Hot on the heels of its successful reverse takeover of Semitech Electronics in January this year, Catalist-listed Sky One Holdings (Sky One) has announced yet another significant piece of development, which could potentially speed up the company’s expansion into China’s fast-growing logistics services market.

Just last month, Sky One signed a non-binding letter of intent to acquire 50.1% of the entire equity interest in Jet International Courier Group Holdings (Jet). According to the management of Sky One, Jet is the largest private courier group in Mainland China with operations in China, Hong Kong and Taiwan.

“We would be paying an amount not less than 10 times PE of Jet’s 2007 audited accounts,” Dicky Suen, CEO of Sky One told Shares Investment (Singapore) when probed about the purchase consideration. On a preliminary basis, both Sky One and Jet have agreed that 50% of the purchase price will be satisfied in cash, while the balance by way of the issue of new Sky One shares at $0.15 apiece – a 36.4% premium over its current trading price of $0.11.

Upon completion, the acquisition will not only entrench Sky One’s industry position in China and Hong Kong but also allow the company to gain access into the lucrative Taiwan market. “With the added sales points in China and Taiwan, Sky One will further establish a comprehensive network of contact points and offices in Asia,” commented Suen.

Express Guaranteed

Based in Hong Kong, Sky One is a total logistics solutions provider, specialising in courier and other logistics services between Hong Kong and Mainland China. The company is principally engaged in the provision of integrated logistics services and customised solutions, delivery of goods from the airport terminal, seaports or distribution centres to the consignees’ or customers’ and vice versa.

Its services include the provision of door-to-door, door-to-port and port-to-port transportation of air and sea cargo, freight and express courier services. Ancillary services include bulk breaking, sorting, labeling and packaging of goods, pick-up and delivery of letter and parcel-sized items, goods and bulk goods from Hong Kong to Mainland China and customs tax clearance. Other related services include transportation management, airport cargo terminal handling, customised logistics services and other value-added services.

Healthy Growth

For the full year ended 31 March 2008, Sky One witnessed an 8.5% jump in net profit to HK$19m on the back of an 18.4% revenue rise to HK$125.2m. As highlighted by the company, the latter was mainly attributable to an increase in sales volume of the Express Land Transport (ELT) division and a maiden contribution of HK$6.4m from the newly established Airfreight division.

Notably, the company’s gross margin stood at 44.1%, a 1.4 percentage points improvement over the previous corresponding period. This was mainly due to a 3.3% increase in the gross margin of the ELT division to 46%, which was mitigated by the lower gross margin of the Airfreight division of 10.3%.

Compared to other industry players, Sky One’s gross margin is considered to be on the high side. So, will this be sustainable going forward? “Yes, only if we focus on our core ELT business. If we continue to grow our Airfreight operations or penetrate into the Seafreight segment down the road, our margins would definitely come down. Nonetheless, our top- and bottom-lines should go up,” Khoo Yee Yen, CFO of Sky One remarked.

Even with the Chinese government implementing measures to cool its economy, China is expected to post another year of sterling growth despite global economic uncertainties following the US subprime calamity and escalating fuel prices.

Moreover, available market research reports show that freight carried between 2007 and 2011 is expected to expand at a rate of 15.6% annually. As a specialist in this area, Sky One would most certainly stand to become a major beneficiary.