CWT reported a decent set of 2Q13 results that were in-line with our expectations. Revenue jumped 66% YoY to S$1.7b, driven by higher contribution from its newly established Commodity business. However, the group incurred higher administrative expenses and higher financing costs. Consequently, net profit eased 6% YoY to S$18.1m for 2Q13. The group also announced a new leadership team – headed by Adam Slater and Alan Kuek – at its Commodity business, replacing former employees who have left the team. We still like CWT, but lowered our valuation peg for its Commodity business to a conservative 9x (previously 12x) after its recent management reshuffle. This in turn lowered our SOTP valuation to S$1.68 (previously S$2.08). Maintain BUY.
Results within expectations
CWT reported a decent set of 2Q13 results that were in line with our expectations. Revenue jumped 66% YoY to S$1.7b, driven by higher contribution from its newly established Commodity business. However, the group incurred (i) higher administrative expenses (S$43.7m, +17% YoY) from management and restructuring costs, and (ii) higher financing costs (S$8.5m, +8% YoY) from higher borrowing and trade volume. Consequently, net profit eased 6% YoY to S$18.1m for 2Q13. For 1H13, revenue and net profit formed 50% and 46% of our FY13F estimates, respectively.
Management restructuring
On 23 May 2013, CWT announced a leadership change at MRI Trading Group, the Commodity business it acquired in late 2011. Adam Slater and Alan Kuek were appointed the Executive Chairman and CEO of MRI respectively, replacing former employees who have left the team. Adam Slater is the Deputy CEO of CWT and brings to the table vast knowledge and experience in the commodities and resources industry. Alan Kuek joined MRI in Feb 2012 and has more than 16 years of experience in originating and structuring financing in banks and commodity traders. With the changes, CWT expects to streamline its operations, enabling greater control over the trading business.
Warehouse construction underway
While the consolidation of the Commodity business remains a work-in-progress at least for the time being, CWT’s logistics capacity expansion is proceeding on track. The construction of Cold Hub (TOP: 1Q2014) and Toh Guan Road East (TOP: end-2013) are 60% and 40% completed. Redevelopment for the newly acquired site at Pandan Avenue will commence in 3Q13. We still like CWT, but lowered our valuation peg for its Commodity business to a conservative 9x (previously 12x) after its recent management reshuffle. This in turn lowered our SOTP valuation to S$1.68 (previously S$2.08). Maintain BUY.
CWT reported a decent set of 2Q13 results that were in line with our expectations. Revenue jumped 66% YoY to S$1.7b, driven by higher contribution from its newly established Commodity business. However, the group incurred (i) higher administrative expenses (S$43.7m, +17% YoY) from management and restructuring costs, and (ii) higher financing costs (S$8.5m, +8% YoY) from higher borrowing and trade volume. Consequently, net profit eased 6% YoY to S$18.1m for 2Q13. For 1H13, revenue and net profit formed 50% and 46% of our FY13F estimates, respectively.
Management restructuring
On 23 May 2013, CWT announced a leadership change at MRI Trading Group, the Commodity business it acquired in late 2011. Adam Slater and Alan Kuek were appointed the Executive Chairman and CEO of MRI respectively, replacing former employees who have left the team. Adam Slater is the Deputy CEO of CWT and brings to the table vast knowledge and experience in the commodities and resources industry. Alan Kuek joined MRI in Feb 2012 and has more than 16 years of experience in originating and structuring financing in banks and commodity traders. With the changes, CWT expects to streamline its operations, enabling greater control over the trading business.
Warehouse construction underway
While the consolidation of the Commodity business remains a work-in-progress at least for the time being, CWT’s logistics capacity expansion is proceeding on track. The construction of Cold Hub (TOP: 1Q2014) and Toh Guan Road East (TOP: end-2013) are 60% and 40% completed. Redevelopment for the newly acquired site at Pandan Avenue will commence in 3Q13. We still like CWT, but lowered our valuation peg for its Commodity business to a conservative 9x (previously 12x) after its recent management reshuffle. This in turn lowered our SOTP valuation to S$1.68 (previously S$2.08). Maintain BUY.
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