4Q13 revenue and net profit nearly doubled YoY, outstripping consensus estimates. DPS raised to SGD 3.5cts.

Key growth driver was strong commodity trading activities, in particular naphtha trading.

Growth story is intact, underpinned by warehouse space increase and diversification of commodity trading portfolio. Maintain BUY with a higher TP of SGD1.50.

4Q13 results beat expectations

CWT reported a strong set of 4Q13 results, with revenue soaring 100.6% YoY and net profit climbing 90.8% YoY. On a full-year basis, however, net profit marked a 1.8% YoY decline, dragged down by poor performance in the first three quarters. Commodity trading revenue grew by more than 120% YoY, spurred by robust naphtha trading volume during the quarter. A final DPS of SGD 3.5cts was proposed, exceeding last year’s SGD 3.0cts.

What’s Our View

The growth in CWT’s logistics business in the next two years will largely be driven by capacity increase. The new warehouse, now under construction, will raise its total warehouse space by 20%. For its commodity trading business, we think copper trading in China could remain tough if the tight credit situation persists this year. Nevertheless, we expect this segment to record 20% revenue CAGR over the next three years as CWT continues to diversify its trading portfolio. Naphtha, for example, though a relatively new product in its portfolio, has been the main growth driver in the past two quarters. We also expect bottom-line growth to further strengthen on reduced start-up/restructuring costs this year.

We raise FY14/15E net profit by 14% as we factor in higher contribution from the commodity trading business. Maintain BUY with a higher TP of SGD1.50 (previously SGD1.47).  

Source: Maybank Kim Eng Research - 28 Feb 2014