KUALA LUMPUR: Corporate Malaysia delivered an underwhelming set of results in the latest March reporting quarter, but banks showed superb earnings resilience, analysts said.
Analysts at RHB Research deemed the first quarter of 2023 as "forgettable", while those at Public Investment Bank Bhd were more direct, describing it as "an overwhelmingly disappointing quarter".
Kenanga Research team led by Joshua Ng said companies were hit by weak commodity prices, the full brunt of higher electricity tariffs and labour cost.
A slowdown in the global economy, a reduction in the accounting useful life (for telco assets) and high-cost inventories were contributing factors too.
The results of the 30 companies that made Bursa Malaysia's benchmark showed a significant quarter-on-quarter (QoQ) deterioration with 7.0 per cent, 48.0 per cent and 45 per cent beating, meeting and missing Kenanga Research's projections, compared with 31 per cent, 45 per cent and 24 per cent respectively in the preceding quarter.
"On a brighter note, the index-heavy financial sector - the bedrock of the economy and the stock market - demonstrated superb earnings resilience," Ng said.
Following the underwhelming results, Kenanga Research now project FBM KLCI earnings to contract by 1.2 per cent in financial year 2023 (FY23) from a growth of 10.5 previously.
Consequently, the firm cut its end-2023 FBM KLCI target to 1,480 points from 1,610 points.
RHB Research said despite already subdued expectations, the March reporting quarter nevertheless disappointed.
"The misses-to-beats ratio spiked higher to 3.6 with 44.6 per cent of results falling below expectations. Subdued topline growth and persistent cost pressures made for negative operating leverage and weaker margins," the firm said.
With the business environment likely to stay challenging, investor sentiment would remain cautious pending the disposal of the impending six state elections, RHB Research said.
The firm cut its FBM KLCI end-2023 target to 1,500 points from 1,575.
Echoing the sentiment, Public Investment Bank Bhd (PublicInvest) said the temporary stalling in the fourth quarter of 2022 earnings momentum had affected the latest sets of results, in what it claimed as an overwhelmingly disappointing quarter.
PublicInvest said different financial and economic concerns surrounding the US had taken over the market direction globally.
One month ago, it was the concerns with the US banking defaults and its impact on the global financial system, and recently the global market got worried over a potential sovereign debt default that eventually got resolved.
"New day, new issue, same outcome - market uncertainty and lethargy. Major global economies are on edge and are at significant risk of sliding into recessions.
"Major global economies are on edge and are at significant risk of sliding into recessions," it said.
PublicInvest lowered its target for FBM KLCI to 1,530 points from 1,650.
Both PublicInvest and RHB Research agreed that sectors that had performed below expectations included plantations, gaming, media, glove and rubber products.
On the oil and gas sector, RHB Research considered it to be performing below expectations.
Sectors that contributed the most number of earnings misses include plantation, technology, construction, rubber products, property and consumer, it added.
PublicInvest called the oil and gas sector a "mixed bag" with equal numbers surprising, meeting and disappointing despite resumption of contract flows with crude oil prices remaining at around the US$80 per barrel level.
Analysts agreed with the current economic climate, market sentiment was weak as global economies worked through the full effects of aggressive rate hikes over the past one year.
PublicInvest reiterated its optimism on the prospects of Able Global Bhd, D&O Green Technologies Bhd, Inari Amertron Bhd and SKP Resources Bhd for the smaller-capitalised picks for 2023.
For larger-capitalised stocks, the firm leaned towards Gamuda Bhd and Malayan Banking Bhd as its top picks.