KUALA LUMPUR: The ringgit's sharp appreciation, by 12.5 per cent during the third quarter ended Sep 30, 2024, hurt exporters and helped companies with US dollar-denominated loans earnings.
CIMB Securities Sdn Bhd said those were a couple of key trends it found in its analysis of the results of 80 per cent, or 72 companies, under its coverage, that have reported their Q3 results as of Nov 27.
The firm said exporters booked substantial realised and unrealised foreign exchange (forex) losses in Q3, denting Q3 earnings.
Conversely, the research firm noted that companies with US dollar loans recorded positive forex translation gains, boosting reported earnings.
"Consumer companies broadly underperformed, reflecting weak consumer spending during the period."
"Additionally, some companies, including Kossan Rubber Industries Bhd, MBM Resources Bhd, and Ta Ann Holdings Bhd, announced higher-than-expected dividends ahead of the 2.0 per cent dividend tax introduced in 2025 Budget," the firm added.
CIMB Securities said 22 per cent of companies under its coverage beat expectations and 33 per cent below expectations.
This translates to an earnings revision ratio (the percentage of companies beating expectations versus those missing forecasts) of 0.63 time, down from the 1.1 time ratio recorded during the second quarter (Q2) results season.
The firm said the decline in the ratio reflects a higher proportion of companies underperforming.
According to CIMB Securities, the sectors outperforming expectations are banks and electronics manufacturing services (EMS), while the rubber gloves, technology, and consumer sectors delivered weaker-than-expected results.
"Despite a slight improvement in the earnings ratio since our earlier Q3 results review, the earnings season remains underwhelming, primarily owing to the underperformance of several large-cap companies."
"MISC Bhd reported lower contributions from its liquefied natural gas (LNG) and offshore segments, Petronas Chemicals Group Bhd faced higher depreciation and interest expenses, Kuala Lumpur Kepong Bhd experienced reduced downstream margins and increased losses from associates, while Nestlé (Malaysia) Bhd and MR. D.I.Y. Group (M) Bhd suffered from weaker sales," it said.
On a positive note, CIMB Securities stated that the banking sector generally delivered strong results, such as Maybank that exceeded expectations owing to lower overhead costs and minimal loan loss provisions.
"Given the performance trends observed thus far, there are downside risks to our KLCI earnings forecasts."
"We intend to reassess our KLCI valuation model after the earnings season concludes, incorporating necessary revisions based on the latest data," it said.
The current earnings season is set to conclude today, with 13 remaining companies under its coverage scheduled to report their results.