Maybank Upgrades WICE’s TP to ฿5.45, Seeing Positive Growth of Profit in 2019
From the previous TP at ฿5.30/share that Maybank had recommended, the securities have upgraded the TP after seeing a positive growth in profit next year.
Maybank Kim Eng has made an analytic review on Wice Logistics Public Company Limited (WICE) and recommended to “BUY” the share, while upgrading a 12-month target price at ฿5.45/share after seeing a positive growth in profit next year.
Maybank maintains a positive view on WICE’s earning, seeing its inorganic growth will see full-year results in 2019. Although net profit forecast was conservatively revised down by 10-15% for FY2018-19 to price-in external risk through low gross profit margin (GPM), the continued expansion of logistic network by ETL started in 4Q18, should continue to drive earnings growth of 29% pa. Maybank recommends “Accumulative Buy“, with 12-month target price of ฿5.45/share (previously ฿5.30/share) based on a P/E of 24.6x (previously 26.3x).
Maybank cuts the net profit forecast for 2018-20 by 15%, 11%, 10% to ฿111 million, ฿144 million and ฿174 million as GPM remained weak vs 25% in the past. As for 9M18, WICE achieved an average of 21.9% of GPM vs 24.5% in FY2017. This was due to the major customers shifted from shipping to land/air transports, according to the management. While some air carriers have problems, it then has to use outsource service, resulting in additional costs.
Moreover, WICE is expanding business abroad as well as rebranding its affiliates; as a result, GPM is lower than what Maybank had estimated. However, the expansion plan by setting up a cross-border ETL (Singapore-Thailand-China) facility, commencing in 4Q18, is expected to generate a new revenue of approximately ฿300m or 16% of its revenue base in 2018. If WICE maintains a GPM of 21.7%, Maybank expects the net profit to grow 28.9% CAGR (2018-21).
The recommendation for “Accumulative BUY” is due to the trade war risk issues, although WICE received orders from Chinese customers who have relocated to Thailand for re-export, its overseas network, such as China, Hong Kong (UWT, ETL) or Singapore (SEL) still face risks. Even though the P/E was revised down to 24.6x (from 26.3x), the consolidation of ETL’s financial statement since Nov will see the full effect in 2019, combined with the roll-over TP to FY2019, there is still a 31% upside.