In line with earlier management expectations, QEX Logistics has made an upward revision to its FY19 KOM targets following strong preliminary FY18 numbers. The company now aims at total sales turnover growth of 30% over FY18 to NZ$41m and gross profit at NZ$5.74m in FY19. This implies a 14% margin, which is somewhat below the initial target of 15% and suggests that in its current rapid growth phase, QEX decided to trade off some of its margin against top-line growth.
QEX Logistics |
Solid growth expected to continue in FY19
General industrials |
NXT Company Spotlight
28 May 2018 |
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In line with earlier management expectations, QEX Logistics has made an upward revision to its FY19 KOM targets following strong preliminary FY18 numbers. The company now aims at total sales turnover growth of 30% over FY18 to NZ$41m and gross profit at NZ$5.74m in FY19. This implies a 14% margin, which is somewhat below the initial target of 15% and suggests that in its current rapid growth phase, QEX decided to trade off some of its margin against top-line growth.
Most FY19 KOM targets revised upwards
Following the recent positive announcement of FY18 KOM results on 26 April, QEX has completed its revision of KOM targets for FY19. It now expects to generate sales turnover of NZ$41m compared with the earlier target included in its listing document at NZ$28m, implying a 46.4% upward revision. This compares with FY18 sales turnover at NZ$31.5m (which was c 21% ahead of the initial KOM target) and suggests a c 30% y-o-y growth rate vs FY18. This is accompanied by an upward revision of the expected monthly volume of dairy products exported from 160 tonnes to 182 tonnes (up 13.8%) and the monthly number of parcels cleared from 72,000 to 80,800 (up 12.2%).
Gross margin KOM target slightly down
QEX’s gross margin target (as a percentage of the sales turnover target) was revised down slightly from 15% to 14%. This compares with 16.0% achieved in FY18 amid an exceptionally strong Q418 at 18.4%, which was assisted by favourable pricing due to the tight supply of milk powder in China. The new gross margin target is also somewhat below the initial FY18 target of 14.3% included in the listing document. However, given the higher top-line growth expectations, this still translates into a significantly higher gross profit target at NZ$5.74m (vs NZ$4.2m previously).
Valuation: Peer comparison
QEX is priced at 14.8x FY17 (end-March 2017) EV/EBITDA, with logistics companies trading on multiples of c 10.1x EV/EBITDA and 22.6x P/E on a trailing 12-month basis. However, this ratio does not reflect the strong growth QEX posted in FY18.
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Company financials
Source: QEX (historicals and forecasts) |
QEX Logistics coverage is provided through the NXT Research Scheme
Valuation
QEX remains a small company and has few peers. We note that AuMake (a recently listed Australian company) is approaching the daigou market differently, planning to open at least 20 specialist stores in Australia targeting Chinese consumers. It generated trailing 12-month revenues as at end-December 2017 of c A$18m and raised A$14m on 22 January 2018.
There are a number of other logistics companies globally, which average 10.1x next-year EV/EBITDA multiples. 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 12 months |
P/E (x) |
|
Direct |
|
||
AuMake International |
50 |
- |
- |
|
|||
Milk and health supplements |
|||
a2 Milk Co |
5,427 |
25.4 |
52.8 |
Bellamy's Australia |
1,397 |
- |
- |
Blackmores |
1,691 |
28.7 |
34.7 |
Median |
27.0 |
43.8 |
|
Logistics |
|||
United Parcel Service |
99,335 |
11.4 |
18.4 |
FedEx Corp |
66,929 |
10.1 |
18.6 |
Deutsche Post |
48,854 |
10.0 |
16.4 |
Kuehne + Nagel International |
18,219 |
14.7 |
24.0 |
Bollore |
15,761 |
17.5 |
29.9 |
DSV |
14,932 |
21.8 |
23.7 |
JB Hunt Transport Services |
13,677 |
13.3 |
32.3 |
CH Robinson Worldwide |
12,849 |
12.4 |
27.0 |
Expeditors International of Washington |
12,175 |
16.2 |
25.0 |
Yamato Holdings |
11,670 |
12.3 |
- |
Nippon Express |
7,406 |
7.4 |
18.6 |
Hyundai Glovis |
4,975 |
7.9 |
9.8 |
Landstar System |
4,701 |
14.6 |
25.7 |
Sinotrans |
3,615 |
4.9 |
12.6 |
Sankyu |
3,466 |
7.6 |
17.2 |
Panalpina Welttransport Holding |
3,067 |
9.2 |
16.5 |
Hitachi Transport System |
3,021 |
15.9 |
40.0 |
Mainfreight |
1,808 |
14.1 |
25.4 |
Forward Air Corp |
1,736 |
10.4 |
23.5 |
Hub Group |
1,660 |
10.0 |
23.5 |
Kintetsu World Express |
1,494 |
8.4 |
24.8 |
Echo Global Logistics |
784 |
14.9 |
- |
Eddie Stobart Logistics |
676 |
- |
- |
Logwin |
463 |
5.3 |
9.1 |
Wincanton |
453 |
5.5 |
13.4 |
Hanjin Transportation |
280 |
11.3 |
- |
Sebang |
257 |
6.7 |
9.0 |
K&S Corp |
160 |
5.8 |
38.9 |
Marsden Maritime Holdings |
151 |
186.1 |
22.6 |
TIL Logistics Group |
120 |
10.2 |
18.7 |
South Port New Zealand |
101 |
- |
- |
Lindsay Australia |
87 |
6.8 |
20.4 |
CTI Logistics |
62 |
- |
- |
Bremer Lagerhaus-Gesellschaft |
58 |
8.1 |
20.5 |
Hansol Logistics |
41 |
5.4 |
30.6 |
Mercantile Ports and Logistics |
16 |
- |
- |
Median |
|
10.1 |
22.6 |
Source: Edison Investment Research, Bloomberg. Note: Prices as at 24 May 2018.
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