Cogent Holdings Ltd - Proven integrated-hub model with further potential

■ Top line growth with improving margins propel bottom line growth.

■ Potential appointment by Singapore Economic Development Board (EDB) as developer of multi-purpose logistics hub on Jurong Island.

Maintain BUY, with DDM-backed valuation of S$0.54

What is the news?
Cogent Holdings Ltd ("Cogent") announced its 3Q FY15 (Y/E Dec) results on 12 November after trading hours.

How do we view this?
Consolidation to Cogent 1. Logistics Hub has been effective. Rental expense in 3Q FY15 was 9.4% lower y-o-y as a result of cessation of 2 warehouse leases during 2H FY14. Depreciation in 3Q FY15 was 19% higher y-o-y arising from the new Integrated Logistics Hub. The net effect was a cost savings of S$322,000 from these two expense items.

Full year earnings are set to outperform previous year. 9M FY15 EPS stands at 3.79 Cents. FY14 core-recurring EPS was 3.92 Cents (adjusting out one-off gain from disposal of property). 9M FY15 EPS is already similar to FY14 core-recurring EPS.

Proven experience in developing one-of-its-kind Cogent 1. Logistics Hub opens up new opportunities. Potential appointment from EDB to develop a multi-purpose logistics hub was announced on 12 October. The purpose of the logistics hub is to support manufacturing operations on Jurong Island. The planned logistics hub is to and occupy up to 6 hectares of land with a total built-up area of c. 150,000 sqm.

Technical Analysis
Daily Chart
Investment Actions
We like Cogent stock for its superior ROE (low twenties) and strong free cash flow. Margins are expanding as a consequence of efforts to consolidate operations at its integrated logistics hub. We have a DDM-backed price target of S$0.54. Reiterate BUY. (Read Report)

Source : Phillip Securities Research

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