Top 30 counters record RM15.4b in 4Q earnings

The figure marked the highest growth recorded since 2Q17, mainly due to the outstanding performance of glove counters


THE top 30 counters on the local index registered an aggregate normalised earnings of RM15.38 billion in the fourth quarter of 2020 (4Q20), rising by 26.5% on an annual basis, driven primarily by the record earnings posted by glovemakers.

MIDF Amanah Investment Bank Bhd strategy VP Syed Muhammed Kifni Syed Kamaruddin said the figure marked the highest growth recorded since 2Q17, mainly due to the outstanding performance of glove counters like Top Glove Corp Bhd, Hartalega Holdings Bhd and Supermax Corp Bhd, which collectively posted an earnings growth of 822.3% year-on-year (YoY).

“Within the MIDF universe, 37% of stocks under coverage which have already announced their results, reported higher than expected earnings. Of the rest, 21% posted earnings which were lower than expected versus 42% that came within expectations,” he told The Malaysian Reserve.

In a report released recently, the firm stated that the top three quarterly earnings contributions came from the healthcare sector, which registered RM4.81 billion in earnings, followed by the financial sector (RM4.54 billion) and the telecommunications and media sector (RM1.16 billion).

MIDF also noted that there were no changes to the number of outperformers in comparison to the preceding quarter, while those who underperformed doubled among the FTSE Bursa Malaysia KLCI (FBM KLCI) constituents that are under its coverage.

The FBM KLCI’s outperformers in 4Q20 included Top Glove, Hartalega, Supermax, Kuala Lumpur Kepong Bhd, MISC Bhd, Axiata Group Bhd, Hong Leong Financial Group Bhd and IHH Healthcare Bhd.

The underperformers were Petronas Dagangan Bhd, Nestle (M) Bhd, CIMB Group Holdings Bhd, RHB Bank Bhd, Maxis Bhd and Tenaga Nasional Bhd.

“The aggregate financial year 2021 (FY21) estimated earnings of the FBM KLCI constituents under our coverage were revised by 3.5% to RM61.4 billion, principally due to upward revisions in earnings of glove counters,” Syed Muhammed Kifni said.

The firm said the upward revision in aggregate forward earnings of FBM KLCI constituents under its coverage is almost entirely contributed by the healthcare sector, while the plantation sector is seen to provide a marginal extra boost.

It also maintained its FBM KLCI end-2021 baseline target at 1,700 points, or a price-to-earnings ratio of 17.5 times.

Syed Muhammed Kifni said local glove counters have been seeing a decline in its share price despite registering strong earnings in the quarter due to the country’s vaccine rollout programme.

He added that selling pressure on glove counters has heightened as the vaccine rollout will mitigate the spread of Covid-19, impacting the sentiment around glovemakers as they may no longer be viewed as an essential item.

Analysts, however, have said a few sectors may benefit from the recovery of the economy as the National Covid-19 Immunisation Programme gets underway. Gainers include gaming, aviation, construction, property, as well as the oil and gas (O&G) sector.

Hong Leong Investment Bank Bhd recently upgraded the O&G sector to ‘Overweight’ from ‘Neutral’ amid expectations of a stronger commitment from the OPEC+ to keep oil prices afloat and higher capital expenditure from Petroliam Nasional Bhd (Petronas).

Its top picks for the sector were Petronas Chemicals Group Bhd with a target price (TP) of RM8.40 and Bumi Armada Bhd with a TP of 75 sen.

AmInvestment Bank Bhd also noted that the banking sector’s recovery is gaining traction with industry loan growth picking up pace to 3.8% YoY in January, from 3.4% YoY in December 2020 with stronger non-household loan growth.

The investment bank is thus ‘Overweight’ on the sector with top buys on Hong Leong Bank Bhd (TP RM20.30/share), RHB Bank (TP RM6.80/share), Malayan Banking Bhd with TP of RM9.80/share and CIMB (RM5.50/ share).