CWT's earnings almost doubles to S$15.8m in 3Q11

Earnings surge with maiden MRI contribution

CWT's 3Q11 core earnings were in line with our expectations, surging 190.5% YoY to hit S$15.8m, mainly due to MRI’s maiden contribution to the group. With 9M11 core earnings making up 72.3% of our FY11 estimates, we are leaving our estimates untouched.

We remain positive over CWT’s long term prospects with its continued business development initiatives, which include the development of a new warehouse, Cold Hub 2 and a joint venture with Turkey-based Unimar Logistics which would help expand its global network to 95 offices across 23 countries.

Reiterating our BUY recommendation with an unchanged TP of S$1.73, based on 20.8x FY11 earnings (a 20% discount to global peers’ 7-year historical average).

Core earnings within expectations. CWT’s 3Q11 core earnings surged 190.5% YoY, coming in at S$15.8m, attributable to MRI’s maiden contributions to the group. In line with its expansion plans, net gearing increased to 0.7x from a net cash position last quarter.

Update on warehouses. The 325k sqf Pandan Logistics Hub has received TOP in mid Oct and was commissioned earlier this month with 100% occupancy rate. In addition, CWT is building a 725k sqf CWT Cold Hub 2 to be completed by Jan 2013. With a pipeline of warehouses being built and completed progressively, it is likely that CWT would continue to perform more asset divestments to REITs moving ahead, which may allow shareholders to continue to enjoy special dividends.

Integrating MRI Trading AG. CWT’s current stake in MRI, a Switzerland-based base metal non-ferrous concentrates physical trading group, has increased from 73.81% to 78.68% following a share buyback in Oct.

Management is now focusing their efforts on maximising MRI’s earnings potential, as well as to realise synergies arising from the integration of trading and logistics supply chain management activities. This includes beefing up manpower, organising logistics operations platforms and pursuing new supply and sales avenues. In our forecasts, we have assumed S$1b of revenue contribution from MRI in FY11.