>AEGIS LOGISTICS (CENTRUM)

Margin expansion boosts bottom line

■ Results mixed: Q1 revenue (consolidated) declined 40.1% YoY to Rs689mn (24.3% lower than our estimate of Rs911mn). EBITDA was flat at Rs155mn vs. our
estimate of Rs129mn as margin improved 880bp to
22.4% against our estimate of 14.2%.

■ Better margins ahead; upgrade to Hold: With volatility in global oil prices reducing and LPG prices more stable, we expect margins to improve. We value the stock at 6x one-year rolling forward earnings and assign a new target price of Rs122 (earlier: Rs90). Upgrade to Hold.

■ Estimates revised: While we have lowered our revenue estimate by 12.3% for FY10E and 15.9% for FY11E, margin estimates have been raised by 222bp to 17.0% and by 330bp to 19.4%. We have also adjusted for the one-time extraordinary other income during this quarter. Effectively, EPS is higher by 6.8% for FY10E and 2.1% for FY11E.

■ Lower LPG prices impacts revenue, but gas division help boost margin: The gas division’s revenues declined 48.0% YoY to Rs504mn, impacted by the 54.1% decline in the global LPG prices to US$390/tonne. Liquid logistics revenue was flat at Rs182mn. EBIT margin increased 974bp to 24.2% as gas division’s margins improved 576bp YoY to 13.3%.

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