Century Logistics (CLH) 1QFY12’s earnings of RM4m were below
our and consensus estimates, representing only 14% and 13% of the respective FY12 forecasts. We attribute this mainly to disruptions at its core Oil & Gas Logistics segment,
which usually fetches lucrative margins. In view of the poor results, we are
trimming our top- and bottom-line forecasts by 2% and 4% respectively for FY12,
but maintain our earnings projection for
FY13 as we believe the O&G logistics division will make full
recovery. Hence, we cut our FV from RM1.94 to RM1.79, based on an
unchanged 6x FY12 PER. Maintain NEUTRAL.
Drag from O&G
logistics. CLH’s 1QFY12 revenue and net profit of RM65m and RM4m respectively
were below our and consensus estimates.
Its O&G logistics business continued
to be hit by disruptions at its key O&G logistics services (also known as
ship-toship bunker fuel services) segment,
which typically fetches lucrative margins. The Transport Ministry’s Marine Department
had ordered CLH to suspend four out of its eight floating and storage units
(FSUs) in Pasir Gudang from Sept-Nov 2011 in relation to the development of the
RM5bn deepwater terminal by Dialog Group (BUY, FV RM2.99) in Pengerang, Johor. As a result, the
group’s EBIT and PBT sank 34% y-o-y
(-14% q-o-q) and 37% (-17% q-o-q)
respectively. Management said two of
the FSUs have resumed operation
in new locations, and that the
company is searching for alternatives
for the remaining 2 FSUs.
Nonetheless, we remain neutral on its O&G logistics business at this juncture
as we think that this division
had yet to fully recover in
2QFY12. We also anticipate a
challenging environment for
CLH’s bunker fuel services owing
to the weak global economic sentiment.
Margins compressed.
The group’s PBT margins dipped 409bps y-o-y owing to the poor performance of its high-margin bunker fuel services as well as highly competitive freight rates.
The group’s haulage business continued to flounder as high fuel costs and congestion
at the depots led to shrinking PBT
margins. CLH is currently working on improving its haulage business through
route optimization and outsourcing. We expect the haulage and trucking business
to turn positive over the next few quarters as the company adopts a new
business approach and ramps up outsourcing.
Maintained NEUTRAL. Following the weaker results, we are trimming
our top- and bottom-lines for FY12 by 2% and 4% respectively, but maintain our
earnings projection for FY13 as we believe the group’s FSUs would have resumed
full operation by then. We see its contract logistics division continuing to
grow steadily as it secures new contracts from FMCG and telco companies such as
Pepsi.Co and Celcom. As such, our FV now stands at RM1.79, pegged at 6x FY12
PER, down from RM1.94 previously, with our NEUTRAL call maintained.
Source: OSK188
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