• Spin-off of logistics arm by parent company LHN Group (BUY, TP: S$0.49).
• To raise 167.7mn shares, including 25.2mn placement shares, at S$0.20 per share, to raise gross proceeds of S$5mn. Post-IPO market cap will be S$33.5mn.
• Two main segments, transportation and container depot services. Growth drivers include new ISO tank depot and expected recovery of container depot utilisation rates.

Company Background

LHN Logistics is a division of LHN Ltd. The company has two principal business segments, transportation (66% of FY21 revenue) and container depot services (34%).

Under the transportation segment, LHN Logistics provides domestic and cross-border ISO tank and container transportation services for various petrochemical products, base oils, bitumen and bulk cargo to customers in Singapore and Malaysia.

As for container depot services, the company provides container storage, surveying, cleaning, repair and maintenance services for general purpose and refrigerated containers.

Key Highlights

1. Growth Driver 1: Construction of 7 Gul Avenue ISO tank depot. ISO tanks are designed to transport chemicals, which the company does between major petrochemical industries located in Jurong Island, Pasir Gudang, Kuantan and Port Klang. This new ISO tank depot will integrate all services necessary for an ISO tank, including transportation, washing and storage. It provides convenience for customers and the ISO tank operators as it reduces number of procedures needed to utilise and maintain the tanks. Construction would commence in April 2022 and is expected to be completed within 12 months.
2. Growth Driver 2: Expansion in container depot services and recovery. LHN Logistics operates two container depots in Singapore – at Benoi Sector and Gul Circle – and two in Thailand, in Laem Chabang and in the vicinity of Bangkok. The company is undertaking preparatory works to establish an additional overseas container depot in Yangon, Myanmar. Growth drivers include the expected rebound in economic activity as the pandemic cases wane, which would push utilisation rates of container depots in Thailand up, and for the additional container depot in Yangon. Capacity of new depot in Yangon is about 6,000 TEUs, an increase of 22%.
3. Attractive indicative dividend yield. LHN Logistics intends to recommend and distribute dividends of not less than 40% of the Group’s profit attributable to equity holders for FY22-24. Based on the IPO price of S$0.20, FY21 EPS of 1.98 Scts and the post-placement share capital, the indicative dividend yield is 4%. This compares to other local listed logistics players with either no dividends distributed in FY21 or an average of 1.4%.

Outlook

Container depot services. Strong demand for logistics continues to fuel container volumes, even as supply chain issues gradually ease. On a 12-month moving average basis, container throughput in Singapore in February 2022 increased 1.6% to 3.12mn TEUs, while the volume at the Laem Chabang port increased 13.5% to 721k TEUs. The container depots in Thailand are expected to see recovery in volumes following the easing of Covid-19 restrictions.

ISO tanks. Construction of the new ISO tank depot will provide a comprehensive range of solutions for customers, from transportation, to washing and storage. LHN Logistics will enjoy a first-mover advantage in integrating all these services in a single location.