Kuwait's Agility has received some welcome relief after its legal wrangle in the US courts.
The GCC's largest warehousing and logistics company by market capitalisation gained the most since December 8 yesterday as the brokerage Al Mal Capital initiated an "outperform" recommendation and 450 fils target price on the company. Agility ended 3.08 per cent higher at 335 fils in Kuwait.
The company has shed more than half of its value since an Altanta court indicted it in November 2009 on charges of conspiracy and fraud for allegedly overcharging the US defence department on about US$8.5 billion worth of food supply contracts to troops in Kuwait, Iraq and Jordan. But analysts at Al Mal said the worst was over for the company as it had concentrated on reaping revenues from its Global Integrated Logistics segment, which provides logistics to the commercial sector.
"All this has been priced in," said Irfan Ellam, an analyst at Al Mal. "It's also been oversold for two reasons: because the market overreacted to the US Army situation; and because the market conditions regionally are pushing the price down further." The company lost the US army as a prime client, which historically contributed as much as 35 per cent to annual revenues, at the end of last year. Agility has also been barred from bidding for any future US army contracts.
But although this will affect the company's future financial performance, Mr Ellam said its low price to earnings ratio would keep it on the radar of investors.
At its present price to earnings of 3.7 times, Agility trades at a discount of 82.5 per cent, compared with a peer group average of 21 times price to earnings.
Mr Ellam added the logistics sector is also a profitable one. The transport and logistics industry in the GCC was estimated to be worth $18bn in 2008 and is expected to grow at an average of 0.2 per cent from then until next year.
The logistics industry in the Middle East acts as a conduit for trade between Asia and Europe.
Agility has operations in 120 countries and secures most of its revenues from Kuwait, while other Asian countries and Europe accounted for 21 and 22 per cent respectively in 2009.
