AGX Group Bhd (AGX) is a third-party logistics (3PL) service provider involved in providing sea and air freight forwarding, aerospace logistics, warehousing and other 3PL services, and road freight transportation, with markets and operation centres in Malaysia, the Philippines, Korea, Myanmar and Singapore. As a registered Non-vessel Operating Common Carrier (NVOCC) and accredited International Air Transport Association (IATA) Cargo Agent, AGX can directly engage with sea (for shipments to the US) and air freight common carriers, allowing the group to obtain better freight rates and priority in securing cargo or container space on ships and aircraft, eliminating the need for third-party agents.

As at 22 Dec 2023, AGX has commenced and is currently identifying suitable locations/units for new warehouses and offices in Johor Bahru and Penang, Malaysia along with a new office in Busan, South Korea. We derive a fair value of RM0.40 based on a c.12x PE multiple to its FY24F EPS of 3.4sen. The IPO is expected to raise approximately RM33.8m from the issuance of 96.5m new shares. Besides utilising 12.2% of the proceeds for repayment of bank borrowings, 25.8% and 48.7% of the proceeds are allocated for business expansion and working capital, respectively.

• Growth drivers. AGX’s growth will be driven by: i) setup of new offices, and ii) setup of new warehouses.

• Competitive strengths. AGX’s competitive strengths include: i) physical presence in five countries, ii) established track record, iii) maximal sales coverage with both indirect and direct channels, iv) wide range of services to meet the diverse needs of customers, v) provision of specialised aerospace logistics services, vi) a registered NVOCC and an accredited IATA Cargo Agent, and vii) experienced management team.

• Catalysts. Key drivers may include: i) trade performance with trading partners, and ii) internal domestic economic growth.

• Key risks. Key downside risks, among others, include: i) competitive industry, ii) fluctuations in sea and air freight rates, iii) dependency on its major customers, iv) dependency on other freight forwarders and service providers, v) fluctuation in foreign exchange rates, and vi) default in payment by its customers.

Source: PublicInvest Research - 23 Jan 2024