PETALING JAYA: Following a poor set of corporate results during the second quarter (Q2) due to the movement control order (MCO), most sectors are showing some signs of recovery in Q3.
Sectors such as technology, plantations and consumer products, in particular, have performed better on a quarterly basis.
According to Rakuten Trade Research vice-president Vincent Lau, the earnings of plantation companies were supported by higher-than-expected crude palm oil (CPO) prices due to supply constraints.
“The technology sector saw a recovery in earnings on the back of fulfilled backlog orders, demand driven by iPhone production and new 5G smartphones, as well as trade flows moving away from China.
“As for the consumer products sector, there was demand for fast-moving consumer goods (FMCG) with more people staying at home, ” he said.
Over the next two quarters, Lau opined that some recovery plays will see improvements as economies open up, along with greater developments in the Covid-19 vaccine.
UOB Kay Hian in a research report highlighted that IJM Plantations Bhd’s (pic below) operations in Malaysia saw a higher operating profit, underpinned by a higher sales volume and better selling prices.
The group’s fresh fruit bunch (FFB) production in Malaysia rose quarter-on-quarter (q-o-q) and year-on-year (y-o-y) due to the yield recovery from the 2015 and 2016 El Nino lagged effect.
In addition, operations in Sabah were not affected by the conditional MCO.
However, the group’s Indonesian operations recorded a reduction in revenue due to a lower sales volume and production, due to adverse weather effects last year, mainly in the Lampung region.
IJM Plantations reported a core net profit of RM40.2mil during the quarter.
Semiconductor company Malaysian Pacific Industries Bhd, meanwhile, registered an all-time high quarterly earnings as core net profit came in above expectations at RM55.3mil, representing a 50.3% y-o-y growth and 12.8% q-o-q growth.
Kenanga Research expects the group’s earnings to continue on its upwards trajectory on the back of rising demand for its power management chip packaging service in data centres and laptops due to the higher usage of web computing, such as video conferencing, e-learning and media streaming.
“Orders for radio-frequency front-end (RFFE) packaging modules are expected to remain elevated, thanks to 5G adoption in smartphones.
“This is along with China’s move to source components locally, benefiting its Suzhou plant. Furthermore, the group’s venture into silicon carbide (SiC) power modules offers promising prospects, given its increasing popularity among electric vehicle manufacturers, ” the research house said.
Inari Amertron Bhd reported its highest quarterly net profit in almost 11 quarters. The semiconductor company saw a 92.4% jump in net profit to RM69mil as compared to the preceding quarter.
CGS-CIMB expects strong earnings recovery for Inari in the financial year 2021 (FY21), driven by higher demand for its radio frequency chips on the back of the new 5G smartphone launch by a United States-based smartphone player.
“Inari targets a 30% y-o-y volume growth in the RF chip shipment in FY21.
“Management expects the RF division to contribute 60% to 65% to group revenue in FY21 as compared to 45% in FY20.
“In addition, we expect a stronger sales recovery from Amertron Philippines in FY21 on the back of new customer wins. The plant is scheduled to begin mass production for its new customer in the second half of FY21, ” said CGS-CIMB.
On a q-o-q basis, Nestle (M) Bhd reported a net profit growth of 21.7% to RM128.4mil for its Q3.
According to Kenanga Research, Nestle’s revenue and core net profit rose 14% and 22%, respectively, as compared to the preceding quarter.
It said the stronger set of results was mainly boosted by stronger contribution from both in-home as well as hotel, restaurant and cafe (Horeca) channels, following the easing of movement restrictions, as well as sequentially lower Covid-19 expenses during the quarter.
Moving forward, the research house noted that Nestle’s Horeca channels are likely to remain under pressure, given the resurgence of Covid-19 cases locally coupled with the gradual imposition of the conditional MCO in most states of peninsular Malaysia.
“We are not overly concerned as earnings should continue to be buoyed by resilient in-home consumption, the group’s established brand presence as one of the market leaders, coupled with its exciting pipeline of new products, ” said Kenanga Research.
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