What is the news?
Cogent Holdings Ltd (Cogent) recently held its FY2016 Annual General Meeting (AGM) at its Cogent 1.Logistics Hub. Following the AGM, Shareholders were given a site visit of the Sky Depot facility located on the roof-top of the logistics hub. (Refer to Exhibits 1 to 3 overleaf.)
AGM Key Takeaways
The integrated logistics hub features five floors of warehouse space and a patented roof-top Sky Depot facility which serves as a container depot for unladen containers. The roof-top container depot design has been patented in US, Singapore, Europe, China and Hong Kong. Efficiency and cost savings have been derived from the consolidation of the warehouse and container depot to the same building.
Shareholders were briefed that the five floors of warehouse space are “completely full”; and that the overhead gantry crane is now fully-operational, following a change in the crane specialist.
Cogent has two ongoing projects on Jurong Island – the Jurong Island Container Depot (JICD) and the Jurong Island Chemical Logistics Facility (JICLF). JICD is the first and only container depot on Jurong Island. A tender will be called soon for the JICLF, and construction is expected to take two years. The investment in the JICD and JILF is to meet the growing demand for logistics services on Jurong Island, which is currently under-served. Management shared that competition on Jurong Island is less intense than on mainland Singapore as there are fewer logistics players with the specialised capabilities to operate on Jurong Island.
Cogent has maintained full warehouse occupancy at its integrated logistics hub in spite of headwinds of an oversupply of warehouse space. It is attributed to Cogent’s business model of being a one-stop solution-provider. This one-stop solution encompasses the entire supply chain of transportation to and from the port, unloading and unloading of goods, warehouse storage and container storage. This complete suite of service creates a captive customer base and has forged long-lasting relationships with blue-chip companies. Cogent’s business model is different from a warehouse real estate investment trust (REIT) which only acts as a landlord for warehouse space.
How do we view this?
After the programme was concluded, we observed the activity at the integrated logistics hub from the public footpath outside the premises. The activity we saw were prime movers using the ramps to access the other floors, fork-lift operators moving goods and the shelves on the ground floor were fully stocked. (Refer to Exhibit 4 overleaf.)
Maintain “Buy” rating with unchanged DCF valuation of S$1.08
We are maintaining our existing forecasts. Our price target is an implied forward 17.0x FY17F P/E multiple, compared to the benchmark Straits Times Index (STI) forward P/E multiple of 14.6x.
Note: Cogent will be announcing 1Q FY17 financial results on 12 May 2017.
Exhibit 1. Roof-top visit to the Sky Depot
Exhibit 2. Profile view of Sky Depot
Source: Phillip Securities Research (Singapore)