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SOS Century Logistics, can or not? Part 2

sosfinance
Publish date: Sun, 16 Apr 2017, 11:12 AM
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VALUATION DOES NOT DETERMINE THE PRICE, IT'S JUST A TOOL TO ESTIMATE A VALUE OF A BIZ

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"How do you save RM50,000? - I shared with a friend on how to do it. I got a term life for RM280 p.a covering RM100k until 70 years old. I cancelled my wholelife insurance of RM2,800 p.a. for the same coverage up to 100 years old. Save RM2500 p.a x 20 years = RM50,000. (PM0122037325)

.....IS THIS ARTICLE FAKE OR FACT?? ANYONE CAN CONFIRM?
Following Message

CENTURY LOGISTICS RM1.11 PER SHARE OR RM434 MILLION

1.  Lets used Dato' Cheah's approach, good biz model, good people, and good price?

GOOD BIZ MODEL?

BIZ #1 - CONTRACT LOGISTICS & PROCUREMENT LOGISTICS

2.  Century's existing biz model is far from great, ROE10%, Profit Margin 9%, Growth is unstable for last 5 years.

3.  Century, at RM434 million, last 5 years average profit of RM25m (growth of 20% from 2018 due to increase capacity), net cash position about RM24m, so at RM410m / RM25m = PE 16x. Assume 2-3 years later, with 20% growth from average profits, then it will be around RM30m, PE of 13.7x.  Reasonable for company with growth.

4.  However, its biz model is Moderate at best, given the key financial indicators of the past 5 years.  I wouldn't pay RM434m for this biz alone.

 

BIZ#2 - PARCEL DELIVERY - NEW BIZ TO BE INTRODUCED 

5.  CJ Korea Express (CJKE) bought abotu 31% of Century Logistics.

6.  CJKE has the largest market share of 40% of parcel delivery in Korea, total market size about RM60b.

7.  CJKE in Korea has the competitive advantage over its competitors for parcel delivery of 10-15% cheaper.

8.  Century, leveraging on CJKE expertise and cross selling, is introducing parcel delivery biz in Malaysia and the REGION, 2Q2017.

9.  Based on GDex's parcel delivery, it's biz model is good, ROE of 20%, PAT Margin of 15%, low capex, high growth past 5 years, latest profit is about RM38m vs 4 years ago is about RM15m.  GDex started its parcel delivery 4 years ago.

10.  Don't be happy so soon, Nationwide Exp and another smaller parcel delivery is making losses.  It need certain volume to be profitable, like any biz.

 

GOOD PEOPLE?

11.  I believe they do have good people in order to be No.1 parcel delivery with 40% market share and some competitive advantage in this sector.

12.  Bringing their expertise to Century will be an advantage.

13.  More importantly, they are bringing new custormers via its Lazada Asean signing of exclusive contract.

 

GOOD PRICE?

14.  Only IF they can do the NEW BIZ, meaning at least half the size of GDex in 4 years, i.e. a target revenue of RM100m, although management wants RM200m by 2020.

15.  GDex market cap today is RM3.2b.  

 

CONCLUSION

GOOD BIZ MODEL?

GOOD PEOPLE?

GOOD PRICE?

Well, only ONE LITTLE PROBLEM, do you believe the management can successfully intorduce the new "parcel delivery" biz into the REGION.    Just providing some facts and figures.  

 

GOOD JUDGEMENT 

So, at RM1.11 can or not? Good judgement required.  The simple question is, can CJKE helps Century in the new biz venture?  However, be ready that first year of new biz, normally quite tough.  

GOOD LUCK.

CJCEN (7117)
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Discussions
Be the first to like this. Showing 13 of 13 comments

KCLiew

can or not

2017-04-16 11:29

xuewenapeng

Tnlogis is better it is the truth

2017-04-16 11:30

Flintstones

We know the direction where Century is going. The risk here is execution. On paper, it sounds fantastic with expertise from CJ Korea. But execution wise, I think there is still things to be proved.

2017-04-16 15:04

stockmanmy

TN is far worse...TN cannot seem to make money from logistics division.

Century will do well.....but first two years in any new business is always tough....can you wait?

2017-04-16 15:29

Flintstones

Most i3 investors here have an investing time frame of less than 1 year. How to wait?

2017-04-16 15:33

stockmanmy

ah...but share price don't follow your time table.....lol.

2017-04-16 16:03

R40s

In Sept.2016, CJKE paid Rm175M to own 31.5% or 120.54423M shares in Century Logistics (CL). At Rm1.45/share they paid about 60% premium above the market prices before the deal was inked, it must be for a good reason, we can easily figure out why. I think they have a great plan to capture the e-Commerce boom in ASEAN region because they knew about Alibaba/Lazada going to go big into Malaysia/ASEAN region (see news link below, before they acquired CL, they already negotiated with Alibaba/Lazada for ASEAN region), so they had a business plan in-place for CL/CJKE to get up to speed quickly in order to seize on this opportunity.

As we now know, in September-2016 in a week after CJKE acquired Century Logistics, CJKE signed a deal with Lazada which was acquired by Alibaba just before that, the coincidence of timing of both deals clearly revealed CJKE's great plan to use CL as their regional hub for e-Commerce parcel delivery business in this region.

http://www.businesskorea.co.kr/english/news/industry/15815-strong-presence-malaysia-cj-korea-express-acquires-malaysia%E2%80%99s-2nd-largest

http://postandparcel.info/75552/news/lazada-using-cj-korea-express-as-delivery-partner/

The agreement is that CJKE/CL will handle the parcel delivery of goods and services from South Korea to Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam (collectively known as ASEAN region). With the current popularity of K-pop and Hanryu, Korean products for example Samsung electronics & electrical products, CJKE/CL will be assured of securing a sizeable pie quickly in the parcel delivery business, and to grow quickly on this base portion of business. The Rm100M revenues should be achieved in the short-term, and the management's objective of Rm200M revenues by 2020 may not be too high, given the expected explosive growth of e-Commerce in ASEAN is happening as we speak now...

2017-04-16 16:04

R40s

The main reasons why CJKE had chosen CL are:
1. CL has a vertically integrated business in this industry,
2. CL is based in Port Klang (also in Johor Port), the biggest port in Malaysia and one of the largest in ASEAN, as larger parcels must be delivered by shipping in order to be cost competitive.
3. CL has a new and modern multilevel warehouse ready by Q2-2017, and add 20% capacity for future growth.
4. The future Alibaba's HQ in Aeropolis-KLIA is nearby Port Klang, so CL can easily have an office near Alibaba to handle small parcels by air, so CL location is ideal for both air and sea delivery mode.
5. The valuation of CL compared to other rivals is actually undemanding even at 60% premium, and so happened the founder Dato' Phua wanted to exit from his business, so the deal was sealed.

2017-04-16 16:27

sosfinance

1. Info and fact are all available, so, judgement must be made (just like any new biz, the success rate). Yes, it is always easier said than done, hence, some discount should be given of delay, short of target, costing etc. That is why, I use half of the target achieved, it still looks good. Good thing the current price of RM1.11 per share has not taken into account the success of the execution of the parcel delivery biz.

2. Btw @R40s, based on the Annual Report, the multi level warehouse completion is in 2018, I suspect there is some changes to cater for the parcel delivery biz.

3. Upside for me outweigh downside, but need to be patient. New biz takes a little bit of time to build up. This one will be faster due to Taiko CJKE around.

4. So, good luck.

2017-04-16 18:33

R40s

Hi SOS, in terms of IT related businesses such as e-Commerce, 4 years is a very long time, if one is slower than others, he would probably miss the plane... The e-Commerce plane would carry only First-Come-First-Serve passengers, so those who play safe and act too slowly, will either miss out or can't make it big... I think CJKE would act fast to seize a good percentage of market share and establish CL's as their ASEAN region's hub as planned by them.

2017-04-17 00:12

sosfinance

HI R40s, you are right on the e-Commerce platform. Time is essence even though retail sale via e-Commerce is only 0.7% of total retail sales (as compared with SKorea, Japan - >20%). Huge opportunity for growth. It's even better they can work with other established e-Commerce platform, while establish their own soonest possible. E-commerce platform biz may be a good model as well.

Purchase via e-Commerce will grow especially its "price competitiveness" even we have included the transport fee (which equates to petrol, parking, time, and also higher price paid for rental in shopping complexes).

2017-04-17 08:16

R40s

Like GDex having a Japanese shareholder who is a market leader in Japan, CL has an added advantage of having Korean market leader CJKE as their major shareholder leading the charge. CJKE will implement their proven TESS model on CL, so that it won't be learning in the dark from Ground-Zero. This should enable CL to grow quickly into one of the market leaders in this industry...

2017-04-17 09:06

sosfinance

Anything below RM1.43 is a good deal, once parcel delivery shows results, it may be too late to buy as prices may have gone up a lot, since CJKE is giving them customers on a silver platter. With 2-3 years horizon of investment, Century plan will be achieved. Fortunately, market has not recognise this potential, and value investors still have time to participate at a very good price of RM1.14.

2017-04-18 17:19

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