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					            PP 7767/09/2011(028730)
                                                                                                                                         25 August 2011

Malaysia                              Corporate Highlights
                                                                                                                                       RHB Research
                                                                                                                                       Institute Sdn Bhd
                                                                                                                                       A member of the
                                                                                                                                       RHB Banking Group
                                                                                                                                       Company No: 233327 -M

                                      R e su l ts /B r ief ing N o t e
                                                                                                                                       25 August 2011
            MARKET DATELINE




                                      Freight Management                                        Share Price
                                                                                                Fair Value
                                                                                                                 :
                                                                                                                 :
                                                                                                                                                   RM1.03
                                                                                                                                                   RM1.89
                                      Net Profit Grows 19.9% YoY; Proposes Bonus Issue          Recom            :                            Outperform
                                      and Free Warrants                                                                                       (Maintained)


    Table 1 : Investment Statistics (FREIGHT; Code: 7210)                                                                        Bloomberg: FMH MK
                                                 Net                                                                 Net
    FYE                               Revenue   Profit     EPS      Growth      PER   C. EPS *      P/NTA        Gearing               ROE             GDY
    Jun                               (RMm)     (RMm)      (sen)         (%)    (x)    (sen)         (x)             (x)               (%)             (%)
    2011                               295.5     19.7      16.2          19.9   6.4       -           1.2            0.1               18.3            4.9
    2012f                              309.5     21.9      18.0          11.0   5.7      18.0         1.0            0.1               17.7            4.9
    2013f                              331.4     24.2      19.9          10.5   5.2      19.0         0.9            Cash              17.0            4.9
    2014f                              349.3     26.8      21.8          10.7   4.7       -           0.8            Cash              16.4            4.9
    Main Market Listing / Trustee Stock / Syariah-Approved Stock By The SC                          * Consensus Based On IBES Estimates

♦    Above expectations. Freight Management’s (FM) FY06/11 net profit                                          RHBRI              Vs.            Consensus
     exceeded our forecasts by 7% but in line with consensus.                                                                    Above
                                                                                                                                In Line
♦    Proposes a bonus issue and free warrants. FM has proposed a bonus                                                           Below
     issue on the basis of 1 for every 3 shares and free warrants on the basis of
     1 for every 5 share before the proposed bonus issue. Ex-bonus, FM’s                                    Issued Capital (m shares)                   121.7
                                                                                                            Market Cap (RMm)                            125.4
     theoretical share price would be RM0.77. Assuming an exercise price of
                                                                                                            Daily Trading Vol (m shs)                        0.1
     RM0.85 (10% premium to the theoretical ex-price), the proposed free
                                                                                                            52wk Price Range (RM)                0.97 – 1.17
     warrants could raise up to RM20.7m on full conversion. In addition,                                    Major Shareholders:                         (%)
     assuming full exercise of the free warrants, FM’s share capital would                                  Chew Chong Keat                             26.2
     increase by 24.3m to 186.6m (currently 121.7m).                                                        Singapore Enterprise                         20.0
                                                                                                            Yang Heng Lam                                18.5
♦    Dilution. Based on our estimates, the free warrants will fully dilute FY06/12
     EPS by 9.3% (see Table 3).                                                                             FYE Jun                FY12        FY13     FY14
                                                                                                            EPS Revision (%)       10.4         13.2         -
♦    10-15% earnings growth. Despite the global economic uncertainty, FM is                                 Var to Cons (%)        (0.1)        4.6          -
     optimistic of achieving a 10-15% earnings growth mainly driven by: (1) the
                                                                                                            PE Band Chart
     still resilient demand for freight services especially seafreight; and (2)
     Higher contribution from the 3PL segment. FM has minimal exposure to the
                                                                                                                            PER = 9x
     US and EU given that more than 90% of its revenue is derived in the Asean                                              PER = 7x
                                                                                                                            PER = 5x
     countries as well as Australia. FM believes the economic growth in these
     countries should remain resilient, driven largely by domestic demand
     despite the economic slowdown in the developed countries

♦    Risks. The risks include: (1) the entrance of new players into segments
     where FM commands significant market shares, hence affecting FM’s pricing
     power and profitability; and (2) a slower-than-expected recovery in the                                Relative Performance To FBM KLCI
     global economy.

♦    Forecasts. We have increased our FY06/12-13 net profit by 10.4% and
                                                                                                                               Freight Management
     13.2% respectively to reflect higher revenue contributions from the 3PL
     segment and stronger contributions from freight services.
                                                                                                                                   FBM KLCI
♦    Investment case. Accordingly, our fair value is raised to RM1.89/share
     (from RM1.69/share) based on unchanged 10x CY12 EPS of 18.9 sen, in line
     with our benchmark 1-year forward PER for the transport and logistics
     sector. We maintain our Outperform call on the stock. We continue to like
     FM for: (1) Its core business, i.e. the provision of LCL freight service that is                                Joshua CY NG
     niche and highly profitable; (2) Its dominance in the sector with an                                           (603) 92802166
                                                                                                                 joshuang@rhb.com.my
     estimated market share of 30-35% in the LCL sea freight segment in
     Malaysia; and (3) The above-trend growth of its LCL business vis-à-vis
     Malaysia’s international trade activities.


                 Please read important disclosures at the end of this report.                                                                      Page 1 of 5


  A comprehensive range of market research reports by award-winning economists and analysts are exclusively
  available for download from www.rhbinvest.com
                                                                                                                 25 August 2011


FY06/11 Results


    ♦   Above expectations. FY06/11 net profit exceeded our forecasts by 7% but in line with consensus. The key
        variance against our forecast came from the stronger-than-expected contribution from the third-party
        logistics (3PL) segment and higher TEU volume from LCL (less-than-container load).
    ♦   YoY. FY06/11 net profit grew 19.9% yoy thanks to:
        1.   Higher contribution from seafreight (+11.7% yoy), landfreight (+83.7% yoy) and 3PL (+81.7% yoy);
             and
        2.   A effective tax rate of 17.6% (FY06/10: 21.7%).
    ♦   QoQ. On qoq basis, net profit increased by 40.2% qoq to RM5.9m mainly attributed to:
        1.   Higher contribution from seafreight (+14.9% qoq), landfreight (+21.4% qoq), 3PL (14.3% qoq); and
        2.   Margin expansion from higher LCL segments (+1.4%-pts).
    ♦   Proposes a bonus issue and free warrants. FM has proposed a bonus issue on the basis of 1 for every 3
        shares and free warrants on the basis of 1 for every 5 share before the proposed bonus issue. Ex-bonus, FM’s
        theoretical share price would be RM0.77. Assuming an exercise price of RM0.85 (10% premium to the
        theoretical ex-price), the proposed free warrants could raise up to RM20.7m on full conversion. In addition,
        assuming full exercise of the free warrants, FM’s share capital would increase by 24.3m to 186.6m (currently
        121.7m).
    ♦   Dilution. Based on our estimates, the free warrants will fully dilute FY06/12 EPS by 9.3% (see Table 3).




Key Takeaways


♦   Highlights. Key takeaways during the analysts’ briefing yesterday are:
        1.   FM is aiming 10-15% net profit growth for FY06/12;
        2.   There are more 3PL contracts in the pipeline; and
        3.   FM is looking for opportunities to expand in emerging markets.
♦   10-15% earnings growth. Despite the global economic uncertainty, FM is optimistic of achieving a 10-15%
    earnings growth mainly driven by: (1) the still resilient demand for freight services especially seafreight; and (2)
    Higher contribution from the 3PL segment. FM has minimal exposure to the US and EU given that more than 90%
    of its revenue is derived in the Asean countries as well as Australia. FM believes the economic growth in these
    countries should remain resilient, driven largely by domestic demand despite the economic slowdown in the
    developed countries
♦   More 3PL contracts in the pipeline. We understand that FM could potentially secure new contracts for the 3PL
    segment in the coming quarters. Currently FM is still in negotiations with several parties. This segment of FM has
    a strong record with several contracts with MNCs (recently, it secured a contract from Shell for 3PL). FM has 5
    acres (217,800 sq ft) of unutilised land which could be used to further expand its warehouse capacity.
♦   Looking to expand in emerging markets. Going forward, FM indicated that it may look for opportunities to
    expand within the Asean region i.e. Laos and Myanmar as well as key emerging markets i.e. Middle East and
    Africa to further diversify its revenue base. Already, FM is extending its services in Thailand which now include
    LCL and FCL for seafreight (previously only landfreight services). FM is confident that this could be replicated in
    other locations.




Risks
♦   Risks to our view. The risks include: (1) the entrance of new players into segments where FM commands
    significant market share, hence affecting FM’s pricing power and profitability; and (2) a sharper-than-expected
    downturn in the global economy.
♦   Forecasts. We increased our FY06/12-13 net profit by 10.4% and 13.2% respectively to reflect higher revenue
    contributions from the 3PL segment and stronger contributions from freight services.




                                                                                                                       Page 2 of 5


     A comprehensive range of market research reports by award-winning economists and analysts are exclusively
     available for download from www.rhbinvest.com
                                                                                                                             25 August 2011


♦   Maintain Outperform. Accordingly, our fair value is raised to RM1.89/share (from RM1.69/share) based on
    unchanged 10x CY12 EPS of 18.9 sen, in line with our benchmark 1-year forward PER for the transport and
    logistics sector. We maintain our Outperform call on the stock. We continue to like FM for: (1) Its core business,
    i.e. the provision of LCL freight service that is niche and highly profitable; (2) Its dominance in the sector with an
    estimated market share of 30-35% in the LCL sea freight segment in Malaysia; and (3) The above-trend growth
    of its LCL business vis-à-vis Malaysia’s international trade activities.



    Table 2: Effects of Proposal on Freight Management’s Share Capital
    Share Capital                                                 Par Value                No. Shares        RM’m       Theoretical ex-price
                                                                                                             Value             (RM)
    Existing @ 24 Aug 10                                                      0.5            121.7            60.9         1.03 (current)
    Upon completion of bonus issue                                            0.5            40.6             20.3              0.77
    Upon completion of free warrants                                          0.5            24.3             12.2              0.77

    Total FD Issued Shares                                                                   186.6            93.3


    Table 3: EPS Dilution From Bonus Issue and Free Warrants
                                                                                                     Before      Bonus Issue    Bonus Issue
                                                                                                                                      +
    FY06/12 (RMm)                                                                                                                   Free
                                                                                                                                 Warrants
    Net Profit                                                                                       21.9             21.9          21.9
    Interest savings                                                                                   -               -             0.9
    Adjusted Net Profit                                                                              21.9             21.9          22.8
    Share Capital (m shares)                                                                         121.7           162.3         186.6
    FD EPS (sen)                                                                                     18.0             13.5          12.2
    Chg %                                                                                                            -25.0         -9.3*
    Key Assumptions: Exercise price of RM0.85, interest cost of 6%, and tax rate of 25%.
    *Compared to ex-bonus issue EPS



    Table 4: Earnings Review (YoY Cumulative)
    FYE Jun                 2010      2011              % YoY       Observations/ Comments
    (RMm)                   12M        12M               Chg
    Revenue                 265.5     295.5              11.3       Higher contribution from: (1) seafreight; (2) landfreight; and (3) 3PL.
    Operating profit         23.2      25.9              11.5       Mainly due to higher volume (TEU) from the LCL segment (+9% yoy).
    Finance costs            -1.5      -1.9              31.1
    Associates                0.0       0.1             >100
    Pretax profit            21.8      24.0              10.3
    Tax expense              -4.7      -4.2             -10.2
    Minority interest        -0.6       0.0             -92.4
    Net profit               16.4      19.7              19.9       Helped further by a lower effective tax rate.
    EPS (sen)                13.5      16.2              19.9

    Operating margin (%)       8.8          8.8           0.0pt
    Pretax margin (%)          8.2          8.1          -0.1pt
    Net profit margin (%)      6.2          6.7           0.5pt
    Effective tax rate (%)     21.7         17.6         -4.0pt     Effective tax rate is lower than the statutory tax rate due to tax
                                                                    exemption by subsidiaries and utilisation of investment tax allowance.




                                                                                                                                   Page 3 of 5


     A comprehensive range of market research reports by award-winning economists and analysts are exclusively
     available for download from www.rhbinvest.com
                                                                                                                    25 August 2011


 Table 5: Earnings Review (QoQ)
 FYE Jun                2011        2011       2011      2011      % QoQ      Observations/ Comments
 (RMm)                    1Q         2Q         3Q        4Q        Chg
 Revenue                                                                      Growth in seafreight and stronger contribution from
                         72.1        73.5      68.7       81.3       18.3
                                                                              3PL.
 Operating profit           6.3       6.1      4.7         8.8       85.5
 Finance costs             -0.5      -0.5      -0.5       -0.5       1.5
 Associates                 0.0       0.0      0.0         0.0      >-100
 Pretax profit              5.8       5.6      4.3         8.3       93.8     Filtered down from higher operating profit.
 Tax expense               -1.1      -0.4      -0.4       -2.4      >100      Moderated by higher tax expense.
 Minority interest         -0.2      -0.1      0.3         0.0      >-100
 Net profit                 4.5       5.2      4.2         5.9       40.2
 EPS (sen)                  3.7       4.3      3.4         4.8       40.2

 Operating margin (%)      8.7        8.3       6.9       10.8     3.9pts
 Pretax margin (%)         8.0        7.7       6.3       10.2     4.0pts
 Net profit margin (%)     6.2        7.1       6.1       7.2       1.1pt
 Effective tax rate (%)    18.7       6.3       9.1       29.0     19.9pts


Table 6: Earnings Forecasts                                           Table 7: Forecast Assumptions
FYE Jun (RMm)             FY11     FY12f      FY13f      FY14f        FYE Jun                     FY12f           FY13f      FY14f

Revenue                   295.5    309.5      331.4      349.3        Volume (TEUs)
Growth (%)                 11.3     4.7        7.1        5.4         Sea Freight                      71,309     75,587     77,855
                                                                      Rail Freight                     2,503      1,627      1,058
Operating profit          25.9     29.6       32.4       35.7         Air Freight (kgs)                 5,475      5,475     5,475
Operating margin (%)       8.8      9.6        9.8       10.2         Land Freight                      3,589     4,307      5,168

Finance costs             -1.9     -1.2       -1.0       -1.0
Associate                  0.0      0.1        0.1        0.1
Pretax profit             24.0     28.5       31.5       34.8
Pretax margin              8.1      9.2        9.5       10.0

Tax expenses            -4.2       -6.3       -6.9       -7.6
Minority interests       0.0       -0.4       -0.4       -0.3
Net profit              19.7      21.9        24.2       26.8
Net profit margin (%)    6.7        7.1        7.3        7.7
Source: Company data, RHBRI estimates




                                                                                                                            Page 4 of 5


  A comprehensive range of market research reports by award-winning economists and analysts are exclusively
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                                                                                                                                              25 August 2011



IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The
opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or
be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be
construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any
manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons
may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives
of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or
strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts
any liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB
Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity
securities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other
services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -


Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on
higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation.             Additional information on recommended
securities, subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the
actions of third parties in this respect.




                                                                                                                                                       Page 5 of 5


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