Arshiya International : FTWZ Play

ARSHIYA INTERNATIONAL

FTWZs to Add Growth

COMPANY PROFILE

Arshiya International, India’s first company which provides Free Trade Warehousing Zone (FTWZ), and is also engaged in providing end-to-end logistics and supply chain solutions to customers across the world. The company's offices are located at Singapore, Australia, Dubai, Qatar, Oman and the United States.

The company offers solutions in areas of innovative technology, business process outsourcing, supply chain, demand chain and financial flow management services. It operates its business activities through its subsidiaries namely Arshiya Hong Kong, Cyberlog Technologies International Pte and Genco (India).

Arshiya’s biggest achievement is developing India’s first Free Trade Warehousing Zone (FTWZ) at Panvel, Mumbai spanning across 165 acres. Very soon it would roll out the second FTWZ at Khurja, near Delhi followed by Chennai with plans afoot for two more at South & East. A real boon for Importers, Exporters and Value adders, FTWZs are deemed foreign territory where Warehousing, Trading and Value Optimizing can be performed with the help of Arshiya’s state-of-the-art Infrastructure and expert personnel. This will also enable India to compete with its cost and skill arbitrage in regional hubbing and also process cargo in and out of India more efficiently – thereby improving logistics connectivity of India.

Under logistics and transportation Solutions, Arshiya International provides services such as air and ocean transportation, customhouse brokerage, global logistics management and logistics consulting services. The company offers solutions in areas of plant construction and relocation, mining, power generation, upstream oil and gas projects and government projects. Under this it caters to companies such as Larsen & Toubro, Jindal Stainless, Bombay Dyeing & Mfg, Vedanta, Bhushan Steel & Strips, Mahindra & Mahindra, Hindalco Industries and KEC International, among others.

 

Unique Advantages of FTWZ

INVESTMENT  RATIONALE

 

Arshiya International is the company which has set up successful FTWZs business in India. India Inc. has not reaped full benefit of FTWZ and that is the key growth prospects for   Arshiya. The company has delivered 52% and 28% CAGR growth in operating profit and net profit respectively. Further we expect the company will continue reporting such high growth going forward on back of

· Adding new warehouse facility across its FTWZ location in Panvel and Khurja will ramp up volumes

· Reduction in Rail maintenance down time to 1 day from the current 5 days as well as adding revenue by commencing operation at Khurja Rail maintenance terminal

· Currently the company possesses clients like CISCO, L&T, GE India, BHEL, Hypercity, Henkel, etc which are the long-term service contracts. The management expects to add more clients as well as for value added services. The company is focusing more to provide Value added service to customers, which ensures long-term earning visibility

Price Information			Company Size			Key Market Ratio
Latest Date	16-Oct-12		Market Cap(Rs Crore)	786		Latest EPS (Rs)	22.4
Latest Price (Rs)	134		EV (Rs Crore)	3008		Latest CEPS (Rs)	28.64
Previous Close (Rs)	137		Latest no. of shares	58829472		Price/TTM CEPS(x)	4.66
1 Day Price Var%	-2.55		Share holding pattern			TTM PE (x)	5.96
1 Year Price Var%	-8.53		Promoter No of shares	26234710		Price/BV(x)	0.9
52 Week High (Rs)	178		Promoter %	44.6		EV/TTM EBIDTA(x)	9.32
52 Week Low (Rs)	112		FII No of Shares	7581539		EV/TTM Sales(x)	2.57
Beta	1.1		FII %	12.9		Dividend Yield%	1.05
Face Value (Rs)	2		Total No of Shares	58829472		MCap/TTM Sales(x)	0.67
Industry PE	14.31		Free Float %	55.4		Latest Book Value (Rs)	148.62

 

Financial Highlights (Consolidated)				(Rs. in Crore)			Quarter on Quarter (Consolidated)				(Rs. in Crore)
Description	201203	201103	201003	200903	200803		Particulars	201206	201203	Q on Q Var%	201106	Y on Y Var%
Equity Paid Up	11.77	11.77	11.75	11.75	11.4
Reserve	854	733	657	583	489		Net Sales	342	312	9.4	223	53.6
Total Debt	2099	1269	572	130	2		Total Expenditure	248	232	6.9	168	47.9
Gross Block	1575	676	266	137	35		PBIDT (Excl OI)	93	81	15.4	55	71.2
Net Sales	1057	822	526	503	401		PAT	35	31	12.2	24	46.5
PBIDT	279	162	128	86	58		PBIDTM% (Excl OI)	27.3	25.9	5.8	24.5	11.5
PAT	121	82	98	66	45		PBIDTM%	29.5	24.5	20.5	24.7	19.6
Dividend %	70	60	50	40	40		PATM%	10.1	9.9	2.8	10.6	-4.5
Adj. EPS(Rs)	20.5	13.9	16.7	11.2	8.0		Adj. EPS(Rs)	5.9	5.3	12.0	4.0	46.3
Adj. Book Value(Rs)	143	123	114	101	88

Peer Group Comparison (Consolidated)								(Rs. in Crore)
Company Name	Year End	Net Sales	PBIDT	PAT	Adj. EPS(Rs)	PBIDTM%	PATM%	ROCE%	ROE%
Allcargo Logistics	201203	4271	574	298	21.9	13.4	7.0	22.7	22.3
Arshiya Internatl.	201203	1057	279	121	20.5	26.4	11.4	9.4	15.5
Gateway Distriparks	201203	821	264	136	12.2	32.2	16.5	23.7	18.9

Logistics Sector : Sector of Future

LOGISTICS SECTOR

Sector of the Future

Logistics has been a traditionally dull business in India, at least as far as the  capital Market is concerned. The market has not taken up in a big way to any logistic company in the past, except perhaps Blue Dart and a few courier companies in the past. For a brief while.

The Logistics business has undergone a major transformation in the last one decade, and today in our view it is the business of the future. There are many players in this segment and new avenues of doing this business have opened up. There could be even more changes in the offing, and in our view this sector needs close watching. There is scope for large players emerging in this segment, and catching the possible candidates early may yield huge returns over the long term.

In this Report we have tried to identify such potential leaders. The companies included in this Report have the potential, but have not yet grown to their full potential . Will they grow as per expectation? We think so, but only time will tell.

 

SERVICES OFFERED

PEER COMPARISON

Logistics Companies

Segment Mix

It is very important to have good segment mix for any logistics company. We have selected three companies out of the logistics universe. These three companies have fully integrated businesses across all segments. All the three companies are leaders in particular segments.

· Allcargo is the leader for Multimodal Transport Operations. Allcargo is also focusing on expanding its network across the world and it is adding more and more ECU line franchises.

· Arshia Int. has setup a rail network across the nation which helps it for inland transport movement. Further the company is focusing more on its FTWZs operation. Currently it possess only 16% business share which is likely to  increase sharply over the years.

· GDL is operating through its two subsidiaries named GDL Rail and Snowman. While very different from the other two companies, GDL has 50-50 business mix from transport operation and CFS operations. Further the company is expanding more on the front of Cold Chain and Distripark business.

SEGMENT WISE PBT MARGINS

Traditionally Logistics Companies were running with very low profit margins, because of asset heavy and labor intensive business model. But now a days the scenario is changing since couple of years, because of operation optimization and implementation of efficient machinery. Among these three companies also there are big gaps in profit margins. Arshiya Int. has highest margins in all the three segments that are because of its business mix. Its FTWZ/CFS segment offers many unique benefits and value added services for exporters and to re-exporters. Further lower business share from this segment prevented a major impact on bottom-line. Because of that Arshiya is going to expand its FTWZ/CFS segment.  Gateway Distripark has very thin margin for its transport segment. But the company has good margins in its cold chain operations. Though Allcargo is the leader in MTO, this segment has very low margins. Overall, all the three companies manage profit margins by managing business mix.

For investment purpose one can have exposure to all the three companies as each of them is leader in its particular segment. Allcargo will be benefited by its logistics network through its direct office as well as through its franchisees. Arshiya International has introduced new concept of FTWZ in Indian Logistics sector which will gain the biggest benefit of growing exports and imports. GDL is the only company which has organized pan India cold chain transportation network. Keep reading my blog to have company specific update for these three and many more companies.

Happy Investing !!