• 1H14 results in-line
• New mega logistics hub plan
• Growth story intact

Continues to deliver growth in 2Q14

CWT Limited’s 2Q14 revenue increased 114% YoY to S$3.7b while PATMI was 64% higher at S$30.3m. The increase in revenue was driven by Commodity Marketing business while the growth in profit was primarily attributable to: 1) strong earnings from trade services in Financial Services segment, and 2) increased capacity in Logistics business from CWT Jurong East Logistics Centre which received TOP in Jan-14. On a half-year basis, 1H14 PATMI came in at S$66.3m, meeting our expectation as it forms 43.9% of our FY14 forecast. 1H14 administrative expenses was lower despite higher revenue (-4% YoY to S$79.7m). We understand from management this is due to a combination of cost control measures and absence of restructuring costs in the current year. However, it was partially offset by the increase in net finance expenses (+455% to S$22.3m).

Unveils mega logistics hub plan

CWT recently obtained JTC approval to redevelop an existing property at 47 Jalan Buroh into a new generation ~2.2m sq ft integrated warehouse cum container port logistics complex. The proposed facilities will house essential interrelated logistics and supporting activities under a single roof to create a ‘hub within a hub’ ecosystem of logistics clusters and sub-clusters. Its innovative design and layout would result in intensification of land use and enhance productivity. Correspondingly, management guided that the plot ratio would be increased from its current 0.38 (gfa of ~357k sq ft) to 2.5 (gfa of ~2.2m sq ft). We think intensification of land use is an apt response to land scarcity in Singapore. The project will start piling works in end-14 and is expected to take ~36 months.

Attractive growth story; Maintain BUY

We incorporate the latest results and derive a new TP of S$2.01 (previous: S$1.92). Nearterm growth will still be driven by increased logistics capacity and full-year contribution from new energy trading products. We think that the recent price retreat since Jul-14 presents an opportunity for accumulation. Maintain BUY.

Source: OCBC Research - 8 Aug 2014