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GKE Corp, Attractive Pipeline Laid For A Bright 2016
Corporate Digest | 08 October 2015
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By: Louis Kent Lee
Articles (199) Profile

GKE Corp is a leading integrated logistics solutions provider that offers a one-stop comprehensive set of solutions for supply chain management.

The primary activities of GKE Corp are made up of two engines of growth: warehousing and logistics, and strategic investments.

Although the oversupply of warehousing scene in Singapore is probably raising your eyebrow, possible bright spots were also uncovered when we found out more on the company’s pipeline to take on 2016.

Oversupply, Warehouse Utilisation Rate Still At 90%

Despite the oversupply scene in the warehousing space, it is important to note the core difference between a warehouse that’s to be leased out, and a warehouse operator, with its own full suite of warehousing space, value chain to connect the different parts of the logistics chain, and also, the expertise to handle the inventory of diverse industries.

GKE Corp, being a warehouse operator, offers not just warehousing space, but the full suite of one stop solutions in the third party logistics value chain. It takes specific niche and understanding to store, manage, ship out, maintain inventories, and produce end goods of players from different industries.

The key factor to note here is that most customers, upon seeing how much load of a nightmare is taken off their plates when it comes to the inventory management, storage, delivery, and maintenance space, most of them will appreciate this streamlined efficiency greatly. Stickiness normally ensues.

From our understanding, the utilisation rate of the warehouses of GKE Corp, stands at some 90 percent.

Revenue Generation Expected From 2 Strategic Investments

For FY15, revenue was singlehandedly generated from the Third Party Logistics segment.

Albeit being in the red for the past two years, GKE Corp has successfully streamlined its operations, disposed entities that are not producing enough value, and has reduced overall losses. Better cost management as a result of this initiative has helped pull up gross profit margin to 25.5 percent in FY15 from that of 20.4 percent in FY14.

It was understood from the management that there are bright spots to watch for both its strategic investments – infrastructure logistics segment and shipping logistics segment.

Infrastructure Logistics To Pour In Revenue With Concrete Visibility

Via its wholly-owned subsidiary, Wuzhou Xing Jian Ready-mix Co, GKE’s success of tendering the piece of 29,640 square metres land at Wuzhou City, Guangxi, has seen the construction of a cement mixing plant.

As Guangxi, being a 3rd tier city in China, is expected to undergo great transformation in the government’s five and 10 year plans, infrastructure investments are going to be lifted by tailwinds that will be greatly helpful when fruition of projects, coupled with the right timing occurs.

It is understood that currently, in the region where the cement plant is at, there seems to be an undersupply of quality premix cement.

With GKE’s cement plant expected to be completed and run commercially by end 2015, it is a timely entrance to this space.

An interesting point to note is that premix cement only has a shelf life of four hours, hence, specific know-hows in just in time delivery (part of logistical value chain), is crucial as this inventory is being transported to customers within specific regions that can meet the shelf life timeline.

This shouldn’t be a problem for GKE given their transferable experience from the third party logistics segment.

The recently divested associated company, Maoming City Hung Ji Construction Materials Co, was used as a test bed for GKE to enter into this space.

On revenue visibility and impact, it was understood that revenue contribution from this segment could be comparable to that of the Third Party Logistics segment (FY15 revenue: $36.2m), come a full year’s recognition of this segment for FY17. [Note: FYE is 31 May. Contribution will not be very significant in FY16.]

Shipping Logistics Expected To Drive Growth

GKE’s raised rights issue in 2015 saw net proceeds of $12.6 million raised. As mentioned in announcements filed with the Singapore Exchange, part of the net proceeds were deployed on the construction of an 83,000 m3 liquefied gas carrier vessel.

This was done through GKE’s wholly-owned subsidiary; GKE Shipping Co’s 50-50 joint venture; Steadfast (HK) Co. It was shared that despite the demise of oil prices, demand for liquefied gas is still healthy, and it is not expected to affect the securing of chartering projects for delivery of liquefied gas.

In addition, it was revealed that GKE is already speaking to several parties to get expression of interests prior to the completion of the vessel.

The vessel is stipulated to be completed by 2016, and will provide an uplift in revenue visibility for FY17 Shipping Logistics’ segment.

Exciting Times Ahead
With the company’s losses narrowing as a result of streamlined efficiency, the primary sector’s contribution is limited on its own albeit achieving growth moderately. That said, the above mentioned points are the segments to watch, that are like to have significant impact in the overall revenue contribution, and the ability to lift the profitability levels of the company up by a few notches.

All things held constant, GKE is set for an exciting future.

Louis is a qualified accountant with the ACCA, and is the Research Editor at Shares Investment magazine.

Please click here for more information about this author.

GKE Corp  0.050 -- --   
Business: Co provides third party logistics services. [FY18 Turnover] Third party logistics (74.6%), infrastructural logistics (25.4%).

Insight: Apr-19, 9M19 revenue rose 17.5% due to higher cont... Read More


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