Corporate earnings worsen in 4Q18 — Affin Hwang

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KUALA LUMPUR (March 4): Corporate earnings of Malaysian stocks were spectacularly disappointing in the fourth quarter of 2018 (4Q18), as large capitalisation stocks missed expectations, according to Affin Hwang Capital Research.

"Huge misses in the telco, transport and utilities sectors were enough to drag market earnings per share (EPS) into negative territory for 2018," said a strategy note from the research house today.

"Cumulative 4Q18 core earnings fell a sharp 23% year-on-year or 14% quarter-on-quarter, one of the largest ever quarterly earnings contractions in recent years," it added.

In particular, the poorer performance reported by heavyweights on the benchmark KLCI made a significant impact, with 33% of the 30 component companies missing expectations, Affin Hwang noted.

"Surprisingly, only 40% of the 20 sectors under coverage managed to deliver year-on-year earnings growth in 4Q18... including automotive, banks, gaming, healthcare, insurance, media and rubber products," it said.

In other sectors, Affin Hwang downgraded AirAsia Group Bhd and Tenaga Nasional Bhd for disappointing earnings, as well as removed UMW Holdings Bhd and Tenaga from its top buy list.

"Lacking any major catalysts, we think the KLCI could continue to trend sideways over the near term. Our 2019 year-end estimate for the KLCI of 1,810 points is unchanged," it said.