Citi cuts target for Malaysia KLCI on earnings misses

CIMB Equities Research expects Dialog Group Bhd to deliver strong earnings growth from next year onwards.

HONG KONG: Citigroup cuts its target for the FTSE Bursa Malaysia KLCI Index to 1,790 from 1,844, citing downgrades in price estimates for companies including Tenaga Nasional.

Earnings misses have outnumbered beats and growth drivers are lacking, analysts led by Patrick Yau write in a note dated March 6.

New target implies a 6.1% gain from the last close.

Tenaga’s price target (PT) was cut 8.4% to 16.40 ringgit last month; Maxis’s, Public Bank’s also lowered. However, upgraded PTs for RHB, Petronas Chemicals, AMMB.

KLCI is the poorest performer in Southeast Asia this year despite an appreciation in the ringgit

“Malaysia, while well-positioned for export-oriented growth, is in need of stronger marketing to gain flows from potential relocations given ongoing U.S.-China trade frictions,” the
analysts write. 

“Investors, we believe, are awaiting better digestion of new policies and ‘brave new ideas’ that have hurt some sectors and eventually new big-ticket direct investments as validation.”

Sees some of last year’s weakest sectors among key return generators, citing gaming, contractors, technology, though remains defensive.

Top picks include RHB, Inari, Sime Darby Plantations, Sime Darby, Dialog and IJM.

Adds Genting Malaysia; removes Public Bank and MAHB. - Bloomberg