Strong 2Q14 net profit within expectations.
Expect defensive growth from the ASEAN import-export activities and EU recovery.
Potential tariff revision is a key re-rating catalyst; BUY.
Strong 2Q14 results was mainly driven by its container division (revenue: +9% QoQ, +18% YoY) on: (i) strong volume of 2.1m TEUs (+8% QoQ, +14% YoY), underpinned by ASEAN box movements (intra Asia: +17% YoY), recovery in Europe (Asia-Europe: +10%) and CMA CGM-driven routes (Asia-Australasia: +31%, Asia-Africa: +7%); and (ii) marginal enhancement of its yield to MYR151/TEU (+1% QoQ, +3% YoY) due to the increase of value added services, such as storage and reefer.
Additionally, normalised EBITDA margin of 53% was flattish YoY in spite of higher electricity tariff and higher cost incurred for the new CT7. Company declared a first interim dividend of 5.1sen/shr (+17% YoY), within expectations.
We maintain our earnings forecasts given the full commencement of CT7 in 4Q14, which will see its operating cost flatten out and lower effective tax rate kicking in on investment tax incentive. Maintain BUY and DCF-based TP of MYR2.85, pending clarification on a potential tariff revision, a key re-rating catalyst.
Source: Maybank Research - 24 Jul 2014
Expect defensive growth from the ASEAN import-export activities and EU recovery.
Potential tariff revision is a key re-rating catalyst; BUY.
What’s New
2Q14 core net profit of MYR123m (+12% QoQ, +11% YoY) brought 1H14 core net profit to MYR232m (+16% YoY), making up 46% and 47% of our and consensus’ full-year forecasts.Strong 2Q14 results was mainly driven by its container division (revenue: +9% QoQ, +18% YoY) on: (i) strong volume of 2.1m TEUs (+8% QoQ, +14% YoY), underpinned by ASEAN box movements (intra Asia: +17% YoY), recovery in Europe (Asia-Europe: +10%) and CMA CGM-driven routes (Asia-Australasia: +31%, Asia-Africa: +7%); and (ii) marginal enhancement of its yield to MYR151/TEU (+1% QoQ, +3% YoY) due to the increase of value added services, such as storage and reefer.
Additionally, normalised EBITDA margin of 53% was flattish YoY in spite of higher electricity tariff and higher cost incurred for the new CT7. Company declared a first interim dividend of 5.1sen/shr (+17% YoY), within expectations.
What’s Our View
Management revised its total container volume growth upward slightly to 7-13% for FY14 (from 6-12%), to reflect the robust 1H14 volume (+13% YoY). This is still in line with our projection of 9.5% for FY14 as we expect a milder YoY growth in 2H14 considering the high base in 2H13.We maintain our earnings forecasts given the full commencement of CT7 in 4Q14, which will see its operating cost flatten out and lower effective tax rate kicking in on investment tax incentive. Maintain BUY and DCF-based TP of MYR2.85, pending clarification on a potential tariff revision, a key re-rating catalyst.
Source: Maybank Research - 24 Jul 2014
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