JWD InfoLogistics

JWD InfoLogistics Plc (JWD) 

 

Investment highlights 

- 2015-17E earnings growth of 11.8-33.4%. We expect JWD to report strong 2015-17 core earnings growth of 25.5%, 33.4% and 11.8%, respectively, supported by a recent expansion of its cold storage business, the rising trade quantity of dangerous goods (DG) at Laem Chabang Port, warehouse modifications and an international expansion into Cambodia, Myanmar and Laos. Better economies of scale and an improved balance sheet after the IPO should further boost its profitability. 

-  Solid current status built on well-established diversified business. Starting as a moving business 35 years ago, JWD has grown into a well-diversified corporate entity with strong exposure in five logistics businesses: warehouse management (general zone and free zone), transportation & distribution, moving, record & information management and IT solutions. It also has a wide range of customers at its main revenue-contributing business (warehouse management; 76.4% of 2014 total revenue) covering the general goods, dangerous goods, automotive and cold chain segments. This well-diversified customer base has created advantages in terms of sustainability and growth compared with other companies in the sector.  

- Innovation, strong location and value-added businesses are keys to its success. A strong IT system that allows JWD to accurately and quickly track, manage and monitor all products stored in its warehouses, cold storage facilities and on moving vehicles, in our view, is the key factor behind the success of the services in its portfolio. In some cases, JWD co-develops these systems with clients. Additionally, the location of its assets allows JWD to stand out from peers given they are in central areas of demand, while its value-added businesses enhance both margin and the loyalty of clients. 

- International expansion to bring exciting growth opportunities. JWD is in the process of expanding its business beyond Thailand’s borders with a strong international partner. Cambodia, Myanmar and Laos are the first target countries. JWD has joined hands with Clipper Holdings, a provider of vehicles, equipment for aid & development purposes primarily in post-conflict countries, to invest in general warehouses and cold storage for consumer products in these markets. The first stage of this expansion will be completed in 1Q16 and the success of this initial phase will create a lot more growth visibility in the long term. 

Valuation 

-  We derive JWD’s 2016 fair value at Bt15.0 using a DCF valuation, which is equivalent to a 2016 PER of 18.6x and 2015 PEG of 0.74x. Despite generating an unexciting dividend yield of 1.62-2.41% in 2015-17E at this fair value, given it is in a strong growth phase, we see shareholders enjoying a larger level of earnings and yield in the long term. In addition, we see upside potential to our current numbers from its international projects if it can enlarge its scale beyond the level mentioned in the prospectus. Note that we see no specific comparable stocks on the SET based on type, market capitalization and liquidity.