Continued business acceleration

QEX Logistics 5 September 2018 Update (1-4pgs)
Download PDF

QEX Logistics

Continued business acceleration

General industrials

NXT Company Spotlight

 

5 September 2018

Price

NZ$1.17

Market cap

NZ$61m

Share price graph

Share details

Code

QEX

Listing

NXT

Shares in issue

52.5m

Last reported net debt at 31 March 2018

NZ$0.6m

Business description

QEX is a logistics company that facilitates direct trade between New Zealand/Australia and China, aiming to be a one-stop shop for Australasian entities looking to export products to China.

Bull

Fast growth into a large market.

Strong board.

Diversified relationships.

Bear

Acquisitions made could be dilutive.

Rapid growth may present management with problems.

Majority of revenues dependent on daigou market.

Analyst

Milosz Papst

+44 (0)20 3077 5700

QEX Logistics coverage is provided through the NXT Research Scheme

QEX’s revised sales turnover target indicates a robust business uptake and confirms the strong start in Q119 (despite weaker sales in Australia), with sales at NZ$15.4m (up 35% vs Q418) driven by dairy products and NZ’s international postage revenue. Importantly, management highlighted that the solid trend continued over the past two months. QEX’s ability to secure funding through its listing in February coupled with the recent NZ$2.5m placement, supports the company’s solid growth prospects.

New FY19 sales target implies 90% y-o-y growth

QEX has made an upward revision of its FY19 sales turnover KOM target to NZ$60m, which is now 46% higher than the prior figure of NZ$41m (already revised from NZ$28m in May this year). FY19 growth should be mostly driven by the New Zealand operations, as sales in Australia are limited by the strong pricing response of competitors (Q119 sales down to NZ$0.4m from NZ$2.0m in Q418).

Other KOM targets remain unchanged

The remaining top-line targets were so far kept in line with prior levels, with monthly volume of dairy products exported still expected at 182 tonnes (vs 241 in Q119) and the number of cleared parcels at 80,800 per month (Q119: 76,516 due to a reduction in logistics sales in Australia). Moreover, gross margin target was also reaffirmed at 14% (despite Q119 number at 12.3%), as QEX expects margin pressures to ease in Q219 thanks to a seasonal reduction in milk powder supply.

NZ$2.5m placement successfully completed

QEX recently raised NZ$2.5m through a placement of 2.2m shares (ie 4.14% of post-issue share count) at a price of NZ$1.15 per share. According to the company, the placement was heavily oversubscribed and supported by a number of wholesale and retail investors. Management highlights that becoming a listed company in February also allowed QEX to increase its banking facilities.

Valuation: Peer comparison

QEX is priced at (end-March 2018) EV/EBITDA and P/E at 30.2x and 51.6x, respectively, with logistics companies trading on c 10.0x EV/EBITDA and 19.4x P/E on a trailing 12-months basis. However, QEX’s ratio may decline further if the company meets its KOM targets for FY19.

Company financials

Year end

Sales turnover (NZ$m)

PBT

(NZ$m)

Cash

(NZ$m)

Cash from operations (NZ$m)

03/16

18.1

0.6

0.3

0.9

03/17

22.2

2.6

0.1

0.4

03/18

31.5

1.8

1.8

(3.2)

03/19e*

60.0

N/A

N/A

N/A

Source: QEX accounts. Note: *QEX’s KOM target.

Valuation

QEX remains a small company with few peers. We note that AuMake (a recently listed Australian company) is approaching the daigou market differently, with plans to open at least 20 specialist stores in Australia targeting Chinese clients and at least 10 stores in China. It had a trailing 12-month sales as at end-2017 of c A$18m and raised A$14m in January 2018. There are a number of other logistics companies globally, which average 10.0x LTM EV/EBITDA. As can be seen, analyst coverage of these is poor for any companies with a market cap of less than c US$700m.

Exhibit 1: Comparative multiples

Market cap (US$ m)

EV/EBITDA (x) trailing 12m

P/E (x)

trailing 12m

Direct

 

AuMake International

58

-

-

Milk and health supplements

a2 Milk Co

6,240

28.3x

48.3x

Bellamy's Australia

939

  -

-

Blackmores

2,038

22.5x

37.7x

Median

 

 

 

25.4x

43.0x

Logistics

United Parcel Service

106,227

11.9x

18.7x

FedEx Corp

65,474

10.0x

16.3x

Deutsche Post

45,270

8.1x

15.6x

Kuehne + Nagel International

19,623

14.8x

24.8x

DSV

17,624

17.8x

30.0x

Bollore

14,325

21.8x

22.6x

CH Robinson Worldwide

13,310

13.9x

25.0x

JB Hunt Transport Services

13,259

12.9x

27.7x

Expeditors International of Washington

12,800

14.3x

25.2x

Yamato Holdings Co

12,346

12.3x

-

Nippon Express Co

6,343

8.0x

16.2x

Landstar System

4,785

13.4x

23.4x

Hyundai Glovis Co

4,039

5.8x

9.2x

Agility Public Warehousing Co

4,025

8.5x

18.6x

Panalpina Welttransport Holding

3,543

15.2x

42.8x

Sankyu

3,479

8.0x

16.3x

Hitachi Transport System

3,111

8.8x

16.7x

Sinotrans

2,574

5.7x

8.8x

Mainfreigh  

1,891

13.0x

25.6x

Forward Air Corp

1,878

11.4x

23.9x

Hub Group

1,808

10.0x

22.5x

Kintetsu World Express

1,417

8.5x

17.3x

Echo Global Logistics

935

12.9x

-

Eddie Stobart Logistics

673

-

-

Logwin

475

5.5x

12.7x

Wincanton

381

5.1x

7.7x

Hanjin Transportation Co

327

10.5x

-

Sebang Co

225

5.7x

7.4x

Marsden Maritime Holdings

143

195.4x

21.5x

K&S Corp

133

4.5x

11.6x

South Port New Zealand

119

10.2x

19.4x

Lindsay Australia

87

6.8x

21.2x

TIL Logistics Group

81

-

-

CTI Logistics

58

8.1x

21.1x

Bremer Lagerhaus-Gesellschaft

54

-

-

Hansol Logistics Co

27

9.9x

- N/A

Mercantile Ports and Logistics

11

-

-

Median

 

10.0x

19.4x

Source: Edison Investment Research, Bloomberg. Note: Prices as at 30 August 2018.

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER Any Information, data, analysis and opinions contained in this report do not constitute investment advice by Deutsche Börse AG or the Frankfurter Wertpapierbörse. Any investment decision should be solely based on a securities offering document or another document containing all information required to make such an investment decision, including risk factors.

Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Deutsche Börse AG and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Share this with friends and colleagues