Japanese, South Koreans may buy stake in Century Logistics

Deal in the making: Main shareholder Datuk Richard Phua (inset) may divest part of his stake to foreign buyer. Teow Choo Hing is likely to remain MD.

PETALING JAYA: Century Logistics Holdings Bhd is in talks with parties from South Korea and Japan looking for a strategic tie-up for access into the Malaysian market, sources say.

The deal, sources said, may include equity participation by one of these foreign parties into the Malaysian integrated logistics services provider, although it is unclear how big a stake could be involved.

Century Logistics has seen its share price rise by some 15% since mid-July, bucking the bearish trend of the overall market to close Friday at RM1.07 for a market capitalisation of RM397.52 mil.

The company was previously in talks with Felda Global Ventures Holdings Bhd (FGV), but that deal did not materialise.

Since then, the company has seen its earnings grow. For the first quarter ended March 31, 2015 it made a net profit of RM7.47mil as compared to RM6.32mil in the same period before. Revenue, meanwhile, came in at RM71.91mil from RM69.06mil previously.

Kenanga Research in a recent report projected the company to post a core net profit growth of 36.2% in financial year 2015. For the following financial year, it expects a 9.8% growth, before new capacity from expansion kicks in by 2017.

Currently the company manages about 2 million sq ft of warehousing space. It has two warehousing facilities in Port Klang and four more in Pelabuhan Tanjung Pelepas. Integrated logistics is its bread and butter contributing over 70% in earnings.

It is also involved in oil logistics, providing ship-to-ship transfer for both fuel and crude oil in mid-sea.

This year, the company will build Malaysia’s first multi-storey warehouse that will see 600,000 sq ft of space being added. The “new method of logistics” has arisen due to the growing scarcity of prime industrial land in the city and is already a common sight in Singapore and Hong Kong where land is limited.

The new facility, which is slated to be ready in mid-2017, will be located in the eastern gateway industrial hub in Klang, and is also set to be the new company headquarters.

An industry source said a deal with a South Korean or Japanese partner would put Century Logistics in good stead to win new customers from those countries.

“Companies from these countries tend to be more comfortable using a logistics firm from their own country, when in other markets. For example, Tasco Bhd that is largely owned by Japan-listed NKY group counts many Japanese firms as its clients in Malaysia,” the source said.

Similarly, with Century Logistics being part of a larger group, this could give it some help to venture into new markets, especially Asean, where it has growth aspirations.

Under the Asean Economic Community, a single regional common market of Asean countries, there are plans to lower entry barriers in the area of logistics.

The largest shareholder of Century Logistics is Datuk Richard Phua Sin Mo with around 26.7% interest.

Sources say there is a possibility that a stake sale could involve this block or part of it.

The 66-year old Phua is the founder and executive chairman of the company and has been involved in the logistics industry for over four decades.

The second largest shareholder is Teow Choo Hing with a 11.6% stake. Teow is also the company’s managing director. Sources say that while Phua may divest part of his block, Teow is likely to remain as the second largest shareholder and the managing director as part of the deal with the foreign party.