Afcom Holdings Limited is engaged in carriage of cargo on airport-to-airport basis. They have appointed General Sales and Service Agents ('GSSAs') in India, Hong Kong, Singapore, Thailand, Japan, South Korea, China, Taiwan. The General Sales & Service Agent – GSSAs represent the Airline and market its cargo space amongst various Freight Forwarders in the market. They are the channel partner function as the extended arm of the Airline in terms of booking the cargo from the Freight forwarders and coordinate with their Custom Clearing Agent to clear the customs and ensure a smooth handover of the custom cleared cargo to the Airline, along with the required documents for shipment. They have entered into agreements with the GSSAs, pursuant to which the GSSAs must provide a minimum of 50% of the volume of cargo to them. They pay the GSSAs commission and incentive based on the cargo they provide. Apart from GSSA, they also have business relations with freight forwarders and cargo sales agents ('CSA'), who blocks space on their aircraft and hand over the cargo to them. They have entered into an agreement dated 24.09.2021 with the Air Logistics group (a part of World Freight Company), which is a global leader in the cargo sales and service business. The Air Logistics group represents Afcom as its GSSA in far-eastern countries. They have also entered into an agreement dated 13.10.22 with Taylor Logistics Private Limited, which is a part of the TTK Group as their GSSA in India. They provided supply chain solutions to a diverse base of customers. Active Customers such as e-commerce marketplaces, direct-to-consumer e-tailers and enterprises and SMEs across several verticals such as FMCG, consumer durables, consumer electronics, lifestyle, retail, automotive and manufacturing, through various Freight Forwarders for the period ended February 29, 2024. As per financial performance, Afcom Holdings Limited has posted total income / net profits of Rs 13.88 Cr / Rs (4.20) Cr (FY21), Rs 48.66 Cr / Rs 5.14 Cr (FY22), Rs 84.90 Cr / Rs 13.58 Cr (FY23) and Rs 134.16 Cr / Rs 23.10 Cr (29.02.24 FY24). So as per previous financials data, company has shown good growth, but negative cash-flow will remain concern. Company has posted an average EPS of Rs 4.83 and average RoNW of 37.91% for last three fiscals. Issue is priced at a P/BV of 1.93 as per NAV of 55.98 as on 29.02.24. If we attribute latest earnings of FY22, FY23 and annualised FY24 on fully diluted equity post issue, then asking price is at a P/E of around 52.15, 19.76 and 10.64 respectively, which looks fairly priced. As per RHP, there is no listed peers. On BRLM's front, GYR Capital Advisors Private Limited is associated with this SME IPO and handled 27 IPOs in last 3 years. From last 10 IPOs, all opened above issue price or at par on the day of listing. As of now from last 10 IPOs, one is trading below issue price. ( As on 31.07.24 ) As per financials, Afcom Holdings Limited has shown good growth, RoNW is 18.53% and P/E is respectively 52.15, 19.76 and 10.64 as per FY22, FY23 and annualised FY24 earnings. So, issue looks fairly priced, but negative cash-flow is a concern. Company is engaged in carriage of cargo on airport-to-airport basis, which is special business segment. So, we give SUBSCRIBE rating for this IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.
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