Thursday 28 Mar 2024
By
main news image

This article first appeared in The Edge Financial Daily on August 10, 2018

DKSH Holdings (Malaysia) Bhd
(Aug 9, RM3.82)
Maintain outperform with an unchanged target price of RM5:
Revenue in the second quarter ended June 30, 2018 (2QFY18) grew 3.5% year-on-year (y-o-y) to RM1.44 billion. The growth in revenue was largely due to organic growth in DKSH Holdings (Malaysia) Bhd’s existing businesses. The logistics segment posted stronger revenue growth of 6% while revenue for the marketing and distribution segment was flattish, growing at about 0.9%. Logistics remained the largest revenue contributor, accounting for 51% of total revenue.

 

As for the operating profit in 2QFY18, it fell 12% y-o-y. Despite a better performance posted by the logistics segment, which delivered an improvement in margin from 1.15% to 1.52%, the group’s profit was dragged down by lower contribution from the marketing and distribution segment. Margin for the marketing and distribution segment was significantly lower at 1.36% compared with the 2.31% registered in 2QFY17. This has resulted in a decline in the group’s operating margin from 1.71% to 1.45%. Meanwhile, the others segment posted a small profit versus a loss incurred in 2QFY17.

Stripping out allowance of inventory obsolescence, inventories write-off and other non-operating items, DKSH reported a core net profit of RM33.3 million in the first half of FY18 (1HFY18), a 14.2% y-o-y increase. The results were in line with our expectation, accounting for 55% of our full-year estimate. 1HFY18 results were largely supported by a stronger 1QFY18 but 2QFY18’s performance was uninspiring with operating profit falling 12% y-o-y on lower margin for the marketing and distribution segment.

Although this segment’s 2QFY18 revenue improved by 0.9% y-o-y, operating cost increased at a faster pace of 1.9% due to the shift in product mix and higher cost base to support future growth. Our earnings forecasts remain unchanged and we expect DKSH to post a quarter-on-quarter improvement in 3QFY18 profit due to higher consumer spending on the back of the transition of the goods and services tax from 6% to 0% effective June 1. — PublicInvest Research, Aug 9

      Print
      Text Size
      Share