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The Three Numbers That Help CWT Limited Deliver

CWTLogoLogistics is defined by some as: “Having the right item in the right quantity at the right time at the right place for the right price in the right condition to the right customer”.

That is quite a lot of things that a logistics company needs to get right. In the case of CWT Limited (SGX: C14), it appears to be executing its duties well. Its Return on Equity of 20% is one of the highest on the market.

CWT, which was founded in 1970, is present in over 50 countries. It is arguably one of the most efficient companies in the Singapore market. Its Asset Turnover of 2.9 is over five times higher than the average for Singapore’s blue chips. The Asset Turnover for the 30 companies that make up the Straits Times Index (SGX: ^STI) is around 0.5.

Its Asset Turnover implies that CWT is able to generate $2.90 in revenue for every of dollar of asset employed in the business. However, whilst CWT’s Asset Turnover is outstanding, its Net Income Margin might be described as a tad sub-par.

Its Net Income Margin of 1.2% suggests that the company only makes S$1.20 of profit on every S$100 of revenue. Worryingly, the Net Income Margin has also slipped from 2.2% in 2011 to 2% in 2012.

Additionally, CWT has been taking on more leverage. Its Leverage Ratio has risen from 3.15 in 2010 to 3.6 in 20111. Last year, the Leverage Ratio was 5.9.

By dismantling CWT’s Return on Equity, it is easy to see how the company delivers to shareholders. Its Return on Equity of 20% is the product of a low Net Income Margin of 1.2%; an above-average Asset Turnover of 2.9 and a hefty splodge of Leverage of 5.9.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.