Xpediator (XPD) is an integrated freight management business. The Group has three main business areas: freight forwarding services, logistics and warehousing and transport services. Revenues are derived from the UK (23.5% of Group revenue), CEE and Baltic states (76.5%).
As demonstrated by the recent trading update, XPD continues to grow rapidly by acquisition and also organically (+46% year-on-year in 2017). We anticipate further strong growth during the course of our estimates, too.
Well-established position with the CEE region and the Baltic states and therefore a competitive advantage over late entrants to the region. The CEE region and Baltic states are growing much faster in GDP terms than either the UK or the remainder of the EU. This positioning, should help the Group benefit from continued re-shoring of manufacturing from the Far East.
Eshopwedrop and Pall-Ex Romania are still in their relative infancies, growth-wise, in our opinion. We anticipate Eshopwedrop, which is now profitable, will grow strongly in both existing markets and by new / forthcoming franchise agreements in Georgia, Albania, Greece, Bulgaria, Ukraine and the USA. The strong growth of Eshopwedrop is expected to result in a cross-selling of warehousing and distribution services.
In addition, Xpediator is looking to open new office locations within the freight forwarding division in the UK. Within the transport & logistics division, management is seeking to open strategically located warehouse facilities (UK Midlands), driven by e-commerce and introduce new services in both existing and new markets.
As management own 68% of the company, their interests are fully aligned with external shareholders and they are fully focused on value creation. On a forecast 2019 PER of 10.8x and yield of 4.1% the shares appear lowly rated despite the many growth opportunities. This is reinforced by our own valuation calculation using three different methodologies: peer group comparisons, discounted cash flow, and dividend discount model. This suggests a share value of 74p is merited, still well above current levels despite recent gains.
NB you can meet CEO and Founder Stephen Blyth at the ED Investor Forum on March 28th, please register here: