Tri-Mode System (M) Bhd

(TRIMODE, 0199)

Tri-Mode System (M) Bhd (Fundamental BUY with TP 0.68)

• Tri-Mode System (M) Bhd’s (TRIMODE) expansion of its new headquarter and distribution hub is set to provide earnings
impetus going forward. Recommend BUY with a target price of RM0.68 based on 17x FY21 PER, as per the average
valuation of Bursa Malaysia Small Cap and Bursa Malaysia Transportation and Logistics Index.
• TRIMODE is an integrated logistics solutions provider involving services of sea freight, container haulage, air freight,
freight forwarding, warehousing and marine insurance. Sales are derived predominantly from Malaysia (90%) with sea
freight remains the bread and butter followed by air freight and forwarding with sales contribution of 59%, 31% and 6%
respectively in FY19. TRIMODE owns its own fleet of haulage (98 prime moves, 545 trailers & 3 side-loaders) making it
one of the top haulage service providers by total volume of container hauled in Port Klang.
• Due to the Covid-19 pandemic, there is a shortage of global shipping containers now especially in Asia. The imbalance
of supply and demand has worsened the container and vessel capacity in Malaysia causing shipping freight rates to
skyrocket by 300% to 400% over the past six months. The higher freight rate is expected to continue until 2H2021 and
this is an added advantage to TRIMODE in addition to its enhanced capacity from the new hub.
• TRIMODE’s new 12-acre headquarter and distribution hub in Pulau Indah Industrial Park is expected to be completed
by April this year. Upon completion, business operation will be consolidated under one roof including the centralisation
of existing haulage operations leading to cost savings and improvement in productivity. The new hub will house a
95,000 sq ft of warehouse built-up space in addition to another 30,000 sq ft which will be added progressively in stages.
Warehouse segment will generate a new source of income together with third-party logistics services, providing
further cross selling opportunities from existing clients within its value chain.
• TRIMODE’s customer base is well diversified within various industries. As key clients are multinational companies (eg:
Mercedes, Top Glove, Scientex) which generally have higher volume, hence enabling TRIMODE to negotiate better rates
from the shipping line thus able to generate higher margins from customers, especially given current shortage of
containers capacity.
• The group has a formal dividend policy of 30% payout ratio, translating to a projected dividend yield of 2.3% in FY21.
Balance sheet profile are manageable at a gearing of 0.3x. We project double digit earnings growth in FY21 driven by
its core freight services and additional warehouse capacity in tandem with the recovery in global trade.
This document has been prepared for general circulation based on information obtained from sources believed
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contained in this document does not have regard to the specific investment objectives, financial situation and
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The Contra Trade account allows clients to buy shares based on available cash and/or collateral shares value
after hair cut at a higher multiplier. The multiplier varies according to the type of counters clients intend to buy.
Outstanding purchase(s) in the Contra Account need to be paid and/or settled within 2 (two) trading days after
the transaction date (T), failing which it will be force-sold on T+2.
Published:

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