Collective turnover higher y-o-y in FY2015 for most sectors

The IRB reportedly expects to collect lower direct taxes of RM118.5 million in 2016, similar to how Malaysia’s gross domestic product is officially projected to grow at 4% to 4.5% this year after having grown at 5% in 2015 and 6% in 2014.

A quick sectoral analysis of this year’s 176 BRC members found that the collective turnover was higher year on year in FY2015 for most sectors except Industrial Products while the 26 Big Cap stocks had a market capitalisation of RM10 billion to RM40 billion.

Interestingly, the 23 BRC members in the Industrial Products sector and 18 in the Property sector saw higher year-on-year pre-tax growth in FY2015. This was also true for net profit — the 140 companies with a market cap of RM1 billion to RM10 billion managed to stay in positive territory but were dragged down by lower earnings among the 10 Super Big Cap (above RM40 billion or about US$10 billion market cap) and 26 Big Cap (RM10 billion to RM40 billion market cap) members.

Uncertainties about global growth plus the advent of zero interest rates in a quarter of the world’s economies, even as the US Federal Reserve continues to contemplate what looks like a slow path to policy normalisation, means companies will come under increasing pressure to sustain, let alone best, their past performance.

Already, much has changed since the cut-off date for BRC membership this year. Britain unexpectedly voted to leave the EU in June. Before that, in March, the Economist Intelligence Unit had listed Donald Trump winning the US presidency as one of the top 10 risks facing the world — riskier than Britain leaving the EU or an armed clash in the South China Sea. China encountering a hard landing or a sharp economic slowdown was among the events seen as a riskier than Trump.

Trump has since been named Republican nominee and will face Democratic contender Hillary Clinton in the US presidential elections on Nov 8 this year — the outcome of which could affect the multilateral Trans-Pacific Partnership (TPP), of which Malaysia is a party.

Over at the Fed, the minutes of its July policy meeting show some members think “economic conditions would soon warrant taking another step in removing policy accommodation”, although there was a general agreement that more data was needed before a rate hike could happen.

In Malaysia, the Ministry of Finance has held a series of consultations with industry and budget focus groups in preparation for Budget 2017, which is slated for tabling on Oct 21, according to the Parliament’s website at the time of writing.

Recall that both Budgets 2015 and 2016 tabled in October 2014 and 2015 had to be revised the following January because of sharply lower crude oil prices on persistent oversupply and global growth concerns.

Brent, which traded between US$31 and US$59 a barrel over the past year, was hovering at US$49 at the time of writing — its level when Budget 2016 was tabled last October. It was at US$31 when the revised Budget 2016, which assumed Brent at US$30 to US$35 a barrel, was announced in January.

Likewise, the ringgit traded between 3.8442 and 4.4812 against the US dollar over the past year and was around 4.00 to the greenback at the time of writing.

Closing at 1,694.32 points on Aug 17, the FBM KLCI was up only 0.1% from its 1,692.51-point close at end-2015. It was also down 1.35% from its 1,717.58-point close at end-March.

Still, our internal analysis of the top 20 companies on the annual BRC list from 2010 to 2016 showed that the members — which repeatedly do well in our quantitative and qualitative criteria to select the Company of the Year — tend to outperform their peers in the long run.

It is worth noting that DiGi.Com Bhd — The Edge BRC’s Company of the Year in 2013 — continues to be the only company that has made it to our internal BRC top 20 list in all seven years since 2010. Nestlé (M) Bhd, the only company to appear on the top 20 list in six of the seven past annual rankings, is this year’s BRC Company of the Year.