KUALA LUMPUR (April 30): Hong Leong Investment Bank (HLIB) Research has valued ACE Market-bound Sin-Kung Logistics Bhd at 17 sen, based on 15x price earnings ratio on FY2024F of 1.1 sen.

In a note on Tuesday, the research house, which does not have a rating on the integrated logistics services provider specialising in airport-to-airport road feeder services, said with 52% of Sin-Kung’s earnings stemming from these services, it is an indirect beneficiary of the uptick in air cargo demand, propelled by recent disruptions in major sea routes.

“Notably, global air cargo volume demand has seen seven consecutive months of year-on-year growth, as mentioned by DHL.

“We project Sin-Kung’ s earnings to record a strong FY23-FY25f CAGR of 39.9%,” it said.

HLIB said in anticipation of a recovery in Malaysia's air cargo traffic, coupled with limited capacity in its container haulage (which reached 80% utilisation in FY2023) and warehousing segments (currently at 83% capacity), Sin-Kung is allocating 47% of its proceeds to purchase 100 commercial vehicles and expand its warehousing capacity.

The research house said these 100 new commercial vehicles are poised to become a pivotal earnings driver for the group in FY2025.

“Looking ahead, the group's FY26f-27f earnings will be further solidified by the newly built warehouse, which will quadruple the group’s warehouse capacity in its northern region, currently operating at full capacity.

“We project Sin-Kung’s core net profit to register a strong FY23-FY25F CAGR of 39.9%, underpinned by (i) the increase in air cargo traffic in Malaysia and Singapore due to disruptions in major sea routes; (ii) the commencement of 100 commercial vehicles in FY25; and (iii) the stronger air cargo traffic resulting from the recovery of E&E output in Malaysia in FY25-FY26f,” it said.