KUALA LUMPUR: Affin Hwang Capital research forecasts Century Logistics Holdings Bhd's 2019 earnings to grow at a slower rate of 5% year-on-year to RM8mil despite projected revenue growth.
"We expect group performance to be hampered by a higher CS operating loss of RM12.2m (vs. RM6.7m in 2018) due to low economies of scale," it said in a note.
However, revenue is likely to grow 22% y-o-y in 2019 the back of the commencement of its new multi-storey warehouse in Setia Alam and expanded clientele base for its procurement logistics services (PLS) segment.
"We believe that the group will be able to fill up the warehouse capacity given its proximity to a port and a highway.
"Apart from that, we expect PLS’ revenue to improve by c. 50% as the group has secured new customers, mainly from Vietnam," said Affin Hwang.
It said the courier service segment is expected to continue incurring losses before it achieves break even in 4Q20 while PLS operating profit margin is expected to fall 5%-6% from 7% in 2018 on the back of higher export volumes.
"Overall, we expect a core net profit CAGR of 29% over 2019-21E mainly due to low base effect and expected turnaround of the CS segment in 2021E," it said.
Affin Hwang maintained its hold call on CJ Century with a lower target price of 46 sen.
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