CWT Ltd’s 1Q13 revenue jumped 39% YoY to S$1.5b, while net profit was flat at S$27m. 1Q results were in-line with ours and the street’s expectations. The surge in 1Q revenue was mainly driven by its newly established trading business (Commodity SCM) which resulted in higher volume, and the inception of a new product line. At the same time, the group incurred higher administrative expenses relating to the costs of establishing new operations. The group’s logistics operations were largely business-as-usual. Looking ahead, we expect operating leverage to kick in for the Commodity SCM business and the group to expand its logistics capacity with the developments of three large warehouses in Singapore. Maintain BUY with unchanged FV of S$2.08.
1Q results within expectations
CWT Ltd’s 1Q13 revenue jumped 39% YoY to S$1.5b, while net profit was flat at S$27m. 1Q results were in-line with ours and the street’s expectations. The surge in 1Q revenue was mainly driven by its newly established trading business (Commodity SCM) which resulted in higher volume, and the inception of a new product line. At the same time, the group incurred higher administrative expenses relating to the costs of establishing new operations. The group’s logistics operations were largely business-as-usual.
Growing the Commodity SCM
Commodity SCM revenue expanded by 49% to S$1,256m in 1Q13 (1Q12: S$841m). However, we believe most of the incremental earnings were offset by higher start-up costs. The Commodity SCM business is still in a very early stage. As the trading volume scales up, operating leverage should kick in and we should see sustainable earnings growth in the coming years.
Expanding the warehouse space
Meanwhile, the group’s construction of CWT Cold Hub 2 (TOP: 1Q2014) and Toh Guan Road East (TOP: end-2013) are at 45% and 30% completion respectively. On completion, we expect the two properties to contribute to rental income. There may also be opportunities for divestment gains. In addition, CWT recently acquired an old industrial property at Pandan Avenue of about 23,800 sqm and plans to redevelop it into a multi-storey ramp-up logistics facility (max GFA of 640,000 sqft) for its expanding logistics operations.
Balance sheet supportive of growth
Excluding the self-liquidating short-term trade financing (non-recourse to CWT), the group has net cash reserve of S$35.9m as of end 1Q13. Overall balance sheet looks sound and is supportive of long-term growth. Maintain BUY with unchanged FV of S$2.08.
CWT Ltd’s 1Q13 revenue jumped 39% YoY to S$1.5b, while net profit was flat at S$27m. 1Q results were in-line with ours and the street’s expectations. The surge in 1Q revenue was mainly driven by its newly established trading business (Commodity SCM) which resulted in higher volume, and the inception of a new product line. At the same time, the group incurred higher administrative expenses relating to the costs of establishing new operations. The group’s logistics operations were largely business-as-usual.
Growing the Commodity SCM
Commodity SCM revenue expanded by 49% to S$1,256m in 1Q13 (1Q12: S$841m). However, we believe most of the incremental earnings were offset by higher start-up costs. The Commodity SCM business is still in a very early stage. As the trading volume scales up, operating leverage should kick in and we should see sustainable earnings growth in the coming years.
Expanding the warehouse space
Meanwhile, the group’s construction of CWT Cold Hub 2 (TOP: 1Q2014) and Toh Guan Road East (TOP: end-2013) are at 45% and 30% completion respectively. On completion, we expect the two properties to contribute to rental income. There may also be opportunities for divestment gains. In addition, CWT recently acquired an old industrial property at Pandan Avenue of about 23,800 sqm and plans to redevelop it into a multi-storey ramp-up logistics facility (max GFA of 640,000 sqft) for its expanding logistics operations.
Balance sheet supportive of growth
Excluding the self-liquidating short-term trade financing (non-recourse to CWT), the group has net cash reserve of S$35.9m as of end 1Q13. Overall balance sheet looks sound and is supportive of long-term growth. Maintain BUY with unchanged FV of S$2.08.
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