KUCHING: Harbour-Link Group Bhd’s (Harbour-Link) first quarter of the financial year 2018 (1QFY18) results were within expectations but analysts believe that it could see a weaker 2QFY18.
In a report, the research arm of Maybank Investment Bank Bhd (Maybank IB Research) said, “While shipping segment may see seasonally stronger cargo volume in 2QFY18, we think the higher bunker cost may eat into margins.”
It also pointed out that the logistics division might see higher diesel cost dampen its earnings. Hence, it believed 2QFY18 earnings could be weaker.
“We maintain our earnings forecasts, expecting sequential earnings to be dampened by the higher bunker/diesel costs.
“Additionally, the scrapping of the cabotage policy since Jun 2017 may see foreign shipping liners encroach the local market,” it added.
Meanwhile, on Harbour-Link’s 1QFY18 results, the research team noted that the stronger year-on-year (y-o-y) results were within expectation, driven by the shipping division.
Aside from that, it noted that the 1QFY18 earnings were slightly weaker quarter-on-quarter (q-o-q) as the weakness in logistics and engineering outweighed stronger earnings from shipping and property, and a lower tax rate to 26.5 per cent.
On a year-on-year (y-o-y) basis, it pointed out that earnings were stronger as shipping registered stronger pretax profit (an increase of 52 per cent y-o-y) on higher fleet utilisation of circa 90 per cent, resulting in better pretax margin (down 0.3 percentage points y-o-y).
“We think the slot exchange with Shin Yang might have helped Harbour-Link in improving its fleet utilisation rate logistics posted weaker pretax profit (down five per cent y-o-y) on lower transport handling and forwarding activities in oil and gas industry, engineering division sank into the red with a marginal pretax loss of RM7,000 given the lower outstanding orderbook of circa RM25 million (RM39 million in 1QFY17), property posted better pretax profit (an increase of 2.3-folds y-o-y) as it sold some of its inventories from Kidurong Gateway (Phase 1 and 2),” it said.
All in, it maintained a ‘hold’ call on the stock.