Watch for inorganic growth
- Initiate with HOLD and TP of S$0.26
- Well positioned in the logistics business as one of Singapore’s largest one-stop logistics service providers
- Upside to earnings could come from acquisitions given that the company has a strong balance sheet
- Current price appears fairly valued at 0.9x FY22F P/B
Initiate coverage with HOLD and TP of S$0.26. COSCO SHIPPING International (Singapore) currently trades at 0.9x FY22F P/B, 1SD below its five-year mean, which is fairly valued given a projected FY22F ROE of 4.1% and a peer average P/B of 1.0x against an average ROE of 7.0%.
Well-positioned in the logistics business. The company is one of Singapore’s largest one-stop logistics service providers, which presents a superior supply chain process. Going forward, demand for warehouse space in Singapore should be robust, in line with the economic recovery in 2022 and continued expansion of the logistics sector. Cogent’s warehouses are currently operating above optimal capacity, but an upside to earnings could come from acquisitions.
Three things to watch: 1) Expansion plans in the logistics segment supported by a strong balance sheet, 2) prospects for the property management segment after the final extension of the lease for The Grandstand expires in December 2023, and 3) the start of dividend payouts.
Valuation:
Initiate with HOLD and TP of S$0.26, pegged to 1.0x FY22F P/B, representing slightly less than 1SD below the five-year mean, and against a projected FY22F ROE of 4.1%.
Key Risks to Our View:
Global economic slowdown, supply chain disruptions, and interest rate risks.