This article first appeared in The Edge Financial Daily on December 2, 2019

KUALA LUMPUR: While corporate earnings in Malaysia for the first quarter (1Q) and 2Q of this year were disappointing, analysts said 3Q earnings largely met expectations, with several sectors recording growth.

CGS-CIMB head of research Ivy Ng, in a recent note, wrote that 16.9% of 59 companies under the research house’s coverage reported results above expectations for 3Q, versus 10% for 2Q.

However, she also said a larger proportion of companies (44.1%) posted lower-than-expected results for the quarter, compared with 40% for the previous year.

Kenanga Investment head of research Koh Huat Soon said earnings were largely within expectations, with some sectors seeing growth during the quarter.

“There were some bright spots in corporate earnings. Improvements were seen in companies in the plantation and oil and gas (O&G) segments,” he told The Edge Financial Daily.

The plantation sector saw mixed results, said RHB Research Institute vice-president of equity research Hoe Lee Leng. However, she noted more companies beat expectations compared with that in previous quarters, despite a lack of improvement in crude palm oil (CPO) prices during the quarter.

“Five plantation companies under our coverage beat expectations, while two companies posted lower-than-expected results and two companies’ results were in line with forecasts,” she said.

She expects plantation companies to do better in 4Q, supported by higher CPO prices. “We should be seeing improvements across the board in the fourth quarter,” she said.

Kuala Lumpur Kepong Bhd was among the better performers for the quarter, posting a 37% year-on-year increase in net profit to RM175.02 million for the fourth quarter ended Sept 30, despite having issued a warning of reduced profit for financial year 2019 (FY19).

The increase was supported by contribution from its manufacturing segment, where profit more than doubled to RM95.3 million despite revenue falling 16% to RM2.05 billion, as lower raw material prices boosted profit margins.

FGV Holdings Bhd, while still in the red, performed better in 3QFY19, with its core net loss narrowed to RM600,000 from a loss of RM104 million for 2QFY19, beating RHB’s expectations, said Hoe.

She said FGV’s plantation division posted a positive core pre-tax profit of RM12.8 million for the nine months ended Sept 30, 2019, supported by a higher fresh fruit bunch output and a lower CPO cost.

MIDF Research analyst Imran Yassin Yusof said banks had largely met forecasts, except for smaller players. “Most of the banks met expectations, except for smaller ones [like] Alliance Bank Malaysia Bhd and Affin Holdings Bhd,” said Imran Yassin.

“For Alliance, it was due to higher-than-expected provisions, while Affin saw weakness in income. In general, we saw improvements in net interest income for the third quarter, compared to that for the year before.”

He added that the main support for banks in the quarter was their trading income. Bond yields declined during the quarter, so banks took the opportunity to realise some profits.

Malayan Banking Bhd’s net profit for 3Q ended Sept 30, 2019 was RM1.99 billion, up 2% from RM1.96 billion for the previous year’s corresponding quarter. Its revenue increased 15% to RM13.83 billion from RM12.06 billion.