TA Research said the companies under its coverage saw their core earnings grow 21.1% year-on-year (y-o-y) and 3.8% quarter-on-quarter (q-o-q), respectively.
“The momentum was consistent with the 20.7% y-o-y expansion that we witnessed in Q1 2024 but the q-o-q expansion was softer compared to 9.1% in the previous quarter due to rising base effect,” it said in a note yesterday.
The research house said the strong y-o-y growth was mainly driven by the oil and gas, power and utilities, plantations, healthcare and property sectors.
It said the Q2 results season was largely in line with its forecasts. “Of the 105 Malaysian companies under our coverage, 69 companies (66% of coverage) delivered earnings that met our expectations.
“Meanwhile, 21 companies (20%) reported disappointing results. Technology announced earnings that fell short of our projections. Several heavyweights, including Nestle (Malaysia) Bhd, Genting Bhd, IOI Property Group Bhd, and CelcomDigi Bhd reported weaker-than-expected results.
“On a positive note, 14% of our coverage, or 15 companies, reported results that exceeded our forecasts. While no single sector outshone the rest, Tenaga Nasional Bhd was the exception among large-cap stocks, delivering results that surpassed our predictions,” it said.
It forecasts CY2024 and CY2025 earnings to grow by 16.5% and 9.3% respectively. “Our earnings growth forecasts for FBM KLCI component stocks in CY2024 and CY2025 are 12.1% and 7.6% versus consensus’ 14.7% and 7.1%, respectively,” it said.
Meanwhile, Public investment Bank (PublicInvest) said some 80% of companies under its coverage saw Q2 2024 results meeting or exceeding forecasts.
“On the balance, the 2024 earnings basket is now expected to expand by 12.7% (Q1 2024: +11.6%), while 2025’s earnings will grow by 8.8%,” it said in a note yesterday.
PublicInvest is “overweight” on the construction, technology, healthcare, consumer, gaming and rubber glove sectors.
Foreign funds to boost stocks
TA has maintained its end-2024 KLCI target of 1,690 points. The benchmark index eased 1.54 points to 1,676.65 at yesterday’s close.
It said foreign funds are “sensing the growth potential vis-à-vis the KLCI’s undemanding valuation”. Foreigners have turned strong net buyers in the last three months, contributing to a net inflow of RM3.04 billion in the first eight months of 2024.
“Still, the foreign shareholding in Malaysian equities is only 19.8% and should rebound to mid-twenties (24.3% in 2014 and 23.1% in 2019 before it dropped to a low of 19.5% in 2023) within the next three years as confidence returns and corporate earnings continue to support expansion in valuation multiples.
“Strong foreign buying interest propelled the KLCI to a high of 1,681.37 last week, increasing the possibility of it rising above our end-2024 target of 1,690 sooner than expected,” it said.
TA said the bullish expectation for Malaysia’s stock market is premised upon the country’s improving fundamentals.
“Domestic demand has been resilient, benefiting from the strong public spending, private consumption, as the strong labour market and government measures have encouraged spending, and significant rebound in tourism activities.
“Malaysia’s stable politics, forward looking policies and structural reforms have attracted sizeable foreign direct investments, especially into artificial intelligence-related infrastructures like data centres, which have spillover effects on sectors like power, construction, property, and utilities,” it said.
It said Budget 2025, to be unveiled on Oct 18, will underpin measures to sustain the economic growth momentum next year and should reaffirm the government’s commitment in driving reforms, attracting investments, boosting consumption and accommodating businesses.
The planned staggered increase in civil servants’ pay in December and 2026 should have a significant impact on consumption in 2025 and 2026.
“The cascading impact from these drivers are expected to contribute to better economic and corporate earnings growth,” added TA.