KUALA LUMPUR: The recent corporate earnings season has analysts optimistic over continued earnings recovery in 2022 given evidence of profit growth in the stocks under their coverage.

       TA Securities Research said big cap sectors such as banks, oil and gas and plantations drove higher 4Q21 earnings with core earnings of stocks under its coverage rising 8.7%.

       Full-year earnings surged 51.4% due to the lower base created by the Covid-19 pandemic in 2020 and the subsequent restoration of economic activities.

       "In this earnings season, we have raised our CY22 earnings by 6.3% mainly after tweaking higher CPO price assumption for the plantation sector and raising upward our forecasts for banks and oil & gas sectors," it said.

       Its adjusted earnings per share growth forecast for FBM KLCI component stocks in 2022 and 2023 are 2.9% and 8.2% versus consensus' 9.6% and 6.3% respectively.

       TA considers the FBM KLCI a bargain, trading at consensus FY23 price-earnings ratio of 14.3 times versus peers' 15 times.

       In addition, it believes the market will be further bolstered by the attraction to commodity plays due to the geopolitical tension, which will keep already elevated prices on a growth path.

       Nevertheless, the research firm cautions that upside could be capped by domestic politics leading up to the 15th general election.

       "Maintain our end-2022 FBMKLCI target of 1,700 based on CY23 PER of 15.3x," it said.

       Meanwhile RHB Research was also positive over the December earnings quarter as it built on the recovery momentum seen in the preceding September quarter.

       "Five sectors beat expectations – including the bellwether banking sector, plantation, auto, NBFI and property – which trumped the two sectors that disappointed (gloves and consumer)," it said.

       For stocks under RHB's coverage, it nominally raised FY22 and FY23 estimates by 3.1% and 3.4%. Excluding the drag from gloves, estimates were raised 5.3% and 4.5%.

       The research firm also raised earnings estimates for the FBM KLCI by 3% and 3.5% for FY22 and FY23, although they do not move valuations down far enough to fundamentally re-rate the market.

       On market strategy, RBH said trading sentiment was set to improve due to the relaxation of border restrictions while the market’s defensive attributes are attracting new foreign portfolio flows.

       "Nonetheless, regulatory and political risks, a protracted crisis in Ukraine as well as uncompelling valuations could limit the market’s fundamental upside," it added.