CIMB IB Research lowers end-2017 KLCI target to 1,790

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KUALA LUMPUR (March 2): CIMB IB Research has lowered its end-2017 target for the FBM KLCI to 1,790 (from 1,820) and said the earnings revision ratio improved from 0.24x in 3Q16 to 0.58x in 4Q16, the highest level attained since 4Q15.

In a strategy note March 1, the research house said this was positive and suggests that corporate earnings may be at an inflection point.

“Still, we have found earnings revision ratios to be at their year-high in the 4Q over the past two years. As such, it is unclear if the worst is over for corporate Malaysia.

“We cut our 2017 market EPS by 3% and our 2018 number by 1%.

“We project an EPS growth of 9% for 2017 and 8% for 2018. We lower our end-2017 KLCI target to 1,790.

“Our top three picks are Genting Malaysia Bhd, Gamuda Bhd and Sime Darby Bhd,” it said.

Commenting on the three stocks, it said Gamuda is the frontrunner in the rail tunnelling tenders totalling RM41 billion across all projects.

In the short term, resolution to the sale of its 40%-owned Splash is the key event catalyst that may lead to special dividends, it said.

On Genting: “We expect Genting Malaysia's share price to rerate as its additional gaming capacity and other various attractions start to unlock value. Additionally, we expect the allure of its upcoming theme park to drive tourist arrivals growth.”

On Sime Darby: “We expect Sime’s share price to improve on the back of higher commodity prices and plans to demerge and list its plantation and property divisions.”