Tri-Mode System (M) Bhd (“Tri-Mode”), an integrated logistics solutions provider had on April 2021 moved into its 12 acre HQ & Distribution Hub situated in Pulau Indah, Klang. The Distribution Hub currently houses 2 warehouses with a total built up of 123,000 sq ft and operates 98 prime movers, 545 trailers and 3 side-loaders. In view of the positive demand for warehousing and 3PL services, we forecast Tri-Mode to register earnings of RM10.9m and RM12.6m in FY2023 and FY2024 respectively. Rolling over to FY12/23, our TP is revised to RM0.66 based on EPS of 6.6sen over PER of 10x (discounted to forward PE of the Bursa Malaysia Transport Index due to its smaller market capitalisation).

Tri-Mode’s warehouses space has always achieved 90% occupation. Contribution from this segment remains low at a mere 1.8% of total revenue as at FY2021. Nonetheless management target to grow its warehousing revenue contribution to eventually 5%. Tri-Mode has on August 2022, submitted application for planning approval to construct a 150,000 sq ft warehouse targeted for completion in 3Q2023. Post 3rd warehouse completion, aggregate warehouse space will increase from 123,000 sq ft to 273,000 sq ft. We expect warehouse services revenue to start contributing in 4Q2023 as management guided potential customers have been in negotiation for the addition warehouse space.

Tri-Mode’s associate company, Atama Logistic (M) Sdn Bhd has obtained Authourised Economic Operator (AEO”) certification which allow Tri-Mode to represent AEO status international agencies on priority fast customs clearance, faster release shipments, lower rate of physical inspection of cargo and enhanced security of terminal transaction. Accordingly, there are only 5 to 10 logistic players having such certification and this poses an advantage for Tri-Mode to deal with the MNCs.

In addition, Tri-Mode had officially obtained Freight Forwarding Agent License from the Royal Malaysian Customs Department via International Integrated Logistics Services (“IILS”) status. The IILS status enables Tri-Mode to complete the integrated and seamless logistics services along the value chain as a single entity on a regional and global scale. Hence, Tri-Mode will be able to provide integrated logistics services under a single entity to its valued customers more efficiently with cost and time savings.

Source: Rakuten Research - 3 Nov 2022