KUALA LUMPUR (March 4): TA Securities has cut its FBM KLCI valuation multiple estimate for 2026, while lowering its 2025 target to 1,785 from 1,845, due to adjusted earnings forecasts and weak market sentiment.

The research firm said although the 4Q2024 results season came mostly within expectations, more companies outperformed compared to the previous quarter.

“Post this (4Q2024) results season, we have cut our CY2025 and CY2026 earnings by 3.0% and 2.8% respectively, mainly due to downgrades in the oil & gas, gaming, technology, healthcare, and consumer sectors. 

“Post revisions, we forecast earnings of our stock universe to grow by 8.2% and 8.3% in CY2025 and CY2026, respectively,” it said in a note on Tuesday.

TA Securities noted that consensus estimates have also reduced 2025 and 2026 earnings forecasts by about 1.2%, projecting growth at 7.9% and 7.4%, respectively.

As such, in line with the tweak in earnings and weak market sentiment, the research house cut its valuation multiple for the FBM KLCI to 15 times CY2026 earnings.

TA Securities noted that core earnings of stocks under its coverage grew by 5.6% year-on-year in the final quarter of 2024, and 12.6% in CY2024, driven mainly by stronger pricing power, cost efficiency, recovery in economic and trade activities, and sector-specific tailwinds.

It said key sectors facing downgrades include oil & gas, gaming, technology, healthcare, and consumer, mainly due to higher operating costs and lower sales volumes.

Meanwhile, the oil & gas sector saw downward revisions because of increased operational expenses at Petronas Chemicals Group Bhd (KL:PCHEM).

Gaming’s forecast was lowered due to rising operating costs in the US and UK, and continued losses from Empire Resorts, it added.

Technology was impacted by lower sales volumes for Inari Amertron Bhd (KL:INARI) and Malaysian Pacific Industries Bhd (KL:MPI), and higher costs for Unisem (M) Bhd (KL:UNISEM). In healthcare, reduced glove volumes and higher expenses led to downgrades.

Consumer forecasts were adjusted due to Nestlé (Malaysia) Bhd’s (KL:NESTLE) higher operating costs and lower sales projections.

On a more positive note, the plantations sector saw upgrades, driven by improved margins and higher sugar division contributions from FGV Holdings Bhd (KL:FGV). 

TA Securities said its CY2025 earnings growth forecast of 8.2%, down from the previous 10% forecast, will be driven by banks, gaming, telecommunications, healthcare, and construction sectors.

The house said banks are expected to benefit from continued loan growth and stable net interest margins, while gaming will likely see a rebound from a low base effect. 

It added that telecommunications growth will be supported by cost optimisation, while healthcare is set to grow with higher patient volumes and glove demand recovery. 

Construction earnings will benefit from higher revenue recognition and an expanding order book, added the research firm.

Meanwhile, its 8.3% earnings growth forecast for 2026 is in anticipation of a recovery across key sectors except automotive, where margins may soften. 

Post-results, TA Securities upgraded eight stocks and downgraded 11, with Ann Joo Resources Bhd (KL:ANNJOO), Capital A Bhd (KL:CAPITALA), and MISC Bhd (KL:MISC) among those upgraded to “buy”.

It maintained an “overweight” call on banking, construction, consumer, and other key sectors, with no “underweight” calls.