Monday, March 01, 2010

Freight Management, Better Coverage Now

Freight Management is another gem of a company that is starting to get better coverage. The company is professionally run by the husband and wife team Chew Chong Keat and Gan Siew Yong. Freight Management is engaged in providing freight services. It offers international freight services covering sea, rail, air freight and tug barge services, customs brokerage and distribution container haulage and conventional trucking services.The company operates in Malaysia, Australia, and Singapore. It is headquartered in Port Klang, Malaysia and employs 380 people.

The company's offices are located in Port Klang, Klia, Penang, Ipoh, Malacca and Johor in Malaysia. It operates a network of 107 independent agents covering 127 ports in more than 47 countries. The company’s freight services include seafreight, airfreight, railfreight, tug & barge, warehouse, and transport and haulage. It offers sea freight services which include port to port, port to door, and door to door deliveries through a network of 107 reliable agents covering 127 ports. The seafreight services offer both export and import freight services for both less than container Load (LCL) and full container load (FCL) shipments. It provides direct LCL consolidation to over 40 major ports of the world. Its FCL services cover most of the major port of the world.

Its air freight services comprise both inbound and outbound shipments through Kuala Lumpur International Airport (KLIA) and Penang International Airport. Also, the company operates warehouses leased from Malaysian Airline, within the FCZ (Free Commercial Zone) in both KLIA and Penang International (Bayan Lepas) Airport. FMHB offers fully containerized landbridge rail services between Malaysia and Thailand. It operates a train route from Port Klang to Lat Krabang, Bangkok with a stopover at Butterworth on its North bound service and returning on the reverse route for its southbound service.

It owns and operates a fleet of about 800 containers in 20 foot and 40 foot units. The company, through its subsidiary, TCH Marine operates a fleet of eight pairs of tugs and barges with cargo carrying capacities ranging from 3,500 to 5,000 metric tones per barge. It specializes in the movement of dry bulk cargoes such as gypsum, feldspar, limestone, granite aggregate and silica sand operates between South Thailand, the West Coast of Peninsular Malaysia and Singapore. FMHB offers warehousing solutions through a 200,000 square feet warehousing complex which is temperature control storage, value added cold room and new racking systems located in Port Klang. It also offers 30 loading bays with motorized dock levelers and a raised road for conventional trucks to load and discharge. This facility offers both general and bonded storage. The company operates container freight stations (CFS) in its leased space at Klang Container Terminal (KCT), North Port and the Free Commercial Zone (FCZ) in Penang Port, these two faclities has a total storage space of about 50,000 square feet.

In the transport and haulage services, the company offers container haulage, conventional trucking, and customs brokerage services. The container haulage operates a fleet of 30 prime movers and 150 trailers and the conventional trucking operates a fleet of more than 20 trucks, of various sizes. It offers customs brokerage services through it subsidiaries at all the major gateways of Port Klang, Penang, Ipoh, Johore-KLIA and Penang Airport.

Share price: 68 sen
Shares: 121.7m
52 week High-Low: 0.85 - 0.57

Chew Chong Keat 27.85%
Singapore Enterprises Pvt Ltd 20%
Yang Heng Lam 18.3%
Gan Siew Yong 4.34%
Pheim Asset Mgmt 1.97%

Strong points:

a) Its not just a freight company anymore. It has diversified upstream and downstream, and is one of the more visionary transportation company with a sensible and spread out platform. It makes them being a more "value-add" company to clients. This will ensure stickiness and customer loyalty.

b) Its still smallish but I like their cohesive business model. Gearing at 7%. Good dividend policy, which means main shareholders are keen to keep owning the shares and growing the company: Dividends June 08 4.5 sen, June 09 4.5 sen, expected June 10 5.5 sen. Consistent payout ratio above 40%.

c) Management is considering the possibility of venturing into the distribution of pharmaceutical products to hospitals and clinics. Those not in FMCG might not be aware that there are a lot of logistical problems and inefficiencies in distribution. I see this as a huge problem and considering the platform Freight Management is on, it could carve out a profitable niche by bringing about a strong inventory management system and coordinated distribution scheme. Imagine a pharmacy chain getting 1,000 products from 200 distributors - yes, you can have a storage center and then distribute with your own trucks, but capital inefficiency. Why the need to even have trucks and inventory space if you can outsource this to a company like Freight? Its a juicy opportunity that not many logistic and transportation company can afford to offer. Its solutions driven and capital/cost efficient.

d) Year ended June 08, revenue RM222m, net profit RM12.2m, EPS 10 sen. Year ended June 09, revenue RM229m, net profit RM13.6m, EPS 11.1 sen. So far, for the year ending June 2010, the company is on track to record revenue of RM2.70m and a net profit of RM17m, or an EPS of 13.9 sen.

e) Its new haulage division made significant improvement with a 41% y-o-y jump in revenue as more prime movers are deployed and its geographical coverage extended. The improvement across all its divisions boosted overall EBITDA margin from 12.2% in 1Q to 13.8%.

NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

p/s photos: Reon Kadena


ronnie said...

Dali, My colleagues and I started to read up on Freight after reading your excellent blog. You are abso;utely right. This company is a rare gem with little assets. High ROE. Thank you so much. said...

Thanks Dali for the pick. I'm looking to take a close look at it tomorrow.

Anthony n Lydia said...

RHB fair value RM1.40 !!!!!!!!!!

Anthony n Lydia said...

By the way, PE is superb low with growth. Dividend yield is excellent. Management is strong. S&P is having a STRONG buy recommendation (2/03/2010) on the counter.