SINGAPORE (Nov 28): Phillip Capital is sticking to its guns, advising Cogent shareholders to reject the $1.02 cash offer from Cosco Shipping International.
See: Cogent gets $1.02 per share cash offer from Cosco Shipping
This comes on the back of the logistics player reporting 3Q17 earnings and revenue which came in line with the research house’s expectations.
“We reiterate our $1.12 valuation for Cogent, which is 10% higher than the offer price. As outlined in our previous report, the offer price of $1.02 is uncompelling, in our view,” says analyst Richard Leow in a Tuesday report.
In addition, Leow says the offer price for Cogent is only 14.9 times trailing 12-month earnings, whereas the offer price for arguably Cogent's closest peer, Poh Tiong Choon Logistics, was at a much higher 23 times TTM earnings.
In 3Q17, Cogent’s revenue came in 3.6% higher at $35.3 million on higher container depot management services and transportation management services.
EBIT fell 2.7% to $9.8 million on 6.1% higher operating expenditure from higher depreciation and higher contract services but offset by 2% and 5% lower staff cost and rental on leased premises respectively on better cost control.
3Q17 earnings therefore ended 6% lower at $7.4 million.
Looking ahead, the immediate future for Cogent is positive, says Leow. Earnings growth visibility is clear with expected pipeline of jobs to come from the Jurong Island Container Depot (JICD) project and to a lesser extent, the student hostel at 362 Holland Road.
As explained in his previous report, Leow says it looks inevitable that Cogent becomes consolidated as a subsidiary of Cosco which intends to develop Cogent into a regional logistics player, benefitting the latter.
See: Phillip says Cosco's offer for Cogent 'uncompelling'
“Our recommendation remains unchanged – minority shareholders should take partial profit to avoid tying up capital while the offer remains open and to reject the offer,” says the analyst.
“If the delisting is successful, minority shareholders will receive $1.02 anyway. If the delisting fails, minority shareholders will remain shareholders of Cogent, a listed-subsidiary of Cosco,” adds Leow.
Shares in Cogent are trading at $1.01 or 14.2 times FY18 earnings.
