KUCHING: Analysts have further downgraded and revised the corporate results forecast for the last quarter of the year as a result of lacklustre financial performance in the third quarter of 2014 (3Q14).
They do not foresee near term catalyst which could spur companies to register better than expected financial performance for 4Q14.
At the same time, analysts have also lowered the corporate earnings growth for companies in FBM KLCI and reduced their year-end target for the Index given the fluctuation in crude oil price movement and the bearish market sentiment at present.
They also believe the core earnings for companies in the FBM KLCI is expected to grow at a much slower rate for 4Q14 compared with the last financial quarter.
Some of the sectors which analysts have downgraded include plantation, oil and gas, banking and telecommunications.
The research arm of CIMB Investment Bank Bhd (CIMB Research) in a report said 2014 is turning out to be another washout year in terms of corporate earnings performance.
The research firm observed the revision ratio has been in negative territory since 2010, which meant analysts were too bullish and have continuously cutting earnings estimate over the past five years.
Overall, CIMB Research noted the corporate sector performance has been a disappointment over the past three years as it pointed out flattish core net profits for two consecutive years and flattish core earnings per share (EPS) for three years were unexpected.
With a lower forward EPS expectations, CIMB Research revised downward the 2015 year-end target for KLCI from 2,050 points to 1,970 points based on 10 per cent premium over three-year price earnings moving average.
It observed that its 2014 year-end target which was previously set will be unattainable.
Meanwhile, the research division of Maybank Investment Bank Bhd (Maybank IB Research) in a report noted for 3Q14 corporate results performance, the sectors which reported both year-on-year (y-o-y) and quarter-on-quarter (q-o-q) core earnings growth were oil and gas, consumer, technology, petrochemical and real estate investment trust.
However, Maybank IB Research observed sectors that registered both y-o-y and q-o-q decline in core earnings were plantation, telecommunication, construction, building material and rubber glove manufacturers.
For sectors that recorded higher q-o-q core earnings but lower y-o-y profit were banks, transport, property developer, automotive, gaming and media.
Maybank IB Research noted the sector that posted higher y-o-y earnings and lower q-o-q profit was the utility sector.
Similarly, the research arm of TA Securities Holdings Bhd (TA Research) in a report said the lower earnings projection for the plantation sector were due to lower downstream earnings expectation while oil and gas sector’s forecast were downgraded due to weakening in crude oil price which will affect upstream oil and gas players.
Therefore, analysts are less optimistic on the prospects of the corporate earnings for companies under the FBM KLCI for the last quarter of 2014.