Stock Name: CENTURY
Company Name: CENTURY LOGISTICS HOLDINGS BHD
Century Logistics Holdings Bhd
(Aug 17, RM1.74)
Maintain buy at RM1.70 with revised target price of RM2 (from RM2.32): Century Logistics posted a strong rebound in its 2QFY11 earnings, growing 12.8% year-on-year (y-o-y) to RM8.5 million, reversing the 4.6% y-o-y decline in 1QFY11. This resulted in a 4.7% y-o-y increase in 1HFY11 net profit due to an improved performance in the total logistics services. Century's 1HFY11 net profit of RM14.8 million was within our expectations at 46.6% but below consensus, coming in at 44.6% of full-year estimates.
For 1HFY11, Century registered revenue growth of 5.5% y-o-y to RM120.5 million in total logistics services. Management indicated that contract logistics played a key part in the growth with the securing of notable customers such as Fraser & Neave Holdings Bhd and Celcom Bhd. We understand contract logistics contributes approximately 42% to total revenue. We expect revenue growth to continue as management increases its efforts to secure new logistics accounts.
The 1HFY11 revenue decline of 1.7% y-o-y to RM20.5 million in the procurement logistics business was due to lower export shipments. We are not overly concerned by the decline as we understand that management is exploring other high growth regional destinations, where it might emulate its Syrian business model. We believe that the Indian subcontinent such as Sri Lanka and Bangladesh could be possible locations.
We like the fact that Century continues to develop its contract logistics model. We believe contract logistics will moderate any negative impact from any slowdown in its other business units. The length of a'' logistics contract for a given customer is usually 2+1 years or 3+1 years.
Management indicated that it is also looking to grow its oil and gas logistics. Currently, O&G logistics provide stable revenue for Century. However, we do not expect any impact in FY11 or FY12. Hence, we are maintaining our FY11 and FY12 earnings.
We maintain our 'buy' recommendation for Century as it continues to deliver the results. Growth will be supported mainly by the contract logistics business. Century announced an interim dividend of five sen or 28% payout from 1HFY11 earnings. We forecast a dividend yield of 4.1% for FY11. Rolling over our valuation to FY12, our adjusted target price is derived by pegging our FY12 earnings per share to a price-earnings ratio of 5.1 times based on a 10% discount to its five-year average PER. While we are expecting Century's growth to continue in FY12, we are applying a discount to the PER due to uncertain market conditions that might affect stock valuations. ' MIDF Research, Aug 17
This article appeared in The Edge Financial Daily, August 18, 2011.
Company Name: CENTURY LOGISTICS HOLDINGS BHD
| Research House: MIDF | Price Call: BUY | Target Price: 2.00 |
Century Logistics Holdings Bhd
(Aug 17, RM1.74)
Maintain buy at RM1.70 with revised target price of RM2 (from RM2.32): Century Logistics posted a strong rebound in its 2QFY11 earnings, growing 12.8% year-on-year (y-o-y) to RM8.5 million, reversing the 4.6% y-o-y decline in 1QFY11. This resulted in a 4.7% y-o-y increase in 1HFY11 net profit due to an improved performance in the total logistics services. Century's 1HFY11 net profit of RM14.8 million was within our expectations at 46.6% but below consensus, coming in at 44.6% of full-year estimates.
For 1HFY11, Century registered revenue growth of 5.5% y-o-y to RM120.5 million in total logistics services. Management indicated that contract logistics played a key part in the growth with the securing of notable customers such as Fraser & Neave Holdings Bhd and Celcom Bhd. We understand contract logistics contributes approximately 42% to total revenue. We expect revenue growth to continue as management increases its efforts to secure new logistics accounts.
The 1HFY11 revenue decline of 1.7% y-o-y to RM20.5 million in the procurement logistics business was due to lower export shipments. We are not overly concerned by the decline as we understand that management is exploring other high growth regional destinations, where it might emulate its Syrian business model. We believe that the Indian subcontinent such as Sri Lanka and Bangladesh could be possible locations.
We like the fact that Century continues to develop its contract logistics model. We believe contract logistics will moderate any negative impact from any slowdown in its other business units. The length of a'' logistics contract for a given customer is usually 2+1 years or 3+1 years.
Management indicated that it is also looking to grow its oil and gas logistics. Currently, O&G logistics provide stable revenue for Century. However, we do not expect any impact in FY11 or FY12. Hence, we are maintaining our FY11 and FY12 earnings.
We maintain our 'buy' recommendation for Century as it continues to deliver the results. Growth will be supported mainly by the contract logistics business. Century announced an interim dividend of five sen or 28% payout from 1HFY11 earnings. We forecast a dividend yield of 4.1% for FY11. Rolling over our valuation to FY12, our adjusted target price is derived by pegging our FY12 earnings per share to a price-earnings ratio of 5.1 times based on a 10% discount to its five-year average PER. While we are expecting Century's growth to continue in FY12, we are applying a discount to the PER due to uncertain market conditions that might affect stock valuations. ' MIDF Research, Aug 17
This article appeared in The Edge Financial Daily, August 18, 2011.
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