KUALA LUMPUR: The earnings of stocks in the FTSE Bursa Malaysia KLCI (FBM KLCI) showed a marginal increase during the just completed reporting season and analysts are not expecting a big jump in earnings for this year.

Summaries of the just concluded earnings season have research houses voicing some optimism that profits will rise in 2017.

Reviews by brokers of the last reporting season showed earnings of the FBM KLCI stocks rose by a low single digit on a year on year basis.

MIDF Research said earnings of the FBM KLCI during the fourth quarter of calendar year 2015 totalled RM14.76bil and rose 1.2% from the year earlier but 25.5% from the third quarter. Stripping out exceptional and one-off items, MIDF found that earnings of the top 30 stocks climbed a mere 1.8% from the third quarter but 6.7% from a year ago.

Its analysis of earnings in the fourth quarter of calendar year 2015 pointed towards the possible resumption of an earnings upcycle and maintained its year-end 2016 FBM KLCI target of 1,800 points.

It said earnings of the FTSE Bursa Malaysia KLCI (FBM KLCI) had met expectations for a second consecutive quarter, following six quarters of disappointment.

CIMB Investment Bank, in its analysis of the results of companies it tracks, found that 40% of companies missed expectations versus 29% in the third quarter of last year.

“We have lowered our calendar year 2016 market earnings per share (EPS) growth forecast to 5.7% from 7.5% previously.

“Consensus growth is at 7.5%. However, for calendar year 2017, our 8.4% market EPS growth is much higher than consensus,” it said in its report.

“While this reflects our more conservative market EPS recovery expectation in 2016, we believe EPS growth momentum should continue into 2017.”

CIMB cut its FBM KLCI target for 2016 to 1,800 points from 1,900 points.

HLIB Research said the removal of macro risks after the budget recalibration, potentially better oil dynamics in the second half of 2016 and the ongoing search for yields would make Malaysian equities attractive to foreign investors.

It said the latest reporting season showed “further signs of improvement” and indicated that earnings deterioration had eased.

Overall, it said, the final quarter of the calendar year had recorded an improvement, with only 35% of the HLIB universe falling short of expectations, compared to 38% in the previous quarter, while 27% surprised on the upside, compared to 12% previously.

Kenanga Research, however, sees limited upside following the latest results season, saying it had failed to provide any strong re-rating catalysts to the local equity market.

The research house said its FBM KLCI earnings universe only recorded a negligible growth rate of 0.8% for calendar year 2015, compared to its expectation of 1.8%.

Kenanga found that companies in the automotive, building materials, consumer retail, and gaming sectors delivered weaker-than-expected results. Plantations and plastics companies showed improvements in their financial results.

“Surprisingly, property developers shown better-than-expected results too,” said Kenanga.

With the lower base, it has fine-tuned estimate earnings growth for financial year 2016 to 4.1% from 3.9%.

“While we have a stronger growth estimate of 8.4% for financial year 2017, we still believe that the upside could be limited from here due to the less exciting valuations,” it said in a note yesterday.

“In line with the lower earnings estimates, we also revised down our end-2016 index target to 1,725 (from 1,755), implying 19.6x/18.1x FY16E/FY17E price to earnings ratio.”