Kerry Logistics share sale a bargain for investors

The US$284 million initial public offering by Kerry Logistics Network, the logistics arm of Kerry Properties, is expected to be a bargain for investors compared to its international peers.

The company expects to cash in on increasing demand for third-party logistics services in the region, especially from multinational brands.

The price range has been set at HK$8.80 to HK$10.20 per share on the first day of its international roadshow. That means the company will trade at a market capitalisation of between US$1.9 billion and US$2.2 billion, translating to 14.9 to 17.3 times its projected earnings in 2014.

That is a large discount in comparison to its international peers, including Germany's Kuehne & Nagel, which are trading at about 22 to 23 times.

Unlike other freight-forwarding companies already listed in Hong Kong, Kerry's profit is mainly driven by the growth in third-party logistics service which has double-digit profit margin, compared to the low single-digit margin by freight-forwarding companies such as Sinotrans.

Third-party logistics services include inventory management at regional distribution centres for multinationals and value-added service such as garment-on-hanging, tagging, sorting, kitting, ironing and labelling.