Aegis Logistics

Investors with short-term trading perspective can consider buying the stock of Aegis Logistics. The stock has been on a steady long-term uptrend since its March 2009 low of Rs 52, shaping higher peaks and higher toughs. This uptrend got accelerated in March 2010 at a level of around Rs 200 and recorded a 52-week high of Rs 341 on April 21. After a 50 per cent Fibonacci retracement of the accelerated uptrend, the stock found support at Rs 262. Subsequently, on May 18, the stock bounced up almost 12 per cent with high volume, which has reinforced its bullish momentum. The stock is trading well above its 50-day moving average. The daily relative strength index is on the verge of entering into the bullish zone from the neutral region whereas the weekly RSI is featuring in the bullish zone. Moreover, both daily and weekly moving average convergence and divergence indicators are hovering in the positive territory. We are bullish on the stock from a short-term perspective. We anticipate the stock's up move to prolong further until it hits our price target of Rs 326. Short-term traders can buy the stock with stop-loss at Rs 288.

via BL

Aegis Logistics

We recommend a buy in Aegis Logistics stock from a short-term perspective. It is visible from the charts that the stock has been on a stable uptrend since the March low of Rs 52, forming higher trading zones. Within this uptrend, the stock had consolidated sideways in a narrow band of Rs 130 and Rs 150 between early September and November. The stock has a key long-term support at Rs 130. In the recent times it made an upward break through the sideways movement and gained 6 per cent with good volume on November 20. The stock is hovering well above its 21- and 50-day moving averages. The intermediate-term up-trendline is still in place. The daily and weekly relative strength indices are showing signs of optimism. Our short-term forecast is bullish on the stock. We expect it to extend its up move until it hits our price target of Rs 180. Trader with a short-term horizon can buy the stock while maintaining a stop-loss at Rs 155.

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Aegis Logistics

Aegis Logistics

By Romil Singla

Aegis Logistics

Investors can consider buying the stock of Aegis Logistics, which offers a unique exposure to the growing business of liquid logistics and auto gas retailing.

The company appears well placed to capitalise on these opportunities, given its established business presence and well-timed expansion strategies; it proposes to ramp up its autogas retail presence and liquid logistics capacity significantly.

Strong fundamentals notwithstanding, the recent market sell-off has seen the stock price fall considerably, rendering its valuations attractive.

At the current market price of Rs 210, the stock is available at about eight times its likely FY-09 per share earnings. This offers a good entry point into the stock for long-term investors.

Business


Aegis Logistics has a presence across two business segments — liquid logistics and gas. The liquid logistics segment provides supply chain services to importers and exporters of petroleum products and chemicals.

The gas division, on the other hand, imports, markets and distributes bulk propane and liquefied petroleum gas (LPG) to a variety of industrial customers and sells autogas through retail outlets.

While Aegis’ liquid logistics division may benefit considerably from the increased need for oil and gas logistics solutions, its autogas retailing business may attain critical mass sooner than expected.

Any hike in domestic petrol price in the future may only hasten the penetration of autogas usage given its favourable cost economics.

Capacity expansion


The company has embarked on an expansion drive to augment its presence in both segments. Its Mumbai operations added capacity of over 75,000 kl to its existing 162,000 kl after it acquired Sealord Containers in September 2007.

Further capacity will be added when Aegis’ third Mumbai terminal becomes operational (expected to commence operations by FY-10). Besides this, Aegis has a presence in Kochi. Currently, the company is looking at expanding presence across cities.

It has acquired land in Haldia and Mangalore and plans to set up facilities there (likely to become operational by FY-11). An expansion of Aegis’ geographical footprint will help it improve the scope of its existing operations.

Aegis also proposes to aggressively ramp up its autogas retailing presence. From over 27 outlets in December 2007, the company plans to increase the number to 100 by FY-09. The management seeks to achieve this using a predominantly franchise-based model.

The autogas dealers, under the franchise model, will be provided with a fixed margin and will be able to sell gas at the same price as oil marketing companies.

This way, Aegis would be able to accelerate its network expansion even as it limits additional capital expenditure. The franchise model may not require Aegis to provide for significant incremental investments.

Aegis recently acquired Hindustan Aegis LPG (HALPG), which owns two refrigerated gas tanks of 20,000 tonnes capacities each. It has issued 36 lakh new shares to the shareholders of HALPG and will assume a debt of about Rs 30 crore. With this acquisition, the company appears to have circumvented its gas storage capacity constraints, which could have limited its expansion plans for the autogas retailing segment.

Results


For the quarter ended December 2007, helped by the addition of capacities, Aegis reported a 73 per cent increase in earnings on the back of a 40 per cent growth in revenues. This was driven by a 1.7 percentage point expansion in operating margins to about 14.2 per cent.

However, since the company’s revenue model is volume-driven and may not be able to sustain any price hikes, margins may not see any drastic improvement.

Considerable growth in volumes handled, however, may offset this. In terms of risk, delays in the rollout of expansion plans and waning of demand for LPG may affect the company’s earnings negatively.

Easun Reyrolle, Aegis Logistics, Temptation Foods

Easun Reyrolle, Aegis Logistics, Temptation Foods

Aegis Logistics: Buy

Investment with a two-three year perspective can be considered in the stock of Aegis Logistics, a leading player in oil and gas logistics. Established in the business of handling, storage and distribution of oil, chemicals and petroleum products, Aegis appears well-placed to benefit from the expanding business opportunities in the oil and gas space. Its presence in autogas retail also holds promise, given the rising oil price scenario.

An expansion in the liquid logistics capacity, a strong presence in Mumbai and the company’s foray into service contracts with oil marketing companies suggest potential for ramping up revenues. At the current market price of Rs 228, the stock trades at a PE of about 12 times its trailing 12-month earnings. Investors, however, can buy the stock in lots given the broad market volatility.
Liquid logistics

Aegisprovides supply chain services to importers and exporters of petroleum products and chemicals. With a strong presence in Mumbai and plans to expand base across other ports, Aegis could gain considerably from the increasing demand for liquid logistics. Its three-pronged strategy of expanding across both existing and new capacity appears promising.

One, Aegis’ plan to strengthen presence in Mumbai (with the acquisition of new facilities) holds potential given the port’s location. Two, expansion to other locations is likely to help Aegis establish a pan-India presence. Notably, Aegis has acquired land in Haldia and Mangalore for setting up facilities in future and plans to extend its presence to Chennai and Kandla also. Besides, the company’s Kochi facility (slated to commence operations by March 2008) also holds potential. Three, its foray into service contracts with oil marketing companies such as Mangalore Refinery and Petrochemicals and Bharat Petroleum Corporation, although insignificant in terms of revenue contribution now, could turn significant in five-six years.
Autogas foray to drive growth

The gas-trading segment of Aegis, which involves import and distribution of liquefied petroleum gas (LPG) from Saudi Arabia appears to offer good potential given the firming oil-price scenario. Further, the favourable cost economics of autogas over petrol and the increasing availability of LPG variants of cars in the market offer opportunities, given Aegis’ presence in autogas retailing. Notably, it intends to scale up the number of autogas dispensing stations from the current 22 to over a 100 in the next two years.

This expansion with a focus on Tier- II cities will be predominantly franchise-based, thus helping the company expand presence without significant incremental investment. Further, gas storage capacity could also expand with the acquisition of Hindustan Aegis LPG unit, pending court approval (expected by March 2008).

For the quarter ended September 2007, Aegis reported a 62 per cent growth in earnings on the back of a 43 per cent growth in revenues. Operating profit margins dipped marginally to about 13 per cent. On a segmental basis, the gas terminal division contributed to about 85 per cent of revenues while the liquid terminal division made up for the rest. However, the latter, owing to higher operating margins, contributed about 54 per cent of the bottomline.
Concerns

Aegis’ earnings stand exposed to any volatility in gas prices. Any fade out in the market appeal for LPG could pose a risk to the company’s revenue stream. Further, given the high gestation period of its expansion plans, the full benefits of expanded capacity (Mangalore and Haldia) are likely by FY-11 only. Besides, any delay in expansion plans could affect the company.

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Aegis Logistics

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