Tiong Nam’s vaccine logistics venture remains uncertain, says MIDF

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KUALA LUMPUR: A question mark continues to hang over Tiong Nam Logistics Holdings Bhd‘s capabilities in handling vaccine logistics despite assurance from management that it is poised and ready to enter the business.

Earlier this year, Tiong Nam entered into a collaboration agreement with Yong Tai Bhd to provide integrated total logistics services of pharmaceutical products such as the Covid-19 vaccine.

However, MIDF Research has reservations over the venture, stating that while the group has experience in handling frozen food SKUs, it is uncertain over its experience in handling medical-grade, temperature sensitive products.

“Despite the management’s desire, there are bigger players in the cold chain space with bigger capacity, reach and the right track record.

“On top of that, with the “Yong Tai vaccine” is not yet shelf-ready (only at Phase III), other approved and well-known

vaccines will saturate the market as Government of Malaysia is committed to execute the vaccination programs expeditiously,” said MIDF.

The research house added that none of Tiong Nam’s cold storage space has been earmarked for vaccine distribution yet.

Nevertheless, Tiong Nam’s management has guided that it has the necessary cold storage and transport infrastructure to handle the cargo.

“Even with extreme vaccine specifications, such as very low temperatures of less than -70o Celsius, Tiong Nam will be able to accommodate with minimal upgrade of its facilities.

“We are also further informed that they have approached Government of Malaysia to champion the group capability and capacity to handle vaccines logistics,” said MIDF.

At present, the research house is highly optimistic over Tiong Nam’s logistics and warehousing segments.

It said it is confident that the segment will continue to perform and cushion the setback from the property and hotel segment.

It also projects that the poor performances of the property and hotel segments will not be repeated past FY21 as the low-base effect will kick in from FY22.

MIDF maintained its “buy” call on Tiong Nam with an unchanged target price of 93 sen per share to account for the prospect of recovery for the group, derived from a discounted cashflow valuation with a terminal growth of 2% and WACC of 4.2%.

It maintained its top line estimate for FY22 as it is upbeat on the long-term potential of Tiong Nam as one of the biggest logistics players in Malaysia with a notable regional presence compared to its peers.



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