CWT

CWT: 2Q14 net profit increased 67% to $30.3m while revenue increased 114% to $3.7b, driven by Commodity Marketing business while the growth in profit was primarily attributable to Financial Services and Logistics business. Financial Services returned strong earnings from trade services while Logistics business was fuelled by increased capacity. Updates on capacity expansion: 1) Singapore Wine Vault (CWT Cold Hub 2) – Received TOP on 4 Jul’14, and expecting facility to be ~90% utilized by Oct’14 2) Pandan Logistics Centre – 75% constructed, target TOP in 4Q14. 80% committed capacity 3) Property at Jalan Buroh – JTC approved 30 year lease extension. CWT plans to build new 2.2m sf integrated warehouse cum container port logistics complex on the land. The project is expected to last 36 months and piling works beginning by year end. Management calls this a “transcendent” project which will solidify CWT’s industry position further, both in Singapore and regionally. Aside, investors should be reminded that analysts are shrugging off the impact of the “Qingdao scandal” (authorities clamping down on falsified aluminum and copper stockpiles to secure multiple loans), as China only accounts for ~3% of the group’s logistics revenue, while while the impact on the group’s commodities segment is expected to be manageable given that highly affected players would generally be those heavily reliant on in-warehouse stock financing. CWT is trading at 7.7x annualized 1H14 P/E. Latest broker ratings: OCBC maintains Buy with increased TP of $2.01 (from $1.92)