KUALA LUMPUR: CIMB Equities Research is maintaining its Overweight stance on the Malaysian stock exchange and end-2011 KLCI target of 1,700 based on an unchanged price-to-earnings target of 14.5 times.
In its strategy report on Thursday, March 3, it said valuations are undemanding and there are other catalysts that will give the market a boost in the short- to medium-term including the various transformation programmes and the election effect.
However, the research house said the October-December 2010 results season was 'generally disappointing as the earnings revision ratio (upgrades/downgrades) stayed negative at 0.7 times'.
CIMB Research raised CY10-11 earnings per share (EPS) by less than 1% while shaving 0.4% off CY12 EPS.
'The past four to five results seasons have been less than sterling, which is one of the reasons why investors need to stay vigilant,' it said.
It said the February results season came in below expectations as the revision ratio stayed negative at 0.7x, same as in Nov. Some 52% of the companies in its coverage met expectations (60% previously) and a higher 28% failed to deliver (23% before) while 20% did better than expected, an improvement on the November results season's 17%.
It said for February, CY10 EPS was raised slightly by 0.5%, CY11 was unchanged while CY12 EPS was cut by 0.9%. EPS upgrades for CY10 came mostly from the gaming, property, PLANTATION []s and media companies.
CIMB Research said 2010 EPS growth ended the year at a record 35%, the strongest in more than 10 years. Although the growth was off a low base and followed two years of EPS contraction (-5% in 2008 and -7% in 2009), it was very encouraging as the growth was across the board.
Returns on equity (ROE) also improved to nearly 16% while net gearing is at its lowest at 19%.
'We are forecasting a moderation of EPS growth to 12% in CY11-12, driven by the banking, plantations, CONSTRUCTION [], oil & gas, property, gaming and transport sectors,' it said.
The research house said regional markets including Malaysia had come under selling pressure due to the twin effects of 1) the pullout of global funds from emerging markets back to developed markets, and 2) concerns over the political situation in the Middle-east and North Africa (MENA) countries which caused oil prices to shoot up.
'We believe that global funds' exodus from emerging markets into developed markets will have a temporary effect as that trend has longer-term positive implications for the global economy.
'The upheaval in MENA, on the other hand, is trickier as it is difficult to predict how far the uprisings will spread and how high oil prices will reach,' it said.
In its strategy report on Thursday, March 3, it said valuations are undemanding and there are other catalysts that will give the market a boost in the short- to medium-term including the various transformation programmes and the election effect.
However, the research house said the October-December 2010 results season was 'generally disappointing as the earnings revision ratio (upgrades/downgrades) stayed negative at 0.7 times'.
CIMB Research raised CY10-11 earnings per share (EPS) by less than 1% while shaving 0.4% off CY12 EPS.
'The past four to five results seasons have been less than sterling, which is one of the reasons why investors need to stay vigilant,' it said.
It said the February results season came in below expectations as the revision ratio stayed negative at 0.7x, same as in Nov. Some 52% of the companies in its coverage met expectations (60% previously) and a higher 28% failed to deliver (23% before) while 20% did better than expected, an improvement on the November results season's 17%.
It said for February, CY10 EPS was raised slightly by 0.5%, CY11 was unchanged while CY12 EPS was cut by 0.9%. EPS upgrades for CY10 came mostly from the gaming, property, PLANTATION []s and media companies.
CIMB Research said 2010 EPS growth ended the year at a record 35%, the strongest in more than 10 years. Although the growth was off a low base and followed two years of EPS contraction (-5% in 2008 and -7% in 2009), it was very encouraging as the growth was across the board.
Returns on equity (ROE) also improved to nearly 16% while net gearing is at its lowest at 19%.
'We are forecasting a moderation of EPS growth to 12% in CY11-12, driven by the banking, plantations, CONSTRUCTION [], oil & gas, property, gaming and transport sectors,' it said.
The research house said regional markets including Malaysia had come under selling pressure due to the twin effects of 1) the pullout of global funds from emerging markets back to developed markets, and 2) concerns over the political situation in the Middle-east and North Africa (MENA) countries which caused oil prices to shoot up.
'We believe that global funds' exodus from emerging markets into developed markets will have a temporary effect as that trend has longer-term positive implications for the global economy.
'The upheaval in MENA, on the other hand, is trickier as it is difficult to predict how far the uprisings will spread and how high oil prices will reach,' it said.
No comments:
Post a Comment