Sing Post: 2QFYMar12 results below expectations.
Revenue grew 2.4% YoY to $140.9m driven by growth in both the mail (+1.7% YoY) and logistics (+10.8% YoY) segments.
But underlying net profit declined 10.1% YoY to $32.8m, as rising labour costs (higher contract worker cost in a tight local labour market) took a toll on its bottom line.
Including one-off items, net profit dipped 22.5% YoY to $30.6m. The one-offs were largely due to a $4.2m marked-to-market loss on Equity-Linked Notes (ELNs). About half of the mark-to-market losses will be reversed based on the market share price as of 27 Oct. Fair value of the ELNs as at 31 Mar 2011 was $36m, or ~ 9% of all its cash and financial assets.
Operating margin saw a steep decline on a YoY and QoQ basis to 29.3%, as a result of higher contribution from the lower-margin logistics business.
Looking ahead, cost pressure is set to mount but mgt remains committed to accelerating the growth of its non-mail and regional logistics business.
Interim quarterly dividend maintained at 1.25 cts, in line with expectations.
KE Research cuts earnings estimate by 6% and downgrades to Hold with TP $1.13 and regular dividend yield of 5.9%.
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