ILB - Tango & Cash

The global market had been quite bullish over the week as World Cup Fever rises, brushing away the saying that the market will be going to be slower as affected by the World Cup. However, I believe that the market continue to remain in a cautious manner with the latest global event being the tension at Iraq that had saw Crude Oil prices surging as high as 4%. The Russia - Ukraine crisis had also yet to see an ending so soon, which had been sending out the fear message on the lacking of supply in the energy resources is the tension prolonged, or go from bad to worse. However, market had been remaining in a overall bullish manner, especially on the new Federal Reserve vice chairman - Stanley Fischer, another believer of the money printing game to boost up the economy.

While the recent market had saw activeness in the small cap company, cash rich company, or company sitting in huge pile of cash had been always my target, which does not exlcude - ILB (Integrated Logistic Berhad - 5614)

Let's have a quick glance at ILB recent price movement.

ILB had been consolidating at the range of RM 0.80 for the past couple of months after selling off 2 subsidiaries in China, hugely raising their cash level. As of the latest quarter, ILB cash amount is standing at RM 175.758 million.

At the current outstanding shares of 178,025,503 units, ILB cash worth per share is standing at RM 0.987 per share. At the current price of RM 0.80 per share, ILB is standing at a discount of 18.9% on it's cash worth per share.


ILB - Moving Forward

Integrated Logistics Berhad (ILB) operates in three segments:
- Warehousing and related value added services segment, which is engaged in the rental of warehouses, handling and providing logistics solution services.
- Freight forwarding segment, which is engaged in the business of sea and air freight forwarding and shipping agent.
- Transportation and distribution, which is engaged in the trucking and container haulage.

ILB had saw continuous losses in their operation at China because of the competitive environment that had saw profit margin slashing down. The decision by the management to exit the China market had been a great decision as ILB dispose off it's Shenzhen and Henan assets, and making a one time off profit from the disposal and also putting a stop into the bleeding assets.

While China had always been a competitive business environment, the ILB board of management had decided to exit the China market and focus on the Middle East market that could be able to see a higher profit margin. ILB is currently in a joint venture with National Trading and Developing Establishment (NTDE) of the UAE to form Integrated National Logistic (INL).

ILB will be looking at their joint venture to see a breakeven at the end of 2014, and start to run in a profit in 2015. ILB will be also looking to put more focus into the Dubai for it's geographic location, the increasing importance of airports and the region’s booming aviation sector. Dubai being a vital connection point between East and West had been facilitating the global flow of goods, services and ideas. The latest Dubai’s foreign trade (excluding oil & gas) amounted to more than DH 1 trillion (USD 270 billion) from January to September 2013.

Back then in 2007, ILB had entered into an agreement with NTDE for a 50:50 JV to operate a logistic hub in Dubai. However, the plan was put on hold due to the 2008 financial crisis. INL started operation in October 2012. As of August 2013, utilization rate at the warehouse is around 30% to 40%. However, with NTDE as its JV partner, NTDE will be aggressively seeking out to ramp up it's utilization rate with their strong connection in international consumer brand in the Gulf. NTDE is the exclusive distributor of world-renowned food and beverage brands like Cadbury, Pokka and Häagen-Dazs.


Coming up Catalyst

ILB will be focusing in the middle east's huge market which is still growing aggressively. ILB will be coming to seal a deal for it's disposal at Wujian Co which operates 2 warehouse near to Shanghai. The disposal for both of the warehouse is rumored at around RM60m. ILB 70% ownership in IL HK, in which IL HK owned 65% in Wujian Co, will be translating a 45.5% ownership from the RM60m proceeds from the disposal, which is RM27.3m, interpreting to another boost of RM 0.153 of cash value into each share of ILB.

The recent massive purchase of shares from Makoto Takahashi (holding 10.47%)and Tee Tuan Sem (holding 10.49%) had also raised the eye brown of the public on the possible privatization of the company by the 2 of them.



ILB will be a great company to be invested in based on the following:
- Sitting on a cash pile of RM 175.758 million, translating to RM 0.987 cash worth per share.
- Selling of Wujian Co, raising cash level by a possible RM 27.3m, translating to a possible RM 1.14 cash worth per share.
- Strong director buy back from Makoto Takahashi and Tee Tuan Sem
- Possible target for privatization
- Great exposure in the Middle East logistic market with 50:50 joint venture with NTDE
- Strong growing Middle East market that is already huge with foreign trade amounting to USD 270 billion in first 9 month of 2013


ILB will be seeing a run up in the coming day, with a short term price target of RM 0.90, and a longer term price target of RM 1.20 when they disposed of the 2 warehouse in China and boost up the utilization rate in INL.

Bone's short term TP: RM 0.90