Dubai – Mubasher: MubasherTrade Research has kept its target price for Dubai-listed Aramex at AED 4.16 with the recommendation “Buy” with an upside potential of 20.6% over the current price. Aramex closed Wednesday at AED 3.42.

The courier’s Q2 profits were up 15% year-on-year to AED 92.6 million, which was in-line with MubasherTrade’s estimates of AED 89.6 million (+3%) and up 2% from consensus estimates of AED 90.6 million, the research firm said in its most recent report on the stock.

It added that revenues were 6% year-on-year higher, reaching at AED 967 million, missing MubasherTrade’s estimate of AED 1.0 billion (10% year-on-year growth) by 4%. “If it weren't for the global currency weakness faced by the company, revenues would have grown 10% year-on-year, and would have been in line with our estimates,” the report stated.

Aramex’s net margin was “impressively higher” than Q2-14, standing at 9.6% vs. 8.8% in Q2-14 and 8.8% in our estimates, MubasherTrade Research said, adding that they believe the improved profitability was due to increased contribution from high-margin segments such as the express and the logistics segments.

“The main growth triggers for Aramex are: increased global e-commerce activity and the inorganic expansion strategy adopted by the company,” MubasherTraded added, noting that the international and domestic express segments saw significant growth due to increased e-commerce services especially in the GCC, Europe and North America. In addition, the Australian unit, MailCall, which was acquired in 2014 contributed to this growth.

“The performance of the freight forwarding segment came weak as we forecasted, affected by lower oil prices, while the logistics segment delivered strong performance driven by demand from core markets, [namely:] GCC and South Africa,” the report added.

Mubasher forecasted double-digit growth for both the express and logistics segments, 17% increase for domestic express year-on-year, while international express and logistics were projected to increase 14% and 16%, respectively.

It estimated the freight segment's growth at only 3% year-on-year due to the increased competition.