Thursday, June 26, 2014
CWT: DBSV raising its TP to $2.08, where they expect the group's core logistics business to post Broad-based revenue growth, led by higher rate renewals for the rest of 2014 and the addition of two more logistic facilties. With two more logistics facilities expected to TOP in 4Q, the additional 1.4m sf of owned warehouse space will boost the segment’s prospects further. Meanwhile, revenue from Financial Services has grown exponentially from $9m in 2Q13 to $48m in 2Q14. The house now projects this segment to contribute $220m (+237% yoy) in revenue in FY14, with a conservative 15% growth estimate in 2015. Regarding the recent Qingdao scandal..CWT’s Logistics revenue exposure to China is less than 3%, the segment will be little affected by the systemic impact. In addition, Commodity Marketing earnings is expected to be fairly resilient. The heat will be mostly felt by those reliant on in-warehouse stock financing. CWT is still trading at attractive valuations 16.7% ROE and less than 9x FY14 PE, versus 17x PE for Logistics peers and 15x PE for commodity trading companies. Reiterate BUY.