We
visited Century Logistics’ headquarter in Port Klang last week together
with a group of fund managers and analysts. We were pleasantly surprised
to discover that the e-commerce parcel business will be commencing
earlier-than-expected with a roll-out by 4Q this year. Apart from the
new multi-storey warehouse currently under construction, management also
targets to enlarge the company size via merger and acquisition
(M&A) exercises. 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 PER of 21x (from 19x) to FY18F
EPS, which derives a TP of RM1.58. Maintain Outperform call.
Source: PublicInvest Research - 29 Jun 2017
- Progress of the multi-storey warehouse. The 3-storey warehouse, which has a total floor area of 450k sq ft, is expected to commence operations by July 2018. Piling works will be completed by next month. The company will carve out about 50k 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 100k parcels/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/parcel and the current market rate is around RM5-10/parcel. For a start, the company plans to lay foundations and build on its capabilities by rolling out the parcel delivery business in 4Q this year. On the remaining warehouse capacity (about 400k sq ft), it plans to fill up the space within the first six months.
- Focusing on South Korean route. In contrast to other parcel delivery providers who mainly focus on China’s products, 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. A quick look into notable B2C platforms like Shopee, ezbuy and Shoppu will reveal a special section categorized 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.
- Looking for M&A opportunities.
Management mentioned yesterday that it is 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 wholly owned
logistics company, CJ Korea Express Malaysia S/B, 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.
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| CENTURY (7117) - Century Logistics - Parcel Delivery Roll Out |
Source: PublicInvest Research - 29 Jun 2017
http://klse.i3investor.com/blogs/PublicInvest/126351.jsp
