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KUALA LUMPUR, July 1 -- RHB Research expects Freight Management Holdings Bhd (FMH) to register tax savings of RM5 million per annum on the back of its expansion project -- which has an annual investment outlay of RM50 million and minimal debt funding -- scheduled to commence next year.
It estimates that FMH’s tax savings represents a 13 per cent to 15 per cent boost to the group’s bottomline from financial year 2022 (FY22) until financial year ending June 30, 2026.
“We make no changes to our forecasts for the time being, pending further clarification from management on the expected timeline to kick-start the expansion project,” said RHB Research in a research note today.
On Tuesday, FMH’s wholly-owned subsidiary, FM Global Logistics (FMGLM), has received an updated approval letter from the Malaysian Investment Development Authority (MIDA) to carry out integrated logistics services and e-commerce fulfilment hub activities as an expansion project.
FMGLM had first received a letter of approval in Jan 2018 for MIDA’s special incentive package, pertaining to the development of an e-commerce fulfilment hub in Shah Alam which qualifies the group for an investment tax allowance based on 60 per cent of total capex, to be offset against 70 per cent of statutory taxable income.
Under the revised conditions stated in the latest approval letter, FMGLM’s development activities have been re-classified as an expansion project that will commit a minimum of RM245 million in qualified investment capex, to be deployed over a five-year period.
“The commensurable tax savings, upon commencement of this expansion project, are expected to contribute positively to earnings,” the research house said.
Given the positive outlook, RHB Research has maintained its “Buy” call on FMH, with a target price of RM1.05.
“We continue to like FMH for its defensive growth profile, undemanding valuations, and consistent track record in paying out dividends,” it added.
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