PublicInvest starts coverage of Century Logistics with ‘outperform’ call

PETALING JAYA: PublicInvest Research has initiated coverage on Century Logistics Holdings Bhd with an “outperform” call and a 12-month target price of RM1.43, based on recovery in logistics activities, venture into the e-commerce space, change in corporate structure under the new leadership and solid balance sheet.
“We arrive at our target price by pegging FY18F earnings per share (EPS) to a target price-earnings (P/E) of 19 times,” its analyst Chong Hoe Leong said in a note last Friday.
“The company could potentially enjoy premium valuations like other parcel delivery players like Pos Malaysia Bhd and GD Express Sdn Bhd (GDex) if they manage to successfully kick start the parcel delivery business,” he added.
Chong said it is timely to ride on the e-commerce boom in Malaysia, noting the logistics sector has been in the spotlight lately thanks to the launch of the first digital free-trade zone in the country.
With the help of Alibaba’s Jack Ma, recently appointed as Malaysia’s digital economy adviser, the government hopes to register a compund annual growth rate of 23.2% for 2017-2021 or double the e-commerce growth from 10.8% to 20.8% by 2020 under the National E-Commerce Strategic Roadmap.
A number of innovative policies have been pushed by the government to make this happen, including setting up the world’s first “digital free trade zone” outside China.
Chong said the research house believes Century Logistics could ride on the e-commerce boom in the country, under the new leadership of e-commerce giant player, CJ Korea Express, which emerged as the largest shareholder in the company eight months ago.
In September 2016, CJ Korea Express bought a 31.4% stake from the founders at RM1.45 per share.