Malaysian companies see Q4 earnings taking a hit due to severe flooding: CGS-CIMB

MALAYSIAN companies could see their Q4 earnings take a beating due to lower production resulting from the 'once-in-100 years' flooding that the country saw over the weekend, said CGS-CIMB analysts.

Manufacturing facilities and estates are expected to sustain some damage from the heavy rainfall, and workers may face difficulties getting to work due to the floods, said analysts Ivy Ng and Nagulan Ravi in a research note on Monday (Dec 20).

Malaysian companies could also face logistical challenges and shortages of materials as port operations were affected by yard congestion made worse by the flood situation, the analysts noted.

With port and logistics company Westports Holdings reporting that its capacity reduced as much as 30 per cent over the weekend due to the floods, the analysts have cut their net profit forecasts for FY2021 by 4 per cent to reflect lower container volume.

"Some companies could incur one-off costs to repair damages caused by the flood or to assist employees affected by the floods," they added.

Still, Ng and Ravi have maintained their target of 1,495 and 1,612 for the Kuala Lumpur Composite Index for FY2021 and FY2022 respectively.

By sector, the analysts said port operators, manufacturers, plantations and companies in the tourism industry would see the largest impact from the heavy rainfall.

They noted that Malaysia's manufacturers association had said that the floods have resulted in heavy losses for firms in the Shah Alam and Klang districts, including damage to property, other assets and inventories, as well as production disruptions, as many workers have not been able to get to work or return home.

On the shipping front, the analysts noted that recovery work at the ports are underway now that the floodwaters have receded.

"We gathered that Port Klang and West Port have not sustained any infrastructure damage, but some of the staff have yet to return to work due to the floods," said Ng and Ravi.

Meanwhile, checks with plantation companies under their coverage showed that some estates were affected by the flooding, which disrupted harvesting activities for the past few days.

The oil palm estates in Pahang and Selangor - which contributed around 18.5 per cent of total crude palm oil production for Malaysia for the first 11 months of 2021 - appeared to be the worst-affected states by the flood.

"The tourism industry could also be affected as some sections of several major highways were impassable due to flooding and landslides," said Ng and Ravi.