Riding on Singapore’s leadership in the global chemical industry, LHN Logistics is fuelled for its next leg of growth, says CGS-CIMB Research analyst Kenneth Tan.
LHN Logistics is a provider of ISO tank logistics and transport services in Singapore. The group provides ISO tank transportation services for major chemical players located on Jurong Island.
In a June 2 note, Tan is initiating coverage on LHN Logistics with a target price of 22 cents. This represents a 53.8% upside to the counter’s current share price of 14 cents.
With Singapore being the world’s fifth-largest refinery export hub and the eighth-largest chemical exporter, the group should benefit from continued growth in chemical volumes, says Tan.
The group is constructing a new ISO tank depot, which Tan estimates will begin operating by end-1HFY2023. “With the new depot, LHN Logistics will offer storage services (dangerous goods included) and washing and miscellaneous services. We believe that the group will be the first in Singapore to offer end-to-end ISO tank services (trucking, washing, and storing). We estimate $4.3 million in revenue contribution in FY2023F, rising to $10.3 million in FY2024. This supports a two-year 28% group revenue CAGR in FY2022-2024.”
According to Tan, the group’s container depots in Singapore and Thailand (Bangkok and Laem Chabang) are set for further volume ramp-up amid recovering post-Covid-19 trade activity from both countries. “We see potential for greater Thailand depot contribution as the group increases use of its Bangkok depot (opened in 2019); we forecast 7% use in FY2022, rising to 12%/15% in FY2023F/24F. For its Singapore depot, containers handled will be well-anchored by key clients, such as Maersk, which the group has good relationships with, in our view.”
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Some tailwinds on the horizon include Singapore’s shift towards sustainability, as part of the Singapore Green Plan 2030. Tan says this could drive greater demand for high-value specialty chemicals, and attract greater capex spend into Jurong Island; these should support higher demand for the group’s ISO tank transportation services.
According to Tan, LHN Logistics is trading at a 50% market size discount to peers with an FY2023 P/E of 9x. LHN Logistics is 84.1% owned by the LHN Group.
As at 9.42am, shares in LHN Logistics are trading flat at 14.3 cents.
