FM Global Logistics (FM) posts FY23 (Jun) core earnings of RM39.9m despite seeing a prolonged weakness across all business segments in 4QFY23.
While RHB Research (RHB) believes FM will be the key beneficiary once trade activities pick up, they still expect the freight market to remain challenging in the near term.
“4QFY23 revenue came in at RM197.4m, dragged by weaker contributions from the international business segment on lower freight rates and slower global economic activities,” said RHB in the recent Malaysia Results Review.
Core earnings for the quarter of RM7.1m were down 27.9% QoQ and 43% YoY – the sharper YoY drop was attributable to the high base in 4QFY22 due to pent-up post-lockdown activities and elevated freight rates.
“Despite challenging freight operations, FY23 core earnings of RM39.9m met our estimates. The subdued YoY performance was in line with the weakening demand as global economic activities decelerated,” said the research house.
While FM’s full-year volume of 123,066 Twenty-foot Equivalent Unit (TEU) posted a modest 3% YoY drop, the declining trend was more prevalent in 4QFY23, which saw a 17.6% YoY drop to 27,688 TEUs.
This was in tandem with the trade activity slowdowns. Within the full container load or FCL segment, FY23 volumes were relatively resilient, as lower sea freight volumes were cushioned by the growth in land freight volumes.
“While ocean freight forwarding remains FM’s core business, we expect the freight market to remain strenuous and continue weighing down on FM’s international business. The group’s domestic business such as 3PL, warehousing, and support services should continue to support FM’s earnings, in our view,” said RHB.
While July’s trade performance continued to see negative growth, the World Trade Organisation still holds its FY23F trade volume growth at 1.7% and expects it to strengthen to 3.2% for 2024.
“We believe FM, as Malaysia’s freight market leader, will be the key beneficiary once trade activities and the global economy pick up,” said the research house.
Key risks to RHB’s call include slower-than-expected volumes within the sea and air freight divisions, higher-than-expected opex, and a global trade activities slowdown.