1Q14 results beat, with revenue more than tripling to SGD4.5b and net profit up 30% YoY to SGD35.0m.

Commodity trading was the key surprise, delivering a 238% YoY gain in revenue. This leads us to raise our FY14E-16E forecasts by 9-18%.

Reiterate BUY with SOTP-based target price raised to SGD1.90.

Results surpass expectations

CWT reported a strong set of 1Q14 results, with revenue more than tripling to SGD4.5b from a year ago and net profit growing 29.8% YoY to SGD35.0m. First-quarter net profit accounted for 30% of our initial full-year forecast. Commodity trading was the key surprise, delivering a 238.3% YoY gain in revenue to SGD4.2b. Gross profit growth was mainly driven by the logistics and financial services divisions. The latter made a meaningful contribution (SGD12.1m) to the gross profit line and we attribute this to the Capital Markets Services Licence CWT received from the Monetary Authority of Singapore, which allowed it to broker a wider range of commodity derivative products during the quarter.

Raise TP to SGD1.90; reiterate BUY

Given the seasonality in naphtha demand, we expect CWT to report some softness in the next two quarters before demand picks up again in 4Q. But copper concentrate trading should remain strong, based on China’s robust import data for April (copper ore imports grew 19% YoY). We raise our FY14E/15E/16E revenue forecasts by 17%/12%/8% on the back of higher commodity trading revenue growth assumption (40% YoY for FY14E from 20% previously). Our net profit estimates for the corresponding years thus go up by 18%/13%/9%. We also raise our SOTP-based target price to SGD1.90 from SGD1.50, and reiterate our BUY call.  

Source: Maybank Kim Eng Research - 15 May 2014