Buy call for Tri-Mode pending upcoming listing on Friday
KUALA LUMPUR: Research house Rakuten Trade Sdn Bhd (Rakuten) Trade has placed a ‘buy’ call on integrated logistics service provider Tri-Mode System (M) Bhd (Tri-Mode) with a target price of RM0.68 based on 14 fold price earnings ratio FY18 as other mid-cap industry peers.
This comes as Tri-Mode is set to on the ACE market of Bursa Malaysia on May 11.
Its IPO is expected to see an institutional offering of 30.71 million shares at a to be determined price, and a retail offering of 12.497 million shares at 61 sen per share.
Principally engaged in the provision of sea freight and container haulage services which makes up 93 per cent of their revenue contribution in FY17, Tri-Mode has a proven track record of 26 years and also offers services such as air freight, freight forwarding, warehousing and marine insurance.
According to (Rakuten Trade), the group’s expansion plans are expected to enhance their warehousing capacity by 50,000 to 55,000 sq ft to the existing 11,804 sq ft.
“This is in line with Tri-Mode’s foray into the e-commerce logistics industry which is expected to commence during the third quarter of 2018 (3Q18).
“The modernised warehouse which is equipped with racking system and bar-coding investor monitoring system will expedite Tri-Mode’s capability to capture the growth potential in the ecommerce logistics segment,” said the research house in an IPO note.
Moreover the group’s balance sheet currently has zero gearing, putting it a position for potential rapid expansion.
Assuming the institutional price will be equal to the retail price of 61 sen, the group is expecting approximately RM26.36 million to be raised and has earmarked 58.8 per cent to be used for the construction of a proposed headquarters and distribution hub and the purchase of prime movers and trailers.
The move which will centralise the group’s operations is aimed toward the purpose of achieving cost savings and efficiency improvements.
Meanwhile, 19 per cent will be used to repay bank borrowings, 8.9 per cent as working capital and the remaining 13.3 to be used to finance listing expenses.
Besides its growth potential, Tri-Mode also has a dividend policy of 30 per cent which translated to a 2.0 per cent dividend yield in FY18.
“It is projected that the new earnings per share is expected to expand by 12.4 per cent and 16.2 per cent for FY18 and FY18 respectively catalyse by the growing e-commerce industry in Malaysia,” said the research arm.