Freight Management Holdings (FMH)’s 1HFY13 net profit of RM9.8m (+5.3% y-o-y) was an encouraging improvement from its sluggish 1QFY13. The growth was mainly led by Land Freight, 3PL & Warehousing, and Tug & Barge divisions. The operating environment remained challenging for Sea Freight as its volume and profit continued to decline. Hence, we are trimming our earnings forecasts for FY13/FY14 by 13.8%/1.0%, with a new RM1.13 FV based on an 8x FY14f PER, as we roll over our valuation. Maintain BUY.
Healthy results. FMH’s 1HFY13 net profit of RM9.8m was largely in line with consensus estimates and our full-year FY13 forecasts of RM23.2m. The overall growth was led by strong performance at the 3rd Party Logistics (3PL) & Warehousing division, coupled with notable improvement in the Tug & Barge as well as Land Freight operations. However, these positives were offset by slower growth in the Sea and Air Freight and weaker Haulage and Customs Brokerage segments. We also note that FMH’s 1HFY13 PBT growth was softer y-o-y, mainly due to higher depreciation and other costs arising from its new recent investments. That said, the company’s 2QFY13 bottom-line benefited from a lower tax rate, helped by favourable effects of the reorganisation of its Malaysian operations, as well as tax-free profits at its Singapore-based Tug & Barge subsidiary.
Contract logistics boost earnings. FMH’s Land Freight segment recorded a robust recovery in 2QFY13 earnings (GP +169.3% y-o-y), mainly boosted by its new Toshiba contract, which commenced in November 2012. Its 3PL & Warehousing segment also chalked up commendable earnings growth in 2QFY13 (GP +70.7% y-o-y), thanks to new customers coming on board, a better service mix, as well as improved efficiency and utilisation. Similarly, the improvement in the Tug & Barge division during the quarter was boosted by rising demand, a better customer mix and improved efficiency.
Healthy results. FMH’s 1HFY13 net profit of RM9.8m was largely in line with consensus estimates and our full-year FY13 forecasts of RM23.2m. The overall growth was led by strong performance at the 3rd Party Logistics (3PL) & Warehousing division, coupled with notable improvement in the Tug & Barge as well as Land Freight operations. However, these positives were offset by slower growth in the Sea and Air Freight and weaker Haulage and Customs Brokerage segments. We also note that FMH’s 1HFY13 PBT growth was softer y-o-y, mainly due to higher depreciation and other costs arising from its new recent investments. That said, the company’s 2QFY13 bottom-line benefited from a lower tax rate, helped by favourable effects of the reorganisation of its Malaysian operations, as well as tax-free profits at its Singapore-based Tug & Barge subsidiary.
Contract logistics boost earnings. FMH’s Land Freight segment recorded a robust recovery in 2QFY13 earnings (GP +169.3% y-o-y), mainly boosted by its new Toshiba contract, which commenced in November 2012. Its 3PL & Warehousing segment also chalked up commendable earnings growth in 2QFY13 (GP +70.7% y-o-y), thanks to new customers coming on board, a better service mix, as well as improved efficiency and utilisation. Similarly, the improvement in the Tug & Barge division during the quarter was boosted by rising demand, a better customer mix and improved efficiency.
Sea Freight continues to be impacted. Earnings growth at its core Sea Freight division slowed (GP +8.4% y-o-y) during the quarter under review, weighed down by lower volume and softer margins, although Less Than A Container Load (LCL) recovered in 2QFY13, although this was offset by relatively softer Full Container Load. LCL registered volume growth of 1.3% y-o-y in 2QFY13, compared to a y-o-y 21.7% decline in 1QFY13. Management guided that the favourable service mix and higher average load factor were the main drivers of the better 2QFY13 performance. Meanwhile, FCL generated higher revenue, thanks to the increase in freight rates but continued to see a dip in profit (-11.0% y-o-y) and volume (-5.0% y-o-y) during the quarter.
Maintain BUY but FV revised lower. We are still positive on the outlook of the company but we prefer to be more prudent and remain cautious due to the gloomy global economic environment and local political uncertainty. We are revising down our earnings forecasts for FY13f/FY14f by 13.8% and 1.0% to RM20.0m and RM23.0m respectively even as we roll over our valuation and derive a new FV of RM1.13 based 8x FY14f PE (adjusted for bonus issue), the stock still offers investors a decent capital gain of 12% based on its last closing price.
Maintain BUY but FV revised lower. We are still positive on the outlook of the company but we prefer to be more prudent and remain cautious due to the gloomy global economic environment and local political uncertainty. We are revising down our earnings forecasts for FY13f/FY14f by 13.8% and 1.0% to RM20.0m and RM23.0m respectively even as we roll over our valuation and derive a new FV of RM1.13 based 8x FY14f PE (adjusted for bonus issue), the stock still offers investors a decent capital gain of 12% based on its last closing price.
Source: OSK
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