This is a post-dated post which was meant to be published last week . However, as I was overseas I wasn't able to blog last week. The po...

Weekly Superstock Scan 25 Sep 2017 - 29 Sep 2017: Cogent Holdings Ltd (Singapore)

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This is a post-dated post which was meant to be published last week. However, as I was overseas I wasn't able to blog last week. The potential superstock last week was Cogent Holdings Ltd (SGX:KJ9), a company listed on the Singapore Exchange. At this point I have already bought the stock at $0.94 and the stock has moved slightly up by the end of the week.

Since I have already done my research, I decided to blog on the company even though I won't be taking additional actions on the stock this week.


Cogent Holdings Ltd operates in four segments:
  • Transport management services - transportation of laden and empty containers
  • Container depot management services - storage, handling, washing and repair of empty containers
  • Automotive logistics management services - export, processing and storage of motor vehicles
  • Warehousing and property management services - rental of warehouses, provision of packing, drumming, other ancillary services and provision of property management services.



Of these segments, warehousing and property management services segment is the greatest contributor, contributing slightly more than half of Cogent's FY2016 revenue.


Technical 



Cogent displayed an almost textbook style long base breakout. Since February this year, Cogent has been trading in a narrow range from $0.73 to $0.86. Last week, price broke out strongly from the base. Price nearly hit $1 before retracing to close at $0.945. The volume of the week was slightly less than twice of its average trading volume.

There was no clear reason for the sudden surge in price. In fact, SGX has queried Cogent on the unusual price movement, and Cogent responded that it was not aware of any information which may explain the unusual price movements in the company's share.

Fundamental


Including the current quarter, Cogent reported 6 consecutive quarters of year on year EPS growth.

Jurong Island Projects

Cogent has two ongoing projects on Jurong Island – the Jurong Island Container Depot
(JICD) and the Jurong Island Chemical Logistics Facility (JICLF). 

The JICD is already fully operational while the JICLF is expected to take two years to construct. These two projects are mostly likely the growth drivers for the next few years.

Turnaround of Port Klang Operations

Following the commencement of its warehouse and container depot operations in Phase 1 of the
Port Klang Project in Malaysia, Cogent embarked on its Phase 2 in April 2016, expanding the
warehouse business with an additional 270,000 square feet of build-up area. The warehouse has
commenced operations in March 2017

Operation of Student Hostel

Cogent Holdings Ltd (Cogent) has been awarded a three-year lease (extendable by another
three-years) by the Singapore Land Authority to operate a student hostel at 362 Holland
Road. 

The property is currently vacant though it is likely to do well due to its proximity to education institutions. While the project itself will not contribute significantly to Cogent's earnings, it opens up a possibility for Cogent to expend into the student accommodation market which is less sensitive to economic cycles.

Matrices
o Relatively small float of  62.2 million shares, with an average daily volume of 490 thousand shares. Float approximately 127 times its average daily trading volume.
o Cogent is trading at 13.8 times its trailing twelve months EPS

Risk Factors/ Things I do not like

  • Big Round Number - Cogent is trading just slightly under $1. The $1 big round number is a very logical point for buyers to take profit at that level (I tried to do that too) therefore it is very hard for the price to break that level. However, if Cogent manage to break their level, most weak hands would be out and there is a very good chance that price will explode further.
  • Oversupply of Warehouse Storage Space in Singapore - Due to new warehouse spaces in 2017 and lower demand, there is a warehouse oversupply situation. However, Cogent's comparative advantage provides may allow it to maintain high occupancy rate. These comparative advantages include the provision of one-stop solutions (1.Logistics Hub), and its geographical monopoly (Jurong Island)



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All information in The Trader Diaries (TTD) does not constitute to investment advice or recommendation to buy, sell or hold. Readers are advised to consult their financial advisors prior to making any investment or pursuing any investment strategy. TTD will not be liable for any losses resulted from information published or shared from the blog.