Malaysia 2012 corporate earnings upgraded

by **hlk** Fri 02 Mar 2012, 20:00

With the proportion of companies that posted positive surprises in 4Q11 corporate earnings being the highest in the last five quarters, HwangDBS Vickers Research expects 12 per cent growth in 2011 and nine per cent in 2013.

"Earnings increased 14 per cent quarter-on-quarter after falling for three consecutive quarters. With our earnings adjustments, we expect the growth of 12 and nine per cent growth respectively for 2012-2013," HwangDBS Vickers said in a research note today.

On the movement of the Kuala Lumpur Composite Index (KLCI), the research house expects its uptrend to be capped.

"Liquidity may provide near-term support for markets but we foresee limited upside for the index with our year-end KLCI target of 1,590 points.

"Sentiment has improved with progress in resolving the Greece debt crisis and better economic data. Abundant liquidity should also provide near term support for markets and opportunities to trade," it added.

However, HwangDBS believes a market uptrend in the medium term is unsustainable, as the roadmap for success in Europe remains challenging and the prospects for acceleration in US growth this year is low.

"Our 2012 year-end KLCI target remains at 1,590, based on 14 times forward earnings," it added.

HwangDBS favours stocks with specific catalysts, bottom-up picks, and selected defensive names such as Maybank, Gamuda, Alliance Financial Group, WCT.

The research house recommended core holdings of defensive sectors and stocks such as telecommunication (Maxis and Telekom Malaysia),REITs (Axis REIT) and gaming (Berjaya Sports Toto and Multi-Purpose Holdings).

It said Maybank offers the highest dividend yield at 5.4 per cent in the banking sector with the group's high proportion of transaction income and CASA (current account savings account) providing relatively resilient income. --Bernama