KUALA LUMPUR (Aug 29): Tiong Nam Logistics Holdings Bhd, whose first-quarter (1Q) net profit dropped 94.9% year-on-year (y-o-y), will spend RM100 million on capital expenditure (capex) for the financial year ending March 31, 2018 (FY18).
Tiong Nam managing director Ong Yoong Nyock said the capex will be used to purchase new vehicles to expand the logistics and warehousing provider’s transportation fleet, build new warehouses due to growing demand, and strengthen its newly established cross-border logistics network from Southeast Asia to China.
“Our efforts are in view of the expected demand growth for logistics services due to increasing regional trade, as well as a burgeoning e-commerce sector,” he said in a statement yesterday.
The group expects its warehousing capacity to increase by 700,000 sq ft to 5.9 million sq ft by end-FY18. Its total warehousing capacity stood at 5.3 million sq ft as at end-FY17. Tiong Nam has invested a total of RM286.8 million in FY16 and FY17, during which the group expanded into Vietnam, Myanmar and China.
The group’s net profit plunged to RM683,000 in the first financial quarter ended June 30, 2017 (1QFY18) from RM13.44 million in 1QFY17, due to loss in fair value of quoted shares amounting to RM8.8 million.
“During the current quarter under review, [the] set-up cost incurred for transnational logistics and warehousing services subsidiaries was also taken up in the balance sheet,” said Tiong Nam in a filing with Bursa Malaysia yesterday. Earnings per share also dropped to 0.16 sen in 1QFY18 from 3.23 sen in 1QFY17.
This is despite its quarterly revenue rising 7.5% to RM140.91 million from RM131.09 million, mainly due to contribution from the logistics and warehousing services segment which grew 12.9% y-o-y to RM122 million.
Going forward, Tiong Nam said the regional and global economic situation this year is expected to remain challenging for its core business — the logistics and warehousing services segment. “The group will continue seeking new business opportunities, focusing on operational efficiency and cost control effectiveness to better contend with [the] competition.
“The property development segment is expected to contribute positively to the group in FY18,” it said, adding that it is still expecting to deliver another year of favourable profit.
This article first appeared in The Edge Financial Daily, on Aug 29, 2017.