SINKUNG : Building a base

Airport-to-airport road feeder services provider. SINKUNG is an integrated logistics service provider, specializing primarily in trucking services, notably for airport-to-airport road feeder services. The company also provides container haulage, warehousing, distribution, and various other logistics-related solutions. With a fleet of 461 commercial vehicles as of FY23, SINKUNG's revenue is predominantly derived from airport-to-airport road feeder services, constituting 52% of the group's earnings. The primary clientele of SINKUNG comprises cargo airlines, passenger airlines, and general sales agents, collectively contributing to 91% of the group's total revenue.

Riding on rising air cargo demand. We see SINKUNG as an indirect beneficiary of the rising demand for air freight. Recent disruptions in two major sea routes have created an opportunity for increased air cargo charter business as shippers and forwarders seek alternative transport. According to DHL, global air cargo volume has recorded seven consecutive months of YoY growth. This surge in demand for air freight boosts the need for SINKUNG’s airport-to-airport logistics services. Notably, not all companies opt for direct flights when selecting air freight; many choose transshipment instead to save costs. This involves transferring cargo between flights or utilizing land transport between airports, particularly when faced with limited slots or seeking lower total fares.

Projecting an earnings rebound. After recording a 47.9% decline in FY23 earnings, we project SINKUNG’s earnings to recover in FY24F and achieve a CAGR of 39.9% from FY23 to FY25. Our optimism is supported by (i) the increase in air cargo traffic in Malaysia and Singapore due to disruptions in major sea routes; (ii) the commencement of operations for 100 commercial vehicles in FY25; and (iii) stronger air cargo traffic resulting from the recovery of E&E output in Malaysia in FY25-FY26F.

Building a base. After correcting 12% from its IPO high of RM0.165 to RM0.145 on the last trading day, SINKUNG is now building a base in the RM0.135-0.145 region.A successful breakout above RM0.15 will spur the price toward RM0.155-0.165-0.175. Cut loss at RM0.125.

Collection range: RM0.135-0.140-0.145

Upside targets: RM0.155-0.165-0.175

Cut loss: RM0.125

Source: Hong Leong Investment Bank Research - 10 Jun 2024