Has CWT’s business stalled?

SINGAPORE (Aug 16): OCBC Investment Research is maintaining its “hold” recommendation for CWT, the provider of integrated logistics and supply chain solutions, with a reduced fair value from $1.95 to $1.93, following the group’s 1H16 results.

To recap, CWT’s 2Q16 revenue decreased 15% to $2.37 billion from lower commodity trading volumes and a fall in commodity prices. Gross profits for the quarter fell 11.2% to $67.1 million from unrealised mark-to-market (MTM) accounting losses arising from its commodity marketing business and a 0.3 percentage point drop in commodity marketing gross margin.

This was however mitigated partially by the 1.8 percentage point increase in logistics gross margin to 15.8%. As such, 2Q16 earnings fell 47.8% to $13.7 million. For 1H16, revenue and gross profit fell 14.7% to $4.24 billion and 5.2% to $150.7 million, respectively.

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