? CLH?s 1Q10 reported net profit of MYR5.9 mln, up 457% YoY butdown 17% QoQ, was broadly within our expectations, accounting for23% of our 2010 estimate. Net profit would have been higher if not foran MYR0.5-mln reduction in fair value of available-for-sale financialasset and an MYR0.2-mln translation loss of foreign operations.

? The key driver for the YoY increase was an improved economicenvironment, which resulted in additional business from existing andnew customers, lifting revenue 51% YoY to MYR59.8 mln. The QoQprofit decline was due to higher fixed and operating costs, includingdepreciation and interest charges upon completion of its new Thailand warehouse in January.

? The 2010 outlook remains firm and we leave our earnings estimatesand recommendation unchanged. CLH?s oil & gas logistics business,especially its ship-to-ship transfer operations, is performing well, aslower oil prices result in increased volumes. Its domestic warehousesare fully tenanted, and new business secured in 2009 shouldcontribute as operations are ramped up. However, CLH?s newThailand warehouse is expected to lose money as it continues tosource for clients. The haulage business continues to be competitiveand CLH will not expand this business. The procurement & assemblydivision is busy with deliveries of LCD TVs to Syria and microwaveovens to Argentina.

? We maintain our Strong Buy recommendation on CLH and leave our12-month target price of MYR2.30 unchanged.

? Our opinion is based on the firmer outlooks for the group?s oil & gaslogistics operations and total logistics business. CLH?s strong niche inthe provision of oil & gas logistics in Malaysia places the group in agood position to benefit from the robust oil & gas sector. Its twowarehouses in Port Tanjung Pelepas (PTP) are fully tenanted, andCLH is looking to expand by building a third warehouse in PTP, to becompeted in 3Q10. Beyond that, CLH is also planning to build itsheadquarters and distribution hub on a 30-acre piece of land it boughtlast year in Bukit Raja, Klang. CLC is also looking at opportunities toventure into Indonesia and Vietnam.

? Our unchanged 12-month target price for CLH of MYR2.30 is based ona blend of 12.0x 2010 earnings and 0.70x end-2010 book value. Ourtarget multiples are in line with peer valuations.? Risks to our recommendation and target price include increased oilprice volatility, which would encourage CLH?s customers to reducetheir fuel oil inventories, and result in lower handling volumes for CLH.A disruption to the global economic recovery would reduce trade flowsand negatively impact CLH?s total logistics and supply managementbusiness. Further appreciation of the MYR could result in more foreigncurrency translation losses.


Summary: Century Logistics Holdings Berhad (CLH) is aprovider of oil & gas logistics, supply chain management andtotal logistics services. It was listed on the Second Board ofBursa Malaysia in June 2001. The group has establishedregional joint ventures in Thailand, India, Sri Lanka, Dubaiand China.

12-Month Target Price: MYR2.30

Source: Standard & Poor's
Analyst: Vincent Ng