PETALING JAYA: Freight Management Holdings Bhd (FMH) will likely record a stronger set of financial results in the coming quarters, assuming that the movement restriction does not prolong beyond July 2021.

       Among the drivers of this are the lower losses from loss-making associates and joint ventures, new client acquisitions due to robust demand for freight-related services and higher economies of scale, said CGS-CIMB.

       “Despite the impact of Covid-19 on global trade, FMH intends to continue to expand both its domestic and overseas businesses, ” the research house said.

       “On the company’s overseas front, FMH plans to secure new clients by leveraging on its established global network, and acquire logistics service providers in new or existing markets, ” it added.

       CGS-CIMB maintained its “add” call on FMH with a target price of RM1.20, based on an unchanged 20 times forecast 2022 calendar year price-to-earnings ratio (PER). This is a 30% discount to global logistics service providers’ average 2022 PER.

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       “We continue to like FMH for its multi-modal logistics service offerings derived from multiple geographies, attractive valuations of a 52% discount to global logistics sector’s 2022 forecast PER and strong growth prospects, ” it said.

       CGS-CIMB elaborated that FMH is anticipating a compounded annual growth rate earnings per share of 24.6% for the financial year 2020 (FY20) to FY23.

       It, however, also noted that while the company is categorised as an essential service that is allowed to operate, FMH is still impacted by the enhanced movement control order in the Klang Valley.

       “We gather that up to 20%-25% of its business volumes have been affected, given that some of its customers are unable to operate during this period, ” CGS-CIMB said.

       On the other hand, it is positive on the recent announcement by FMH that the Malaysian Investment Development Authority had granted it tax incentives.

       “This is on condition that FMH spends a capital expenditure (capex) of at least RM245mil across five years into an integrated logistics services, including an e-commerce fulfillment hub, ” CGS-CIMB said.

       “FMH can enjoy lower tax rates while further facilitating its growth plans in its third-party logistics, warehousing and distribution segments. We have yet to reflect the capex for potential investments into a new integrated logistics hub, ” it added.