• An established logistics and warehousing player in ASEAN. TNLOGIS (listed in 1992) is mainly involved in: (1) Total Logistic; (2) Transportation; (3) Warehousing; (4) Forwarding; (5) Cold chain; (6) Crane services; (7) Technology deployment; (8) Project cargo; (9) Property development etc.
• The group owns over 70 warehouses in the region, with a combined storage capacity of over 5.7 million square feet, including general warehouse, bonded warehouses, cold rooms and free trade zone warehouses. It is also the largest trucking companies in Malaysia, with a fleet of 2,000 trucks of various capacities including open, box/bonded and refrigerated containers, enabling it to transport goods of varying temperatures including dry, chilled and frozen. In 9MFY16, the logistics and warehousing division contributed 75% to revenue and around 46% to EBITDA while the rest was contributed by its property development business.
• TNLOGIS is likely to benefit from the growing logistic industry in Iskandar Malaysia as well as Singapore (to reap the potential benefits from TPPA) as some multi-national companies at the southern tip are expected to choose logistic providers in Johor rather than Singapore due to cost factor.
• Rerating catalyst from warehouse REITs IPO. The company is mulling potential of spinning off its warehouses under a REIT structure to unlock values as well as part of the alternatives to bring down the gearing ratio. According to industry sources, the exercise is set to come to fruition by end 2016. Based on the company’s lates t accounts as at 31 Dec, TNLOGIS has property, plant and equipment worth RM679m, investment properties worth RM98m and total net debt of RM510m.
• Poised for a downtrend line breakout again. After staging a downtrend line breakout in early April to a high of RM1.34 (23 Apr), share prices retraced back to RM1.25 (4 May) before inching up 1sen to RM1.26 yesterday. As share price is still above 200-d SMA near RM1.23 and a possible technical rebound in immediate term from steeply oversold position, TNLOGIS is ripe for another downtrend line breakout soon. A decisive breach above RM1.29 (downtrend line and 20-d SMA) is likely to spur prices higher towards RM1.35 (61.8% FR) and RM1.41 (76.4% FR) before reaching our long term objective of RM1.50 (52- week high on 9 Nov) levels.

• Key supports are RM1.23 (200-d SMA) and RM1.19 (lower Bollinger Band). Cut loss at RM1.16.
• Attractive risk to reward ratio with 19% upside against 7.9% downside. At RM1.26, TNLOGIS is trading at 1.11x P/B, about 11% lower against its peers. All in, we see a good risk to reward ratio for investor with a theoretical entry price of RM1.26 given that the downside to the cut loss zone of RM1.13 is 13 sen (-10.3%) while the upside to the LT target of RM1.59 is 33 sen (+26.1%).

Source: Hong Leong Investment Bank Research - 6 May 2016