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https://focusmalaysia.my/exploring-the-sudden-appeal-for-high-flying-dksh/

THE fact that the usually lowly-traded DKSH Holdings (M) Bhd has shot up to a four-week high of RM4.85 on Aug 30 amid brisk volume from a month-low of RM2.88 has surely raised eyebrows.

The one question lingering in investors’ mind is probably whether the appeal is one that is sustainable or just a one-off affair.

DKSH Holdings (M) Bhd announced yesterday that the company is working alongside Solution Group Bhd to assist the Government to speed up the vaccination rate the country as single-dose vaccines are more convenient and effective in states that have many areas with low accessibility.

DKSH Malaysia has been appointed by the Health Ministry (MOH) to handle the logistics and distribution of CanSino vaccine (Convidecia) to the Vaccination Administration Centres (PPV) in the country.

In its recent assessment, CGS-CIMB Research maintained its “add” rating on the Swiss multinational with a 26% rise in target price to RM5.30 (from RM4.20 previously) in anticipation of improved demand outlook in 2H FY2021F as the Malaysian economy recovers from the worst period since the COVID-19 outbreak.

“A normalisation in consumer demand bodes well for its M&D (marketing and distribution) segment as channels that were negatively impacted by the pandemic such as hotels, restaurants and cafes (HORECA) could see a gradual recovery,” opined analyst Syazwan Aiman Sobri in a recent results update.

“Its logistics segment should also continue on its recovery trajectory as demand normalises for both public and private hospitals.”

On the back of a stronger-than-expected operating margins from its M&D segment, DKSH reported a 1H FY2021 core net profit of RM46.3 mil (+83.0% year-on-year) excluding unrealised derivative gains which beat CGS-CIMB Research’s expectations at 74/73% of its/Bloomberg consensus full-year forecasts.

Elsewhere, PublicInvest Research was also bullish with DKSH, upgrading the counter from “trading buy” to “outperform” with a higher target price of RM5 (from RM4 previously) based on nine times (three-year historical average) FY2022F earnings per share (EPS).

“We think that DKSH is well-positioned to benefit from the recovery in consumer spending as the economy gradually reopens, aided by the rapid COVID-19 vaccination rollout,” projected analyst Wong Ling Ling.

“In addition, DKSH remains committed to focus on operational efficiencies and working capital management to provide better support to its profit margins.”

All-in-all, PublicInvest Research is also positive on DKSH’s outlook as consumer demand remains relatively stable even during lockdowns, given the inelastic demand for consumer staple goods. – Sept 2, 2021