All cargo Logistics

I am pretty impressed with this business . The business model and their competitive advantage looks like no one can even touch this business for next 5 - 7 years . This business has a great opportunity to grow .

Little facts about the business :

The business is in logistic industry . They act as a middle man between exporter and importer . This business has presence in around 90 countries and they have 200 offices globally . Low debt company with a good management who is handling money very well .

How do you i think this business would grow :

Well exports and imports are always there . Just like we eat food , exports and imports are always needed . High labour lost is making developed countries like Europe , USA to import from China , India , Indonesia , Bangladesh etc !!! Seeing the labor cost in India and USA , USA is paying a wage of around 10$ per hour while in India we are getting 10$ - 20$ a day(Depending on the profession it may go lower or higher) . So still there is a huge gap for importing from developed countries . Hence importing would happen continously . People might ask me a question why would you think that USA,Europe would import only from India and not from China , Indonesia etc . Well I am not bullish on India particularly , I am bullish on developing countries for imports , so i could say they can import from any where like china ,bangladesh , thailand ,indonesia etc . This company has presence in 90 countries . And am damn sure they would be increasing their presence in the country where they would see more imports are growing . This companies job would be just picking the stuff from one country and delivering to another country through ship . As this company has presence in all countries , its going to be a great advantage for this company .

What is the competitive advantage of this company ?

Well they are in 90 countries and 200 offices globally ( As per their site datas) . Well not a small player can start office in each and every country . It would cost you lots of money , particularly while you are importing/exporting , lots of trade licences are needed to enter/exit a country . Its not going to be so easy to get those licences . And before you get those licences , it would take minimum of 5 years to get exposed to all countries (where this company has presence) and its not going to be so easy . Lots of money is required . Every Investor would be expect a ROI . So if someone is gonna spend such a big money without being efficient , its not a good ROI obviously . Whoever sees a opportunity to start a business and become a competitior of this company has to start slowly and grow slowly . Its not gonna happen in a year or two , its gonna take atleast 5 - 7 years . Before that this company would make huge money . Their subsidary has already signed a aggrement with Alibaba ( A Big Ecommerce Website in China ) .


This company made some acquizations from USA . When i was seeing a interview from their managing director , i came to know that they bought a company for 50 million $ ( around 300 crores) . The company which they bought has a EBITA of around 200 crores . This is just a example to make you clear that how management has bought a company so cheap bargaining !!! . They can clear the debts in just 2 years . They are doing more acquizations . They are building their networks more and more . By adding more acquizations and acting brilliantly ,company is adding more revenues to their accounts .

Just see a company which is acting a logistic player globally and bringing money to their shareholders in $ , having a great competitive advantage with networks and contacts , i feel they can bring revenues something similar to big Indian pharma companies or IT companies .

Even they can form a subsidary as a wholesaler dealer, and get the client requirments , get it for cheap price,mark up and sell it . Do the interchange through this logistic business !!! Profit and more profit !!! They are already have huge networks . If any of their clients need a product from china or thailand ,they can buy it , charge them for logistics and sell it at USA for their client with great profit margin . As they have presence in all countries , i dont think if india exports/imports gets affected this company revenue is going to go down .

I feel this is a great company for long term . Feedbacks are always invited !!!

I guess i am writing such a big story . Sorry guys

 

@Investor2008 Firstly, you do not have to be sorry about anything. The purpose of this forum is to share and exchange our ideas. I would want to know what do you think of the competitors. Since as you told it has a global presence, it would have competition from local/domestic companies as well as huge global logistics chain.I would also like to know how much do you think that they could expand their profit margins upto. For last financial year they had profit margin of around just 4%. Lastly, in your research did you came across any risk factors that you think might affect their performance in future.

 

I would say its difficult to find their competitors because most of the companies I know is targeting locally . Even if they compete internationally it would be between maximum 3-5 countries. There are risk factors such as if the vessel get sinked due to natural disasters ,then it would be a great loss for the company. But am damn sure they can recover atleast half of the amount via insurance . secondly trading policies in each country would affect this country . for example if this company is having high profit margin on a particular product and if the trade policies are going to affect their business cant do well . but risk is a part of business. We have to see above the risk how this company can make good profit . the margins would differ on each and every product they export . so if you said that there were only 4% margins ,overall I think it's good . based on margins if they avoid products then the business would suffer . the management is focusing on delivering as much products they can . they are allowing even something like (if there is a space in the container ,they are accepting delivery from 3rd party even . so the goal of this is to be efficient. Creating this infra structure would be a very big challenge. You can see the management acquisition they have done and the debt of the company is still low . they are looking for.more acquisition. Also they are making acquisition via debt majorly and paying it back from profits . they are trying to do acquisition which can be covered in 3-4 years and after that the business is pure.profit . as their other companies are making profits they are able to clear the debt so fast .they already have a logistic player called eculine which is a leading logistic player in USA. Their consolidation profit is around 5000 crores . they have grown almost 20% in past five years in top line. As they are trying to eat big fishes I am damn sure they are just lowering their competitor ratio and also getting network contacts of those companies . These network contacts can help them in future in any of their business. Also these are just my point of view .

As you were talking how they would expand their margins ,am bullish on their top line growth . Competitive advantage can't be just with price , these guys are having networks . if their competitor can't deliver for a particular country they are going to come to these guys and there are higher chances to push more deals from the same exporter.

These are the things which I feel this company can go ahead from here.

Note : Not all my picks are 100% right but I diversify into different sectors and different companies. So I am just keeping my risk low while reward is unlimited.

 

@Investor2008 Yes I know these are your point of view and you have a strong conviction on the company and whether anyone invests in it or not they have to do their own independent due diligence. I also understand that nobody's picks can be 100% right, if that has to happen then you would certainly be a very very rich person. Nevertheless,I was asking all that thing was because sometime back I was just going through logistics space and within India there are competitors like BlueDart and Gati as well as whole lot of private players, but from your description I got an idea that this was logistic player on an international field and that got me interested and hence I wanted to know more about the company.
I also have one more query. Pardon me, whether I invest or not, I usually do have a lot of questions. Based on your description of the company, it looked more like a trading plus shipping company. Usually the shipping or logistic companies just ship products from one end to the other and charge their customer on that basis. So as you say that company does have a high profit margin on a particular product, does it mean like it is a trader and shipper of the product together. If that is indeed the case then company should be having two streams of revenue viz. Trading as well as Shipping.

 

Well their main business in shipping . I meant it as a trader depending on a product because they would charge according to the size of the product and also if a whole container is reserved for one person and they have a very small space ,and a exporter wants to send it urgently then they can use that opportunity to keep margins higher for that product and lower for remaining of the products which is present in the container . As they have plenty of containers their aim is to be efficient which would bring more profits . well I don't mind the questions which you asked, we need to ask questions to ourself while researching about company . the first thing I would ask is whether the business is scalable ? Does the company has competitive advantage? So these are the questions which gives me answers.

They can even start a subsidiary soon which can be something like a wholesale dealer as they have presence in lots of countries . These things would make the company focus on logistics and also the subsidiary profitable bringing the consolidated value of the company more.upside .

Well in India I feel blue dart is good for the domestic logistics play. As econmerce is booming and blue dart has a good brand name there is a good.opportunity for them .

Even.all cargo is having plans to start a domestic logistics business . the management said that they have contacts with dealers who supply huge trucks locally . so they might start soon once they study the local market well . that's what I heard in the interview from the managing director. They don't want to just invest simply without studying the market and see how they can profit. Trust me !! Management is good .

 

@Investor2008 Thanks for all the information.