Affin Hwang maintains buy on Century, lowers TP


Century Logistics executive director Edwin Yeap:

KUALA LUMPUR: Affin Hwang Capital Research has maintained its "buy" call on Century Logistics Holdings Bhd with a lower target price of RM1.64, following lower revenue and net profit of 12.9% and 37.7% year-on-year (y-o-y) in Q2FY17.

Century’s core net profit decreased from RM9.9mil in H1FY16 to RM8.2mil in H1FY17,mainly due to lower volume from its existing steel customers and lower volume from F&N during the Hari Raya festive season.

Revenue from the total logistics segment decreased 11% y-o-y, while revenue of procurement logistics services fell by 20% y-o-y. 

For Q2FY17, the operating margins for the total logistics segment, which accounts for 83% of total revenue, fell 3.9ppts from the preceding quarter owing to rental cost of a vacant warehouse. Century will not renew the lease of the warehouse when it expires in September.

The operating margins for the procurement logistics segment remains the same at 8% for both Q1FY17 and Q2FY17. 

"We cut our earnings forecast for 2017-19E due to lower sales in 2Q17, lower margins due to additional rental cost of warehouse and higher operating costs as Century is venturing into a new business segment.

"We revised our earnings downward by 21.3%/11.9%/11.5% for 2017E/18E/19E," says Affin Hwang Research. 


However, the research house continues to like Century for its upcoming revenue stream from parcel delivery service, potential new customers from the integrated logistics segment and stable revenue streams from the oil logistics and producrement logistics segmnt.

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