• CENTURY (listed in June 2001) is a leading integrated provider of supply chain solutions. CENTURY focuses on providing total supply chain management (SCM) that integrates all the logistics functions from production to point-of-sale processing, warehousing, assembly or packaging of products, transportation and delivery, and post-transaction processes. In short, it is a onestop shop for the consignor, providing a range of services and wide geographical coverage against traditional stand-alone logistics operators.
• Under SCM, CENTURY serves a diversified base of industries such as oil & gas, Fast Moving Consumer Goods (FMCG), E&E etc. The Group also has presence in over 20 countries worldwide e.g. India, China, U.S.A, Vietnam, South Korea and Thailand, via its offices and accredited agents.
• Niche in oil & gas logistics. CENTURU akso differentiates itself from peers by providing oil & gas logistics solution via its ship to ship transfer service. The Group has licenses to operate ship to ship transfer to offload bunker fuel from floating storage units (FSUs) to bunker barges in Port of Pasir Gudang and Port of Tanjung Pelepas (PTP), Johor.
• Bright prospects in the increasingly complex logistics sector given the rising importance of total logistics solutions. The economy today is increasingly focusing on cash flows, tight inventory management, and just-intime processes. Hence, customers increasingly require intermediaries to provide total and increasingly complex logistics solutions, which lead to more outsourcing of the total supply chain management process.

Negatives

• mostly discounted after recent rout in share prices. CENTURY’s share prices nosedived 35% from a high of RM1.14 (3 Aug) to a low of RM0.745 (25 Aug) before ending at RM0.835 yesterday, as the group was slapped with a Letter of Demand (LOD) amounting to RM21.6m from Nestle (the Plaintiff) on 5 Aug for purported losses and damages. Meanwhile, CENTURY has also counter-claimed against Nestle for RM9.3m being damages as well as services rendered. CENTURY’s pos ition is that the Plaintiff’s case is bas eless and unsubstantiated.
• According to Management, in the unlikely event that Nes tle’s demand materializes, the financial impact on Century will be limited as the claim sum of RM21.6m only amounts to approximately 7.5% of the net assets of the Century as at 30 Sep 2015 (The next case management is fixed on 13 Jan 16). Although the dispute might drag on for a long period of time, we believe CENTURY’s share prices have grossly discounted the negatives. At RM0.835, the stock is trading at 1.08x P/B, which is approximately 8% below its peers , and supported by more superior dividend yield of 6% (peers: 2.6%) coupled with PBT margin of 15% (peers: 12.2%).
• Strong downtrend line breakout. After nearly 4-month-long sideways consolidation phase on increased volume, CENTURY ended 4sen or 5% higher yesterday at RM0.835, breaking its ST downtrend line. Hence, CENTURY’s near term trend has turned bullish as its latest share price has crossed above all key SMAs (10-d/20-d/30-d/50-d). This signals a potential continuation of its prior uptrend with further gains expected ahead towards RM0.87 (30-w SMA) and RM0.905 (16 Oct high), with long term objective at RM1.00 psychological barrier. Key supports are RM0.80 and RM0.78 (daily lower Bollinger band). Cut loss at RM0.77.
• Attractive risk to reward ratio with 19.8% upside against 7.8% downside. All in, we see a good risk to reward ratio for investor with a theoretical entry price of RM0.835 given that the downside to the cut loss zone of RM0.77 is 6.5 sen (-7.8%) while the upside to the LT target of RM1.00 is 16.5 sen (+19.8%).
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Source: Hong Leong Investment Bank Research - 23 Dec 2015