Record quarterly core net profit in 3QFY6/22
? 9MFY6/22 core net profit of RM35.9m (+45.4% yoy) was above expectations,
due to higher-than-expected contributions from overseas operations.
? We are not overly concerned about falling freight rates as this will be partially
mitigated by higher freight volumes and more cross-selling of services.
? Maintain Add with a lower TP of RM0.91 (12x CY23F P/E).
9MFY22 core net profit rose 45.4% yoy, beating estimates
FM Global’s (FMG) 3QFY6/22 core net profit came in at RM13.2m (+23.6% yoy), bringing
9MFY22 core net profit to RM35.9m (+45.4% yoy). This was above expectations (101%
of our and 95% of Bloomberg consensus’ full-year estimates), owing to stronger-thanexpected demand for international freight services (higher contributions from overseas
operations). A 1 sen/share dividend was declared in 3QFY22, bringing 9MFY22
cumulative dividends to 2 sen/share (31% payout), within our expectations.
3QFY22: Strong growth driven by overseas operations
9MFY22 revenue and core net profit rose by 53.1% and 45.4% yoy respectively, thanks
to higher demand for freight-related services, better overall cost control and greater
economies of scale. On a qoq basis, 3QFY22 revenue rose 15.5% thanks to higher
contributions from both local (+9.6% qoq) and overseas operations (+28% qoq). Although
3QFY22 EBITDA margin weakened by 1% pt qoq to 8% due to higher freight costs
imposed by asset-based carriers, 3QFY22 core net profit rose to RM13.2m (+7% qoq)
after excluding one-off losses of RM1.2m (impairment of trade receivables).
Impact of lower freight rates to be offset by higher freight volumes
We are not overly concerned about the impact of declining freight rates on FM’s margins,
given FM’s status as a freight forwarder (service provider), and not asset owner (not a
key beneficiary of higher freight rates). Also, we expect the impact of weaker freight
charges to be partially offset by: i) higher freight volumes (given lower freight charges), ii)
more efforts to cross sell other services, and iii) higher overseas operation contributions.
Still expecting a 3-year EPS CAGR of 17.4%
While we have already inputted lower freight rates, we still project FMG to record a 3-
year (FY21-24F) net profit CAGR of 17.4%, mainly be driven by i) strong demand for
freight services, ii) continuous effort to upsell the multi-modal services it offers, and iii)
contributions from its three newly acquired US freight forwarders (IOS) in 2QFY22.
Reiterate Add with lower TP of RM0.91
We raise our FY22-24F EPS for higher freight volumes mainly from overseas operations.
But our TP is cut to RM0.91 as we apply a lower P/E multiple of 12x on CY23F earnings
(20% discount to its 10-year mean of 15x) as we adopt a more conservative approach to
account for the current peak operating environment. We continue to like FMH for i) its
multi-modal logistics service offerings, ii) operations in multiple geographies (31.9% of its
9MFY22 revenue), and iii) robust balance sheet (net cash of RM76m as at end-3QFY22).