CJ Century Logistics miss projected profit, downgraded to ‘Neutral’

CJ Century Logistics Bhd has been downgraded to ‘Neutral’ from ‘Buy’ at MIDF Research after its profit number came way below expectations.

For the first quarter ended March 31, 2024 (1Q24), it posted a net profit of RM2.0 million, down 46% from the preceding quarter, on a revenue of RM215.1 million, down 2% from 1Q23.

Its profit after taxation and minority interests (PATAMI) of RM1.8 million accounted for only 8% of MIDF Research’ projected and consensus full-year forecast, significantly lower than expected.

While revenue aligned with its expectations, it said the shortfall could be attributed to reduced margins from both of its divisions.

Hence, MIDF Research has downgraded the stock to ‘Neutral’, slashing the 52-week target price to 30 sen from 45 sen previously. The counter was trading unchanged at 33 sen at 9.40am today (May 24).

It said the weakness observed in the freight forwarding segment was likely attributable to its South Korean-based customers, who contribute 30% to 35% of the revenue.

“We postulate that one such customer could be CJ Bio, possibly affected by direct competition from suppliers in China. The continued decline in this segment could have a ripple effect on the demand for its other logistics services.

“However, the PLS division is set to remain resilient, fueled by anticipated export growth of electrical & electronic (E&E) products to Vietnam and Indonesia, which are key markets for CJ Century. This is supported by the strong economic performance of both countries, which recorded mid to high single-digit growth rates in 1QCY24,” it said. — TMR