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Author: PublicInvest   |   Latest post: Mon, 18 Feb 2019, 10:19 AM

 

DKSH Holdings (M) Berhad - In Line With Expectation

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Stripping out allowance of inventory obsolescence, inventories write-off and other non-operating items, DKSH Holdings (M) Berhad (DKSH) 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. 1HFY18 results were largely supported by stronger 1QFY18 but 2QFY18’s performance was uninspiring with operating profit falling 12% YoY on lower margin for the marketing & distribution segment. Although this segment’s 2QFY18 revenue improved by 0.9% YoY, operating cost increased at a faster pace of 1.9% due to shift in product mix and higher cost base to support future growth. 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. We maintain our Outperform rating on DKSH with an unchanged TP of RM5.00.

  • 2QFY18 revenue grew by 3.5% YoY to RM1.44bn. The growth in revenue was largely due to organic growth in its existing businesses. Logistics segment posted stronger revenue growth of 6% while revenue for the marketing & distribution segment was flattish, growing at about 0.9%. Logistics remained the largest revenue contributor, accounting for 51% of total revenue. This segment benefitted from a healthy growth in the healthcare and telecommunication sectors.
  • 2QFY18 operating profit fell 12%YoY. Despite a better performance posted by the logistics segment, which delivered an improvement in margin from 1.15% to 1.52%, the group’s profit was dragged by lower contribution from the marketing & distribution segment. Margin for the marketing & distribution segment was significantly lower at 1.36% compared to 2.31% registered in 2QFY17. This has resulted in a decline in group’s operating margin from 1.71% to 1.45%. Meanwhile, Others segment posted a small profit versus a loss incurred in 2QFY17.

Source: PublicInvest Research - 9 Aug 2018

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