PublicInvest maintains outperform on DKSH with TP of RM5

KUALA LUMPUR: PublicInvest Research maintained its outperform rating on DKSH Holdings (M) Bhd with an unchanged target price of RM5 as its 1HFY18 results came in within expectations.

"Stripping out allowance of inventory obsolescence, inventories write-off and other non-operating items, DKSH Holdings (M) Berhad reported a 1HFY18 core net profit of RM33.3m, +14.2% YoY. 

"The results were in line with our expectation, accounting for 55% of our full-year
estimate," it said.

However, the research house said DKSH's 1HFY18 results were largely supported by its first quarter results while its second quarter was uninspiring with operating profit falling 12% year-on-year on lower margin for the marketing and distribution segment.

Margin for the marketing and distribution segment was significantly lower at 1.36% versus 2.31% registered in the year-ago quarter, resulting in the group's operating margin declining from 1.71% to 1.45%.

"Our earnings forecasts remain unchanged and we expect DKSH to post a QoQ improvement in 3QFY18 profit due to higher consumer spending on the back of transition of Goods and Services Tax from 6% to 0% effective 1 June 2018," said PublicInvest.