Freight Management (FMH)’s 9MFY13  earnings of  MYR14.4  m  (+5.3%  y-o-y)  was  in  line  with  our  and  street  estimates.  Despite  the  challenging period,  all  its  division  posted  decent,  although  small,  y-o-y  growth.  We remain  positive  on  the  company  and  expect  a  better  FY14  as  the 2HCY13 economic outlook improves. Upgrade to BUY from Neutral, with our FV revised upward to MYR1.48 from MYR1.25.

-  Chalking  up  growth  despite  the  challenges.  3Q  has  always  been seasonally  a  weaker  quarter  for  FMH  as  trade  activities  usually  slow down during the Chinese New Year. Still, the company managed to post revenue  and  net  income  growth  of  12.6%  y-o-y  and  5.3%  y-o-y respectively. We deem its 9M net earnings of MYR14.4m in line with our estimate as we see FHM reporting stronger numbers in 4Q.

-  All  business  segments  performed  relatively  well.  FMH’s  overall healthy  growth  was  attributed  to  strong  performance  at  its  third  party logistics (3PL)/warehousing and land freight divisions while the air freight and  tug  &  barge  divisions  delivered  satisfactory  results.  Meanwhile,  the performance  of  the  sea  freight  segment  remained  soft  but  still  showed positive recovery.

-  Cautiously  expanding  3PL  business.  FMH  will  remain  focused  on  its core  Less  Than  a  Container  Load  (LCL)  business  which  commands higher  margins  while  cautiously  expanding  its  3PL/warehousing business,  which  has  been  doing  well.  Management  believes  that  it  can come  up  with  a  sturdier  business  model  if  the  warehousing  service  is offered  as  a  package/value  added  service  to  clients  who  use  its integrated  logistics  services,  instead  of  expanding  the  3PL/warehousing 
business  to  provide  solely  warehousing  services.  It  believes  this  may pressure  the  company  to  constantly  scout  for  clients  to  fill  up  its warehouse space and also saddle it with high rental payments when the market is weak and occupancy is low.

Source: RHB