TA Securities values ACE Market-bound Sin-Kung at 16.5 sen

KUALA LUMPUR: TA Securities Research has valued ACE Market-bound Sin-Kung Logistics Bhd at 16.5 sen, equivalent to 14 times its earnings per share (EPS) for the 2025 financial year (FY25).

“We attach a premium on Sin-Kung’s valuation as we are bullish on the prospect of eCommerce in the future. We also like Sin Kung for its market leader position in the airport-to-airport trucking services and its earnings quality with superior margins,” TA said in a report.

The research house does not have a rating on the stock. It said at the initial public offering (IPO) price of 13 sen, Sin-Kung is priced at a trailing PE of 24 times FY23 EPS.

The integrated logistics service provider’s IPO entails an offering of up to 303.5 million shares in conjunction with the listing of the shares on the Ace Market of Bursa Malaysia.

It comprises a public issue of 200 million new shares and an offer for sale of up to 103.5 million shares.

Sin-Kung expects to raise RM26mil from its IPO en route to a listing on the ACE Market of Bursa Malaysia on May 15.

TA expects Sin-Kung’s FY24 and FY25 earnings to grow at 72% and 26% respectively.

This is premised on the normalisation in effective tax rate to 20-22% versus 34% in FY23, a 15-20% increase in business volume as a result of rising orders from its main airline customers as well as the revenue growth would be in tandem with the expansion in fleet size.

TA noted that Sin-Kung’s balance sheet is relatively small with a total shareholders’ fund of RM60.2mil as at FY23.

Like others, Sin Kung also has an asset-heavy business model given its fleet size of 461 vehicles and 5 warehouses, which is funded mainly through bank borrowings.

“As such, it has a net gearing of 0.7x which is close to the industry standard. In terms of liquidity ratio, the group’s current ratio consistently stood above 2x for the past 3 years, showing its cash-generating efficiency. Note that Sin Kung’s total cash of RM10.1mil was 0.8x its current liability as at FY23,” it added.

On the dividend front, Sin Kung does not have a dividend policy.

However, TA expects the group to pay out 20% of earnings as dividends given the robust earnings growth and excess cash.