Red Star Express Plc is a leading logistics and delivery firm which recently appeared on the news when they acquired an airside facility at the international airport in Lagos. The moves help them cut back on the time wasted in clearing their goods from the airport. The company released its 9months to Dec 2012 unaudited results with revenue rising modestly by 6.88% to N3.8b when compared to the same period last year. Pre-tax profits remained flat only increasing 1% to N361m compared to same period prior financial year.
Red Star is a tightly held company with Dr Koguna (Chairman) and the company named after him owning about 31% of the company. In fact, 56 people own a total 72% of the company’s nearly 590m outstanding shares as at the last financial year. Despite this, the company appears very well run having posted consistent profits and dividend payout over the years. Last financial year it posted revenue of about N5billion up 19% from the prior year and CAGR of about 10% over 5 years. Much of its revenue are derived from its courier business making up 68% of revenue last year alone.
Typically, businesses like this are the bellwether for predicting economic growth in the west, as the performance of delivery businesses is an indication of how economic activities are performing in terms of the sale of goods and services. It’s not so in Nigeria, the room for growth in delivery business is hinged on huge infrastructural development such as roads, safer airspace etc.
Between the end of the last financial year and date of the post their share price has risen over 39% to N3.40. Current P.E Ratio based on its trailing Eps of 55kobo is 6x, a cheap stock if you ask me. The company has no long term or even short term debt to any financial institution, has a strong working capital of N1billion and about N600m in cash as at the end of the quarter ended Dec 2012. The company currently relies on its assets to drive returns as margins are thin at 9%, however, shareholders can’t complain much with 9 months returns on equity at 15%. Surely, the balance sheet shows the company is well placed to expand its business efficiently if it can just borrow below its impressive returns on asset of 11%. Its cautious and organic approach to growth is understandable and surely will evolve to a more aggressive one in future. Just as customers want their goods delivered not only safely but quickly, investors look forward to a sustainable double digit growth in revenue every quarter rather than depend on the fourth quarter to boost revenue.
