KUALA LUMPUR: CIMB Securities has revised downward its earnings forecasts for FTSE Bursa Malaysia KLCI (FBM KLCI) constituents by 5.6 per cent for both 2025 and 2026, citing widespread underperformance in the first quarter ended March 31, 2025 (1Q 2025).
The brokerage said the downgrade was primarily driven by lower earnings projections for the banking sector, Sime Darby Bhd
, and Petronas Chemicals Group Bhd. "As a result, CIMB now forecasts KLCI core net profit growth at 3.4 per cent for 2025 and 6.5 per cent for 2026, down from 9.3 per cent and 6.6 per cent, respectively.
CIMB Securities has also lowered its end-2025 FBM KLCI target to 1,560 points from 1,657, based on an unchanged price-to-earnings (P/E) multiple of 14.7 times.
"The KLCI is trading at a 12-month forward P/E of 12.7 times with an attractive dividend yield of 4.2 per cent, but the upside may be capped by downside risks including the 10 per cent US import tariff, the end of the tariff reprieve on July 9, potential hikes in the Sales and Service Tax (SST) and RON95 fuel prices in the second half of 2025, and higher electricity tariffs expected in July.
"These headwinds may be partially offset by strong domestic liquidity, a strengthening ringgit, and policy support from initiatives such as the National Energy Transition Roadmap (NETR), the Johor-Singapore Special Economic Zone (JS-SEZ), and the New Industrial Master Plan 2030 (NIMP 2030),” CIMB Securities said.
The brokerage noted that only 7 per cent of companies under its coverage beat expectations in the first quarter, while 64 per cent missed, pulling the earnings surprise ratio down to 0.24 times, the weakest showing since the second quarter of 2020. It attributed the underperformance to lower-than-expected net interest margins for banks, weaker earnings in the oil and gas, consumer, and technology sectors, along with higher effective tax rates and foreign exchange losses.
In terms of sector positioning, CIMB downgraded oil and gas and plantations to "neutral” from "overweight” due to a lack of near-term catalysts. It downgraded Petronas Chemicals Group Bhd and Sime Darby Plantation Bhd to "hold” from "buy.”
Despite the cautious tone, the brokerage maintained its overweight stance on telecommunications, utilities, and construction. It added Maxis Bhd, IJM Corp Bhd, and IOI Corp Bhd to its top large-cap picks, alongside existing names such as CelcomDigi Bhd, Gamuda Bhd, Public Bank Bhd, RHB Bank Bhd, Tenaga Nasional Bhd, and 99 SpeedMart.
In the small- and mid-cap space, Axis Real Estate Investment Trust (REIT) has been added to its list of recommended stocks, joining Malaysian Resources Corporation Bhd (MRCB), KJTS Group Bhd, Farm Fresh Bhd, and Mah Sing Group Bhd. - Bernama