Sailing through rough seas: A peek into NZX-listed logistics stocks - TIL, QEX

The freights and logistics sector is integral in increasing the economic growth and productivity of a country. NZ’s freight and logistics industry is characterised by a system of distinct transport modes and organisations engaged in providing infrastructure and services to end users. The industry includes 4 main transportation modes, which are road, rail, coastal shipping, and air.

The freight logistics sector operates in an ever-changing world of foreign trade, resulting in all sorts of difficulties and strains to change within the market. Some of these challenges are the result of innovation by players imposing pressure on other participants and players within the supply chain to act.

Let’s have a look at the performance of these 2 NZX-listed logistics stocks.

TIL Logistics Group Limited

TIL Logistics Group Limited (NZX:TIL) is a leading logistics services provider in NZ. Its activities consist of transporting and warehousing freight throughout New Zealand, and co-ordinating freight activities offshore through international alliances.

The Group witnessed a challenging FY20. It had a poor result of H1 FY20 due to the underperformance of its Freight division and had to face COVID-19-induced hurdles in the second half.

TIL did not declare dividend for FY20 and plans to resume dividends in FY21 if trading conditions continue to improve.

The Group expects difficulties occurring due to COVID-19 to persist in FY21 with the flow on effects to be felt for some time. TIL looks to build its name and expertise for increasing its market share in certain sectors.

Some of the highlights of TIL’s performance included the following:

  • The delivery of a $3 million radar, which uses the latest dual polarisation technology to identify different types of precipitation, was completed in November 2020 with the radar fully commissioned on 10 December 2020.
  • TIL benefitted from the acquisition of the assets of Fletcher Construction’s Asset Hub In July 2020, and entered into a long-term exclusive contract to look after the transport operations for Fletcher Construction.
  • More than 439,000 kgs of freight has been loaded and railed from Auckland to destinations around NZ in October-November 2020.

Freight volumes are expected to get support from COVID-19 fiscal stimulus, global trend of businesses using 3rd-party warehousing & logistics providers (3PL) such as TIL; and continuing high demand in food & beverage, viticulture, aquaculture, and other primary industries, are some of the prospects that lie ahead for TIL.

The Group has 4 main priorities as organic customer growth, improvement of Freights division, expanding international services, and building strong connections.

The Board has confirmed its earlier guidance that EBITDA for FY21 is expected to be at least that of the FY20 post IFRS-16 result of $57.4 million.

On 9 February, TIL ended the trading session at $1.04, down 2.8% from its previous close.

QEX Logistics Limited

QEX Logistics Limited (NZX:QEX) is a NZ cross-border logistics company, which specialises in the delivery of products brought from New Zealand and Australian stores and online sites for consumers in China.

COVID-19 caused significant disruption to business and economic activity with substantial contraction in NZ and Australian diagou sales channels, which has been affecting the Group since April 2020. The disruption was caused due to the lower volume of tourism from China and reduction in the number of international students.

To reduce COVID-19 impact, the Group has engaged itself in close monitoring of cash flows and initiatives to improve liquidity, development of new sales channels, and supporting customers, as they move to new ways of selling to Chinese consumers.

QEX reported an after-tax loss of $5.9 million for 6 months ended 30 September 2020, of which $4.3 million was related to inventory loss. In October 2020, QEX reported an estimated $4 million of inventory had been eliminated from its secured China Custom’s bonded warehouse without the Company’s permission. Since then, QEX has been actively engaging in investigating to recover the removed inventory.

As at 30 September 2020, the Group's net assets were $7.9 million and net working capital was $6.1 million.

The Group also provided an extra $268,000 for potential impairment in receivables. Further, the diagou channel disruption is anticipated to continue for the remaining FY21 as well.

On 9 February, QEX ended the trading session at $0.315, up 3.28% from its previous close.

(NOTE: Currency is reported in NZ Dollar unless stated otherwise)

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