KUALA LUMPUR: CJ Century Logistics Holdings Bhd is able to increase its nationwide presence post-acquisition of a 100 per cent stake in CJ Korea Express Malaysia Sdn Bhd (CJKX) via the sharing of key logistics hubs and networks, MIDF Research said.
The firm said this was so as the north and east coast regions of Peninsula Malaysia were previously underserved.
CJ Century had completed the acquisition of CJKX in the second quarter (Q2) of financial year 2020 (FY20) for RM100 million via the issuance of 200 million new shares to CJ Logistics Asia, thus allowing the latter to increase its shareholding in CJ Century from 30.9 per cent to 54.3 per cent.
Similar to the CJ Century, CJKX is a total logistics services provider involved in freight forwarding, warehousing and distribution, as well as transportation.
"The acquisition of CJKX by CJ Century has effectively made it the only logistics subsidiary under CJ Group in Malaysia.
"We believe with the backing of CJ Group, this has opened up new opportunities to be leveraged on, especially in terms of securing tenders and servicing contracts from multinational companies (MNC).
"The group would also be able to enhance their operational synergies by making full use of each other's resources and technical know-how to achieve greater scale in their operations and market presence beyond the local market," it said in a note today.
MIDF Research said CJ Century derived about 30-35 per cent of its total revenue from its Korean customers including Coway, CJ Bio, Hankook Tires, Hanwa Q Cell as well as Lotte Chemical.
According to CJ Century, there were currently about 15 Korean employees within the group who solely focused on tapping and serving the ever-expanding Korean businesses operating in Malaysia.
Meanwhile, MIDF Research said the Regional Comprehensive Economic Partnership Agreement (RCEP) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) were expected to spur renewed momentum for intraregional trade.
"We believe the logistics players of the participating nations would stand to benefit from the flows of goods with the eventual reduction of up to 90 per cent of the tariffs on goods traded between the members over the next 20 years," it added.
MIDF Research has initiated its coverage on CJ Century, with a target price of 98 sen.