CWT’s Q3 2010 earnings of $5.5 million was below brokers’ estimates, with the costs for its Freight Logistics and new warehouses being responsible.
Their views can be summed up in DMG& Partners comments:
While we remain positive over its long term prospects with new offices set up for its Freight Logistics, new warehouses being built and Singapore’s strong economic recovery, we are trimming our FY2010 and FY2011 core earnings estimates by 9.6 per cent and 12.4 per cent respectively, to account for higher startup costs.
Q3 2010 revenue was up 22.8 per cent year-on-year (y-o-y) to $192.7 million, but earnings fell 9.2 per cent y-o-y to $5.5 million on the back of rising freight costs, the phasing out of the government’s resilience budget scheme, startup costs incurred for new undertakings such as operations in Europe and new major customer accounts and steel logistics business adversely affected by a drop in demand from the marine industry.
CWT recently set up new offices in Hong Kong, Indonesia, Portugal, Slovenia and Croatia and extended direct service coverage to Ukraine, Ghana and Nigeria.
Following the recent boost in its presence in Europe, we believe expanding in South Africa remains as CWT’s focus, as this will enable it to capture trade flows of soft commodities such as coffee and tobacco, between Asia, Africa and Europe.
Demand for logistics facilities is likely to grow in view of its correlation to economic and trade growth. CWT is building more warehouses (Hub 3 and one at Pandan Road) to capture rising demand. Err what happens if there is an economic slowdown caused by currency wars or a slowdown in the US.