PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 22 Oct 2020, 9:57 AM


DKSH Holdings (M) Berhad - Strong Ending for the Year

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DKSH Holdings reported a 4QFY19 net profit of RM17.3m, a 64% jump YoY mainly attributable to better margins and Auric’s contribution. Full-year FY19 earnings surpassed our estimates but were below consensus’ estimates, accounting for 120% and 90% of our full-year forecasts respectively. The discrepancy in our forecast was mainly due the lower than-expected operating cost as the group reaps the benefits from the growth acceleration program. As such, we adjust our FY20F-22F upwards by 6-12% to reflect on the better operational efficiencies. Subsequently, we upgrade our call on DKSH to Outperform with a higher TP of RM2.93 (RM2.60 previously) based on unchanged FY20F PER of 9x.

  • 4QFY19 revenue grew by 0.7% YoY to RM1.6bn. The Marketing & Distribution segment increased 9.6% YoY as the group integrates the contribution from Auric as well as the growth of its existing clients. However, the growth in the Marketing & Distribution segment was partially offset by the lower revenue contribution from the Logistics segment as lower government tender sales were recorded, which saw the segment revenue to decline by 6.8% YoY. Meanwhile, the Others segment grew by 3.5% YoY.
  • 4QFY19 operating profit jumped by 109.6% YoY. Marketing & Distribution segment reported an operating profit of RM12.5m, up 543% due to Auric’s contribution as well as adjustment to the cost incurred for growth and efficiency improvement project. The operating result for the Logistic segment grew by 48.8% YoY on the back of better operational efficiencies despite recording lower revenue for the quarter. The Others segment operating profit increased by more than 100% due to the higher revenue and MFRS 16 impact.
  • Future outlook. We believe that DKSH’s margins will continue to benefit from the on-going growth acceleration program and the synergies arising from the integration with Auric Malaysia. Despite Covid-19 affecting the retail business as a whole, we believe that the Logistic segment will likely receive a timely boost, given the surge in consumer demand for healthcare products like supplements or vitamins to strengthen the immune system which could essentially cushion the negative impact of the coronavirus outbreak on FMCG.

Source: PublicInvest Research - 20 Feb 2020

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DKSH 2.95 -0.03 (1.01%) 28,600 

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