Executive summary

• We initiate coverage on CJ Century Logistics Holdings Berhad (CJ Century) with a Buy recommendation. Target price is RM0.95 based on 16x CY23 EPS.

• CJ Century is a leading logistics solution provider in Malaysia. It is a 54.9%- owned subsidiary of CJ Logistics Asia Pte Ltd, which in turn is controlled by CJ Corporation.

• The company’s core businesses can be segregated into 1) total logistics, and 2) procurement logistics. For FY21, it achieved a total revenue of RM843mn, which mainly came from the total logistics service (79%) segment.

• CJ Century is one of the top 3 warehouse operators in Malaysia with a total storage capacity of 4.5mn sf. It also operates a fleet of 130 trucks.

• On the global economic front, global freight charges are expected to remain high due to supply-chain disruption. Free-trade agreements will bode well for Malaysia’s future trades and the adoption of “just-in-case” inventory management will spur the demand for freight and warehousing space.

• In the logistics industry, industry players have been enjoying higher revenue and profit since 3Q20. Unfriendly competition is unnecessary when everyone is benefitting from higher volume and price.

• For company specific, the disposal of loss-making courier service will help CJ Century to stop the bleeding and refocus on growth in the total logistics segment.

• We project CJ Century to record core profits of RM29.9mn, RM35.4mn and RM44.4mn for FY22/23/24, representing earnings growth of 49%, 18% and 25% respectively. FY22-24 dividend is estimated at 1.3-1.9sen, yielding approximately 2-3%.

Source: TA Research - 9 May 2022