Cogent Holdings Ltd 3Q17 Results Summary
Core Content
Cogent Holdings Ltd, a subsidiary of COSCO, released its 3Q17 results, which showed revenue and net profit in line with expectations. The company is currently facing a voluntary cash offer of $1.02 from COSCO, which is considered unjustifiably low by analysts. The report reiterates a $1.12 valuation for Cogent, suggesting that shareholders should reject the offer and consider taking partial profit.
Key Financial Performance
Revenue and Profit
- Revenue: Increased by 3.6% YoY to SGD 35.3 million.
- EBIT: Declined by 2.7% YoY to SGD 9.8 million.
- PBT: Declined by 2.7% YoY to SGD 9.13 million.
- NPAT: Decreased by 6.0% YoY to SGD 7.36 million, primarily due to a 14% rise in income tax expenses.
Cost Management
- Operating Costs: Increased by 6.1% YoY, mainly driven by higher depreciation and contract services.
- Positive Aspects: Better cost control mitigated the impact of higher operating costs, with staff costs and rental costs decreasing by 2% and 5% YoY respectively.
Valuation and Recommendations
- Valuation: The analyst reiterates a valuation of SGD 1.12, which is 10% higher than the offer price of SGD 1.02.
- Recommendation: Minority shareholders are advised to reject the offer and take partial profit to avoid tying up capital.
- Reasoning: The offer price is only 14.9x price-to-trailing-earnings, significantly lower than the 23.0x multiple of Cogent's peer, Poh Tiong Choon Logistics Ltd.
Outlook
- Positive Outlook: The company is expected to benefit from the Jurong Island Container Depot (JICD) project and the student hostel at 362 Holland Road.
- Consolidation: Cogent is expected to be consolidated as a subsidiary of COSCO SHIPPING International (Singapore) Co. Ltd. (COSCO), potentially positioning it as a regional logistics player.
Financial Metrics
| Metric |
3Q17 |
3Q16 |
YoY |
Comments |
| Revenue |
SGD 35.3 |
SGD 34.1 |
+3.6% |
Higher container depot and transportation services |
| EBIT |
SGD 9.8 |
SGD 10.1 |
-2.7% |
Higher opex from depreciation and contract services |
| PBT |
SGD 9.13 |
SGD 9.39 |
-2.7% |
Lower net finance costs |
| NPAT |
SGD 7.36 |
SGD 7.83 |
-6.0% |
Higher income tax expense |
Shareholder Structure
| Shareholder |
Percentage |
| Yeowkhoon Tan |
70.3% |
| Yeowlam Tan |
13.6% |
| Min Cheowtan |
0.5% |
Price Performance
| Metric |
1M TH |
3M TH |
1Y R |
| Company |
4.1 |
29.7 |
66.8 |
| STI Return |
16 |
5.6 |
24.2 |
Valuation Ratios
| Ratio |
3Q17 |
FY16 |
FY17e |
FY18e |
FY19e |
| P/E (x) |
7.4 |
10.1 |
14.9 |
14.3 |
9.5 |
| P/B (x) |
1.8 |
2.6 |
3.4 |
2.7 |
2.2 |
| EV/EBITDA (x) |
6.2 |
7.8 |
10.0 |
10.4 |
6.9 |
| Dividend Yield (%) |
4.8 |
- |
3.1 |
2.4 |
3.7 |
Growth and Margins
| Metric |
3Q17 |
FY16 |
FY17e |
FY18e |
FY19e |
| Revenue Growth (%) |
9.1% |
5.8% |
3.8% |
1.6% |
36.3% |
| EBITDA Growth (%) |
15.6% |
18.6% |
8.0% |
2.8% |
43.5% |
| EBIT Growth (%) |
13.5% |
23.0% |
3.6% |
2.3% |
46.5% |
| Net Income Growth (%) |
3.3% |
26.0% |
1.0% |
4.4% |
50.1% |
| Margin |
3Q17 |
FY16 |
FY17e |
FY18e |
FY19e |
| EBITDA Margin (%) |
32.5% |
36.4% |
37.9% |
38.3% |
40.4% |
| EBIT Margin (%) |
25.9% |
30.1% |
30.1% |
30.3% |
32.5% |
| Net Profit Margin (%) |
19.7% |
23.5% |
22.8% |
23.5% |
25.8% |
Key Ratios
| Ratio |
3Q17 |
FY16 |
FY17e |
FY18e |
FY19e |
| ROE (%) |
25.4% |
27.9% |
24.0% |
21.0% |
25.8% |
| ROA (%) |
9.6% |
11.4% |
10.8% |
10.3% |
13.7% |
| Net Debt/Net Cash |
72.9 |
61.9 |
54.3 |
92.5 |
63.9 |
Investment Recommendation
| Total Return |
Recommendation |
Rating |
| > +20% |
Buy |
1 |
| +5% to +20% |
Accumulate |
2 |
| -5% to +5% |
Neutral |
3 |
| -5% to -20% |
Reduce |
4 |
| < -20% |
Sell |
5 |
Conclusion
The report highlights that while Cogent's financial performance for 3Q17 was in line with expectations, the offer price is deemed too low. The analyst recommends shareholders to reject the offer and take partial profit to protect capital. The company's future growth is anticipated from its JICD project and student hostel, and its potential consolidation under COSCO could offer long-term benefits. The valuation of SGD 1.12 remains unchanged, suggesting a strategic hold until the delisting outcome is clear.
Disclaimer
This report is prepared for general circulation and does not constitute tailored investment advice. Investors should consult financial advisors before making any investment decisions. The report is not a solicitation to act as a securities broker or dealer in any jurisdiction where such activity is not permitted. Redistribution or disclosure of this material is prohibited without the express written consent of Phillip Securities (Hong Kong) Limited.
