CWT

CWT: 3Q12 results were in-line market expectations. Profit was padded by the expected $22.6m gain from the sale of 49 Pandan Road warehouse which was completed this quarter. Recurring net profit came in at $17.7m, bringing 9M12 recurring net profit to $63.4m. Commodity trading fell short, but more accounting than operational and we could expect next qtr’s run-rate to normalize. In its commodity trading business, CWT hedges price risk through the futures market. During this qtr, the rising base metal prices meant these hedges incurred paper losses. Operationally, these losses will be compensated by gains of the physical trade delivery, or if prices reverse before then. However, unlike more established commodity traders, CWT does not use cashflow accounting in its reporting. This means they recognize unrealized losses on future hedges but can only recognize gains on physical trade upon delivery. Warehousing business continue to thrive, with positive rental increases this year and almost full occupancy at all its warehouses. Ratings as follow: Maybank-KE maintains Buy but reduce TP to $1.77 frpm $1.90