FM Global Logistics Expects Delayed Earnings Recovery Amid Sluggish Trade

FM Global Logistics Bhd, a significant participant in the logistics industry, is preparing for a delay in its earnings recovery during the first half of its 2024 financial year. This anticipated delay is primarily attributed to a slowdown in trade activity, as noted by RHB Research’s economics unit.

The research firm forecasts that Malaysia’s trade performance is likely to see a postponed recovery, with year-on-year export contractions possibly extending into the fourth quarter of 2023. Consequently, the earnings recovery for FM Global Logistics is expected to resume toward the end of the year, coinciding with an improvement in both domestic and global trade, particularly driven by the economies of the US and ASEAN.

RHB Research has revised its earnings estimates for FM Global Logistics for the first half of FY24 to MYR19.8 million, reflecting a 6% year-on-year decline. This adjustment is influenced by the continued weakness in China’s economy expected for the latter half of 2023, although a gradual improvement is anticipated as the year concludes, supported by the robust US economy and recovering regional economies.

In terms of its business segments, FM Global Logistics’ international operations are expected to remain affected by current market dynamics. Nevertheless, its domestic segments, particularly third-party logistics, warehousing, and supporting services, are projected to provide steady earnings support.

RHB Research has also lowered its full-year FY24 earnings forecast for FM Global Logistics by 4.6% and reduced the target price to 68 sen from the previous 79 sen. Despite these adjustments, RHB continues to recommend a ‘Buy’ on FM’s shares, citing the attractiveness of its current valuation at 8.3x compared to regional peers, along with a respectable dividend yield of around 6%.

The research firm has identified several key risks to FM Global Logistics’ performance, including slower-than-expected volumes in sea freight and air freight operations, higher operational expenses, and a downturn in global trade activity.

As of recent data, FM Global Logistics holds a market capitalization of $0.01 million. Despite a challenging economic environment, the company has demonstrated a remarkable 300% stock return over the past month, although its shares have faced considerable volatility, with a total return of -81.82% over the last six months.

Additionally, FM Global Logistics has a positive financial standing, holding more cash than debt on its balance sheet, and has consistently paid dividends for 28 consecutive years. These attributes underline the company’s strong financial health and commitment to returning capital to its shareholders, even in adverse economic conditions.