FM Global Logistics Bhd, a key player in the logistics sector, is bracing for a delay in the recovery of its earnings in the first half of its 2024 financial year. This is primarily due to an expected slowdown in trade activity, according to RHB Research's economics unit.
The research firm anticipates Malaysia's trade performance to witness a delayed recovery, with the possibility of year-on-year exports contraction extending into the fourth quarter of 2023. This, in turn, is expected to impact FM Global Logistics' earnings recovery, which should resume towards the end of the year. The recovery is predicted to align with an upswing in both the country's and global trade, primarily supported by the US and ASEAN economies.
RHB Research has adjusted its 1HFY24 earnings estimates for FM Global Logistics to MYR19.8m, a decrease of 6% year-on-year. The firm attributes this revision to China's economy, which is expected to remain weak for the remainder of 2H23. A gradual improvement is anticipated towards end-4Q23, supported by the strength of the US economy and recovery in regional economies (ASEAN).
In terms of business segments, current market dynamics are expected to continue impacting FM Global Logistics' international business. Despite this, domestic businesses such as third-party logistics, warehousing, and supporting services are forecasted to continue bolstering the group's earnings.
RHB Research has lowered its FY24 forecast earnings for FM Global Logistics by 4.6%, resulting in a decrease of its target price to 68 sen from 79 sen previously. RHB maintains its 'Buy' call on FM's shares. The firm finds FM's current valuation of 8.3x attractive compared to its regional peers, while also offering a decent dividend yield of approximately 6%.
RHB has identified key risks that could impact FM Global Logistics' performance. These include slower-than-expected volumes within the sea freight and air freight divisions, higher-than-expected operational expenses, and a slowdown in global trade activities.
According to InvestingPro Data, FM Global Logistics currently has a market cap of $0.01 million, and despite a challenging economic climate, the company's stock has shown a 300% return over the last month. Yet, it's important to note that the company's shares have also experienced significant volatility over the last six months, with a total return of -81.82%.
Furthermore, InvestingPro Tips suggest that FM Global Logistics holds more cash than debt on its balance sheet and has maintained dividend payments for 28 consecutive years. These factors indicate a strong financial position and a commitment to returning capital to shareholders, even amidst economic downturns. For those interested in further insights and tips, InvestingPro offers a comprehensive range of tips and real-time metrics to help guide investment decisions.
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