TA Securities Research cuts Tiong Nam FY21-22 earnings projections

KUALA LUMPUR (June 23): TA Securities Research has cut its earnings projections for Tiong Nam Logistics Holdings Bhd for the financial year ending March 31, 2021 (FY21) and FY22 due to additional leased assets that contributed to higher depreciation and finance costs under Malaysian Financial Reporting Standard 16 (MFRS 16) and a 50-basis-point interest rate cut in May 2020.

“We downgrade our FY21-22 earnings projections by 52% and 6.9% respectively,” TA Securities Research analyst Tan Kam Meng said in a note today.

In a filing with Bursa Malaysia yesterday, the group registered a narrower net loss of RM4.32 million for the fourth quarter ended March 31, 2020 (4QFY20), against a net loss of RM10.34 million a year ago, on improved utilisation of warehousing services and higher deliveries of essential products, namely food and beverage as well as other consumer goods and medical equipment supplies.
Meanwhile, quarterly revenue grew by 4% to RM141.58 million for 4QFY20 versus RM136.47 million a year ago.

Tan noted that the group’s FY20 earnings performance came in below his expectations and the consensus estimate.

“Stripping out fair value gains (RM7.6 million) and write-back of impairment of receivables (RM3.4 million), its FY20 core profit slipped into a loss of RM5.7 million against our profit projection of RM10.5 million.

“The variance was largely due to higher than-expected depreciation and finance costs as a result of a change in the accounting standard (MFRS 16) as well as higher-than-expected tax expense,” he said.

On the outlook, the analyst expected Tiong Nam’s logistics and warehousing businesses to start to recover gradually in 1QFY21 and the pace would likely escalate in 2QFY21 after the reopening of the Malaysian and US economies in May and June.

“As far as debt and interest expense are concerned, the company has received approval to defer principal repayments for six months, especially those loans used to finance its hotel business. This would likely ease cash flow constraints in the near term,” he added.

He maintained a ‘buy’ call on the group with a lower fair value of 55 sen per share (from 57 sen per share previously) based on an unchanged 0.4 times FY21 net tangible assets per share.

At 10.28am, shares in Tiong Nam was one sen or 2.44% higher at 42 sen, valuing the group at RM183.73 million. It saw some 611,600 shares traded.

Source: TheEdgeMarkets