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Equity Focus
Market Strategy
4Q08 Results – Cash Needed
Three concerns gained prominence in the 4Q08 results season – deep earnings cut as companies frontloaded provisions, significant rights issues by TMI and Maybank, and rising incidences of dividend cuts.
We have cut our 2009-10 market earnings forecasts by 7.3% and 6.1%, with our revised figures showing 4.1% and 10.5% contractions in 2008-09’s corporate earnings, before a 6.3% modest recovery in 2010 (previously 2008-10: +0.8%, -7.6%, +5.0%). The steep earnings cuts reflect nasty surprises especially towards the season’s last reporting week, with key disappointments emanating from the Steel and Tech sectors, as well as a host of various large caps.
We maintain our end-2009 KLCI target level of 900 points, which implies target P/B and PE multiples (based on 2008 and 2010 figures respectively) of 1.3x and 12.8x.
WCT (RM0.96): Hold
RM2.6b outstanding works to start the year
Ex- profit reversals, we estimate that WCT made net profits of RM42m in 4Q08 (-12% YoY, +23% QoQ) and RM176m in 2008 (+19% YoY).
Outstanding order book of RM2.6b would keep works going into 2010, while several LOI jobs, if awarded, should strengthen earnings base.
Upgrade to Hold after share price drop since Meydan. We lowered forecasts by 16-21%, but largely retained asset-based RM1.05 TP.
In The news
Dreamgate Corportion (RM0.105): Fully Valued
Still cautious
Other Local News
Muhibbah Engineering: Awarded contract worth RM109m
Retail index by year-end
Ho Hup: Plans to dispose of KL land
TM: And MIMOS in research tie-up
RHB: And AIA negotiate for a 10-year alliance
Puncak Niaga: Signs MOU to bid for Kimanis power plant job
Other Local News
U.S: Stocks drop, treasuries gain on concern about economy
U.S: AIG gets more aid after record USD 61.7b loss
U.S: Manufacturing shrinks for 13th straight month on collapsing sales
U.S: Consumer spending climbs for first time in seven months on discounts
E.U: Manufacturing contracts at record pace as export orders collapse
U.K: House prices drop annual 10%, Hometrack says
China: Manufacturing shrinks as crisis cuts demand
India: Exports fell in January by most in decade on weak demand
S. Korea: Exports drop 17.1% YoY on global recession
Indonesia: Exports plunge most in 22 years, inflation slows
Technicals
The market closed lower yesterday on weaker fourth quarter GDP number and on poorer corporate earnings
Special Technical Perspective
World Indices plunge. Is there any light at the end of the tunnel soon?
The DJIA and SP500 plunged to new recent lows
The KLCI and BOVESPA are in bearish “Rising Wedge” patterns
Step away from the bear until the dust settles down
Market Strategy
4Q08 Results – Cash Needed
Three concerns gained prominence in the 4Q08 results season – deep earnings cut as companies frontloaded provisions, significant rights issues by TMI and Maybank, and rising incidences of dividend cuts.
We have cut our 2009-10 market earnings forecasts by 7.3% and 6.1%, with our revised figures showing 4.1% and 10.5% contractions in 2008-09’s corporate earnings, before a 6.3% modest recovery in 2010 (previously 2008-10: +0.8%, -7.6%, +5.0%). The steep earnings cuts reflect nasty surprises especially towards the season’s last reporting week, with key disappointments emanating from the Steel and Tech sectors, as well as a host of various large caps.
We maintain our end-2009 KLCI target level of 900 points, which implies target P/B and PE multiples (based on 2008 and 2010 figures respectively) of 1.3x and 12.8x.
WCT (RM0.96): Hold
RM2.6b outstanding works to start the year
Ex- profit reversals, we estimate that WCT made net profits of RM42m in 4Q08 (-12% YoY, +23% QoQ) and RM176m in 2008 (+19% YoY).
Outstanding order book of RM2.6b would keep works going into 2010, while several LOI jobs, if awarded, should strengthen earnings base.
Upgrade to Hold after share price drop since Meydan. We lowered forecasts by 16-21%, but largely retained asset-based RM1.05 TP.
In The news
Dreamgate Corportion (RM0.105): Fully Valued
Still cautious
Other Local News
Muhibbah Engineering: Awarded contract worth RM109m
Retail index by year-end
Ho Hup: Plans to dispose of KL land
TM: And MIMOS in research tie-up
RHB: And AIA negotiate for a 10-year alliance
Puncak Niaga: Signs MOU to bid for Kimanis power plant job
Other Local News
U.S: Stocks drop, treasuries gain on concern about economy
U.S: AIG gets more aid after record USD 61.7b loss
U.S: Manufacturing shrinks for 13th straight month on collapsing sales
U.S: Consumer spending climbs for first time in seven months on discounts
E.U: Manufacturing contracts at record pace as export orders collapse
U.K: House prices drop annual 10%, Hometrack says
China: Manufacturing shrinks as crisis cuts demand
India: Exports fell in January by most in decade on weak demand
S. Korea: Exports drop 17.1% YoY on global recession
Indonesia: Exports plunge most in 22 years, inflation slows
Technicals
The market closed lower yesterday on weaker fourth quarter GDP number and on poorer corporate earnings
Special Technical Perspective
World Indices plunge. Is there any light at the end of the tunnel soon?
The DJIA and SP500 plunged to new recent lows
The KLCI and BOVESPA are in bearish “Rising Wedge” patterns
Step away from the bear until the dust settles down
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