PublicInvest maintains neutral on DKSH, TP cut to RM2.60

KUALA LUMPUR: PublicInvest research maintained its neutral call on DKSH Holdings (M) Bhd with a lower target price of RM2.60 from RM2.75 previously following a weaker-than-expected earnings result.

In a note, the research house said DKSH’s 1QFY19 net loss of RM600,000, a fall of 105.7% year-on-year was due to a growth acceleration programme to improve cost efficiency.

Scheduled for completion by 2QFY19, the programme incurred a RM11.2mil cost.

“We trim our earnings forecast for FY19F-21F by 9-13% to factor in the higher costs incurred from the growth and efficiency improvement project coupled with the increase in finance cost, a direct impact from higher bank borrowings,” said PublicInvest.

However, the research house noted that DKSH has been returned to the Securities Commission’s Shariah-compliant securities list after being excluded from it last year.

It also noted that the group completed the acquisition of Auric on March 29 with works to integrate it into the group currently ongoing.

PublicInvest expects Auric to contribute positively to DKSH’s results in 2018 although it expects the overall impact of the acquisition to be muted in the short term due to higher interest expense.

Source: TheStar