LHN Logistics – Fuelled for next leg of growth

Excerpts from CGS CIMB report

LHN Logistics (SGX: GIH)

• LHN Logistics is a leading provider of ISO tank logistics services and is well positioned to benefit from Singapore’s leadership in the global chemical industry.
• Commencement of new ISO tank depot (by end-1HFY9/23) should boost group revenue; we expect FY22-24F group revenue CAGR of 28%.
• We believe the group’s container depot services are set for volume ramp-up as trade activity recovers.

We initiate coverage with Add and TP of S$0.22.

Riding on Singapore’s leadership in the global chemical industry

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. 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. Further tailwinds include Singapore’s shift towards sustainability (as part of Green Plan 2030), which 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.

LHN Logistics new ISO tank depot to drive 28% revenue CAGR in FY22-24F

The group is constructing a new ISO tank depot which we estimate to commence operations by end-1HFY9/23. 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), which should allow quick depot utilisation ramp-up. We estimate S$4.3m in revenue contribution in FY23F (due to half-year of contribution and initial ramp-up phase), rising to S$10.3m in FY24F. This supports a 2-year 28% group revenue CAGR in FY22-24F.

Poised for recovery in ASEAN container trade activity

In our view, the group’s container depots in Singapore and Thailand (Bangkok and Laem Chabang) are set for further volume ramp-up amid recovering post-Covid trade activity from both countries. We see potential for greater Thailand depot contribution as the group increases utilisation of its Bangkok depot (opened in 2019); we forecast 7% utilisation in FY22F, rising to 12%/15% in FY23F/24F. For its Singapore depot, TEUs handled will be well anchored by key clients (e.g Maersk) which the group has good relationships with, in our view.

Valuation/Recommendation

We initiate coverage on LHN Logistics with an Add call and TP of S$0.22, based on 9x CY23F P/E which is a c.50% market size discount to peers. Re-rating catalysts: quicker recovery in chemical trading activity and faster depot utilisation ramp-up. Downside risks: prolonged supply chain disruptions hindering trade activity, delays in new ISO tank depot construction. You can find the full report here and the company website here