Lean year for WTK on weaker timber, plantation and O&G

KUCHING: WTK Holdings Bhd ( WTK) saw a core net loss for its financial year 2016 ( FY16) of RM2.9 million which came below Affin hwang Investment Bank Bhd (AffinHwang Capital) and consensus expectations.

In a note ye s terday, AffinHwang Capital said the net loss was mainly attributable to weaker earnings from the timber, plantation and oil & gas divisions.

WTK posted a core net loss of RM2.9 million in 2016 from a core net profit of RM60.6 million in 2015, despite revenue increasing by one per cent year on year ( y- o-y) to RM690.1 million.

“Sequentially, WTK’s 4Q16 revenue increased by 11.2 per cent quarter on quarter ( q- o- q) to RM176.6 million,” Af f inHwang Capital said in a note. “The increase in revenue was mainly due to higher contribution from the timber, plantation, and trading divisions, which saw their revenue rising by 7.6 per cent, 109.4 per cent and 4.6 per cent q- o- q, respectively to RM134.1 million, RM13 million and RM7.8 million.

“However, this was partially offset by lower contribution from the manufacturing and oil & gas divisions, where revenue declined by 31.5 per cent and 0.6 per cent q- o- q, respectively to RM9 million and RM11.9 million.

“MEanwhile, earnings before interest, tax, depreciation and amortisation ( EBITDA) margin was weaker at 14.1 per cent in 4Q16, dropping 0.2 percentage points from 14.3 per cent in 3Q16, mainly due to lower margins from the plantation division.

“After excluding forex and other one- off items, WTK recorded a core net loss of RM5.5 million, worse from a core net loss of RM4 million in 3Q16.”

At the moment, AffinHwang Capital made no changes to its 2017 to 2019 earnings forecasts pending a meeting with WTK’s management.

“We maintain our buy reccommendation on WTK with an unchanged target price of RM1.24 per share as we continue to like WTK for its future plantation earnings prospects with the first palm oil mill likely to be completed this year.”