Analysts showed optimism that the ongoing fourth-quarter (4Q) earnings season has got off to a firmer start, with the beat-to-miss ratio improving sharply from the previous two quarters.
In a strategy note on Friday, CIMB Securities said as of Feb 19, 27 companies under their coverage have released their results, of which 30% beat expectations, 11% missed, and 59% met forecasts.
This entails a beat-to miss ratio of 2.7 times, which CIMB Securities said is an improvement compared to the beat-to-miss ratio of 0.78 times in the third-quarter and 0.55 times in the second-quarter.
Within the FBM KLCI, four constituents (30% of CIMB Securities' total coverage) have reported so far, all of which met expectations.
Exporters lead in producing better-than-expected results despite the stronger ringgit with Top Glove Corp Bhd (KL:TOPGLOV) and Hartalega Holdings Bhd (KL:HARTA) in CIMB’s focus for the fourth quarter. Top Glove benefitted from lower raw material costs while Hartelga had cost optimisation initiatives and a lower effective tax rate.
In the technology sector, Malaysian Pacific Industries Bhd (KL:MPI) delivered stronger-than-expected earnings supported by improved margins from better cost control, favourable sales mix and lower tax expenses. VS Industry Bhd (KL:VS) also exceeded forecasts on higher customer orders for its Malaysian operations.
Westports Holdings Bhd (KL:WPRTS) in the transport sector outperformed primarily due to lower operating costs with lower electricity costs, which also lifted real estate investment trust (REIT) earnings as IGB REIT (KL:IGBREIT) also outperformed on stronger-than-anticipated contributions from the newly acquired Mid Valley Southkey Mall.
Elsewhere, United Malacca Bhd (KL:UMCCA) and Yinson Holdings Bhd (KL:YINSON) reported better-than-expected earnings. In contrast, Bursa Malaysia Bhd (KL:BURSA), Yoong Onn Corp Bhd (KL:YOCB) and SKP Resources Bhd (KL:SKPRES) underperformed as their earnings came in below analyst expectations.
4Q shows encouraging momentum, KLCI target maintained
Following the results releases, CIMB Securities upgraded AEON Credit Service (M) Bhd (KL:AEONCR), CelcomDigi Bhd (KL:CDB) and Eco World Development Group Bhd (KL:ECOWLD) to "buy" ratings.
The research house also made selective downgrades as recent share price strength already reflected fundamentals, as such 99 Speed Mart Retail Holdings Bhd (KL:99SMART), SKP Resources, and Fraser & Neave Holdings Bhd (KL:F&N) were downgraded to "hold" calls.
“Overall, although only 30% of companies under our coverage have reported thus far, the 4Q 2025 earnings season is tracking better than in previous quarters,” said CIMB Securities.
The research house said the stronger start to 4Q 2025 is consistent with firmer economic growth in the quarter and improving earnings momentum in the technology and rubber glove sectors, both of which were laggards in the first half of 2025. It remains upbeat that export players will continue to perform despite the stronger ringgit.
It maintained its KLCI year-end target of 1,772 points, noting that the current earnings trajectory, if sustained, could lend support to broader market sentiment.
At the time of writing on Friday, the KLCI was down 0.19% to 1,749.21 points.
Source: theedgemalaysia