Trimode should see operational boost post-listing
KUALA LUMPUR: Freight and logistics services provider TriMode System (M) Bhd (Trimode) which is on its way to listing on Bursa Malaysia’s ACE market should see a boost in operations after listing, based on its superior earnings growth with dividend policy.
According to Kenanga Investment Bank Bhd (Kenanga Research) in an initiation report yesterday, its calculations showed that Trimode’s financial year 2018 estiamtes (FY18E) and F19E net profit of RM7.1 million to RM8.2 million implied a five-year cumulative annual growth rate (CAGR) of 26 per cent.
“For the past two years (FY1517A), Trimode displayed strong annual profit before tax growth of 17 and 29 per cent, which is superior among industry peers,” it said.
Via an IPO, Trimode is seeking to raise RM26.4 million, implying a market cap of RM101.3 million upon listing, with bulk of the proceeds for business expansions.
The company had also indicated a dividend policy of 30 per cent, translating to dividend per share of 1.3 to 1.5 sen for FY18-19E -- implying 2.1 to 2.4 per cent dividend yields based on IPO price of RM0.61.
Additionally, Kenanga Research saw that Trimode’s balance sheet appeared healthy, with the company poised to be in net-cash position going into FY1819 -- from current net gearing of 0.3 times -- with RM5 million of the IPO proceeds used for borrowings repayment.
“Sea freight and container haulage represents the two largest segments for Trimode in terms of earnings contribution,” it observed,
“As at FYE17A, sea freight and container haulage contributed the bulk of the company’s gross profits at 51 and 37 per cent respectively.
“Other segments include air freight (nine per cent), freight forwarding (one per cent), warehousing ( two per cent) and marine insurance (less than one per cent).”
Trimode generates most of its revenue in Malaysia, at 90 to 91 per cent for the past three years.
Its customers mainly consist of local and multinational companies, as well as importers and exporters, with sizable exposures from packaging materials, textile-related products, rubber-related products, chemical products and building construction materials.
Of the RM26.4 million raised through IPO, 57 per cent of it will be allocated for the construction of a proposed HQ and distribution hub, with estimated completion by 3Q20.
Post-completion, this will contribute an additional 50,000 to 55,000 sq ft in warehousing capacity to the company’s current capacity of 11.8k sq ft.
Nonetheless, Kenanga Research said the premise is expected to bring costs saving benefits and improved efficiency as the company seeks to consolidate its operations under one roof.
“Additionally, it comes with a larger parking area for its fleet, and in-house repair workshops to facilitate growth for its container haulage segment, with two per cent of the IPO funds allocated for haulage fleet expansion.”