Where Do We Stand Now?

Today marks the last day for the month of February of 2017. The reporting season saw a mixed bag of results. The key themes of the reporting season are summarised as follows:

  1. Significant translation losses due to uncertainties associated with the foreign exchange / Ringgit;
  2. Earnings recovery in palm oil sector (due to supply-related issues, rather than demand-driven factors);
  3. Property sector is subdued;
  4. Banking – rising provision and flattish growth;
  5. Declining profitability margins in line with rising inflation (associated with commodity / weakening Ringgit);
  6. Massive impairments in Oil & Gas sector
  7. Mixed results in retail sector due to weakening consumer sentiment
  8. Certain export-driven companies appear to achieve revenue growth but not in terms of profitability margins

Now, where do we stand? Uptrend, range-bound or downtrend……

Technically, we may continue to be stuck in a range-bound channel, with a current downward price bias (expected support at 1,615):

FBMKLCI_28022017.jpeg

Unless there is further deterioration in future earnings, FBMKLCI’s current trailing P/E of 16.75x is relatively not too deviated from the historical mean P/E of 16.657x  (since 2011):

FBMKLCI_normality_Feb17_PER.png

Unless there is further impairment in book value, FBMKLCI’s current trailing P/B of 1.689x is relatively lower than the historical mean P/B of 2.1084x  (since 2011):

FBMKLCI_normality_Feb17_PBR.png

FBMKLCI’s current dividend yield stands at 3.12% which is relatively lower than the historical mean dividend yield of 3.334%.

FBMKLCI_normality_Feb17_Div.png

In a nutshell, the likelihood of FBMKLCI to be “overvalued” at this juncture is relatively low unless there is further deterioration in the earnings and book value of the listed companies.

On a separate note, we are observing a possible diverging trend between FBMKLCI’s PER and PBR since 2015, whereby it is observed that the PBR line continues to decline whilst the PER line has been oscillating. This could be possibly attributable to (i) lower earnings; (ii) lower dividends recorded by the listed companies.

FBMKLCI_normality_Feb17_PBRvsPER.png

What is more concerning is that the current volatility of FBMKLCI appears to be relatively low if compared to its historical trend. Will be there be a “storm” ahead?

HVG_feb_fbmklci 2017.png

DISCLAIMER: THIS IS A PERSONAL BLOG AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. ALL ARTICLES CONTAINED IN THIS SITE ARE FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY, COMPLETENESS AND TIMELINESS. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED IN THE ARTICLES.

Author: Ken Utau

Data Scientist, Markets Analyst and Food Lover

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