Mixed 4Q15 results
■ 4Q15 results were mixed, with 40% of companies under our coverage reporting results below our expectations.
■ Revision ratio for 4Q15 was at 0.63x, largely similar to the previous quarter.
■ Our 2016 market EPS growth forecast falls to 5.7% (7.5% previously), but we expect stronger earnings growth in 2017.
■ KLCI target cut from 1,900 to 1,800pts, based on 3-year average P/E.
The 4Q15 corporate results were mixed, with 40% of the companies under our coverage reporting results below our expectations (29% in 3Q15). However, the percentage of companies that beat our expectations rose from 18% in 3Q15 to 25% in 4Q15. Plantation and aviation sectors positively surprised while the rest disappointed. Revision ratio was unchanged qoq at 0.63x.
4Q15 EPS growth
4Q15 EPS rose both on yoy and qoq basis, which is a positive sign. On a qoq basis, 4Q15 EPS rose 9.7% mainly due to the strong earnings recovery in the plantation and aviation sectors.
EPS growth outlook this year
We have lowered our CY16 market EPS growth forecast to 5.7% from 7.5% previously. Consensus growth is at 7.5%. However, for CY17, our 8.4% market EPS growth is much higher than consensus. While this reflects our more conservative market EPS recovery expectation in 2016, we believe EPS growth momentum should continue into 2017.
KLCI target falls to 1,800
Our previous KLCI target was based on a 5% premium to the three-year moving average of 15.5x P/E. In view of our uninspiring 2016 market EPS growth outlook, we are removing the 5% premium. Our new KLCI target is based on the 3-year average of 15.5x P/E and our end-2016 KLCI target falls from 1,900 to 1,800pts. Our preferred sectors are still banking, construction and select smaller-cap stocks.
source: CIMB Research - 02/03/2106
