Review

• CJ Century Logistics Holdings’ (CJ Century) 1Q22 core profit of RM8.8mn was within expectation at 29.4% of our full-year forecast.

• Excluding the discontinued courier operations, 1Q22 core profit surged 19.5% YoY to RM8.8mn, underpinned by revenue growth of 10.4% YoY to RM242.8mn. The decent performance can be attributed to significant rise in revenue from total logistics services to RM197.5mn (+21.2% YoY), which filtered down to higher EBIT of RM13.4mn (+90.3). 1Q22 EBIT margin expanded by 1.4%-pts to 9.8% due to higher operational efficiency.

• QoQ, the revenue and adjusted PBT increased by 18.9% and 22.3% respectively on the back of higher contribution from both total logistics and procurement logistics services. Also, the reduction in interest cost by 4.4% contributed to higher earnings too. Impact  No change to our FY22-24 earnings projections.

Outlook

• The global freight charges are expected to remain elevated owing to inflationary pressure emanating from high crude oil price and other challenges like equipment shortage, limited space on board ships, reduced sailing and capacities by shipping liners, congestion in major ports, and low schedule reliability. This is expected to benefit CJ Century, which has close working relationship with major shipping liners, thereby ensuring priority treatment.

• The overwhelming demand for warehousing space will also bode well for the group, which operates 30 warehouses and distribution centres in Peninsula Malaysia with a total storage capacity of circa 4.5mn sf. We expect rental rates to increase by 10% this year.

Valuation

• We maintain CJ Century’s fair value at RM0.95/share, based on unchanged 16x CY23 EPS. Maintain Buy

Source: TA Research - 27 May 2022