Kerry Logistics Network: Fair Value Estimate Maintained After Investor Day; Shares Cheap

After attending no-moat Kerry Logistics Network, or KLN,’s investor day, our earnings forecast is unchanged and fair value estimate remains at HKD 11.90. The shares are undervalued. We believe a potential transfer or sale of the loss-making Thailand express business to parent SF Holding, or SF, could help drive KLN’s share price toward our fair value estimate, increase return on invested capital, and strengthen KLN’s moat. Despite the Red Sea shipping disruption and drought at the Panama Canal, KLN’s management maintained the view that the worst is over and the outlook is more stable. We are encouraged to see KLN is on track in increasing its collaboration with SF, supporting our core operating profit and net gains forecast of 7% CAGR from 2023 to 2027.