RHBInvest Research

Wednesday, June 1, 2011

Top Story: Earnings Review / Strategy – More earnings downgrades; rising risk aversion

Market Update
The 1Q report card continued to be below our expectation as there were more companies reporting results that were below our projections compared with those that exceeded forecasts. Of the 111 companies that we cover, 62 of the results (55.9% of the total) were within our expectations, 33 below projections (29.7% of the total) and 16 above forecasts (14.4% of the total).

Sector Call
Banking: Apr ‘11 system data – Leading indicators moderated but loan growth resilient Overweight

Sector Update
Apr ’11 system-wide loan growth gathered further pace, growing 13.5% yoy as compared to +13.2% yoy achieved in Mar ’11. Similar with the previous month, this was mainly due to stronger loan growth to businesses (+14% yoy) while household loans outstanding continued to grow at a rather steady pace of 13.2% yoy.

Corporate Highlights

Affin: Keeping faith Outperform

Briefing Note
While 1Q11 headline net profit appears weak, management was keen to stress that the results were not representative of the full-year as 1Q tends to be a seasonally slower quarter coupled with the one-off RM40m litigation loss. As such, there was no change to the full-year targets.

MNRB: FY03/11 Earnings Up On Better Claims Experience Outperform

Results/Briefing Note
MNRB’s full year net profit of RM124m (+172% yoy) was above our expectations, accounting for 118% of our forecast. The main variance was the lower-than-expected claims ratio of 59.4% for its Malaysian Reinsurance division, compared to our projected 63% for FY03/11.
MAHB – Net profit up 21% yoy; land development in the works Outperform

Results/Briefing Note
MAHB’s 1QFY11 net profit came in at 21.7% of our full-year forecast. We consider the results to be within expectations as we expect a stronger 2H on the back of the year-end peak period for air travel.

Maxis: A slow start Market Perform

Results / Briefing Note
Maxis’s 1Q core net profit of RM2.29bn (-0.9% yoy; -7.7% qoq) was within expectations.
Management’s new tighter subscriber definition resulted in to better reflect its actual revenue generating base resulted in its overall subscriber base “contracting” by 1.2m to 12.7m.


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