CLSA Cuts Malaysia Profit Forecasts, Says Sell Banks, Planters

Nov. 18 (Bloomberg) -- CLSA Asia-Pacific Markets cut its estimate for Malaysia’s 2009 corporate profits for the fourth time this year to reflect the downturn in banking, plantations and construction.
“We are finally confident” that the forecast is a “fair reflection of the bleak outlook,” Clare Chin, a CLSA analyst in Kuala Lumpur, said in a report today. The prospect for earnings “has been bad, but now it’s looking ugly.”
Corporate earnings will shrink 18.7 percent next year, more than the 6.1 percent decline predicted on Oct. 20, Chin said. The benchmark Kuala Lumpur Composite Index may fall 12 percent to 776 next year, from 882.75 at the 12:30 p.m. lunch break today, she said.
Investors should sell banks including Malayan Banking Bhd. and Bumiputra-Commerce Holdings Bhd., which will be hurt by rising bad debts and slower loan growth as a global economic recession takes hold, CLSA said. Planters including Sime Darby Bhd. will struggle to cover production costs amid declines in palm-oil prices, the report said.
Profit at Malaysian banks may fall 29.6 percent next year, plantation companies 31.4 percent and builders 13.4 percent, Chin said.
Shares of Malayan Banking, the biggest Malaysian bank, fell 10 sen, or 1.9 percent, to 5.20 ringgit at 11:52 a.m. local time. It’s down 44 percent this year, more than the benchmark Composite Index’s 39 percent decline. Sime, the largest palm oil producer, has slumped 46 percent this year.
Chin said stocks that may “ride through the current downturn” include Resorts World Bhd., Digi.Com Bhd. and British American Tobacco Bhd. Investors with risk appetite should buy stocks such as Genting Bhd. and YTL Power International Bhd. with “large war chests for fire-sale acquisitions.”