CIMB Equities Research expects Dialog Group Bhd to deliver strong earnings growth from next year onwards.
KUALA LUMPUR: Of the 127 companies that CIMB Equities Research actively covers, only 11% reported results that were above expectations in 3Q18.
In its research note issued on Tuesday, it said the percentage of companies with results that were below its expectations rose to 38% in 3Q18 from 36% in 2Q18.
“Our revision ratio (% of outperformers vs. underperformers) improved to 0.29 time in 3Q18 vs. 0.19 time in 2Q18. However, the latest revision ratio is the fifth-lowest since we started tracking quarterly results,” it said.
CIMB Research said the earnings disappointment was due to weaker CPO prices, lower margins from telco operators, and some impact from US-China trade tension.
It pointed out its 3Q18 market earnings for stocks under its coverage fell 5.9% yoy (2Q18: +5% yoy) due to lower earnings from the agribusiness, aviation and telco sectors.
Corporate earnings for 9M18 fell 2% as profit margins were impacted by lower commodity prices, provisions, weaker profit margins, and delays in contracts for some companies.
“We cut our KLCI earnings growth forecasts to 4% for 2018F (from 5%) and 4% for 2019F (from 8%), in line with our earnings revision.
“We also fine-tune our end-2018F KLCI target to 1,704 (based on 16.6 times /E or one standard deviation above three-year mean) from 1,684, and introduce our end-2019 KLCI target of 1,674 (based on 15.4 times or one standard deviation below average P/E of 16 times).
“Our top pick list now includes Axiata, Kossan Rubber
, Supermax, Malaysia Airports, UMW Holdings and Star Media.
“ We have removed Digi, Genting Plantations, Velesto Energy, Tan Chong and Prestariang from it. There is no change in our top three picks, which remain Dialog, Westports and MPI,” it said.
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