Highlights

• We met with Century Logistic management recently to have a better understanding of its operations and prospects. Key takeaways are as follows-

• Century Logistic was founded in 1970s initially as a forwarding agent. To date, it has grown its business into integrated logistics, oil logistics, procurement logistics and data management solution.

• 62% of revenue come from its total logistic business, 19% from ship to ship transfer services for fuel and oil traders; while the remaining 19% come from procurement services for various electronic and electrical items (Figure #1).

• Having its presence in Mal aysia and Singapore, Century’s fleet includes 70 conventional trucks, 75 haulier prime movers, 13 side loader trailers and 448 trailers.

• Century owns two facilities (warehouse and office) in Port Klang as well as four facilities in Port of Tanjung Pelepas with combined storage facility of 1.8m sq ft, which is about 42% of its peers’ Tiong Nam.

• Century is also in the midst of expanding its storage facility with construction of multi-storey warehouse on 8.2 acres land near Setia Alam. The project which would potentially add another 600,000 sq ft of warehouse space is slated to be completed by end 2017.

• The company also ventured into data management solutions which involves physical and electronic storage and data management as well as consultancy service. We understand that this business is still at infant stage.

• Top-line has been growing at 0.29% CAGR from 2010 to 2014. We were guided that core earnings for FY15 will be flat mainly on the back of exceptional items.

• In FY14, the company was in net cash position. However, it is is not expected to be maintained in FY15 due to drawdown of loan to finance expansion plan.

• Since 2013, the company has been generous with dividend payout ratio of more than 50%. At closing price of 85 sen, that would translate into a decent dividend yield of 5% (Figure #3). We were guided that payout ratio of 50% will be maintained for FY15.

Risks

• (1) Slower than expected manufacturing/trade industry; and (2) Risk of losing existing client following court case with one of its longest serving clients.

Forecasts

• None.

Rating

• Positives – (1) Signing of TPP to induce import; and (2) Diversified clientele to mitigate impact on specific industry.

Negatives

• Lack of catalyst.

Valuation

• Currently trading at 7.4x P/E (peers average of 10.2x), P/B of 1.1x (peers average of 1.3x), and dividend yield of 4.8% (peers average of 2.9%); discount to peers average valuation (Figure #4).

Source: Hong Leong Investment Bank Research - 30 Oct 2015