Century Logistics’ valuation to rise with roll out of parcel delivery business

0

KUCHING: The team at Public Investment Bank Bhd (PublicInvest Research) believes shares of Century Logistics Holding Bhd (Century Logistics) deserves more attractive valuation, driven by its sooner-than-expected roll-out of parcel delivery business.

This comes after a corporate visit by researchers and investors to the group’s three-storey warehouse recently, which has a total floor area of 450,000 square feet (sq ft) and is expected to commence operations by July 2018.

“The company will carve out about 50,000 sq ft on the ground floor for the business-to-consumer (B2C) parcel delivery business,” it said in a note yesterday.

“It will have a sorting capacity of 150,000 parcels a day and targets to achieve 100,000 parcels per day within the first three years. On the parcel rate, we understand that Malaysian Communications and Multimedia Commission has set a minimum rate of RM5 per parcel and the current market rate is around RM5 to RM10 per parcel.”

For a start, PublicInvest Research said the company plans to lay foundations and build on its capabilities by rolling out the parcel delivery business in the fourth quarter this year. On the remaining warehouse capacity, it plans to fill up the space within the first six months.

Another key seller for Century Logistics is in its focus on the South Korean route, the research firm said.

In contrast to other parcel delivery providers who mainly focus on China’s products, Century Logistics plans to focus on delivery of South Korean products by riding on its major shareholder’s global profile.

“South Korean products are getting more visible in the Malaysian consumer market, driven by the increasing popularity of Korean celebrities and also cosmetics and facial products, which are selling at more competitive pricing than Japanese and European brands,” it highlighted.

“A quick look into notable B2C platforms like Shopee, ezbuy and Shoppu will reveal a special section categorised for South Korean products while the second most popular B2C platform, 11Street Malaysia is jointly owned by a leading e-commerce operator in South Korea and Celcom Axiata.

“All these would be low-hanging fruits for Century Logistics, while allowing it to get away from the competitive route in the China market.”

On future growth, Century Logisitics is targeting to acquire a mid-size logistics company to kick start its courier service. It is worth noting that CJ Korea Express already had a footprint in Malaysia before taking up a major stake in Century Logistics.

“Its wholly-owned logistics company, CJ Korea Express Malaysia Sdn Bhd, owns two warehouses in Shah Alam and was established eight years ago.

“We do not rule out the possibility of seeing any synergistic tie-up between CJ Korea Malaysia and Century Logistics as it will not only help consolidate the logistics warehouse size and all resources for greater economies of scale, it could potentially push Century Logistics’ revenue to be one of the biggest logistics players in Malaysia.”