Harbour-Link sees encouraging 4Q, outlook remains bright from SCORE and Rapid initiatives
KUCHING: Harbour-Link Group Bhd (Harbour-Link) recorded a net profit of RM11.9 million for the fourth quarter of the financial year 2014 (4QFY14) which brought its FY14 core earnings slightly above analysts’ expectations at RM32.7 million.
The group’s outlook has been envisaged as still intact particularly given the high demand for logistics services spurred by mega projects in the country such as Sarawak Corridor of Renewable Energy (SCORE) and Refinery and Petrochemicals Integrated Development (Rapid).
According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), as a major logistics player in East Malaysia, SCORE could be the driver for Harbour-Link’s marine, shipping and logistics divisions in years to come with higher economic activities expected in Sarawak, driving demand higher for logistics services.
As for its property development segment, Kenanga Research noted, “With an estimated total gross development value (GDV) of RM1 billion, the group’s maiden property development project in Bintulu is a mixed industrial and commercial development with Phase 1 GDV of RM120 million.
“Response for the Phase 1 project has been encouraging with 60 per cent take-up and 40 per cent completion rate achieved so far.
“However, strong earnings growth is only expected to be felt in FY16 as the group plans to recognise property earnings on completion basis.
Outlook for engineering division remains bright with current orderbook standing at RM120 million and tender book at RM1 billion, Kenanga Research viewed.
“The group intends to bid for tank terminal works in Rapid, Johor but the mega project is still in preliminary stage at the moment.
“We reckon it would take at least half a year for their round for bidding as they are likely to bid as a subcontractor. However, this is being partially offset by weaker shipping division,” it said.
Meanwhile, on its 4Q14 results, Harbour-Link’s 4Q core net profit surged by a whopping 117.5 per cent quarter-on-quarter (q-o-q) driven by lower operating expenses, and lower effective tax rate (4Q14 at 28.3 per cent versus 3Q14: 39 per cent) mainly due to higher non tax-deductible expenses in 3Q14 despite 10.3 per cent q-o-q decline in revenue,” Kenanga Research said.
It explained, “ore net profit remains relatively unchanged in 4Q14 on year-on-year (y-o-y) basis (-minus 0.2 per cent).
“Drilling deeper into its business segments, logistics & equipment rental division was the outperformer with 304.3 per cent y-o-y surge in revenue on the back of higher amount of contracts secured for project logistics.”
For other divisions registered y-o-y, the research team said there is a decline in revenue on weaker container shipping market condition.
Its overall FY14 core earnings registered a 6.6 per cent uptick on the back of higher revenue backed by improvements in logistics & equipment rental and engineering division and lower finance costs on lower borrowings, Kenanga Research added.
The research team maintained its ‘outperform’ call on the stock and derived its target price at RM2.20 per share, based on sum-of-parts.