Friday 29 Mar 2024
By
main news image

This article first appeared in The Edge Financial Daily on May 24, 2018

DKSH Holdings (Malaysia) Bhd
(May 23, RM4.10)
Maintain outperform with a target price (TP) of RM5:
Stripping out allowance for inventory obsolescence, inventories write-off and other non-operating items, DKSH Holdings (Malaysia) Bhd reported a first quarter ended March 31, 2018 (1QFY18) core net profit of RM14.8 million, up 32% year-on-year (y-o-y).

The results are in line with our expectations, accounting for 24% of our full-year estimate.

The logistics segment performed well, mainly due to higher sales and margin expansion.

DKSH’s share price has recovered sharply since the announcement of the zero-rated goods and services tax (GST) effective June 1, 2018. Without GST, consumer spending is likely to pick up and this should be positive for DKSH’s sales.

At this juncture, we are keeping our earnings forecasts. Our TP of RM5 suggests an upside of 16%.

DKSH’s 1QFY18 revenue grew by 6.3% y-o-y to RM1.46 billion, which was largely due to organic growth in its existing businesses and a more favourable timing of the Chinese New Year festival, which fell in February compared with January in 2017 (sales were mostly captured in December 2016).

The logistics segment posted a stronger revenue growth of 8.8%, compared with only 3.8% for the marketing ad distribution segment. Logistics remained the largest revenue contributor, accounting for 52% of total revenue.

DKSH’s 1QFY18 operating profit improved by 5.9% with the earnings before interest and tax margin for the logistics segment improving sharply from 1% to 1.7% due to better product mix and a one-off debt recovery.

However, the marketing and distribution margin fell from 1.3% to 0.8% due to a one-off doubtful debt provision and a slight increase in cost.

Meanwhile, losses at other segments have widened from RM260,000 to RM1.4 million mainly due to rising expenses and accounting adjustment in central costs. — PublicInvest Research, May 23

      Print
      Text Size
      Share