CENTURY (7117) - SOS Is Century Logistics ripe for picking? Part 1
BRIEF BACKGROUND INFORMATION
Just a very brief write up from what I read and chat with a fund manager. Fundamental is average, ROE 10%, PAT Margin 8-10%, PE 22x (less net cash of RM92m, PE is about 16x). I learned about thsi company from Bonescythe's blog. Last 5 years total earnings is RM125m, or average RM25m p.a.
Market Cap @ 6 April 2017 RM1.14 = RM445m.
South Korea largest logistics CJ Logistics took up 30% at RM1.45 per share last Oct 2016.
CATALYSTS
1. CJ Logistics, is the largest B2C in Korea with 40% market share, and sharing their experience and expertise with Century.
2. CJ Logistics and management wanted to start B2C biz in 2Q of 2017. (many other companies is also jumping into the wagon)
3. CJ Logistics will do cross sale from its TES clients. New customers.
4. CJ Logistics improving Century's operational productivity via their existing technology
5. Century is building a new warehouse, about 450,000 sf, adding about 50% or more to the exisiting capaciy.
6. CJ Logistics wants to make Century from a domestic into a REGIONAL logistic player.
CENTURY LOGISTICS VS GDEX
1. Past 5 years total earnings RM125m vs RM106m.
2. Market Capital at RM445m (net cash RM92m) vs RM3,000m (net cash RM287m)
3. Average last 5 years earnings RM25m vs RM21.2m ROE is 10% vs 20%.
4. PE using average earnigns (last 5 years) = 22x vs 79x or net of cash 14x vs 128x.
5. Going forward, I believe CJ Logistics can double their average earnigns from RM25m to RM50m in 5 years time based on the catalysts stated above. So, we need to monitor their progress.
HOW MUCH DO YOU VALUE CENTURY?
1. I will used a PE of 15x - 20x due to the e-commerce platform CAGR of 11% and CAGR of Century 15%.
2. For easy calculation, RM50m x PE20 = RM1.0 billion.
3. GDex is now RM3 billion at PE of 79x or 72x (net of cash). If you believe they can do a CAGR of earnings of about 70% in next 3 years, then their valuation is not extreme.
4. Hope Century price will drop back lower, so more people can accumulate and enjoy the return 5 years from now.
DISCLAIMER
Not a buy, sell or hold call. I did enjoy Beauty and the Beast. In today's market, participants seems to have problems differenciating which is the Beauty and which is the Beast.
CENTURY (7117) - SOS Is Century Logistics ripe for picking? Part 1
http://klse.i3investor.com/blogs/sosfinance/120080.jsp
