HLIB Research cuts KLCI target to 1,710

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KUALA LUMPUR (Sept 2): Hong Leong IB Research has cut its target for the FBM KLCI to 1,710 and said CY2Q15 earnings disappointed for 17th consecutive quarter, worst since started tracking in CY2Q11.

In a note today, the research house said 2015 EPS now contraction of 1.6% (versus +2.6% pre-results) but 2015 +8.3% (versus 7%) on lower base.

HLIB Research said market rebound may signal capitulation but headwinds persist as old issues still lingers while new issues take time.

It said the Special Economic Committee was positive given more concerted efforts and holistic approach but also need time.

HLIB said despite headwinds, repeat of AFC unlikely while valuations at least 0.8SD below mean and only worst off during crisis.

“Modest reversion of valuation closer to mean, towards year-end, post clarity, is attainable amid lower foreign presence.

“FBM KLCI target cut to 1,710 based on lowered 15x (0.5SD below mean) 2016 earnings.

“Slight change in focus themes to: 1) sold down big caps (Axiata Group Bhd, DiGi.Com Bhd, IJM Corporation Bhd, Malayan Banking Bhd and Tenaga Nasional Bhd); 2) 11MP + RAPID (Edgenta, KNM Group Bhd and Mitrajaya Holdings Bhd); and 3) exporters (Evergreen Fibreboard Bhd, Homeritz Corporation Bhd and Inari Amertron Bhd).