This article first appeared in The Edge Financial Daily on April 10, 2018

Century Logistics Holdings Bhd
(April 9, 69 sen)
Maintain outperform with a lower target price of 94 sen: Since the entry of CJ Logistics as the largest shareholder of Century Logistics Holdings Bhd with a 30.6% stake, the Korean logistics player has appointed four directors to the board and also filled in several management positions. To ride on CJ Logistics’ leading profile in the global logistics industry, Century Logistics will eventually change its name to “CJ Century Logistics Holdings”.

Century Logistics has been running its courier business since the beginning of this year after securing a licence from the Malaysian Communications and Multimedia Commission in June 2017. It is currently utilising 96 trucks in 11 distribution centres, mainly covering the West Coast region. For the East Coast, the company currently outsources it to a third party. The main hub is located at CJ Korea Express’ premises in Puchong with a combined capacity of 7,000 parcels per day. The group plans to ramp up its sorting capacity up to 30,000 parcels per day by increasing its total number of trucks to 300 with 25 distribution centres by year end. We estimate that it will take at least two years before seeing the break-even level for this courier business.

The procurement segment is expected to perform well this year as it has recently bagged some new export orders for assembling electrical products, namely fridges, televisions and air conditioners.

We understand that the Port of Tanjung Pelepas in Johor is currently flooded with at least two million square feet of warehouse space due to the influx of warehouse capacity from Tasco, Pan Asia and Maple Tree. About 280,000 sq ft or 33% of Century Logistics’ total warehouse space at the Port of Tanjung Pelepas has been left vacant since last August.

The company has allocated a staggering budget of around RM120 million for capital expenditure for financial year 2018. The bulk of it will go into the construction of a three-storey warehouse, while the remainder will be used for purchase of trucks. The new multilevel warehouse in Klang had reached about 17% completion as of end-March 2018 and is expected to be ready by year end. Upon commissioning, it will see a sorting capacity of 150,000 parcels per day together with 300,000 sq ft of warehouse space. — PublicInvest Research, April 9