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Malaysia: PublicInvest retains outperform on Century Logistics with higher target price
KUALA LUMPUR: PublicInvest Research has maintained its “outperform” call on Century Logistics Holdings with a higher target price of RM1.58 as it believes the company deserved more attractive valuation.
“We think the company deserves more attractive valuation, driven by the sooner-than-expected roll-out of parcel delivery business.
“Hence, We peg a higher price earnings ratio (PER) of 21 times (from 19 times) to FY18F EPS, which derives a target price of RM1.58. Maintain ‘outperform’ call,” PublicInvest said.
The research house said the 3-storey warehouse, which has a total floor area of 450,000 sq ft, was expected to commence operations by July 2018. Piling works will be completed by next month.
The company will carve out about 50,000 sq ft on the ground floor for the business-to-consumer (B2C) parcel delivery business. It will have a sorting capacity of 150k parcels/day and targets to achieve 100,000 parcels per day within the first three years.
“On the parcel rate, we understand that Malaysian Communications and Multimedia Commission has set a minimum rate of RM5 per parcel and the current market rate is around RM5-10 per parcel.
“For a start, the company plans to lay foundations and build on its capabilities by rolling out the parcel delivery business in fourth quarter this year. On the remaining warehouse capacity (about 400,000 sq ft), it plans to fill up the space within the first six months,” PublicInvest said.
Century Logistics plans to focus on delivery of South Korean products by riding on its major shareholder’s global profile.
South Korean products are getting more visible in the Malaysian consumer market, driven by the increasing popularity of Korean celebrities and also cosmetics and facial products, which are selling at more competitive pricing than Japanese and European brands.
PublicInvest said a quick look into notable B2C platforms like Shopee, ezbuy and Shoppu would revealed a special section categorised for South Korean products while the second most popular B2C platform, 11Street Malaysia is jointly owned by a leading e-commerce operator in South Korea and Celcom Axiata.
“All these would be low-hanging fruits for Century Logistics, while allowing it to get away from the competitive route in the China market,” it said.
PublicInvest said Century Logistics’ management mentioned that it was targeting to acquire a mid-size logistics company to kick start its courier service.
It is worth noting that CJ Korea Express already had a footprint in Malaysia before taking up a major stake in Century Logistics. Its whollyowned logistics company, CJ Korea Express Malaysia, owns two warehouses in Shah Alam and was established eight years ago.
“We do not rule out the possibility of seeing any synergistic tie-up between CJ Korea Malaysia and Century Logistics as it will not only help consolidate the logistics warehouse size and all resources for greater economies of scale, it could potentially push Century Logistics’ revenue to be one of the biggest logistics players in Malaysia,” PublicInvest said.
Source: http://www.thestar.com.my/business/business-news/2017/06/29/publicinvest-retains-outperform-on-century-logistics-with-higher-target-price/#trQh0XyshuHDVs6W.99