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.
QEX Logistics |
Continued business acceleration
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5 September 2018 |
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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.
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Company financials
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 |
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.
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