LHN Logistics - Fuelled For Next Leg Of Growth
- LHN Logistics (SGX:GIH) is a provider of ISO tank logistics and transport services in Singapore. The group provides ISO tank transportation services for major chemical players located on Jurong Island. With Singapore being the world’s fifth-largest refinery export hub and the eighth-largest chemical exporter, LHN Logistics should benefit from continued growth in chemical volumes. Further tailwinds include Singapore’s shift towards sustainability (as part of Green Plan 2030), which could drive greater demand for high-value specialty chemicals, and attract greater capex spend into Jurong Island; these should support higher demand for the group’s ISO tank transportation services.
- LHN Logistics is constructing a new ISO tank depot which we estimate to commence operations by end-1HFY23. With the new depot, LHN Logistics will offer
- storage services (dangerous goods included), and
- washing and miscellaneous services.
- We believe that LHN Logistics will be the first in Singapore to offer end-to-end ISO tank services (trucking, washing, and storing), which should allow quick depot utilisation ramp-up. We estimate S$4.3m in revenue contribution in FY23F (due to half-year of contribution and initial ramp-up phase), rising to S$10.3m in FY24F. This supports a 2-year 28% group revenue CAGR in FY22-24F.
- In our view, LHN Logistics’s container depots in Singapore and Thailand (Bangkok and Laem Chabang) are set for further volume ramp-up amid recovering post-COVID trade activity from both countries. We see potential for greater Thailand depot contribution as the group increases utilisation of its Bangkok depot (opened in 2019); we forecast 7% utilisation in FY22F, rising to 12%/15% in FY23F/24F. For its Singapore depot, TEUs handled will be well anchored by key clients (e.g Maersk) which LHN Logistics has good relationships with, in our view.
- We initiate coverage on LHN Logistics with an ADD call and target price of S$0.22, based on 9x CY23F P/E which is a ~50% market size discount to peers.
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
Kenneth TAN CGS-CIMB Research | https://www.cgs-cimb.com 2022-06-02 2022-06-02
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