THE BUZZ
Century Logistics (CLH) entered into a Sale & PurchaseAgreement (S&P) with Nakamichi SB yesterday to buy apiece of leasehold land in Klang, consisting of a double-storey factory andoffice buildings for a total sum of RM19m.
OUR TAKE
Hungry for morewarehouses. We are not surprised with this acquisition since CLH has been looking for warehouses in strategic locations in its efforts to expand its warehousing and contractlogistics business. As the group's present 7 warehouses with total capacity of840k sq ft space is 96% full, we think the price of this newly-purchased pieceof 26.93 sq ft leasehold land (expiring in 30 June2105) ' which comes with a double-storey factory and officebuildings - is fair and reasonable as itwill enable the group to take its contract logistics business a step further.With a strong clientele base comprising names like Celcom and F&N, we thinkthe group's contract logistics business should continue to see robust growth,which we expect would chalk up a healthyy-o-y 8% growth in FY12.
No change inforecast; CAPEX well within projections.As the acquisition is well within our CAPEX projection, we are maintaining ourforecast at this juncture. While we believe that CLH's contract logisticsbusiness will cruise through without a hitch, we are still only cautiously optimistic on the group's core Oil & Gas logistics' segment, which experienced an interruption in bunker fuel services in 4QFY11.During that quarter, CLH was asked by the Ministry of Transport's MarineDepartment to suspend the services of four out of eight of its floating andstorage units (FSUs) in Pasir Gudang from Sept-Nov 2011 due to works on the RM5bn deepwater terminal by Dialog Group (BUY, FV RM3.07) inPengerang, Johor. As a result, the group's 4Q earnings slid 29% during the quarter. Meanwhile, management has guided that two of its FSUs have resumed operation in new locations,and that it is also finalizing the strategic areas for the remaining 2 FSUs. As such, we believe thegroup's 1QFY12 results would still bear the impact of weaker performance in this division. That said, we maintain our NUETRAL stance fornow, with an unchanged FV of RM1.94, based on 6x FY12 EPS.