By Xavier Kong
BIMB Securities (BIMBSec) downgraded Xin Hwa Holdings Bhd to a “hold” call, maintaining its target price at RM1.14, on the belief that the group’s shares are currently trading at a premium. The research house also feels that the group’s nine months of financial year 2015 (9M15) earnings were within expectations.
Xin Hwa’s 9M15 earnings amounted to RM12.2 million, which came in within expectations, according to BIMBSec.
However, it was noted that the group’s revenue and nett earnings had slipped to RM24.8 million and RM3.3 million respectively, though it was also noted that this was to be expected, following the reduction in revenue generated by land transport operations and warehousing in relation to the completion of the group’s mass rapid transit (MRT) and highway projects.
“The lower figures can be attributable to underutilised capacity in relation to expiration of contract from Kimlun Corp’s wholly-owned subsidiary SPC Industries Sdn Bhd, with the completion of the MRT and highway projects,” said BIMBSec.
Moving forward, Xin Hwa has a newly completed warehouse with a capacity of about 220,000 square feet in Pasir Gudang, Johor. This facility has been granted a bonded warehouse licence to cater to the demand for bonded warehouses post-goods and services tax.
“Goods stored in a bonded warehouse are exempt from custom duties, which allow the goods to be exported at a lower cost,” explained BIMBSec.
At the end of the morning’s trading, Xin Hwa’s shares were last traded at RM1.19, down 2 sen.
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