GWC withstands blockade well as freight business picks up: QNBFS

Qatar’s leading logistics firm Gulf Warehousing Company (GWC) has withstood the blockade well with freight forwarding bouncing back nicely, QNB Financial Services (QNBFS) has said in its latest report.

According to the report, the company’s logistics business has also picked up steam driven by contract logistics and increasing occupancy in Bu Sulba.

Given the company’s solid numbers with in-line earnings in the first quarter of 2018, QNBFS said, it remains bullish on GWC and retains its price target of QR51 per share with outperform rating. Commenting on the company’s impressive results in the first quarter, QNBFS said GWC reported net profit of QR56.7 million in the first quarter in line with its estimate of QR57.4 million.

“While gross margins declined as revenue exceeded our forecasts in lower-margin fourth party logistic model (4PL) and freight forwarding businesses, earnings came in-line with our model boosted by the revenue uplift. We have updated our forward expectations reflecting higher revenue from these aforementioned segments along with mostly unchanged earnings per share (EPS) estimates,” the report said.

Growth post Bu Sulba when it reaches 100 percent occupancy later in 2018 might decline, the report said adding that GWC should start generating substantial free cash flow (FCF) with FCF yield increasing from 1.8 percent in 2017 to 13.7 percent in 2018, reaching 19.5 percent in 2023.

“Dividend yield of 4.4 percent for 2018 should grow to 6.3 percent by 2023. With major capex already done, there could be upside to dividends medium-term,” the report said.

“The company’s revenue jumped 40 percent on year on year (YoY) exceeding our forecasts with strong growth in both logistics and freight forwarding,” the report said adding the company’s revenue is forecast rise 13 percent from QR1.1bn to QR1.2bn in 2018.

Commenting on the factors that would make positive impact on the growth of the company in the coming years, the report said,”The Al Asmakh logistics park management agreement could add to long term revenue. Moreover, Ras Abu Fontas could add 8,000 SQM to warehouse space by the third quarter of 2019. 4PL remains a growth area for the company. International and regional expansion could further diversify operations.”