A-Sonic Aerospace - Phillip Securities 2022-03-16: Trading Below Cash


A-Sonic Aerospace - Trading Below Cash

  • A-Sonic Aerospace (SGX:BTJ) is involved in freight forwarding of cargo via sea and air. China, including Hong Kong SAR, accounted for 74% of its FY21 revenue.
  • A-Sonic Aerospace's 2H21 PATMI jumped 127% y-o-y to US$3.4mil on the back of an 85% surge in revenue. Freight forwarding rates have surged due to the lack of supply. Customers are more price inelastic as availability and securing slots more critical.
  • A-Sonic Aerospace's share price is trading at a 24% discount to net cash and 31 % discount to book value. Dividend yield is 8.9%.

A-Sonic Aerospace - Company Background

  • A-Sonic Aerospace (SGX:BTJ) was listed on the Catalist in 2003 as a supplier of aircraft systems and aerospace components. Today, the company is mainly engaged in logistics.
  • A-Sonic Aerospace operates in 29 cities in 15 countries, spanning 4 continents in Asia, North America, the Indian sub-continent and Europe. Around 75% of freight forwarding is wholesale and 25% retail (or end to end delivery). Margins are higher for retail due to additional service provided including warehousing, truck, custom clearance, insurance, etc.

Key Highlights of A-Sonic Aerospace

Local player in air cargo terminal handling.

  • A-Sonic Aerospace takes care of all air cargo unloaded in Singapore, before delivering to their customers which includes multi-national corporations in various industries, e.g. semiconductors, healthcare. It also collects goods from all over Singapore, to be exported overseas. As Singapore is a trade-focused country, it offers the advantage of having a Free Trade Zone (FTZ), which offers direct connections to the Changi Airfreight Centre. A-Sonic Aerospace plays a key role in ensuring that goods and products are transported on time.

Asset-light model.

  • In the coordination and shipment of goods from one place to another, A-Sonic Aerospace offers solutions to integrate the end-to-end transportation process. This includes transporting the products from the manufacturer to the airport, before being shipped overseas, to reach the end-customer.
  • A-Sonic Aerospace does not have asset-heavy warehouses. Other than the leasehold office, non-current assets consist of mostly motor vehicles and right-of-use assets.

Trading below cash.

  • A-Sonic Aerospace's balance sheet is very strong, with net cash of US$39.4mil. A-Sonic Aerospace's share price is trading at a 24% discount to net cash and 31% discount to book value. Assuming all warrants are delisted, final number of shares listed would amount to 73,097,289 shares, and market capitalisation would increase to S$43.5mil, according to last closing price of S$0.595. This marks a 6% increase compared to A-Sonic Aerospace's current market cap. Market cap would then be at a 19% discount to net cash, still very undervalued.

Logistics business thriving in China and Hong Kong SAR.

  • 74% of A-Sonic Aerospace's FY21 revenue was derived from China and Hong Kong SAR. The 12-month moving average value of China’s airfreight volume has been averaging growth of 15% in 2H21, and has already surged past pre-pandemic levels. In 2021, total air cargo loaded and discharged in Hong Kong increased 12.8% y-o-y to 4.98bn tonnes. Compared with the pre-pandemic level in 2019, it was also up 6%. China’s airfreight volume in 2021 surged 16.2% to 27.8 ton-km mn.

Dividend yield of 8.9% in FY21.

  • In FY21, A-Sonic Aerospace declared a special dividend of S$0.048/share, on top of a final dividend of S$0.005/share. This implies a dividend yield of 8.9% and payout ratio of 34%.
  • Since resuming profitability in FY18, A-Sonic Aerospace's dividend payout ratio and yield averaged 21% and 3.2% respectively. With strong cash generation and a robust balance sheet, consistency in dividend payments is expected.
  1. See

Vivian Ye Phillip Securities Research | https://www.stocksbnb.com/ 2022-03-16
SGX Stock Analyst Report NOT RATED MAINTAIN NOT RATED 99998.000 SAME 99998.000