CENTURY LOGISTICS HOLDINGS BHD

By Kenanga Research Outperform (maintained)

Target price: RM0.90

CENTURY Logistics’ venture into the courier services business is expected to break even by 2021, underpinned by the support from its largest shareholder, according to Kenanga Research.

The research house said Century Logistics is poised to become a longer-term e-commerce play, following a meeting with the company’s management.

The courier services business, which is progressing as planned, currently operates 86 trucks and 11 distribution centres, at a full capacity of 7,000 parcels per day.

“After emerging as Century Logistics’ largest shareholder, CJ Logistics is understood to continue its hands-on approach in providing the former managerial and networking assistance.

“This is further evidenced by the company’s proposed name change to CJ Century Logistics Holdings Bhd announced on 15 March 2018, which we believe, allows Century Logistics to further leverage on CJ Logistics’ established branding.

“We believe CJ Logistics’ guidance to be crucial towards Century Logistics’ venture into courier services, given the former’s status as the number one delivery company in South Korea with a 40% market share,” said Kenanga Research in its published note.

Century Logistics’ management plans to expand rapidly and has targeted to reach 350 trucks and 25 distribution centres by the end of the year. Once its new multi-storey warehouse becomes operational in 2019, the group’s parcel capacity is expected to be given another major boost.

On Century Logistics’ outlook in the near term, Kenanga Research said the company would likely post flattish earnings performance on the back of elevated costs.

The research house also pointed out that the group registered poorer financial results in the fourth quarter of financial year 2017.

Century Logistics’ net profit plunged by 44% y-o-y, mainly as a result of additional operating costs from the setting-up of its courier services business, unutilised warehouse capacity in Port of Tanjung Pelepas due to competition and lower utilisation in its oil logistics.

“We favour Century Logistics given its rela- tively healthy balance sheet, CJ Logistics’ expertise as a market leader and the group’s ability to leverage on existing customer base and branding,” said Kenanga Research.