Cogent Holdings Ltd - Phillip Securities 2016-05-16: Better performance all round

Cogent Holdings Ltd - Phillip Securities 2016-05-16: Better performance all round COGENT HOLDINGS LIMITED KJ9.SI 

Cogent Holdings Ltd - Better performance all round 

  • S$32.8mn revenue in line with our expectations of S$32.2mn 
  • S$7.77mn NPAT exceeded our expectations of S$6.50mn by almost 20% 
  • Lower yoy OpEx mainly due to lower Rental on leased premises, Storage and handling charges, Fuel and utilities. 

 Phase 2 of Port Klang Free Zone project in motion 

  • Cogent Holdings Ltd (Cogent) recently announced the completion of Phase 1 of the Port Klang Free Zone project. 
  • The project comprises a warehouse and a container depot. The warehouse is fully-leased to a master tenant. Phase 2 involves the construction of a warehouse; expected completion in April 2017. 
  • The warehouse will be leased to the same tenant as the Phase 1 warehouse. Phase 1 was completed at a cost of c.S$5.9mn, whilst the contract sum for Phase 2 is c.S$8.9mn. 

 Roof-top container depot gantry crane system 

  • Some delay in the implementation of the gantry crane system, due to breach of contract by the Crane Specialist. 
  • We understand from Management that the roof-top depot is currently using the conventional container-stacker where they can stack about 7~8 containers. This is in contrast to 15 containers if the crane system were to be operational. 
  • Cogent is still leasing their existing container depot yard at Jalan Terusan and may have to extend the lease. 

 Strong free cash flow generation 

  • Cogent generated S$7.56mn net cash from operating activates in 1QFY16. 
  • We do not see any major obstacles in Cogent being able to fund Phase 2 of the Port Klang Free Zone poject through internal resources. However, we note that total debt currently stands at c.S$120mn. 

Maintained "Buy" rating with higher DDM-backed target price of S$0.70 

  • We made some minor adjustments to our forecasts, mainly bringing estimated margins in line with what has been observed in this quarter. 
  • The largest change to our forecast was to lower or FY16e Rentals and leased premises OpEx by c.10%. 
  • The target price of S$0.70 gives implied forward P/E multiple of 10.4x FY16e EPS.

Richard Leow CFTe Phillip Securities | http://www.poems.com.sg/ 2016-05-16
Phillip Securities SGX Stock Analyst Report BUY Maintain BUY 0.70 Up 0.64