CWT

CWT: DMG resumes coverage on CWT with a BUY and TP of $1.90, implying an upside of 30%. The TP is valued based on 10x 2014F P/E, compared to listed logistics players average of 17.5x and supply chain managers' average of 13.9x. CWT's most profitable business, logistics, is the most stable and predictable source of overall earnings. Logistics revenue, which fell by 1% first time ever in 2013, is expected to rebound, aided by recovering global trade flows, especially in Asia and Singapore’s rapid rise as a global trading hub. On commodity marketing- despite being a low-margin business, income from the segment quadrupled to $40m in 2013. Its revenue is highly scalable as volumes are small compared with that of its global peers, on top of the fact that CWT trades only in a few commodities. CWT, which currently trades base metal, naphtha and diesel, looks to grow its naphtha volume and add gasoline and fuel oil to its existing portfolio over the next 1-2 years. DMG notes the potential for unlocking value from CWT's warehouse assets from the sale-and-leaseback model to recycle capital. Since 2006, it has securitised 5.2m sqf of warehouse space worth $817m, gaining $270m. By end-2014, it will have 4.5m sqf of warehouse space in Singapore, valued at $564m, available to be securitised.