Harbour Link lacks near term catalysts
KUCHING: Although Harbour- Link Group Bhd’s (Harbour Link) results for the third quarter of financial year 2016 (3QFY16) was stronger on a quarterly and annual comparison, it was still below expectations of Maybank Investment Bank Bhd (Maybank IB Research).
To note, the local shipping magnate saw a 3QFY16 net profit of RM15 million, bringing its nine months of FY16 net profit to RM40 million which accounts for 70 per cent of Maybank IB Research’s full-year forecast.
“Group earnings were boosted by lumpy earnings at its property division while its core divisions registered weaker earnings,” it cited in its research note yesterday.
“Key takeaways from the results include its shipping division registered pretax loss of RM2 million on the high initial operating cost for its new vessel.
“Also, its logistics’ pretax profit was weaker owing to a lower volume of cargo freighting across Sarawak. Meanwhile, its engineering’s pretax profit was weaker as its recently-secured jobs are still at their initial stage.
“The group’s property division registered lumpy pretax profit of MYR39m as it recognised the sale of its completed properties at Kidurong Gateway.”
Maybank IB Research anticipates a weaker fourth quarter for Harbour Link in the absence of lumpy property earnings and earnings at its logistics arm may remain weak until the manufacturing activities recover/infrastructure works heighten in Sarawak.
“The group’s fourth quarter earnings should be weaker sequentially in the absence of lumpy property earnings. While Harbour Link’s longterm prospects remain bright on the logistics requirement for Baleh dam, it may only benefit meaningfully in FY6/18,” it added.
“Hence, we reduce outrarget price for the group RM1.07 after imputing also a 30 per cent discount (nil previously) on our sum of parts, in view of its weaker near-term earnings.”