Counters brave the storm and stand out for their resilience in earnings
FBM KLCI Top 20 Gainers
IN a year which saw the ringgit depreciate by some 10% and oil prices continued to languish, it was the evergreen consumer stocks which braved the storm and stood out for their resilience in earnings.
The top performer for the FBM KLCI was Dutch Lady Milk Industries Bhd.
Other food and beverage players such as Fraser and Neave Holdings Bhd (F&N) and Nestle (M) Bhd were also favourites with the investors, as all have benefited from the subdued commodity prices for the past two years. Collectively, their gross profit margins have widened for seven consecutive quarters from the fourth quarter of 2014 to the second quarter of 2016.
Another consumer and multi-level marketing player which made the cut was Hai-O Enterprise Bhd, which has seen improved sales from new products, higher recurring sales and an increase in monthly recruited new members.
For the second quarter ended Oct 31, Hai-O recorded 35.6% higher revenue of RM99.78mil and 78% increase in net profit of RM15.91mil.
Sole bank Public Bank Bhd made the cut, once again demonstrating its ability to generate stable profitability even when the operating environment remains challenging.
Public Bank’s net profit rose marginally by 3.1% to RM1.24bil in the third quarter ended Sept 30 compared with the same quarter last year, due mainly to higher net interest income and income from the Islamic banking business.
Two plantation companies made the list – Kuala Lumpur Kepong Bhd and United Plantations Bhd, not surprising given that sentiment in the sector has improved. Local crude palm oil prices are trading above RM3,000 per tonne and palm oil inventory levels have fallen to about 1.7 million tonnes, making this supportive for palm oil prices.
A new entrant to the list is Ekovest Bhd, which has attracted investors for its plans to make a special payout to shareholders of up to RM244mil, or 25 sen a share. Ekovest has hogged headlines since it announced its intention to dispose of a 40% stake in phases one and two of the Duta-Ulu Kelang Expressway (Duke) to the Employees Provident Fund for RM1.13bil.
FBM KLCI Top 20 Losers
The downstream oil and gas players and the rubber glove players were quite certainly the worst performers of 2016.
Investors sold down shares of Shell Refining Co (Federation of Malaya) Bhd, Petronas Dagangan Bhd and Petronas Gas Bhd (PetGas) on the back of unexciting earnings, forex losses and higher costs.
Generally, analysts are less enthusiastic on the outlook of Petronas Dagangan, as the domestic marketing arm of Petronas faces higher costs and weak consumer sentiment.
Meanwhile, PetGas continued to incur unrealised forex losses for its US-dollar finance lease liabilities, although this has now reduced from the previous year.
Not surprisingly, UMW Holdings Bhd was a big loser due to its oil and gas division, which has been badly hit by exceptional impairments and very low utilisation of its rigs.
Then there is Axiata Group Bhd, which has operations in 10 countries, and has seen competition rise in almost all the markets it operates in. Hence it needs to incur more capital expenditure which has thus put pressure on its profits.
The rubber glove players that were most sold down were Kossan Rubber Industries Bhd and Hartalega Bhd because of the price war on glove products. The industry as a whole will continue to be impacted by higher production cost, especially with the recent increase in minimum wage.
Nonetheless, glove makers are poised to record sequentially stronger earnings on improved supply-demand dynamics and a more favourable operating environment due to the weak ringgit.
SAM Engineering & Equipment (M) Bhd was another loser, probably because of the expansion cost it requires for its new RM100mil production facility in Bukit Minyak, Penang. Results over the last year have been weaker mainly on new projects start-up costs and foreign exchange movement.
SAM is building a new plant on a four-acre site in Bukit Minyak to produce nacelle beams for the new Airbus A320neo aircraft.