GDL is expected to benefit from improving infrastructure and policy initiatives like entry of private players in the rail freight business. It has also moved up the value chain through acquisitions in the cold storage business and become an integrated logistics solution provider.
Gateway Distriparks (GDL) is a one of the major private players in handling, transport and storage of containers, warehousing of cargo and various value added services provided in relation to import and export of cargo in containers. GDL is an Indo-Singapore joint venture and has been promoted by Prism International Pte Ltd. Windmill International Pte Ltd and Thakral Corporation.
The company has modern Container Freight Station's (CFS's) at Dronagiri (about 9 kms from the
In March 2005 the company raised Rs 79.2 crores by way of initial public offer (IPO). GDL offered 1.1 crore shares of Rs 10 each at a premium of Rs 62. In December 2005, GDL raised Rs 384.6 crore by way Global Depository Receipts (GDR) at a price of Rs 230.87 per share.
The company has recently proposed a bonus issue in ratio of 1:4.
Container Freight industry to grow at a rapid pace
Entry into cold storage to derisk business
GDL has acquired 50.1% stake in Snowman Frozen Foods Ltd (SFFL) for Rs 48 crore. The acquisition would enable GDL to forward integrate into the cold storage business and become an integrated logistics player. The acquisition would help GDL to diversify and de-risk its business by providing an additional revenue stream. GDL can also look at exploring business opportunities with other stakeholders like Mitsubishi Logistics Corporation and Nichirei Logistics Group Inc. who hold the balance stake in SFFL.
JV with Concor to transition GDL into an end-to-end rail transportation service provider
The rail freight business was recently opened to the private sector. GDL formed a subsidiary Gateway Rail Freight Pvt Ltd (GRFPL) and acquired an all
Better infrastructure and policy initiatives
The Government’s impetus on promoting FDI for construction of small ports at various locations will provide an impetus to Export-Import trade volumes and thus provide a boost to the container freight segment. India’s two major ports JNPT an Chennai, which control 80% of the container freight business are constructing new terminals to decongest the ports. The improved infrastructure and decongestion of the ports would enable GDL to capitalize on the opportunity.
Low entry barrier
The container freight business is characterized by low barrier to entry. Any player with significant investment capacity can enter the business.
Idle cash balance
The company has Rs 157 crores of fixed deposits. GDL earns an interest of 8.5% on the same. The company has kept this cash balance to finance future acquisitions. GDL’s Return on equity will be impacted till the cash balance is not utilized.
GDL is expected to benefit from improving infrastructure and policy initiatives like entry of private players in the rail freight business. It has also moved up the value chain through acquisitions in the cold storage business and become an integrated logistics solution provider. We expect GDL’s consolidated sales to grow from Rs 160.99 crore to Rs 240 crore and net profit to post a 28% growth to Rs 99 crore in Fy08E. For FY09E, we expect the company to report sales of Rs 300 crore and a net profit of Rs 124 crore.
GDL with pan-India presence and good connectivity with the major ports is well poised to take advantage of the strong growth in the container freight industry. It would be able to ramp up its volume by entering into newer areas like cold storage and rail transportation services. In addition, the company is actively scouting companies for acquisition, which would trigger further upside in the stock. At the current price of Rs 182 the stock trades at a P/E of 16.3x FY09E EPS of 11.13 (on post bonus dilued equity of Rs 115 crore), which is at 22% discount to the average industry P/E of 20. Given the huge business potential and de-risked business model we rate the stock an OUTPERFORMER with a price target of Rs 220, an upside potential of 20% in the next 6 months.