TIONG NAM LOGISTICS HOLDINGS BHD
By Affin Hwang Capital Research Buy (maintained) Target price: RM1.90
POST-MEETING with the management of Tiong Nam Logistics Holdings Bhd last week, Affin Hwang Capital Research projects stronger earnings for the logistics and warehousing provider in 2018.
The research house said Tiong Nam is expected to perform better next year on the back of its warehouse-capacity expansion and higher margins from its property division. Affin Hwang Capital Research opines that Tiong Nam’s move to expand regionally is timely and allows the company to stay competitive.
Tiong Nam’s warehouse capacity is projected to increase by 10.4% to 5.26 million sq ft by year-end. The capacity is expected to further increase by 35.1% to 7.11 million sq ft by end2020.
To note, the firm’s warehouse capacity expansion includes new facilities in Yangon, Myanmar and Savannakhet, Laos. It is also setting up sales offices in emerging markets including in China, Vietnam, Laos, Myanmar and Thailand.
Tiong Nam’s property division’s margins are expected to trend higher as the bulk of unbilled sales should come from its Pinetree project, which has higher selling prices and stronger margins. Note that the group currently has total unbilled sales of RM132mil through Tiong Nam Business Park and Batu Pahat 8, Tiong Nam Business Park SiLC 7, Pinetree Residence.
As for the company’s logistics business, Affin Hwang Capital Research noted that changing trade patterns have led Tiong Nam to come under pressure.
“We expect 10% top-line growth on a yearon-year basis for the logistics division, underpinned by capacity expansion and revenue streams from new segments. Both cross-border services and parcel-delivery services commenced operations in May 2017.
“As Tiong Nam is the new kid on the block in last-mile delivery service, the company is only expecting revenue contributions of RM1mil from its e-commerce delivery service, Instant. We think the group’s effort to get a slice of the e-commerce market is commendable although it is still a small segment,” said the research unit in a note.
The research house reiterated its “buy” call on the logistics and warehousing provider, and left the target price unaltered at RM1.90.