Cogent Holdings - Maybank Kim Eng 2016-07-20: A Logistics Disruptor

COGENT HOLDINGS LIMITED KJ9.SI

Cogent Holdings (COG SP) - A Logistics Disruptor

Cogent is a Singapore logistics specialist that engages in transportation management, container depot operations, automotive logistics, and warehousing & property management.
The group has delivered top line growth of 17%/5%/9% and core op. profit growth of 80%/24%/48% over FY13-15, driven by new asset additions and improved operating leverage.

Much of Cogent’s success is attributed to the launch of the Cogent 1. Logistics Hub (C1.LH) in 2014, a facility with an innovative & game- changing design that is particularly useful in land scarce markets like Singapore.
The S$153m hub is close to full occupancy and integrates five floors of warehouse units with the world's first and only rooftop container depot. This patented design eliminates the need for shippers to return empty container boxes to offsite depots post devanning, collapsing the transport value chain.
Taking cue from market-based warehouse rents, C1.LH would have offer a 2015 NOPAT yield of 9.4% vs. the industry’s 6-8.5%.

Cogent is awaiting approval from the Singapore Economic Development Board and Jurong Town Corporation (JTC) to build a similar logistics facility like C1.LH on Jurong Island to cater to the petrochemical industry.
If Cogent secures approval for the second facility in 2016 at similar terms to C1.LH, it could lead to a new earnings stream by late 2018 or early 2019.

Based on trailing P/E, Cogent is trading close to peers at around 11x despite its margins and ROE (25%) are more than double of peer average.
If Cogent is awarded the project for a second logistics hub, the contract may well catalyse a new source of earnings growth for the group.

Designed and owns a logistics hub that integrates warehouse with a sky-deck container depot to enhance land productivity and profit margins on lease cost savings.
The sky depot design, patented in US, EU, China, HK, JP and SG, results in greater cost savings and efficiencies for shippers.
Licensed by government for close to two decades to store higher-yielding chemical/hazardous goods.
Opportunistic management. Established track record with government agencies.
One of the two operators authorised by LTA to process export documentation, transport and store de-registered vehicles.
FY15 ROIC of 12.7% is 2x higher than its WACC of 5.5%.

Successful appointment to develop, own, and operate another logistics hub at Jurong Island.
Secure more land plots to expand operations.
Solid recovery in oil and gas industry, which would boost transportation business.

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Teh Kwong Yew Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-07-20

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