Kerry Logistics: Plan to Divest KEX Is Positive; Lifts Cash Flow, Should Boost Fair Value

Kerry Logistics Network’s, or KLN’s, plan to distribute its 52.1% stake in Thailand-listed Kerry Express (Thailand), or KEX, to KLN shareholders is positive but largely anticipated. The date of the distribution is not finalized but we estimate it to occur in early February 2024 at the earliest. KLN had announced in July that it would dispose of its other express delivery businesses to focus on its international freight forwarding and integrated logistics businesses. We like KLN distributing its stake in KEX to shareholders as the loss-making KEX’s drag to KLN’s earnings would be removed, increasing KLN’s return on invested capital and strengthening its moat. At the moment we have a no-moat rating on KLN and this move should lift its economic profit. We are buyers of KLN given its attractive valuation. We like KLN focusing its strength in international freight forwarding, given it is the largest transpacific non-vessel operating common carrier.