This is a not a recommendation to buy but it is a well worth opportunity to do a case study on a current blue chip company that is out of favor. Unfortunately, my expertise is not enough for me to analyze the business behind transmile's operatives. Currently, the only thing that I know about their business is that they are a serious logistics carrier that owns a potential profitable line from Shanghai to LA and if they are able to secure enough contracts with major clients such as manufacturers in China, they will be able to make a profit. At the moment, I knew that DHL has signed up for their services until a certain future date. This route could be the hidden gem behind this out of favor company. However, I am still trying to understand the financial statements that they are revising after their admitted their loss in 2005. It is yet to know what caused the loss to this company. The cost mainly comes from the operating expenses and we will have to look deep into their financial statements to find out what really went wrong before jumping right into this boat!!
Basically the main risks of a logistics companies are fuel prices and the number of contracts that they are able to secure in a timely manner. In addition, they will have to be able to secure a profitable flight route which happened to serve the right booming economy at the right time. For example routes from Vietnam, China to consumer countries like North America and Europe are said to be profitable. Last but not least, they will need to have a reasonable maintainance crew to help upkeep their fleet. As long as they are good at doing these few things right, they will be able to maintain and to grow as in this competitive logistics business.
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