Stock Name: CENTURY
Company Name: CENTURY LOGISTICS HOLDINGS BHD
Research House: RHB
Century Logistics Holdings Bhd
(March 23, RM1.90)
Initiate coverage at RM1.85 with outperform call and fair value RM2.70: Leading integrated solutions provider Century Logistics Holdings (CL) provides a wide range of services through its subsidiaries, including international freight forwarding (sea, land and air), warehousing, inventory management, procurement and assembly services. The company also provides ship-to-ship (STS) transfer for the oil and gas industry.
Malaysia's external trade is expected to remain healthy going forward. RHB Research's economics team expects exports and imports to grow 10% and 11.6% respectively in 2011, underpinned by resilient economic growth. Given that 85% to 90% of CL's business caters for the domestic market, rising import activity could translate into higher demand for distribution services. Hence, we believe rising trade will be positive for the company.
CL stands out from its peers by providing STS transfer for both fuel and crude oil, which are carried out mid-sea. CL operates floating storage units (FSU) which are converted from very large crude carriers (VLCC) with an average of 280,000 deadweight tonnes. These FSU are used for blending, storage and offloading of oil to various sized vessels (ranging from VLCCs to barges) off the Port of Tanjung Pelepas and Pasir Gudang, Johor.
Risks include the non renewal of its STS operating licence and a weaker than expected economic recovery.
We forecast FY11/13 net profit compound annual growth rate of 19.3%, driven mainly by: (i) resilient demand for freight forwarding, distribution and warehousing services on the back of rising trade activity; (ii) higher value-added services from assembly business as it gains traction in new markets and products; and (iii) stronger contribution from STS services driven by strong demand for fuel and crude oil, especially from emerging markets such as China and Vietnam.
We like CL given its: (i) attractive business model of total integrated logistics solutions that continues to attract more outsourcing of logistics services; and (ii) diversified earnings base which should provide earnings growth. We have pegged a target price-earnings ratio of 10 times to the stock as we believe CL deserves a premium to its peers' weighted average given its stronger earnings growth, diversified business model, higher net profit margins and higher return on equity. We estimate a fair value of RM2.70 per share (based on FY11 FD earnings per share). We initiate coverage on CL with an 'outperform' recommendation. ' RHB Research, March 23
This article appeared in The Edge Financial Daily, March 24, 2011.
Company Name: CENTURY LOGISTICS HOLDINGS BHD
Research House: RHB
Century Logistics Holdings Bhd
(March 23, RM1.90)
Initiate coverage at RM1.85 with outperform call and fair value RM2.70: Leading integrated solutions provider Century Logistics Holdings (CL) provides a wide range of services through its subsidiaries, including international freight forwarding (sea, land and air), warehousing, inventory management, procurement and assembly services. The company also provides ship-to-ship (STS) transfer for the oil and gas industry.
Malaysia's external trade is expected to remain healthy going forward. RHB Research's economics team expects exports and imports to grow 10% and 11.6% respectively in 2011, underpinned by resilient economic growth. Given that 85% to 90% of CL's business caters for the domestic market, rising import activity could translate into higher demand for distribution services. Hence, we believe rising trade will be positive for the company.
CL stands out from its peers by providing STS transfer for both fuel and crude oil, which are carried out mid-sea. CL operates floating storage units (FSU) which are converted from very large crude carriers (VLCC) with an average of 280,000 deadweight tonnes. These FSU are used for blending, storage and offloading of oil to various sized vessels (ranging from VLCCs to barges) off the Port of Tanjung Pelepas and Pasir Gudang, Johor.
Risks include the non renewal of its STS operating licence and a weaker than expected economic recovery.
We forecast FY11/13 net profit compound annual growth rate of 19.3%, driven mainly by: (i) resilient demand for freight forwarding, distribution and warehousing services on the back of rising trade activity; (ii) higher value-added services from assembly business as it gains traction in new markets and products; and (iii) stronger contribution from STS services driven by strong demand for fuel and crude oil, especially from emerging markets such as China and Vietnam.
We like CL given its: (i) attractive business model of total integrated logistics solutions that continues to attract more outsourcing of logistics services; and (ii) diversified earnings base which should provide earnings growth. We have pegged a target price-earnings ratio of 10 times to the stock as we believe CL deserves a premium to its peers' weighted average given its stronger earnings growth, diversified business model, higher net profit margins and higher return on equity. We estimate a fair value of RM2.70 per share (based on FY11 FD earnings per share). We initiate coverage on CL with an 'outperform' recommendation. ' RHB Research, March 23
This article appeared in The Edge Financial Daily, March 24, 2011.
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