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I consider Worldwide Container Terminal Providers, Inc. (OTCPK:ICTEF) [ICT:PM], or ICTSI, as a purchase order. On its investor relations web site, the corporate describes itself as “the world’s largest impartial terminal operator.”
That is an replace to my introductory article for ICTSI dated August 30, 2019. Within the final write-up, I centered on expectations for the corporate’s monetary efficiency in FY2024 and the outlook for inorganic progress. I improve my ranking on ICTSI from Maintain to Purchase after contemplating the corporate’s optimistic outlook. The rise in tariffs on the Manila Worldwide Container Terminal will assist enhance the corporate’s ends in FY24, whereas ICTSI has the intention and monetary energy to interact in inorganic progress initiatives.
Buyers must be conscious that ICTSI shares are traded within the over-the-counter market and on the Philippine Inventory Alternate. Buying and selling liquidity for the corporate’s OTC shares is low, with a three-month common each day buying and selling quantity of simply over $10,000, in line with S&P Capital IQ. ICTSI shares within the Philippines boast a better common each day buying and selling worth of $8 million (supply: S&P Capital IQ) over the previous three months. Readers can use the companies of Singapore’s OCBC Securities and Hong Kong’s Growth Securities to commerce the comparatively extra liquid ICTSI shares listed within the Philippines.
Anticipating higher ends in 2024 with increased charges on the important thing asset
The corporate’s newest Q1 2024 financials had been good, and ICTSI’s full-year 2024 monetary outcomes are anticipated to be increased than 2023.
ICTSI’s earnings per share or earnings per share rose +37% YoY from $0.072 in Q1 2023 to $0.099 in Q1 2024. The corporate’s precise Q1 earnings beat the consensus EPS estimate of $0. 08 {dollars} (supply: S&P Capital IQ) by +24%. Trying forward, sell-side analysts forecast ICTSI’s earnings progress to speed up from +6.5% final 12 months to 10.0% this 12 months. Moreover, the market sees the corporate’s EBITDA margin enhance by +100 foundation factors to 64.0% in FY2024. Consensus monetary forecasts are obtained from S&P Capital IQ.
Within the earlier a part of this text, I famous that the important thing asset or “flagship” of ICTSI is the “Manila Worldwide Container Terminal”. Moreover, the corporate’s 2023 annual report reveals that the Manila Worldwide Container Terminal boasts “a 70% share of Manila’s worldwide container site visitors.”
A current article dated June 21, 2024, printed on PortCalls Asia (a port business information portal) notes that “The Philippine Ports Authority has accredited a 16% enhance in cargo dealing with expenses on the Manila Worldwide Container Terminal.
Within the firm’s Q1 2024 analyst name (audio and transcript not out there), ICTSI estimated that its income per TEU, or profitability, may probably enhance from $182 within the earlier fiscal 12 months to $190-$200 within the present fiscal 12 months. It’s reasonable to suppose that the speed hikes for ICTSI’s key asset – the Manila Worldwide Container Terminal – will contribute to the corporate’s FY2024 earnings steerage.
Prospects for inorganic progress
ICTSI intends to pursue inorganic progress initiatives and the corporate has the monetary capability to assist future acquisitions or investments.
At its earlier annual shareholders’ assembly in April this 12 months, ICTSI harassed that it was “actively searching for funding in areas” the place it had been “profitable”, resembling “Asia, Latin America, Africa and the Center East”. From the corporate’s feedback, it’s cheap to conclude that ICTSI sees inorganic progress as a key precedence.
The corporate’s money circulation technology is robust and its steadiness sheet is wholesome. Free money circulation for ICTSI elevated +46% YoY to $358 million within the current Q1 2024, equating to a powerful free money circulation margin of roughly 12%. As of March 31, 2024, the corporate’s debt-to-EBITDA ratio was a reasonably manageable 1.8 instances. ICTSI additionally has restricted refinancing publicity given its lengthy weighted common debt maturity of 4.7 years. The above figures had been obtained from the slides of the corporate’s Q1 2024 earnings presentation. ICTSI’s trailing twelve month curiosity protection ratio can also be respectable at 3.7x in line with S&P Capital IQ.
For ICTSI, there’s a potential inorganic progress issue within the close to time period. In April 2024, South African media The Mail & Guardian reported that ICTSI had been chosen because the “most well-liked bidder for the 25-year three way partnership growth and improve” of the “Durban Pier 2 Container Terminal”. This shall be a major deal for the corporate. The Durban container terminal “handles 72 % of the port’s capability and 46 % of South Africa’s port site visitors” and is claimed to be “the most important ICTSI operation in Africa,” in line with the corporate.
In its Q1 2024 analyst briefing, ICTSI mentioned it stays assured it could possibly shut a deal for the Durban container terminal by the third quarter of this 12 months. This deal would have been accomplished even earlier, within the first half of 2024, if not for the authorized case introduced by Maersk (OTCPK:AMKBY) (OTCPK:AMKBF) (OTCPK:AMKAF) which misplaced its bid for the container terminal in Durban. A Bloomberg report dated Could 7, 2024 talked about that Maersk is “searching for to cancel the award of the concession to function” the Durban container terminal on the grounds that ICTSI “didn’t meet the necessities of the tender”. A possible near-term catalyst for a ranking change for ICTSI would be the completion of the Durban container terminal deal, if and when Maersk is defeated or withdraws its declare.
Even when the Durban container terminal deal is delayed by authorized points, ICTSI’s medium-term inorganic progress prospects stay good. As talked about above, the corporate has the power (monetary energy) and want (feedback from the annual shareholder assembly) to determine and implement new inorganic progress initiatives.
View possibility
Sure situations pose a threat to ICTSI’s prospects.
If antagonistic financial or political developments happen within the Philippines or different markets the place the Firm’s property are situated, ICTSI’s precise quantity or income progress could also be decrease than anticipated.
ICTSI could discover it troublesome to execute the Firm’s inorganic progress technique if available-for-sale property are overvalued or if regulators tighten approval standards for potential mergers and acquisitions or investments.
Closing ideas
Primarily based on my evaluation above, ICTSI’s outlook is favorable and the corporate’s inventory is undervalued. The inventory’s PEG (price-to-earnings) ratio is 0.74x or decrease than 1x, indicating a good valuation. That is primarily based on its consensus trailing twelve month normalized P/E of 17x and a consensus FY2023-2026 EPS normalized CAGR of +23% (supply: S&P Capital IQ).
Editor’s Observe: This text discusses a number of securities that aren’t traded on a serious US trade. Concentrate on the dangers related to these shares.