KUALA LUMPUR (Oct 23): The FBM KLCI could trend lower on Tuesday in line with the somewhat bearish sentiment at most global markets, but analysts remain steadfast on the local market's resilience in the short and medium term.
European stocks fell early on Monday, with a key index slipping further from a one-month high hit last week as investors worried about corporate profits after a string of disappointing results, according to Reuters.
Meanwhile, Asian markets closed mixed on Monday as lacklustre earnings from leading US companies and a sharp drop in Japan's exports, a key driver of the world's third-biggest economy, dented risk appetites and prompted investors to take profits on recent gains, it said.
The FBM KLCI closed lower on Monday, but managed to remain above the 1,660-point level.
Analysts said the local market was expected to nudge higher this week and stay resilient on domestic factors.
MIDF Research head of equity Syed Muhammed Kifni in a strategy note Monday said that looking at the performance of FBM KLCI during the past 26 weeks, investors could expect its trailing earnings to at least sustain its ground in the third quarter and to continue on an upward momentum in the subsequent quarter ending December 2012.
"Nonetheless, as evident during the period of between 4Q10 to 2Q11, failure of earnings to keep pace with market expectation may sooner or later results in price correction," he said.
Syed Muhammed reiterated MIDF Research's FBM KLCI year-end 2012 target of 1,670 points.
"The numbers are supported by (i) organic earnings growth performance, as well as (ii) absence of lumpy abnormal losses.
"We reiterate our FBM KLCI 2012 year-end target of 1,670 points (PER of 15.4x CY2012 earnings). Likewise, we retain our FBM KLCI 2013 year-end target of 1,750 points (PER of 14.7x CY2013 earnings)," he said.
Syed Muhammed said that judging by the outperformance among the Telecommunication and Building Material stocks in 2H12 to-date, we may expect some consensus-beating earnings during the upcoming earnings result season.
"By the same token, the underperformance of PLANTATION [], Transport and Semiconductor stocks may foretell negative surprises in their bottomlines in 3Q12," he said.
Meanwhile, Affin Investment Bank Bhd vice president and head of retail research Dr Nazri Khan in a note Monday said he expects the local benchmark FBM KLCI to trend higher in tandem with Asian regional strength supported by an active flow of Chinese economic data and anticipation of more aggressive stimulus following the upcoming European Union Summit.
"Following the positive weekly performance in the US and Europe as well as reversals seen in China and Japan, we expect the FBM KLCI to maintain positive momentum and possibly hit further new fresh record this next week," he said.
"We are pegging 1,680 and 1,700 as the most likely major targets for the FBM KLCI near and medium term," said Nazri.
Among the stocks that could be in focus are DIGI.COM BHD []; Malaysia Airports Holdings Bhd (MAHB); Astro Malaysia Holdings Bhd; Tiger Synergy Bhd; and ALAM MARITIM RESOURCES BHD [].
DiGi is expected to release its 3Q12 results on Tuesday.
MIDF Research has maintained its "Neutral" rating on DiGi with a target price of RM4.60 and said it expects DiGi to register double digit growth of 10%-11% year-on-year (y-o-y) for 9MFY12 net profit on the back of revenue expansion and lower taxes.
"For example, DiGi registered an effective tax rate of 21.9% in 1H12, versus 26.5% in 1H11. For FY12, we are expecting an effective tax rate of 20.0%.
"For 9MFY12, we are anticipating revenue growth of 6.1% year-on-year to 7.6% year-on-year or RM4.69 billion to RM4.75 billion respectively. The revenue growth will be due to continuing momentum from data revenue and we believe that its contribution will improved in 3Q12, hitting the 31% mark," it said in a note Monday.
MAHB is scheduled to release its third quarter (3Q) financial results in the afternoon on Tuesday.
Astro Malaysia, which ended its second day of trading down 7.7% to RM2.77 on Monday, would be worth as low as RM2.30 apiece at what Mercury Securities deem to be a "bear case" scenario.
In an initial public offering (IPO) note dated Oct 19, Mercury had said Astro would be worth as low as RM2.30 apiece, should tough operating conditions hamper new subscriber growth and knock the company's earnings to as low as 14 sen per share next year.
Astro ended flat at its IPO price of RM3 on its maiden trading day last Friday (Oct 19).
At Monday;s RM2.77-close, Astro's stock price was already below Mercury Securities' price target of RM2.85 for the stock.
Tiger Synergy has been queried for unusual market activity (UMA) by the stock exchange.
At 5pm, the stock was up 5.5 sen or 36.7% to 20.5 sen with over 99.3 million shares done. This was off an intra-day high of 22 sen.
Tiger had yet to reply to the query at the time of writing.
Alam Maritim was among the most actively-traded stocks on Bursa Malaysia on Monday on speculation that the company was landed several contracts.
"The spike in its shares could be on prospects of Alam scoring the Pan Malaysia contract and some other risk service contracts soon, although nothing is concrete at this point in time," an analyst told theedgemalaysia.com on Monday.
He added that earlier this year, Alam Maritim, Perdana Petroleum Bhd and Bumi Armada Bhd shares had all been "bashed down" and only recently had been seen to be on a "recovery track" in recent weeks.
Written by Surin Murugiah of theedgemalaysia.com
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