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Expansion strategy pays off for niche logistics provider

OneLogix is a niche logistics provider focusing on specialised transport services. This gem, with a market capitalisation of just under R1bn, is either one of the best-kept secrets on the JSE or perhaps simply a misunderstood business.

This group has grown organically and through a number of acquisitions. The acquisitive strategy focuses on purchasing businesses with like-minded owners, which have, for the most part, retained a minority stake, thereby aligning interests and providing funding and head office support to grow.

Each business acquired shares with similar characteristics: a niche service offering, dominant market share and quality operations run by skilled management teams. The group has successfully incorporated and diversified the business with each bolt-on acquisition.

OneLogix now comprises 11 unique businesses, nine of which increased their market share over the most recent reporting period.

Vehicle Delivery Services (VDS) was historically the dominant driver of revenue for the group. Management embarked on a deliberate strategy to lessen the company’s dependence on the automotive industry, successfully reducing its exposure over the years from 90% of revenue down to 51% in the most recent reporting period.

Today, the other half of the business includes primary product logistics, viz. United Bulk (liquid bulk), Vision Logistics (acids, solvents) as well as Jackson and Buffelshoek (refrigerated fresh produce, industrial food).

The recent Vision Logistics purchase has proved to be a great acquisition as management has been able to extract synergies between United Bulk and Vision through load configuration. This simply means the same fleet can be used to transport liquid bulk loads to and from destinations with no empty load return trips.

As a result, margins in this division almost doubled from 5.5% to 10% over the period. The primary product logistics division is now a market leader in most of the segments in which it operates: Acids (first), solvents (first), food grain (third) and liquefied petroleum gas, or LPG (second).

The OneLogix Logistics Hub is perhaps the best illustration of a strategic, forward-thinking management team. This development is situated in Cato Ridge in KwaZulu-Natal, just outside the rust belt.

The second phase of the hub was completed at the beginning of January this year and according to management has surpassed expectations with 9 000 motor car storage and 1 000 truck parking bays.

The development has led directly to new business volumes for the group. Of the 9 000 bays, 4 000 are bonded storage spaces, meaning original equipment manufacturers (OEMs) can store vehicles without paying customs duties immediately and only pay them once a sale transaction has been concluded.

To add to this, the group is trying to entrench itself into smaller OEMs’ supply chains by providing services such as pre-delivery inspection, body work reparation and installing security dots at its logistics hub development.

The hub also provides facilities such as refuelling, workshops, driver accommodation and fleet parking areas, and has allowed management to consolidate operations in one central location.

We think the group remains very well positioned to benefit from increased trade across Southern Africa.

The recent period was characterised by consolidation of certain subsidiaries, investments and acquisitions, which we think will be earnings accretive. At current levels (320c/share) we see considerable value, especially on a medium-term view.

*Samantha Pauwels is a portfolio manager at Cannon Asset Managers.

This article originally appeared in the 24 March 2016 edition of finweek. Buy and download the magazine here.

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