Century Logistics

kltrader

Publish date: Fri, 13 Aug 2010, 10:22 PM

Target RM2.24

Century?s 2QFY10 results were in line estimates and consensus. The numbers, the highest semi-annual revenue and earnings the company has ever achieved, were boosted by all its 3 segments of logistics, oil and gas and assembly. For 2H, management is taking a prudent stance on its upcoming expansion plans in anticipation of slowing growth. We maintain our earnings forecasts for the company but roll over our valuation to FY11 at an unchanged PE of 6x. This gives a fair value of RM2.24 (from RM2.00), which also comes with an attractive net dividend yield of 5% (FY10f) and 6.2% (FY11f). Maintain BUY.

A record year. Century recorded its highest semi-annual revenue and earnings (in 1HFY10) of RM75m and 7.6m respectively, which were higher y-o-y (due to the low base in the corresponding 1HFY09) as well as YTD and q-o-q (revenue q-o-q: 26%; earnings q-o-q: 14%). With 1FY10 top and bottom-line numbers already representing 51%-53% of our and consensus? full-year forecast, we deem the numbers in line. On a q-o-q basis, margins contracted slightly owing to higher costs of goods from the assembly segment.

Pushed up by assembly division. 2Q revenue from all 3 segments (OEM, third party logistics and Oil and Gas) was predominantly driven by higher sales from the OEM assembly division (which manufactures TV sets) ahead of the FIFA World Cup in South Korea (q-o-q: 152%, y-o-y: 132%, YTD: 78%). On the logistics side, demand for trade activities continued to be driven by the higher shipments handled for its new and current

customer base, while oil and gas logistics continued to see healthy turnover for ship to ship transfer, thanks to spillover demand from Singapore, which is Asia?s largest bunker market.

2H outlook one of caution. For 2H, management is taking a prudent stance to its upcoming expansion plans in anticipation of slowing growth, notably at its logistics and assembly division. Management?s immediate focus is centered on cost cutting, optimization of its own warehouses and setting up a new production line (from which capacity will increase to 50% by end-2010).

Maintain BUY. With the results being in line with our numbers, we continue to maintain our earnings estimates. We have rolled over our valuation base to reflect FY11 earnings, as we continue to peg the counter at 6x PE, which is a slight discount on the sector PE of 7x, after taking into consideration the dilution effect from exercise of its warrants. This gives a fair value of RM2.24 (from RM2.00), which provides an attractive net dividend yield of 5% (FY10f) and 6.2% (FY11f). Maintain BUY.

LOGISTICS

Century Logistics offers one-stop total logistics solutions encompassing forwarding, transportation, warehousing and other ancillary services.

Stock Statistics

Bloomberg Ticker CLH MK

Share Capital (m) 81.9

Market Cap (RMm) 132.7

52 week H?L Price (RM) 2.10 1.35

3mth Avg Vol (?000) 36.2

YTD Returns -19.0

Beta (x) 1.05

Major Shareholders (%)

Phua Sin Mo 24.66

Teow Hing Choo 10.88

Teow Choo Chuan 6.08

By OSK188

Analyst: Ahmad Maghfur Usman

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