Background

Sin-Kung Logistics (Sin Kung) is an integrated logistics service provider principally involved in the provision of trucking services with a focus on airport-to-airport road feeder service.

IPO Statistic

The IPO entails an offering of up to 303.5mn shares in conjunction with the listing of the shares on the Ace Market of Bursa Malaysia. It comprises a public issue of 200mn new shares and an offer for sale of up to 103.5mn shares. Of the total 200mn public issue, 60mn will be offered to Malaysian public, while 45mn will be offered to eligible employees and persons contributed to the success of the company and 95mn to Miti-approved Bumiputera investors, at an IPO price of RM0.13 per share.

Investment Thesis

1. Differentiation and niche market position.

2. Support from ecommerce industry.

3. Expansion plans.

Forecast

We expect FY24 and FY25 earnings to grow at 72% and 26% respectively, premised on the following assumptions: 1. Normalisation in effective tax rate to 20-22% vs 34% in FY23; 2. 15-20% increase in business volume as a result of rising orders from its main airline customers; and 3. The growth in revenue would be in tandem with the expansion in fleet size.

Valuation

At the IPO price of RM0.13/share, Sin Kung is priced at a trailing PE of 24x FY23 EPS. We value Sin Kung at RM0.165/share based on 14x FY25 EPS. Not Rated.

Source: TA Research - 29 Apr 2024