KUALA LUMPUR (Nov 16): Affin Hwang Capital Research has maintained its 'Hold' call on CJ Century Logistics Holdings Bhd with a lower target price of 53 sen, compared to 70 sen previously.
In a note today, its analysts Laila Razip and Loong Chee Wei said they have also cut their FY18-20 earnings-per-share (EPS) forecasts by 11-20% given the lower-than-expected earnings from the total logistics services (TLS) and courier services (CS) segments for the first nine months of the year (9MFY18).
The analysts said the earnings during the period were below expectations, accounting for only 60% of the consensus and the research house's previous FY18 estimate.
"Its 9MFY18 core net profit decreased by 47% y-o-y to RM7.8 million mainly due to higher costs from certain TLS contracts and ongoing costs as a result of the expansion of the CS operation," it said in the note.
The research team believes that CJ Century’s CS segment will continue to incur losses in FY19 and break even in FY20, given the ongoing merger and current lack of economies of scale.
"The construction of the 3-storey warehouse in Setia Alam, which is expected to be completed in 1HFY19, will increase its self-owned warehouse capacity by about 33%.
"With the additional capacity, complementary networks and expertise from the recent acquisition, we believe its profit margins will improve, resulting in better earnings growth in the long run," it added.
At 10.04am, CJ Century gained 0.96% or 0.5 sen to 52.5 sen with 20,300 shares traded.