Hefty start-up costs, low commodity prices block CWT's bumpy road to growth

Its prospects are muted in FY15.

Chunky start-up costs related to the construction of new logistics hubs and persistently low commodity prices will block CWT’s road to growth in FY15, according to analysts.

DBS Vickers analyst Paul Yong noted that while the new logistics hubs will help consolidate CWT’s position as a logistics operator, the cost of putting up these properties will impact CWT’s bottomline in coming quarters.

“We have cut our FY15/16 forecasts by 8%/9% to take into account the start-up costs and also slower growth across the various segments,” Yong noted.

Maybank Kim Eng analyst Wei Bin warned that CWT will continue to suffer from low commodity prices, particularly naptha.

“We cut revenue by 35% for the next three years for lower naphtha trading. However, gross profit margin should improve as naphtha trading yields low margins. As a result, we cut EPS only by 7-9%,” he noted.