This article first appeared in The Edge Financial Daily on December 6, 2017 - December 12, 2017

Xin Hwa Holdings Bhd
(Dec 5, RM1.28)
Buy with a target price (TP) of RM1.68: Johor-based Xin Hwa Holdings Bhd is a leading land transport operator with a fleet size of 1,500 trailers, prime movers and trucks which has in-house capabilities to fabricate, manufacture and provide maintenance for its fleet of prime movers. 

To lower costs, the company acquires used prime movers and reconditions them in-house — hence the higher margins. 

Xin Hwa’s existing warehouse space of 404,000 sq ft which is close to full utilisation, has just added a new warehouse of 180,000 sq ft. It recently announced plans to acquire 44 acres (17.8ha) of land for RM26.5 million to transform its warehouse and distribution division at Pasir Gudang into an integrated logistic hub.

Xin Hwa’s recent foray into e-commerce via the acquisition of a 50.01% stake in China- based Yiwugou Ecommerce Sdn Bhd for RM500,000 is to capture the business-to-business market. 

Yiwu Commodity Market is the world’s largest small commodity wholesale market with 1.8 million products by 75,000 wholesalers and retail shops. This unique platform allows direct access to Zhejiang’s five districts and ships 570,000 containers to over 200 countries. 

We expect earnings per share growth to chart double-digit growth of around 12% for FY18 and 27% for FY19 as its warehouse reaches full utilisation and e-commerce reaches scale towards Southeast Asia.  — Rakuten Trade Research, Dec 5