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How Profitable Are The Different Businesses Of Cogent Holdings Ltd?

Logistics services provider Cogent Holdings Ltd (SGX: KJ9) has been a big winner in Singapore’s stock market over the past five years with its stock price up by over 600%.

Its strong performance caused me to take a closer look at its business. In an earlier article, I looked at the different ways Cogent generates revenue. I thought it would be interesting and useful to follow up by looking at how profitable each business segment within the company is.

More specifically, I want to understand how well each segment is doing when it comes to making a profit on each dollar of Cogent’s equity that they employ. In other words,  I want to calculate the return on equity for each segment.

(The return on equity is found by dividing each segment’s profit by its net assets, or equity.)

Cogent segment ROE table
Source: Cogent 2016 earnings release

From the table above, we can see that the most profitable segment for Cogent in 2016 was Automotive Logistics Management Services. Interestingly, Cogent’s largest profit contributor – the Warehousing and Property Management Services segment – was the least profitable in 2016 given that it has the lowest return on equity.

With the table above, we can conclude that for Cogent to grow its overall profitability, it should (1) maintain and hopefully increase the profitability of high return businesses such as Automotive Logistics Management and Container Depot Management, and (2) improve the profitability of its largest segment, Warehousing and Property Management.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.