Structural growth story intact. 1Q13 net profit was within expectation as CWT registered recurring net profit of SGD26.5m for 1Q13. Our expectation of a 30% profit growth for the full-year remains intact, and we continue to see a multi-year structural growth story from there. Reiterate BUY.

Within expectation. 1Q13 recurring net profit was up 7% yoy to SGD26.5m (reported net profit of SGD27m). Revenue grew 39% yoy on expansion of commodity trading business, which helped gross profit grow 12% yoy. The profit growth came despite higher SG&A cost (up 17% yoy), as CWT continues to build out its commodity trading business. There was also a high base effect in that MRI had strong profitability in the same quarter last year.

Commodity trading volumes are up. While the company does not disclose volume in this segment, revenue was up 20% yoy. Given that commodity prices are lower, the implication is that volume growth was stronger than that. This is in line with management’s earlier aim to grow volume significantly in FY13, and we are likely to see operating leverage kicking in as the year goes on.

Yet another piece of land. CWT Cold Hub 2 which commenced construction in March 2012 is now 45% complete and likely to achieve TOP in 1Q14. Toh Guan Road East is now 30% complete and TOP has been set for end 2013. We expect these two properties to provide good rental income next year or provide options for divestment gains. The company also announced that it has purchased an old industrial facility at Pandan Avenue in April and this will be developed into a ramp-up warehouse which will be approximately 640,000 sq feet.

Reiterate BUY. Excluding non-recourse debt associated with commodity trading business, CWT is in a net cash position of SGD35.9m. We keep our estimates unchanged, and adjust our SOTP TP to SGD2.20 from SGD2.05 on account of change in financial asset and cash value. We have not incorporated the possible value of the Pandan Avenue property, but it will likely add around between SGD0.15-SGD0.20 to value per share. Reiterate BUY.

Source: Maybank Kim Eng Research - 15 May 2013