Harbour-Link, the undervalued stock from Sarawak
Lady Luck has been smiling on Harbour-Link Group Bhd, a major logistics player with a market share of over 50% in Sabah and Sarawak. Listed in 2004, the company’s share price has more than doubled to RM2.80 on June 18, giving a market cap of RM509.6 mil, from its 52-week low of RM1.36 in January.
Investor interest in this low-profile counter was ignited by its cheap valuation, strong earnings track record, and more room to grow from its core business in the logistics and shipping operations.
In an initiation report this month, Maybank Investment Bank Bhd’s analyst Lee Yen Ling has a buy call for the logistics group.
Setting a target price of RM3.65, she forecasts strong earnings per share (EPS) growth of 36% and 25% for the financial years ending June 30 of 2015 and 2016, respectively, on better logistics and shipping earnings, as well as a “lumpy” income from property development in FY16.
Harbour-Link also boasts a solid financial track record. Lee says the group’s core net profit increased at a nine-year compound annual growth rate (CAGR) of 34% from FY05 to FY14, underpinned by a revenue CAGR of 9% and steady margin expansion.
For the nine months to March 31, 2015, integrated logistics business accounted for 63% of the group’s earnings before interest, tax, depreciation and amortisation (Ebitda), followed by engineering works (17%), shipping (16%) and property (4%).