Logistics’ platform for third-party vehicles: SLG plans to raise Rs1.19bn in equity capital

KARACHI: Backed by strategic investors such as Saudi Bugshan and Karandaaz, the Secure Logistics Group (SLG) has planned to raise Rs 1.19 billion in equity capital through a combination of a pre-IPO placement and an Initial Public Offering (IPO) at floor price at Pakistan Stock Exchange (PSX).

Whereas, the pre-IPO of Rs 585 million has been subscribed by the existing investors, the IPO of Rs 600 million will comprise of 50 million shares (18.27 percent of the total post-IPO) at an attractive floor price of Rs 12 per share. Arif Habib Limited (AHL) is the lead manager and book runner.

The funds raised from the capital market will be used to set up a logistics platform for third party vehicles.

The platform, which shall be launched in the third quarter of 2024 shall initially onboard 70 Prime Movers and Semi Trailers along with 20 distribution vehicles and gradually expand to 140 Prime Movers and Semi Trailers and 60 distribution vehicles by 2028.

The SLG’s long-term plans also include investment in warehousing starting 2025 to accelerate long-term growth with a total of 8 warehouses planned by 2028. These initiatives are expected to deliver revenues and earnings of CAGR of 20 percent and 37 percent, respectively over the next five years.

These initiatives will start from CY24 for which company is seeking to raise equity capital through a combination of pre-IPO placement with existing shareholders and an IPO by way of listing on Pakistan Stock Exchange through a book building process.

The SLG was incorporated in 2013 and was formerly named Asia Capital Partners (Pvt.) Ltd (ACPL). The company operates in horizontally synergetic business lines of logistics, asset tracking and security services.

From humble beginnings in 2013, the SLG has over the years emerged as a fully integrated logistics operator. Based on its B2B business model, the company serves almost 125 corporate clients across its three business lines. The client portfolio includes multi-nationals, leading domestic corporates, financial institutions, foreign mission and NGOs.

The company has had a successful capital raising track record whereby it closed a convertible TFC of Rs 600 million in 2019 and a private placement of equity of Rs 1.20 billion in 2020. The shareholder group includes two reputable international investors, namely Saudi Bugshan Group, one of the largest conglomerates in Saudi Arabia and Karandaaz Pakistan, a FDCO-backed development finance institution.

The SLG has submitted an elaborate usage of funds plan in its prospectus as well as the Information Memorandum. The main purpose of the equity capital raising is to deleverage the balance sheet in an unprecedented high interest rate environment, complete the on-going transformation of the existing logistic business line from a traditional play to a tech-driven operation, expand the logistic operation to Central Asian regional markets and execute numerous efficiencies enhancement initiatives. The company’s long-term plans also include the initiation of a warehousing segment whereby, from 2025 to 2028, the SLG plans to add 8 warehouses with an aggregate storage capacity of approximately one million square feet.

The company has a solid earnings track record over the past five years (2018-23) with a robust consolidated revenue CAGR of 39 percent and net profit CAGR of 30 percent, respectively. The SLG has enjoyed consistently high GP margins (average GPM of 39 percent over the past 5 years), while operating margins have averaged 27 percent over the same period. This is commendable considering the major external challenges faced by the company in the form of Covid (2020-21) and political and macroeconomic instability in 2022/23.

The SLG floor price implies a 2023 P/E of 5.3x and P/B of 0.69x which compares favourably with the average TTM (Trailing Twelve Months) P/E multiple of around 6x for private sector listed companies at the PSX.

Copyright Business Recorder, 2024