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Author: PublicInvest   |   Latest post: Fri, 14 Jun 2019, 12:18 PM

 

CJ Century Logistics Holdings - Dragged By Courier Segment

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Century Logistics reported a net loss of RM1.8m in 1QFY19, despite its topline growing 37% YoY. The results were below our and streets’ expectations of full year net profit of RM11m and RM10.3m respectively. No dividend was declared for the quarter. The weaker-than-expected results were mainly due to a start-up costs related to the courier segment. We maintain our forecast for now, as we expect better contribution in the 2H on the back of maiden contribution from the new multi-storey warehouse in Setia Alam which is expected to be operational by July 2019. Share price has declined by an average of c.24% since our last downgrade. Given an upside potential of 4.7% from current price, we upgrade our call from Underperform to Neutral with target price of RM0.42.

  • 1QFY19 revenue (QoQ: +44%, YoY: +37%) The group’s 1QFY19 revenue jumped 37% YoY to RM127m, driven by higher sales contribution from all segments mainly Procurement Logistics services (+88%). This was on the back of new additional orders for the assembly of electrical products e.g. television, air conditioners and fridges. For air conditioners, the volume is expected to be higher during 2Q and 3Q of the year due to warmer weather. Meanwhile, Courier sales contribution and Total Logistics business for 1Q19 also increased YoY to RM5.7m and RM63m respectively (Figure 2).
  • 1QFY19 core earnings. The Group’s reported a net loss of RM1.8m in 1Q19, compared to a net profit of RM2.6m in 1Q18. This was mainly dragged by its Courier service segment which registered a loss of RM3.9m (vs loss of RM1.4m in 1Q18), as it expands its operation since early FY18. Meanwhile, earnings from its Total Logistics business halved to RM1.3m, mainly due to lower margins from certain operations especially the oil & gas segment. Nevertheless, its Procurement Logistics services continue to report better contribution to RM3m (+24% YoY) due to higher export sales.
  • Construction progress of new warehouse. The construction of its new multi-storey warehouse in Setia Alam is expected to be completed by end May 2019 and to be occupied by July 2019. This will increase its total warehouse capacity by another c.450k sqft, with parcel sorting capacity of c.150k parcels/day. Upon commencement of this new warehouse, the Group expects to breakeven its courier segment by FY20F. For FY19F, it targets to increase its immediate sorting capacity to an average of c.30k parcels/day (from current 10k parcels/day). As of now, it has bought a total of 300 trucks and targeted to increase its fleet size to 400 trucks with 28 to 30 branches by end-FY19.

Source: PublicInvest Research - 27 May 2019

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