Company Profile

On Time-Express, incorporated in 1995, is an international freight forwarder whose business has extended to 16 countries and regions. They provide export cargo freight forwarding service by booking shipping spaces from an airliner or an ocean shipping company to deliver the goods in full containers or in less than container load to the designated destinations. International freight forwarding is a competitive industry with low profit margin.

Investment Overview

The main business of On Time-Express is to provide air and ocean freight forwarding services, accounting for 69% and 28% respectively, in addition to a small amount of warehousing and storage, supply chain and sales agency services. Its business results growth in 2014 can be attributed to the air freight service, with net profit margin rising to 2%. Its European freight business is overall weak although this is partly offset by American freight business and logistic cooperation with Alibaba.

From late 2014, the Company began its cooperation with CaiNiao, which will become a highlight. The packages from Alibaba are sent to Russia via Finland and the number of packages has increased from 500 to 30000 a day. The revenues in this respect are expected to reach RMB60 million to RMB100 million, with a profit margin less than 20% but higher than its traditional services. It is said that JD.com will likely join the cooperation with the Company.

HoliBuy, an e-business platform owned and operated by the Company, is created specially to serve foreign brands which aim to explore China market, in particular Tmall. To put it simply, HolicBuy opens a store on Tmall and foreign brands on HolicBuy which delivers services such as marketing, warehousing, storage and distribution. Now the platform has attracted 5-6 customers.

The Company is going to acquire 20% equity of a Beijing-based logistics company which will be listed in New Three Board soon. When the deal is closed, the Company will enter domestic cargo distribution service market. In the future, the two parties each will hold 50% shares of the new company which will launch a platform for online purchase overseas in mid August.

One of the catalysts for the results in the second half of the year is that it will acquire an ocean shipping company which promises an annual profit of no less than HK$40 million, contributing remarkably to the profitability.

On Time-Express is turning from the traditional freight forwarding service to e-business supply chain service, and the logistics cooperation with CaiNiao will make difference in its business revenues and profit margin. Recently, the State Council issued new policies to encourage cross-border e-business and boost the weakening export. International logistics distribution is a key support for cross-border e-business and On Time-Express will benefit much. We give On Time-Express a “Buy” rating and set a 12-month target price of HK$2.2, equivalent to 11x PE for 2015. (Closing price as at 25 June 2015)

Financials

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