Tri-Mode System (M) Bhd ("TMS") which has traded below its IPO price since listed on the ACE Market is expected to see a change in fortune as their warehouse and distribution centre expansion starts contributing in FY20. BUY with a target price of RM0.63 based on 13x PER FY19 as per closest related peers average.

TMS is an integrated logistic player founded by entrepreneur Dato Hew Han Sang back in 1992 with over 27 years of track record in sea freight, container haulage business and warehousing across Penang Port, Pasir Gudang, Port of Tanjung Pelepas, KLIA and Penang Airport. It operates a relatively new fleet of 99 prime movers and over 500 trailers, averaging less than 4 years old at around 90% utilisation rate. 

TMS's growth catalyst will come from their new HQ, warehouse and distribution hub sitting on a 12-acre land at Pulau lndah Industrial Park, to consolidate business operation and develop new warehouse infrastructure adding over 91,000 sq. ft. Their site is within the vicinity of IKEA's regional distribution and supply chain hub the world's 3rd largest IKEA distribution centre with RM908m investment. 

TMS has also moved to capture inbound courier services via their recently launched e-commerce platform HiClicks Malaysia, essentially grabbing a slice of the lucrative e-commerce business without major investment circa.RM1mil. It provides end-to-end logistic service for overseas purchase and delivery arrangement in Taiwan, Korea, Japan & US.  TMS's balance sheet remains in net cash and has indicated a dividend policy of 30% translating to a dividend yield of 3.8%. Currently, TMS is at an inflection point and poised to see double digit earnings growth in the next few years chalking sustained EPS growth of 14% in FY19 and 27% in FY20.

Source: Rakuten Research - 28 Jan 2019