It’s all about the dry powder

TheStar Sat, Jun 06, 2020 10:30am - 3 years View Original


AS expected, quarter one (Q1) results season was as disappointing as trying to catch a sunset on a cloudy day.

With the movement control order (MCO) imposition with effect from March 18, it was not a surprise to see most corporates churning out disappointing quarterly report cards as business closures, especially among consumer names and the retail sector, were hit hard on revenue and earnings. Some corporates even experienced losses as revenue evaporated during the MCO period, while operating expenses ate into profits that have been earned in the early part of the Q1 period.

Due to the extension of time granted by Bursa Malaysia for companies to report their respective Q1 results to end of this month, some 20%-25% of the companies covered by brokers have yet to report their quarterly results. As such, not all brokers have made their summary report for the Q1 period reporting season.

Based on data from six brokers, the number of companies that reported disappointing earnings spiked up to 47% in 1Q20 against 31% in the preceding quarter while companies that surprised the market fell to 10% in the latest quarter against 19% in the 4Q19 period. Hence, the disappointing ratio plunged to 4.54x from 1.21x. The drop in the ratio is not surprising mainly due to the partial impact of the MCO period.

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