Financial Highlights

The table below sets out a summary of the Group’s key financial and operational highlights based on the Group’s historical audited consolidated financial information for the Financial Years and Period Under Review:

• The revenue increased from RM 122 million in FYE 2020 to RM 234 million in FYE 2022. This indicates that the company is expanding its market share within the industry.
• The gross profit margin declined from 28.78% in FYE 2020 to 21.51% in FYE 2022. The increase in the GP margin was mainly due to the rising sea and air freight rates, and the reduction in the GP margin was part of management’s commercial decision to maintain relationships with customers given the rising sea/air freight costs in the industry. (Generally, a GP margin of 20% is considered high/ good).
• The PAT margin increased from 0.46% in FYE 2020 to 5.78% in FYE 2022.
• The gearing ratio was 0.22 in FYE 2022. The company is within a healthy range for the gearing ratio, which also shows that the company will not be as prone to financial-related crises. (A good gearing ratio should be between 0.25 – 0.5).

Major customers and supplier

Major Customers

The top 5 major customers for FYE 2022 are listed in the following table:

The top 5 customers contribute 43.47% of the company's revenue. The management disclosed that they are dependent on the top 2 major customers, Kukdo Chemical and AirAsia Group, because both companies contribute a significant portion of the Group’s total revenue.

Major Suppliers

The top 5 major suppliers for FYE 2022 are listed in the following table:

The total purchases from the top 5 suppliers account for 25.39%. The management mentioned that the company is not dependent on any suppliers because there is no supplier that contributed more than 10% of its total purchases of services and materials.

Industry Overview

The logistics industry is involved in managing and organising the storage and movement of goods, also referred to as freight, from one point to another. Logistics is one component of a supply chain. A supply chain comprises a series of activities starting from goods that are extracted, manufactured, produced, processed or procured, up to delivery to their final destinations. The logistics industry can be segmented as depicted in the diagram provided. The overall logistic industry of the company is as below:

• Warehousing is mainly concerned with the temporary storage of goods in an enclosed and covered building. The types of warehousing include, among others, general, hazardous and high-security goods, as well as goods stored in ambient or temperature and humidity-controlled environments. In some situations, warehousing also includes storage of goods in open yards but does not include storage of liquids or gasses in storage tanks. AGX Group is involved in the warehousing of general goods at ambient temperature within enclosed and covered buildings.
  Warehouses can be bonded or non-bonded. Bonded warehouses are designated secured areas or buildings where the stored goods are exempted from customs duties and taxes. Non-bonded warehouses are ordinary warehouses. AGX Group provides both bonded and non-bonded warehouse services
• Transportation refers to the physical movement of goods using vehicles to traverse over land, water or air. Road transportation is commonly categorised into haulage, which involves the movement of goods within standardised containers, and trucking which refers to goods transported using trucks or vans. AGX Group is involved in providing haulage and trucking services. Transportation over bodies of water includes oceans and seas (maritime), and waterways such as rivers. Goods are categorised as containerised or noncontainerised. Containerised goods are goods packed within standardised 20-foot or 40-foot containers, while non-containerised goods include bulk goods such as grains and coal, and other general goods placed onboard vessels. AGX Group is involved in mainly containerised sea freight. Air transportation uses commercial cargo and scheduled passenger flights, as well as chartered flights. AGX Group uses all modes of air transportation.
• Freight forwarding is a service mainly involved in arranging cross-border transportation of freight, including warehousing where necessary. A freight forwarder’s main function is to organise and manage the end-to-end transportation of goods on behalf of its customers. Among others, it involves arranging and booking cargo space on vehicles, preparing all relevant documentation, permits and approvals including those for customs and port authorities, clearing customs and ports, and ensuring that freight arrives at its destination promptly and safely. AGX Group provides freight forwarding services.

Market Size and Share

There were no publicly available statistics or data on the market size for third-party warehousing, therefore it is not possible to derive market share.

Source: Vital Factor Consulting

Future plans and strategies for AGX Group BERHAD.

The business strategies and plans include continuing with the company’s existing services as well as enhancing and expanding the business as follows:

1. Malaysia - Set up new warehouse and office at Pelabuhan Tanjung Pelepas in Johor Bahru.
2. Malaysia - Setup now warehouse and office in Penang
3. Korea - Expand presence by setting up new office in Busan.

MQ Trader View

Opportunities

1. The company has a physical presence in 5 countries via its subsidiaries to facilitate business growth, market diversification, and risk mitigation. The company operates in 5 countries, namely Malaysia (Head Office), the Philippines, Korea, Myanmar, and Singapore. Additionally, the company has a total of 9 warehouses, with 2 in Malaysia, 3 in the Philippines, 1 in Myanmar, and 3 in Singapore.

Risk

1. The company is subject to risks related to fluctuations in sea and air freight rates. The pricing of sea freight forwarding services, as well as air freight forwarding and aerospace logistics services, is largely dependent on prevailing sea freight rates and air freight rates, respectively. Therefore, we will have to be concerned about the recent Red Sea crisis, which will affect sea freight rates.
2. The company is involved in the risk of fluctuation in foreign exchange rates. The group's revenue is mainly derived from international shipments, and given that its business covers several countries, most of the transactions are conducted in foreign currencies.

Click here to refer the IPO - AGX Group Berhad (Part 1)

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