimmed the year-end target for the benchmark FBM KLCI following mixed results across sectors in the July-September quarter (3Q2024).

In a note, UOB Kay Hian has trimmed earnings forecasts for the FBM KLCI by 0.8% for 2024 and 1.7% for 2025, driven by downgrades in the plantation and consumer sectors and weakness in the oil and gas shipping segment.

However, the healthcare and technology sectors saw upgrades, it said.

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According to UOB Kay Hian, there is a notable increase in 3Q surprises, with both outperformers and underperformers rising in tandem.

Sectors such as construction, technology, automobiles and building materials saw the most disappointment while oil and gas, property and utilities saw the most positive surprises, the research house noted.

"We now expect our coverage universe and the FBM KLCI to deliver earnings growth of 21%/10.7% and 11.4%/8.3% respectively in 2024/2025," it said.

UOB Kay Hian also revised its year-end KLCI target to 1,650, down from 1,735 citing persistent global trade uncertainties and a weaker ringgit outlook, which is expected to depreciate further through 3Q2025.

While the research firm expects Malaysian equities to experience profit-taking after the start of the year, following a potential window-dressing rally in December 2024, investors could also keep watch of trade policies by incoming US president Donald Trump, it said.

TA Securities, however, have raised earnings forecast upward for calendar year 2024 (CY2024) and CY2025 by 0.7% and 1.3% respectively, following 3Q2024 results that came within expectations.

"This marks the first post-results upgrade after 10 consecutive quarters of downgrade," it said.

Among the 103 Malaysian companies under its coverage, 55% delivered earnings in line with expectations, while 28% missed and 17% exceeded forecasts. The oil and gas sector stood out as a key outperformer, the research house noted.

While TA Securities kept its FBM KLCI target unchanged at 1,690, it maintains a cautiously optimistic view on local equities, despite concerns that the index may underperform its end-2024 target.

However, improved clarity on macroeconomic factors and Malaysia’s inherent strengths could bolster investor sentiment in 2025, it said.

Separately, Kenanga Research lowered its FBM KLCI target for 2024 to 1,700 from 1,760, pointing to a stronger greenback, weaker ringgit and an anticipate reversal in 2025.

While noting overall earnings in 3Q versus the past two quarters, it maintained earnings growth forecast unchanged. The downward revision on the KLCI target is premised on lower valuation multiple, it said.

Notable sectors by Kenanga include gloves, contractors and healthcare, which are expected to drive more interest into the market near-term.

Looking ahead, “we have left unchanged our 16.5 times price earnings ratio in FY2025, which commensurate to a 1,880 FBM KLCI target from 1,920 previously, backed by an earnings growth of 8% in 2025.” said Kenanga.

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