Monday, August 28, 2017

FW: AmBank Research - Strategy report, 28 Aug 2017


More than midway past the 2Q 2017 reporting season (76% of our stock universe having reported), corporate earnings have thus been subdued – with 11% beating and 57% meeting our projections respectively, while 32% coming in below. This compares with 12%, 63% and 25% for "above", "within" and "below" respectively in 1Q 2017.


A number of FBM KLCI Index-linked heavyweights have disappointed, they are: Tenaga (lumpy deferred tax expenses and higher-than-expected repair and maintenance costs), Digi (lower service revenue growth guidance, from flat to a low-to-mid single-digit decline), HLFG (tax deductions disallowed) and Genting Malaysia (higher operating cost, particularly staff cost, on the opening of new attractions at Resorts World, Genting).


Despite the subdued 2Q 2017 reporting season thus far, we maintain our end-2017 KLCI target of 1,745pts and end-2018 KLCI target of 1,900pts, based on 17.5x 2017F and 2018F earnings, at a 1x multiple premium to the 5-year historical average of about 16.5x.




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