Clasquin $EPA:ALCLA, a French microcap in the attractive freight forwarding industry
Clasquin is an interesting French microcap growing nicely in the attractive freight forwarding industry
All figures in this article are in euros
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The Freight Forwarding Business
Clasquin is operating in the global freight forwarding industry. It is a pure play asset lite freight forwarding company. Clasquin has only 2.31 million shares outstanding and we havent seen any dilution since the IPO in 2006. The founder owns 41.4% of the shares. This is a microcap with a total market value of 180 million and an enterprise value of 159 million (net cash of 21 million) - based on 2022 year end results before the 2023 acquisition of Timar.
I first got introduced in this attractive asset lite industry when I first invested in Expeditor International in the 2000s. The industry consist of the coordination and shipment of goods from one location to another via single or multiple carriers via air, sea, rail, or highway. Freight forwarding companies typically do not own hard assets like boats or airplanes. Freight forwarding principles are based on the efficient and cost-effective transfer of goods that are kept in good condition throughout their journey. It is all about developing a relationship of Trust with its customers that the goods will be delivered in time and in good shape.
Clasquin’s gross profit is split among these 3 major components based on 2022 numbers:
Maritime freight forwarding: 56.8%
Air freight forwarding: 28.1%
Road freight forwarding: 10.5%
The company is still very French. 48.9% of gross profit originates from France and 50% of the trades is between Asia and Europe. Clasquin is actively focusing on growing the Europe - Africa trading routes. The Europe - Africa trading routes are growing faster and have less competition. Clasquin has made several acquisitions (refer to the acquisitions section) to boost this segment.
Clasquin has developed niches in the Art and Shows industry. It also very present in high value items in the Fashion, Cosmetics, luxury and Fine Arts as well as Food, Wine and Spirits.
The top 10 global freight forwarding companies are the following. Not all the companies in the list are asset lite pure play.
DHL (not a pure play, owns trucks, plane)
Kuehne + Nagel International AG (mostly logistics but not pure play: owns warehouses and distribution)
DB Schenker (part of German railway Deutshe Bahn)
DSV (asset lite pure play except trucks)
Sinotrans (China logistics arm of CMG)
Expeditors International (pure play)
Nippon Express Co. Ltd
UPS Supply Chain Solutions (not a pure play)
Bollore Logistics (bought by CMA in 2023)
Pure plays asset lite companies trading in the stock market are Kuehne + Nagel, DSV, and Expeditor International.
Clasquin is a very small player in this industry, positioned in strategic niches and focusing on key trading routes. It probably provides superior services to customers in terms of flexibility, personalized touch, addressing specific niches to compensate for the lack of scale.
The growth story - a true hidden French Champion
The company started in 1983 with only 1 office purchased by the founder Yves Revol, in Lyon, France. The main thrust in the 80s to mid90s was to grow the southeast Asia - France air freight trading routes. In early 90s, the company started to develop the maritime freight forwarding business. The maritime business is now the largest contributor. In 1995, it open up its first office in North America. North America represents 23% of trading volume (Europe-NA + Asia-NA). It also made some acquisitions to develop the North American trading routes further but most of the growth is organic.
In recent years, the company is growing its road freight forwarding business especially between Europe and Africa.
Since revenue fluctuates greatly with shipping rates, a better measure of the company growth is the gross profit. The gross profit is what it charges customers to handle the logistics on top of the freight charges.
We can observe that Clasquin has grown gross profit steadily, mostly organically by opening new routes and new offices. Since 2005, the CAGR is 11.6%. The last 2 years were exceptional, so if we exclude the last 3 years, the CAGR from 2005 to 2019 is 9.4%. I think this is more inline with normal expectation of future growth.
The air freight (more mature) in million euros has grown steadily but at a slower growth.
The maritime freight in million euros component has seen very strong growth and overtook the air freight in terms of contribution in 2010.
As we will discuss in the next section, 2021 and 2022 were exceptional years for the maritime business.
The number of 20ft containers has risen steadily over the years.
The Road forwarding (brokerage) was almost flat in the 2000s and then with the renewed focus on the Europe - Africa trade, gross profit has increased significantly in the recent years. It is expected to grow even further over the next few years based on the recent acquisitions in Africa.
In terms of net profit, Clasquin growth was actually endemic in the first 10 years after the IPO. It was operating almost as a startup, funneling most of the profits into growth, opening new offices. It probably lacked scaled to cover the G&A and new office costs.
Although the company net earnings was always positive, it always struggled to balance growth and the cost of developing new trading routes. New trading routes are expansive as you have to hire people in new offices without the steady revenue that you will eventually generate after the first few years.
As we can observe below, the net profit margin (over gross profit) have actually gone down from 10-12% range in early 2006-2008 to a low 5% in 2016-2018. Since then, the margin have gone up steadily. If we can stabilize at around 10-14%, Clasquin will make money for its shareholders and this is will be a very good investment.
The 4 brokerage firms are unanimous that Clasquin will not return to the anemic net profit margin once the 2021-2022 boom is gone. But this is THE RISK for this company.
2021 and 2022 - the booming years
The challenges faced on global shipments during the COVID crisis was very beneficial to the global freight forwarding industry. During those years (especially in 2021 and 2022) gross profit per shipment has more or less doubled.