Century Logistics Holdings - Looking Forward to Parcel Delivery Set-Up

Date: 20/11/2017

Source  :  PUBLIC BANK
Stock  :  CJCEN       Price Target  :  1.39      |      Price Call  :  BUY
        Last Price  :  0.65      |      Upside/Downside  :  +0.74 (113.85%)

Century Logistics’ 9MFY17 core earnings fell 17.6% YoY to RM11.7m despite revenue only dropping 4.5% YoY. The results were below our and market expectations, making up only 61% and 55% of full year estimates respectively. Nevertheless, the results would have been within our forecasts if not for i) the higher effective corporate tax rate (30.6% vs 26.5% in FY16) and ii) the initial set up costs of the parcel delivery operation amounting to RM0.5m. No dividend was declared for the quarter. On a more positive note, the group will to kick-start the parcel delivery business soon. No changes to our earnings forecasts as we maintain our Outperform call with an unchanged TP of RM1.39.

  • 3QFY17 revenue (QoQ: +0.8%, YoY: -1.4%) The group’s 3QFY17 revenue dropped slightly by 1.4% YoY to RM72.5m, dragged by weaker sales contribution from procurement logistics services (-13.9%). Total logistics services, which made up more than 85% of the group’s revenue, remained steady at RM62m.
  • 3QFY17 core earnings (QoQ: +30.0%, YoY: +11.4%) Compared to 3QFY16, the Group’s bottomline improved by 11.4%YoY to RM3.9m after stripping out the foreign exchange gains.
  • Management expectations. The parcel delivery business is expected to be rolled out at CJ Korea Malaysia’s premise in Shah Alam by 1QFY18 under the Century brand name. The project is expected to incur an additional cost of RM400k in the 4Q. On the progress of the new multi-storey warehouse in Setia Alam, the project is expected to be completed by 1 Nov 2018. As of end-Oct, it has reached 3% of completion and is slightly ahead of schedule.

Source: PublicInvest Research - 20 Nov 2017

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