KUALA LUMPUR: CIMB Securities Bhd has revised downwards its earnings projections and year-end target for the FTSE Bursa Malaysia KLCI (FBM KLCI), following a weaker-than-expected first-quarter earnings season for 2025.
The research house cut its 2025 core net profit growth forecast for the benchmark index sharply to 3.4%, a notable decline from the previous estimate of 9.3%. The projection for 2026 was also marginally reduced to 6.5% from 6.6%.
Reflecting the downgraded earnings outlook, CIMB trimmed its end-2025 FBM KLCI target to 1,560 points, down 6% from the earlier forecast of 1,657 points. This revision is based on an unchanged price-to-earnings (P/E) multiple of 14.7 times—equivalent to 0.25 standard deviation above the historical mean.
The downward adjustment was driven primarily by a less optimistic outlook for the banking sector and weaker earnings prospects for Sime Darby Bhd and Petronas Chemicals Group Bhd.
CIMB noted that the KLCI is currently trading at a 12-month forward P/E of 12.7 times, coupled with an attractive dividend yield of 4.2%. Nonetheless, the firm cautioned that potential gains could be limited due to a range of macroeconomic headwinds. These include the newly implemented 10% baseline tariffs on all US imports effective 2 April, the expiry of the 90-day reprieve on heightened US reciprocal tariffs on 9 July, anticipated hikes in domestic electricity tariffs in July, and possible increases in sales and service tax (SST) as well as RON95 fuel prices in the second half of the year.
According to CIMB’s analysis, only six companies under its coverage outperformed expectations during the quarter, largely driven by higher-than-expected margins and stronger sales. In contrast, 25 companies fell short of estimates due to a mix of foreign exchange losses, tepid sales, cost pressures associated with expansion, weaker loan growth, softer net interest margins, and dilution losses from Chinese associates.
The earnings surprise ratio, which measures the number of outperformers against underperformers, fell further to 0.24 times. This marks a continued decline from 0.6 times in Q4 2024, 0.7 times in Q3 2024, and 1.1 times in Q2 2024. Furthermore, 17% of FBM KLCI constituents reported results that fell below expectations.
While CIMB estimates a 4% quarter-on-quarter increase in core net profit for the companies under its coverage—driven by the banking, construction, consumer, gaming, and utilities sectors—first-quarter earnings declined 4% year-on-year. This was largely attributable to weaker results in the automotive, oil and gas, and gaming sectors, which collectively accounted for 94% of the year-on-year decline.
In light of these developments, CIMB downgraded its outlook on both the oil and gas and plantation sectors to ‘neutral’ from ‘overweight’. This adjustment was primarily influenced by the downgrade of Petronas Chemicals Group Bhd to ‘hold’ from ‘buy’, reflecting weak short-term earnings visibility, and SD Guthrie Bhd’s downgrade to ‘hold’ from ‘buy’, citing a lack of near-term catalysts.
Given ongoing uncertainty around tariffs and broader macroeconomic pressures, CIMB said it continues to favour stocks with resilient earnings profiles, compelling dividend yields, or specific catalysts—whether valuation-driven or event-related.
In line with this, its top large-cap recommendations now include IJM Corporation Bhd, Maxis Bhd, and IOI Corporation Bhd, replacing SD Guthrie Bhd and IHH Healthcare Bhd. Within the small- to mid-cap segment, Axis REIT has been added, replacing Muhibbah Engineering Bhd and Genetec Technology Bhd.
CIMB’s current large-cap top picks are CelcomDigi Bhd, Gamuda Bhd, Public Bank Bhd, RHB Bank Bhd, Tenaga Nasional Bhd, Maxis Bhd, IOI Corporation Bhd, IJM Corporation Bhd, and 99 Speed Mart Bhd. For small- to mid-cap selections, its picks include KJTS Group Bhd, Malaysian Resources Corporation Bhd, Axis REIT, Farm Fresh Bhd, and Mah Sing Group Bhd.
-The Edge Malaysia
