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ILB sees higher earnings from stronger China presence



INTEGRATED LOGISTICS BHD (ILB) could see higher earnings from China as it strengthens its presence in the country, which is currently experiencing rapid economic growth, analysts said. The company had in May proposed increasing from51% to 60% its stakes in its China units - ISH Logistics (Shenzhen) Ltd, ISH Logistics (Shenzhen II) LTD, ISH Logistics (Shanghai) LTD - with an additional investment of HK$29.1mil (RM15mil).

Analysts said the investment could further strengthen the company's presence in Shenzhen and Shanghai. Both the cities have sizeable numbers of multinationals, which had in the past several years established manufacturing bases there.

For its first quarter, ILB reported a 20% rise in turnover to RM44.6mil from RM36.9mil a year ago. It attributed the growth mainly to higher contributions from the China operations and higher occupancy rate at its warehouses locally.

"I believe the company's second-quarter results will be better, as most of the warehouses, particularly those in China have had higher occupancy rates," an analysts with a local stockbrokerage said.

In Shenzhen, ILB is one of the logistics providers for IBM Corp, which has a large manufacturing facility in the city that produces nearly 70% of IBM laptops for the world market.

As for Shanghai, ILB's main customer is IKEA, which has stores in Beijing and Shanghai as well as in Hong Kong.

Being one of the first Malaysian companies to establish itself in China would give ILB the edge over others, in view of the rapid growth of the country, said a fund manager with a local brokerage.

"Compared with other (Malaysian) companies which only recently ventured into China, ILB has already established itself there," the fund manager said.

ILB's operations in China currently contribute about 20% of its total revenue, but that is expected to increase in the future.