LHN Logistics has launched an all-placement IPO to raise gross proceeds of $5 million by issuing around 25.2 million new shares at 20 cents each. After deducting listing expenses, the net proceeds will be around $3.6 million.
LHN Logistics, which has two main businesses — transportation and container depot services — is a spin-off from LHN, which is listed on both the Singapore and Hong Kong exchanges. LHN is involved in businesses ranging from facilities management to operating co-living spaces.
Upon completion of the IPO, LHN will continue to hold a stake of 84.1% in LHN Logistics. Based on the IPO price, LHN Logistics is likely to have a market cap of around $33.5 million. LHN now has a market cap of around $137 million.
Based on the post-placement FY2021 earnings per share of 1.98 cents, the IPO is priced at 10.1x historical earnings. LHN, meanwhile, trades at 5x historical earnings, based on April 20’s closing price of 35 cents.
LHN Logistics plans to distribute not less than 40% of its earnings as dividends for the current FY2022, and the subsequent FY2023 and FY2024.
LHN Logistics plans to use the IPO proceeds to expand its transportation fleet, buy moving equipment, and to also help finance the construction of new facilities at a depot it operates.
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“We are confident that this spin-off and the proposed listing will allow both LHN and LHN Logistics to strengthen our respective positions and identities in the market by releasing real valuations of the two companies and creating more value for investors in the long run,” says LHN Logistics’ executive chairman Kelvin Lim, who is already wearing an existing hat as executive chairman and group managing director of LHN, the parent company.
“Upon completion of the spin-off and the proposed listing, LHN will still hold a substantial stake in LHN Logistics, although their respective operations, financial and other resources will be managed and operated independently,” he adds.
Specifically, under LHN Logistics’ transportation services, its fleet of tankers help to move so-called ISO tanks between Singapore and Malaysia.
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The ISO tanks are used to carry cargo including petrochemical products, base oils and bitumen. The company’s fleet of trucks ply between places such as Jurong Island, Pasir Gudang, Kuantan and Port Klang. Its customers are chemical traders, freight forwarders and subsidiaries of the oil majors.
Its container depot services business, meanwhile, helps customers do things such as container cleaning, repair and maintenance. Its customers for this business include the major shipping lines and container leasing companies.
LHN Logistics now operates two depots in Singapore, 27 Benoi Sector and 9 Gul Circle, with a total capacity of up to 8,200 twenty-foot equivalent units (TEUs). It runs two other depots in Thailand as well: Laem Chabang Depot and Bangkok Depot, with a bigger capacity of 19,000 TEUs. The company has applied to set up something similar in Myanmar.
For FY2021 ended Sept 30, 2021, LHN Logistics reported earnings of $3.3 million, versus FY2020 earnings of $2.86 million. Revenue between the same periods increased from $25.2 million to $27.2 million.
The company attributes this to higher demand for its transportation business, which generated a revenue of $18 million for FY2021, versus $16.1 million reported for FY2020.
The container depot services segment, on the other hand, is a smaller revenue contributor. While its topline grew, it did so at a slower pace. This segment generated a turnover of $9.1 million for FY2020, and this improved by $0.1 million to $9.2 million for FY2021.
Meanwhile, its costs of sales increased by 7.1% to $18.3 million between FY2020 and FY2021.
The company attributes this to higher container depot management charges, higher depreciation charges and higher manpower costs.
Trading of LHN Logistics shares will commence on April 29. PrimePartners Corporate Finance is the sponsor, issue manager and co-placement agent, while CGS-CIMB Securities is the other co-placement agent.
