Soochow CSSD Capital Markets (SCCM) analyst Ilvin Cornelis has initiated a “buy” call on LHN Logistics with a target price of 24 cents. The target price implies an FY2024 P/E of 10x.
LHN Logistics provides ISO tank logistics and transport services in Singapore. It also runs container depot operations in Singapore, Thailand and Myanmar.
LHN Logistics’ ISO tank and container transportation services in Singapore and Malaysia make up 65% of its FY2022 revenue while the remaining 35% is contributed by its container deposit services. LHN Logistics’ financial year ends on Sept 30.
To Cornelis, the company’s new ISO tank depot, which will be integrated with the existing transport operation within a single location to provide end-to-end ISO tank logistics solutions, will be its next growth driver. The new depot is expected to become operational in July.
“We believe this one-stop solution for ISO tanks will be unique in Singapore, and it will gain traction quickly, thus boosting the utilisation rate of the tank depot (above 80%). We forecast revenue of $2 million /$14 million (6%/29% of total revenue) in July-September FY2023/FY2024, respectively,” he writes in his March 30 report.
Cornelis also sees utilisation rates of LHN Logistics’ container depots in Thailand and Myanmar to rise further by 10 percentage points (ppt), 10 ppt and 35 ppt to 38%, 29% and 46% for FY2022, Fy2023 and FY2024 respectively. According to the analyst, this is largely due to the strong demand from the company’s existing clients, which are major shipping lines.
From FY2022 to FY2024, the analyst sees LHN Logistics’ top-line to rise “substantially” by a compound annual growth rate (CAGR) of 34% to $49 million mainly due to contributions from the company’s new ISO tank depot, the additions of 15 prime movers as well as the rising utilisations of its container depots overseas.
During the same period, the analyst is estimating LHN Logistics’ adjusted patmi margin to improve by 1.5 ppt to 8.5% mainly due to the relatively high gross margin of 38% from its ISO tank depot (from its overall gross margin of 28% in FY2022) as well as the higher gross margin from its container depot service segment from the rising utilisation rates. Cornelis expects gross margin for this segment to rise by 6.5 ppt to 32%.
The analyst’s estimates exclude the company’s listing expenses and write-off from the building demolition in FY2022.
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At its current share price levels, LHN Logistics is trading at an attractive FY2024 P/E of 7x with a yield of 6% with its adjusted ebitda growing by a CAGR of 44% from FY2022 to FY2024.
Shares in LHN Logistics closed flat at 16.5 cents on March 30.
