Freight Management told Bursa Malaysia that it entered into a Sale and Purchase Agreement with Axis Real Estate Investment Trust yesterday to buy a piece of land in Bandar Sultan Sulaiman, North Port, Klang measuring some 148,815 sq ft, which consists of warehouse space of 121,155 sq ft and office space of 13,000 sq ft, for total cash of RM14.5m.
Getting more space for warehousing. We are not surprised with this acquisition as Management had previously hinted of the upcoming warehouse expansion dedicated to a contract that it would be securing with a MNC client (due to be announced soon), since its existing 659,930 sq ft warehouse is full. The warehouse FMH is acquiring from Axis (with total land measuring about 148,815 sq ft comprising a warehouse space of 121,155 sq ft and office space totaling 13,000 sq ft) is located opposite its present main office/warehouse.
Maintain BUY. We expect the revenue contribution from the upcoming MNC contract to be some RM3m-RM4m per annum. However, as we have projected an aggressive 30% and 15% revenue growth for the warehousing segment for FY11 and FY12 respectively, we maintain our earnings forecast. Our Buy recommendation and TP of RM1.40 are maintained based the target PE of 9x on FY11 EPS.
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