COGENT HOLDINGS LIMITED
KJ9.SI
Cogent Holdings Ltd - Still undervalued!
- FY15 revenue of S$129.2mn in line with our expectations of S$126.3mn.
- FY15 NPAT of S$25.5mn exceeded our expectations of S$23.0mn by more than 10%.
- NPAT growth underpinned by revenue growth and effective cost controls.
- 35.7% yoy growth in FY15 NPAT from continuing operations, after adjusting for FY14's one-off gain from disposal of property.
- 1.88 cents proposed final dividend is lower than our forecast; cash retained for expected financial commitment for the Jurong Island chemical logistics facility project.
How do we view this?
Effective cost controls through successful consolidation at Cogent 1.Logistics Hub led to improved overall margins.
- We highlighted in our Initiation report (12 December 2014) that the consolidation would improve margins through a reduction in its highest cost component of rentals, offset by higher depreciation expense.
- Rentals on leased premises decreased by 8% yoy in FY15, while depreciation increased by 22% yoy.
- These two expenses combined were 2.3% lower yoy (FY15: S$37.5mn vs. FY14: S$38.4mn.
Significant yoy growth in FY15 adjusted NPAT.
- Cogent reported a 40% yoy NPAT growth, which excludes gains from disposal of PPE.
- However, we specifically exclude the S$5.9mn gain from disposal of 1 Chia Ping Road, and calculate a 35.7% yoy growth in NPAT.
Lower final dividend proposed, in anticipation for future growth through reinvestment.
- 1.88 cents ordinary dividend proposed, representing 35.3% payout (vs. FY14: 2.58 cents ordinary dividend, 65.8% payout on adjusted NPAT and 1.18 cents special dividend), was lower than our forecast of 3.46 cents (65% payout assumption).
- The lower dividend is in anticipation of the expected financial commitment for the Jurong Island chemical logistics facility.
- The FY15 dividend payout of 35.3% is in line with FY13 dividend payout of 39.9%.
Higher DDM-backed value of S$0.64
- Transfer of escalating rental expense to constant depreciation resulted in S$875,000 cost savings in FY15.
- We continue to view Cogent favourably for its cash generating ability and high ROE in the low-20s. We assign a new higher target price of S$0.64 (previous S$0.54). This gives an implied forward P/E multiple of 10.8x FY16e EPS.
- BUY.
Richard Leow CFTe
Phillip Securities
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http://www.poems.com.sg/
2016-03-01
Phillip Securities
SGX Stock
Analyst Report
0.64
Up
0.54
