MIDF: 29% companies post earnings below expectation

The findings are based on results of 104 out of 105 companies under the research firm’s coverage that have announced their results


MORE companies posted earnings that were below expectation for the first quarter of 2021 (1Q21), increasing to 29% from 21% in 4Q, according to MIDF Amanah Investment Bank Bhd (MIDF Research).

The percentage of positive surprises declined to 22% quarter-on-quarter (QoQ) in 1Q21 from 37%, it added in a note yesterday.

The findings are based on results of 104 out of 105 companies under MIDF Research’s coverage that have announced their results.

Cumulatively, the reported earnings of companies under MIDF Research universe increased 13.3% QoQ to RM19.7b in 1Q21, hence continuing the rebound which began in 3Q20.

On a year-on-year (YoY) basis, earnings for the quarter jumped by 250.5% driven by a 7,377.8% jump in the healthcare sector’s (i.e. glove) earnings.

Construction, healthcare, industrial P&S, plantation, property, telecommunications and media, and transport and logistics were the sectors which recorded improved total earnings (as reported) in 1Q21 compared to both the preceding quarter and corresponding period last year.

Financial services was the only sector that registered both negative sequential and YoY earnings growth percentages in 1Q21 principally due to huge (more than RM4.7 billion) one-off settlement and impairments incurred by AMMB Holdings Bhd.

The estimated aggregate for financial year 2021 earnings of FTSE Bursa Malaysia KLCI (FBM KLCI) constituents under MIDF Research’s coverage was revised upward by 7.1% to RM65.7b vis-à-vis its earlier estimates prior to the latest reporting season.

The higher aggregate forward estimates were mainly contributed by upward earnings revisions in the healthcare (glove), financial (banking) and plantation stocks.

“The adjusted earnings aggregate of FBM KLCI catapulted to the highest level on record in 1Q21. It was a stellar achievement engendered mainly by massive growth in the bottomline of healthcare (glove) companies that benefitted from the Covid-19 pandemic.

“In reaction, the consensus calendar year 2021 earnings forecast for the FBM KLCI firmed up further to 119.4 points,” said MIDF Research.

The reported earnings aggregate of FBM KLCI’s 30 constituents rebounded further to RM20.3 billion in 1Q21.

It recorded positive growth both sequentially at 32.9% QoQ and at 167.4% YoY.

On an adjusted basis, the normalised earnings aggregate of FBM KLCI’s 30 constituents in 1Q21 grew sequentially at 25.4% QoQ and 70.6% YoY to RM19.4 billion, mainly due to stellar performance by healthcare (glove) counters which collectively posted 917.2% YoY earnings growth, the research firm’s report yesterday noted.

The performance of construction companies was mostly below expectation in 1Q21, mainly attributed to the imposition of Movement Control Order 2.0, which took effect from Jan 13, 2021 to March 4, 2021 and which negatively impacted the construction progress and billings.

Meanwhile, the 1Q21 earnings season was a strong one for automotive. UMW Holdings Bhd and MBM Resources Bhd both reported >70% YoY core earnings growth driven by strong, tax-holiday driven sales volume growth.

Public Investment Bank Bhd noted that the cyclically-important oil and gas, banks and consumer sectors provided the bulk of 1Q earnings surprises, reflective of improving economic prospects.

The technology sector continued to report robust earnings, in line with the global upcycle, while plantation companies (four misses from eight under coverage) failed to shine despite the all-time high crude palm oil prices, the investment bank noted in a report yesterday.

It added that gaming counters (two misses from three under coverage) are being affected by the start-stop nature of containment measures to curb the spread of Covid-19, though a more rapid pace of vaccinations should help restore consumer sentiment and jump-start its recovery.