AFTER a lacklustre first-quarter (1Q26) earnings season, corporate Malaysia delivered one of its better quarters in recent times, with more companies reporting earnings that came in above expectations, while those that disappointed fell sharply.
Nevertheless, pockets of weakness emerged, especially among some larger banking stocks and selected consumer names.
The ongoing tensions in the Middle East also lifted the oil and gas sector, especially among refiners, with Hengyuan Refining Co Bhd, seeing a big jump in its 2Q26 earnings, taking its half-year (1H26) earnings per share to more than 90% of its share price before the recent rally.
Hibiscus Petroleum Bhd also benefited from the higher global oil prices as its quarterly earnings soared 155.6% year-on-year (y-o-y).
Among FBM KLCI stocks, Press Metal Aluminium Holdings Bhd showed impressive growth with 2Q26 core earnings rising by just over 50% y-o-y on higher commodity prices.
IOI Corp Bhd saw robust earnings growth in the 2Q26 period, with net profits rising by 14.7% versus a year ago.
However, Kuala Lumpur Kepong Bhd reported a dip in profits despite higher plantation profits, while SD Guthrie Bhd’s performance was boosted by land sales.
Banking stocks reported a decent set of results, but there were hardly any surprises.
Nevertheless, Hong Leong Bank Bhd did report better y-o-y earnings growth as net profit expanded by more than 14% for the quarter. This allowed the banking group to raise its dividends to 80 sen per share, up 17.6% y-o-y.
Newly added index component IOI Property Group Bhd also reported strong performance. The doubling of its dividends to 16 sen per share from eight sen last year was certainly a surprise.
Healthcare stocks KPJ Healthcare Bhd, IHH Healthcare Bhd and Sunway Healthcare Holdings Bhd saw their bottom line surged 26.6%, 29.3% and 88.9%, respectively, as margins improved on higher bed occupancy.
YTL Power International Bhd saw a significant contribution from the data centre (DC) segment, where revenue surged by nearly eight-fold while segment profit leapfrogged almost 20-fold to RM244.3mil for the 4Q26 ended June 30.
The DC segment contribution to the company is now almost on par with its power sector, generating a profit margin in excess of 50%.
No wonder YTL Power is gearing up to spin-off its DC segment as another listed entity.
Among construction stocks, Sunway Construction Group Bhd continued its strong earnings growth momentum with 2Q26 net profit rising by 23.5% y-o-y, while Westports Holdings Bhd’s spectacular 55.8% earnings growth was mainly driven by the higher tariff and value- added services.
Consumer names, in general, again disappointed as weaker 2Q26 earnings were reported by Oriental Kopi Holdings Bhd, MR DIY Group (M) Bhd and Heineken Malaysia Bhd, with earnings falling by 5.3%, 15.2%, and 39.1% y-o-y, respectively. In the case of Heineken Malaysia, the decline in earnings and a bleak outlook dragged its share price to new multi-year lows.
Carlsberg (M) Bhd, despite reporting a small growth in y-o-y earnings, also saw intense selling pressure since its competitor announced its quarterly results and has been trading at levels last seen in 2016.
It was not all gloom and doom for consumer names, as companies like Fraser & Neave Holdings Bhd, 99 Speed Mart Retail Holdings Bhd and Nestle (M) Bhd showed decent earnings growth of 10.3%, 13.4% and 38.3% y-o-y, respectively, reinforcing these companies’ strength in the sector.
Glove makers had a superb quarter, with even Supermax Corp Bhd turning around, allowing it to report its first quarterly profit in fourteen quarters.
Detailed analysis of its earnings before interest, tax, depreciation, and amortisation (Ebitda) suggests the change in Ebitda in absolute terms was even larger than the change in revenue when compared with the previous corresponding quarterly period.
Elsewhere, Hartalega Holdings Bhd, Top Glove Corp Bhd and Kossan Rubber Industries Bhd saw earnings surge 5.5 times, 2.3 times and 2.1 times y-o-y, respectively, signalling a return to normality although whether current higher average selling prices can be maintained is left to be seen.
Among automotive stocks, Sime Darby Bhd had a bumper quarter as core profit surged 55%, while both MBM Resources Bhd and Bermaz Auto Bhd also had a good 2Q26 as earnings surged 32.2% and 120% y-o-y, respectively.
The technology sector, which has seen strong outperformance this year, saw impressive showing from companies like ViTrox Corp Bhd and MI Technovation Bhd, with earnings soaring more than threefold, while Frontken Corp Bhd and Kellington Group Bhd net earnings jumped by 42.5% and 25.7% y-o-y, respectively.
Decent growth
The 2Q26 earnings season was one of the best we have seen in recent times as quarterly earnings expanded by 12.6% q-o-q and 12.2% y-o-y, allowing 1H26 net profit to grow by 7.4% y-o-y.
Overall, there were also more surprises than misses, as companies reporting earnings that came in above expectations improved to 18.6% (1Q26: 12.2%), while companies that disappointed the market dropped to 22.5% from 26.2% in the preceding quarter’s reporting season.
The increase in the number of companies beating estimates and the smaller number of companies that missed the market’s expectations translate to a lower disappointing ratio of 1.21 times, which is a significant improvement from the 2.14 times that was observed in the preceding quarter.
FBM KLCI at 1,762 points
Most brokers maintained their FBM KLCI target after the 2Q26 results season, with consensus now looking at 1,760 points as the new fair value, against 1,766 points in the preceding quarter, based on earnings growth of approximately 8.5% for 2026 and a market price-to-earnings multiple of 15.2 times.
For 2027, earnings growth has been lowered marginally from the previous estimate of 6.8% to 6.2%. Interestingly, among the eight brokers polled, the market fair value is rather narrow and within a tight range of between 1,750 points and 1,780 points.
The closure of the Strait of Hormuz remains a key prolonged headwind risk for markets, and although global markets have largely priced the disruptive nature of oil and gas supply from the region, there could be de-risking if the closure goes beyond the US mid-term elections in November.
Another key concern for markets is the recent selloff in the bond market, which has sent US 10-year benchmark yields soaring to levels last seen three years ago, while the Japanese 30-year bonds have recently surpassed the 4% mark.
This clearly indicates that the market expects rate hikes to persist as inflationary pressure remains elevated in most economies.
Locally, although Bank Negara Malaysia is unlikely to hike rates anytime soon, the last Monetary Policy Meeting statement does suggest that the central bank has turned a little hawkish.
Investors’ focus over the remaining months of 2026 will now be on the tabling of Budget 2027 on Oct 9, which most expect to be expansionary and people-friendly.
While corporate Malaysia has delivered in the 2Q26 reporting season, pockets of weakness among large index-linked stocks are dragging the overall FBM KLCI’s performance.
With the expansion of the 30-stock benchmark index to 50 constituents in the December review, the enlarged number of constituents will add more breadth and depth to the FBM KLCI, especially for sectors that are unrepresented in the current composition.