Blue chips lost over RM20b in value since end of 2018, worst in recent years

The 9 stocks which lost the most market value in the country post-4Q18 also experienced a decline of up to 20% in terms of share price


The 2018 full-year financial reporting season ended last month, and to many, it was a poor quarter. Some analysts said it was among the most disappointing quarterly corporate earnings in recent years.

Investors, especially foreign funds, dumped local equities following the dismal results, adding pressure to key stocks and driving prices down.

A check showed nine of the 30 most valued companies have collectively lost more than RM20.56 billion in market value after the recent financial announcements.

A check on Bloomberg data shows that in the span of three months, 30% of the FTSE Bursa Malaysia KLCI’s (FBM KLCI) companies lost between RM850 million and RM4.5 billion in market capitalisation.

Considering Dec 31, 2018, as the end of the third quarter of 2018 (3Q18) financial results’ reporting period, the benchmark index saw a total of 11 companies recording an increase in market cap between RM1 billion and RM3.5 billion, while 10 companies recorded a marginal increase or remained the same.

The nine stocks that lost the most market value in the country post-4Q18 had also experienced a decline up to 20% in terms of share price.

Affin Hwang Investment Bank Bhd in a research note last week said corporate earnings in  4Q18 were among the worst seen in recent years, as huge misses in the telecommunications, transport and utilities sectors dragged market earnings per share (EPS) growth into negative territory for the whole year.

The aggregate reported earnings of 30 constituents of the FBM KLCI counters that make up the main index, totalled RM11.58 billion in 4Q18, a 8.7% increase quarter-on-quarter, but remained 22.4% lower year-on-year.

Given the poor earnings and lack of fresh catalysts, the FBM KLCI fell 15.27 points yesterday, or 1.53% year-to-date (YTD), to 1,664.63 points, as the poor corporate results continued to drag the market.

The largest loss among the 30 blue chips is power company Tenaga Nasional Bhd (TNB) with its market capitalisation down by around RM4.4 billion.

The fall was due to its RM134 million net loss recorded, the company’s first quarterly loss in more than seven years. Earnings were hit mainly by foreign-exchange translation losses of RM145.8 million. TNB’s share price decreased by 6.18% YTD and about 19% in the past 52 weeks.

The second-largest drop in market value among the blue chips is Hartalega Holdings Bhd that sees itself RM3.91 billion poorer.

Valued at RM20.45 billion as at the end of December 2018, the nitrile glove maker saw its share price dropping more than 19%, dragging its market capitalisation to RM15.95 billion as of yesterday.

Analysts noted that Hartalega’s net profit of RM365 million for the nine months ended Dec 31, 2018, came in below expectations, making up only 72% of Bloomberg consensus’ finanical year 2019 (FY19) estimates.

The analysts’ consensus one-year price target for the company is RM5.52, a 4.6% decrease in target in the past three months. Yesterday, Hartalega’s stock price dropped to RM4.75, declining 24 sen.

The company currently trades at 33 times its estimated EPS for the coming year and its dividend yield is 1.7% on a trailing 12-month basis and 1.8% based on Bloomberg dividend forecasts for the next 12 months.

Top Glove Corp Bhd is another glove maker that had witnessed the dwindling of its market value.

The rubber glove manufacturer lost about RM2.95 billion in market value from RM14.32 billion on Dec 31, 2018, to RM11.37 billion yesterday.

Recently, analysts had lowered their target price on the company. But the price downgrade was not due to its financials.

Its share price plunged by 18.21% YTD mainly because Top Glove had priced US$200 million (about RM814 million) in principal amount of exchangeable bonds on Feb 21, 2019. Top Glove’s share price dropped to RM4.45 yesterday or 14 sen lower.

The company said proceeds from the five-year bonds with a coupon rate of 2% a year will refinance the existing debt of the group and payment of fees and expenses relating to the bonds issue.

Top Glove’s 1Q ended Nov 30, 2018, booked a net profit of RM110.1 million compared to RM105.4 million the previous year.

Other big decliners in market value were Petronas Gas Bhd (PetGas), CIMB Group Holdings Bhd, Sime Darby Plantation Bhd and Press Metal  Aluminium Holdings Bhd.

PetGas and CIMB both saw a decline of about RM2.57 billion and RM2.48 billion respectively.

PetGas’ 4Q net profit fell by 34.6% to RM317.9 million from RM486.69 million, weighed down by share of losses from a joint-venture company, Kimanis Power Sdn Bhd.

PetGas said the losses from Kimanis were due to a derecognition of deferred tax assets in relation to certain tax benefits which now have a seven-year utilisation limit under the new Finance Act 2018.

Its net profit rose just 1% to RM1.81 billion from RM1.79 billion in FY17.

PetGas also saw a loss of 7.5% in terms of share price YTD and analysts’ consensus one-year price target for the company is RM17.42, for a potential loss of 1.8%. Analysts lowered the target by 6.4% in the past three months.

For CIMB, though its 4Q18 earnings were within expectations, analysts are keeping in line with the cautious outlook ahead on account of slower loans and net interest margin (NIM) compression.

CIMB’s share price have also been declining, dropping for nine straight days as of yesterday. The counter dropped 11 sen yesterday to close at RM5.28.

The stock had declined more than 24% in the past 52 weeks and the company’s dividend yield is 4.6% on a trailing 12-month basis and 4.6% based on Bloomberg dividend forecasts for the next 12 months.

For Sime Darby Plantation and Press Metal, both companies had their market value reduced by about RM1.5 billion and RM1.2 billion respectively.

MIDF Investment Bank Bhd in its research report last Friday said plantation companies underwent a tough and challenging 4Q18 as the price of crude palm oil (CPO) declined to a record low during the period.

“This was mainly due to the global supply glut as inventories soared to a record high during the high production cycle and demand could not keep pace with it.

“Coupled with the rising costs of CPO production which comprises minimum wage and fertiliser cost, these negative developments have impacted most of the companies beyond our expectation,” said the research house.

Grappling with the rising raw material cost and weaker aluminium selling prices, Press Metal’s share price have been under pressured since the beginning of 2019. Press Metal’s share price had been battered over the past 12 months, falling about 24.5% as of last Friday after tripling in value in 2017.

While prospects of an aluminium price recovery may not be certain yet, a silver lining for investors is that Press Metal has hedged 40% of its aluminium sales volume for FY19 at US$2,000 to US$2,100 per metric tonne, a premium to the current market price, Kenanga Research said in a report.

Meanwhile, MIDF said the banking sector’s performance was as expected. However, earnings were impacted by NIM compression that stemmed from deposits competition throughout the year due to earlier expectations of the implementation of Net Stable Funding Ratio requirement.

“Also affecting banks’ earnings were the challenging capital market conditions which had put pressure in non-interest income,” the research house said, adding that these headwinds were curbed by lower provisions and lower operating expenses.