Freightlinks

Freightlinks is a 3PL logistics company dealing mainly in freight-forwarding. Basically a third-party logistics (3PL) provider is a firm that provides outsourced logistics services to companies for part, or sometimes all of their supply chain management function.

As such, it is important for a 3PL firm to establish a good international network as well as have forwarding agents at countries of growing economies (i.e. China/India) and they have just that.

Looking at their financial report for FY2008, their net profit has increased almost 40% from S$12.5 million to S$17.5 million. Giving rise to a net profit margin increase of about 2.6% from 2007 – 2008. Increase in net profit margin is important as it shows how efficient the group is. EPS for FY2008 is at 0.88 cents.

The group has about S$43 million in cash which is a moderately humble amount. However, their total of financial liabilities of secured bank borrowings adds up to a total of almost S$92.5 million with S$58 million due payable in the current year. Their borrowings have mostly been used to finance their acquisitions and constructions of warehouses justified in their increase in assets and property over the years.

With secured liabilities at S$92.5 million, their net debt to equity ratio stands at 0.67 showing that it is not necessarily a very strong balance sheet.

However the outlook for them looks positive. Completion of their warehouses earlier last month will help to bring in more revenue. They are also well invested in fast growing markets like China where demand for logistics services will grow rapidly as well as in the Chemical logistics sector to cope with Jurong Island’s increasing need for dangerous goods warehouses. Their warehousing space enjoy about 90% occupancy and will soon increase to 1.5 million sq ft. Most of their assets have not been revalued after being written down years ago so we are technically looking at a virtual goldmine. Also, their net asset value (NAV) increased by 1.04 cents to 6.02 cents in FY2008 which is just over its current trading price of 6.00 cents. With such an attractive NAV coupled with a PE ratio of 7.4 and a cash dividend of 0.25 cents a share, I believe we have a winner here.

Conclusion
Freightlinks to me is well poised to enjoy a logistics boom in countries where it is well invested in such as China. Also with the YOG 2010 being held locally, I believe it will be beneficial to our local logistics community.

However, with current economic sentiments so discouraging, it is up to individual’s risk appetite and time horizon to decide if they want to invest in Freightlinks.

For me, their outlook is bright and I will be paying close attention to their debt and profit margin in the next financial report. But for now, their NAV of 6.02 cents, Undervalued warehousing space, low P/E ratio plus an attractive dividend is too good to pass, will invest when the next paycheck comes in!