Mixed bag of corporate earnings in 1Q21

Bursa expected to post strong 1Q due to sustained heightened trading interest

by NUR HANANI AZMAN / Pic by ARIF KARTONO

LISTED corporates on Bursa Malaysia are likely to post mixed earnings in the rst quarter of 2021 (1Q21) as a result of the ongoing impact of the Covid-19 pandemic on the economy.

Malacca Securities Sdn Bhd head of research Loui Low opined 1Q21’s overall earnings, the bulk of which will be filed next month, should be flat or slightly lower compared to 1Q20.

“Because of the Movement Control Orders (MCOs) in 2020 and 2021, it should be mixed. I think it should be flat to downward,” he told The Malaysian Reserve (TMR).

Low expects glovemakers, healthcare and industrial products, especially metal-based, are likely to post positive earnings as these sectors have shown resilience.

“Given that aviation is still not able to fully run, it will be impacted quite badly as will the tourism sector,” said Low.

Rakuten Trade Sdn Bhd head of research Kenny Yee believes financial results for the 1Q21 will be better than that of 1Q20 despite the Conditional MCO in force in the 1Q.

He said it will be a vast improvement from the last quarter as many companies embarked on kitchen sinking activities last year.

“I expect the plantation sector to again exceed expectations. The banking sector should also improve as the economy normalises with the absence of fresh rate cuts.

“Industries that may be affected badly could be the construction/ property sectors amid the rising raw material costs,” he told TMR.

According to JF Apex Securities Bhd head of research Lee Chung Cheng, companies are likely to report better earnings year-on-year

(YoY) on the back of improved economic activity.

“1Q21 earnings will post low to mid-teens growth. Electronics manufacturing service, technology, plantation, automotive, logistics and oil and gas shall chalk up commendable earnings,” he told TMR. “Aviation, gaming, hospitality and tourism could still be affected.”

Recent 1Q earnings have been relatively mixed. Kossan Rubber Industries Bhd’s 1Q earnings ended March 31, 2021 (1Q21), soared 16-fold YoY to RM1.04 billion from RM64.8 million made in 1Q20, mainly attributed to the surging demand for gloves and pricing power amid the Covid-19 pandemic.

Revenue for its glove division rose to RM2.09 billion in 1Q21, up 281.75% YoY from RM548.25 million in 1Q20, while its profit before tax rose 1,656.33% to RM1.36 billion from RM77.13 million in 1Q20.

Despite the tough real estate environment, Axis Real Estate

Investment Trust’s (REIT) net income rose 9% in 1Q21 to RM49.82 million from RM48.25 million a year ago.

Its quarterly revenue increased by 5% YoY to RM57.48 million despite the pandemic-hit economy.

The telecommunications sector had a weaker 1Q YoY. Maxis Bhd’s net profit slipped 7% YoY to RM334 million for the 1Q21 due to lower revenue which declined by 5% to RM2.23 billion.

Service revenue was down RM10 million, by 0.5%, to RM1.95 billion against RM1.96 billion in 1Q20.

This was largely attributed to lower international direct dial revenue and a temporary lack of international roaming income offset by growth in enterprise and fibre businesses, it said.

DiGi.Com Bhd net profit fell 20% YoY to RM264.8 million in the 1Q21, while revenue fell 1% YoY to RM1.55 billion.

Bursa Malaysia Bhd, which is set to announce its 1Q result today,

is expected to post a relatively strong quarter due to the sustained heightened trading interest on the exchange.

MIDF Amanah Investment Bank Bhd VP and head of research Imran Yassin Md Yusof said 1Q earnings will be supported by glove companies’ strong earnings.

“We expect it will be a mixed quarter with companies that rely on retail might be affected by MCO 2.0, such as retail REIT, consumer discretionary etc.

“However, we expect earnings of the healthcare and tech sectors to be robust. In general, we expect corporate earnings will be better in 1Q21 than in 1Q20,” he told TMR.

“The quarter will be skewed by strong performance of the glove sector. While 1Q20 earnings decline (the combined earnings of FTSE Bursa Malaysia KLCI 30 component companies as proxy) of circa -27.7%, we expect earnings to double in 1Q21, led by earnings jump of glove companies.”