As per the 2Q2013 corporate results released so far, First Capital Equities said it was encouraging that consolidated revenues and earnings are up by 5.5% YoY and 5.3% YoY respectively, despite margin pressure experienced by the majority of companies as a result of higher input prices and surge in interest costs.
On a sectoral basis, First Capital Equities said banking and finance generated revenue growth of 23% during the quarter while sector profits grew by only 2% on account of narrowing of spreads. The diversified sector reported a 3% decline in revenues while reporting flat earnings growth. Companies in the manufacturing sector recorded a 6% top line growth while earnings for the sector grew at a faster 10%.
Food and beverages, meanwhile, reported a 7% growth in revenues with earnings rising in tandem at 6% YoY. Telecom sector revenues on the other hand rose by 8% during the quarter, although earnings declined by 1%.
“While the majority of the listed companies have still not reported their quarterly results, we expect revenue growth to be partly offset by margin pressure which may result in slower EPS growth for most. Nonetheless, bellwether companies may continue to report robust earnings on the back of higher volume growth,” First Capital Securities stated.
Commenting on the market’s trajectory, the broking firm said with both buyers and sellers largely sitting in the wings in anticipation of a market trigger, heading into 3Q2013, it expects market activity to remain relatively restrained in the near term.
“However, we expect momentum to gather steam in the medium to longer term with a break to the upside from the relatively sideways flag that we have been experiencing so far. Consequently, we view the current market environment as an opportunity for investors to clean their books, re-align their portfolios and reposition themselves with a flight to quality. We consequently advise investors to break away from the herd, maintain a healthy investment horizon and focus on companies that will deliver quality earnings during the next coming quarters,” First Capital Securities said.