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This article first appeared in The Edge Malaysia Weekly on October 8, 2018 - October 14, 2018

WITH just about anything you wish to buy a mere click away in the digital age, logistics players and courier firms have been quick to ride the booming e-commerce scene.

Some were quick to spot the potential years ago and had set the wheels in motion. For instance, GD Express Carrier Bhd (GDEX) has been expanding its vehicle fleet as well as manpower to cope with the surge in demand for its express delivery services.

Pos Malaysia Bhd, through Pos Laju, has been expanding its physical courier infrastructure by providing ad hoc kiosks and investing in fuel-efficient vehicles and mobile scanners.

Meanwhile, Tiong Nam Logistics Holdings Bhd created an Asean-wide cross-border road transport network linking Singapore, Malaysia, Thailand, Laos and Vietnam to its hub in Guangzhou, China.

However, Port Klang-based Tri-Mode System (M) Bhd, which is involved in sea freight, container haulage and airfreight, has found a different way to ride the wave.

Last month, the ACE Market-listed firm launched an e-commerce logistics platform to cater for inbound courier services. Dubbed HiClicks Malaysia, it provides hassle-free courier services for local online shoppers buying products from various third-party e-marketplace operators in Taiwan, Japan, South Korea and the US.

By signing up for an account via HiClicks Malaysia’s website, goods purchased by them would then be delivered to dedicated warehouses in the respective countries.

Tri-Mode founder and managing director Datuk Hew Han Seng tells The Edge in an interview that HiClicks Malaysia is expected to be a significant earnings contributor to the group in the coming years.

HiClicks Malaysia is not an e-commerce mercantile platform where vendors put up their products on an e-marketplace, he explains. “If you go to Lazada or Alibaba, you can only buy what they sell; you have no alternative. But with us, we give you the freedom to shop anywhere in Japan, Taiwan, South Korea and the US. There are a lot of local brands only available in their respective countries.”

Hew points out that many online stores only cater for the domestic market, and hence, are unable to send their products abroad. But with HiClicks Malaysia, Malaysians can buy from stores in the four countries. All they have to do is ask the vendors to send their products to warehouses in Tokyo, Taipei, Busan and Oregon, operated by independent operators that are local partners of Tri-Mode.

“The trick is the address of the local warehouse. In other words, we are giving you a home address in these countries. That’s it, full stop. From there, we will take over, air freight and send the products to your doorstep,” Hew says.

With agents in 53 countries, the integrated logistics service provider arranges air cargo transport with international air freight agents and manages inbound and outbound air freight shipments.

Chief financial officer Sua Hee Yuan estimates that the tangible impact of HiClicks Malaysia will kick in by 2020. “We give ourselves six months to educate the users and make them feel comfortable. We should be able to see the full impact of the e-commerce logistics platform by the end of 2019 or 2020.”

HiClicks, which started in Taiwan, is well established there and Tri-Mode signed an agreement with the operator for the exclusive right to operate the platform in Malaysia.

Sua says Tri-Mode’s investment in HiClicks Malaysia is about RM1 million, slightly lower than it had budgeted for, and that the group will pay HiClicks Taiwan in stages, via internally generated funds.

“This platform is already proven in Taiwan. We are very confident of taking it to the next level,” he says.

Last month, Tri-Mode also signed a memorandum of understanding with OGN Online Sdn Bhd, which operates Kumoten — Malaysia’s largest homegrown dropship platform that is integrated with prominent e-marketplaces, such as Lazada, Shopee and Lelong.my.

“By end-2019, conservatively, we expect to have at least 10,000 members. Indirectly, we would have more than that because we also collaborate with Kumoten, which has 20,000 members. It would be great if we could turn 5% to 10% of them into active users every month,” Sua says.

In its sea freight segment, Tri-Mode is a non-vessel operating common carrier partner of vessel operators and freight agents to provide full container load (FCL), less-than-container load (LCL), and oversized project cargo shipments to ports worldwide.

As for its container haulage segment, Tri-Mode owns and manages 99 prime movers, 505 trailers and three side-loaders, with an average age of less than four years. It does not need to rely on third-party haulage service providers.

Sea freight contributes the most to Tri-Mode’s revenue (59%), followed by container haulage (34.2%), airfreight (5.4%), warehousing (0.9%), freight forwarding (0.3%) and marine insurance (0.2%).

 

Staying the course

Malaysia’s 14th general election on May 9 saw plenty of drama and culminated in a historic change in government after 61 years of one-party rule.

The stock market debut of Tri Mode — it was the first company to list after the election — was eventful as well, partly due to the polls.

“Our listing date was initially May 9 but we postponed to a tentative date of May 11. But after the election, a public holiday was declared [on May 11], and hence, the date was pushed back further to May 14,” Hew recounts.

Amid the cautious sentiment following the change in government, the shares of Tri-Mode slipped as much as 11 sen apiece, or 18%, shortly after the opening bell.

The stock eventually pared some of its losses to close at 52.5 sen, 14% lower than its initial public offering price of 61 sen. It slipped further to 44.5 sen last Tuesday, giving it a market capitalisation of RM74 million.

In hindsight, it might have been better if Hew had waited for market sentiment to recover. But he is unperturbed. “Some people asked why we were so gung-ho to proceed with the listing. My answer was that I have full confidence in my company. I didn’t build this company overnight, it was built over the past 26 years.

“As a promoter, I am not running away, I am not selling shares. I said, go ahead. That is how confident I am,” he says. As the IPO successfully raised RM26.4 million, he was not going to let any short-term shocks stand in the way, he adds.

As the controlling shareholder with a 50.1% stake, he admits he is not satisfied with the share price performance so far, but contends the company’s fundamentals remain solid.

“The share price is beyond our control. It could be due to timing, macroeconomic issues and sentiment. Moving forward, our shares should be, correctly, valued higher.”

Hew, 52, has over 29 years of experience in the logistics industry. His wife, Datin Sam Choi Lai, has a 20.3% shareholding in Tri-Mode and is an executive director.

Tri-Mode is currently trading at a price-earnings ratio of 12.3 times, based on its RM6 million net profit for the financial year ended Dec 31, 2017, on revenue of RM85.51 million.

In comparison, CJ Century Logistics Holdings Bhd and Xin Hwa Holdings Bhd are trading at significantly higher PERs of 19.6 times and 20.8 times respectively, although their market capitalisations is relatively bigger.

For the first half ended June 30, 2018, Tri-Mode’s top line increased 5% to RM43.25 million, from RM41.06 million a year ago. Excluding one-off listing expenses of RM2.1 million, its bottom line grew 26% to RM3.45 million, from RM2.74 million a year ago.

“Historically, we have been achieving double-digit growth in revenue and single-digit growth in net profit. We hope to at least maintain the growth momentum,” Hew says. The emphasis, he adds, will be on delivering good financial results and business development, as well as showing investors solid progress.

 

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