Harbour-Link Group Bhd
(June 9, RM2.55)
Initiate coverage with a buy and a target price of RM3.65: Harbour-Link Group Bhd (HLG), a dominant logistics player in Sarawak, is presently benefiting from the logistics demands in the local construction industry and industries at Samalaju Industrial Park in Bintulu.
We project a strong earnings per share (EPS) growth of 36% and 25% for financial year 2015 (FY15) and FY16 on higher logistics and shipping earnings, and lumpy property development earnings in FY16.
While we forecast FY17 EPS will soften by 7% year-on-year due to lower property earnings, we highlight that our forecasts have yet to be imputed for the upcoming mammoth construction projects in Sarawak.
We estimate that for every RM100 million new project cargo contract HLG secures in FY17, it will lift our FY17 EPS forecast by 7%.
Additionally, we caution that its fourth quarter of FY15 (4QFY15) net profit could be lower at RM10 million on the diminishing order book of its engineering works.
We believe a rerating will materialise once the market understands its strong capability and earnings growth potential. — Maybank Investment Bank Bhd, June 9
This article first appeared in The Edge Financial Daily, on June 10, 2015.