As a result, Ebit (earnings before interest and taxes) margin fell by 2 percentage points to 9.9 per cent from 11.9 per cent in Q3 2011 (Q2 2012: 10.6 per cent). Contributions from joint ventures were 16 per cent lower, largely arising from lower cargo volumes.
The third quarter also booked a loss of $5.5 million on discontinued operations. Excluding this, underlying profit would have fallen by a smaller 9 per cent y-o-y to $43.7 million.
We expect Q4 2012 earnings to remain lacklustre due to macro headwinds, coupled with a seasonally weaker quarter.
We trimmed FY12 and FY13 forecasted earnings by 12 per cent and 7 per cent, respectively, arising from lower topline growth (FY12 and FY13 forecasted revenues cut by 3 per cent and 6 per cent, respectively).
We have factored in a smaller contribution from its joint ventures and associates due to the weaker economic outlook, as well as a higher effective tax rate for the group.
Cash position as at end-Q3 2012 stood at $423 million (about 38 Singapore cents a share), contributed by the disposal of Daniel's UK.
Management indicated that it is on the lookout for opportunities to deploy its cash for inorganic growth, and does not rule out paying special dividends to shareholders if there are no immediate uses for it.
We believe this possibility could provide support to share price, despite its soft earnings outlook in the near term.
Our discounted-cash-flow and PE-based TP is trimmed slightly to $2.48, as a result of our lower earnings offset partially from rolling our valuations forward to the average of forecasted FY12 and FY13.
We are concerned about visibility of near-term earnings, but prospects of deployment of cash or a higher-than-expected payout may support share price. Maintain 'hold'.
HOLD
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