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COL Financial - ICT Earnings Analysis

International Container Terminals Inc's (ICT) 1H15 core earnings were in line with COL Financial's forecast despite revenues slightly missing estimates. Excluding one-time items, 1H15 net income rose 19.8% year-over-year to US$102 million, meeting COL's forecast. Interest and depreciation expenses were lower than expected. While revenues grew 8.2% to US$552.1 million, they fell slightly below COL's estimate due to declines at ports in Portland, Poland, and currency devaluations. However, cash operating expenses increased less than estimated. COL maintains a HOLD rating on ICT as valuations are currently fair based on the company's share price.

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95 views

COL Financial - ICT Earnings Analysis

International Container Terminals Inc's (ICT) 1H15 core earnings were in line with COL Financial's forecast despite revenues slightly missing estimates. Excluding one-time items, 1H15 net income rose 19.8% year-over-year to US$102 million, meeting COL's forecast. Interest and depreciation expenses were lower than expected. While revenues grew 8.2% to US$552.1 million, they fell slightly below COL's estimate due to declines at ports in Portland, Poland, and currency devaluations. However, cash operating expenses increased less than estimated. COL maintains a HOLD rating on ICT as valuations are currently fair based on the company's share price.

Uploaded by

gwapongkabayo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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TUESDAY, 11 AUGUST 2015

International Container Terminals Inc:

1H15 core earnings in line with COL forecast


Excluding one-off items, 1H15 rose 19.8% to US$102Mil, representing 51.8% and 54.9% of COL
and consensus forecast. Earnings met our forecast as interest and depreciation expenses during
1H15 were lower than expected. Revenues were slightly below COL estimate, with 1H15 gross port
revenues up 8.2% to US$552.1Mil or 48.8% of our full year forecast. Cash operating expenses were
below estimates, increasing by 2.5% to US$226.5Mil, representing 48% of our full year forecast.

SHARE DATA

HOLD

Rating
Ticker
Fair Value (Php)
Current Price
Upside (%)

ICT
110.60
108.50
1.94

SHARE PRICE MOVEMENT


Revenues slightly missed estimates due to Portland, Poland and currency devaluation.
1H15 revenues rose 8.2% to US$552.1MIl, slightly missing our estimate, representing 48.8%
of our full year forecast. Container volume grew by 9% to 3.88Mil TEU, representing only 46%
of our full year forecast. This was mainly due to the strong performance of flagship Manila
International Container Terminal (MICT), Yantai terminal in China, the continuous ramp up of
the ports in Mexico and Honduras, and the first full year contribution of Iraq. However, container
volume still fell short of estimates due to the sharp decline in the volume of the port in Portland
due to the ongoing labor dispute. ICTs port in Poland also suffered a decline in volume due
to weakness in trade, while revenues from ICTs ports in Brazil and Madagascar were dragged
down by the devaluation of the Real and Euro.
EBITDA slightly below forecast due to revenues. Cash operating profits as measured by
EBITDA grew 11.9% in 1H15 to US$237.4Mil, equivalent to 48.5% of our full year forecast.
EBITDA slightly missed our estimate due to lower than expected revenues. Meanwhile, the rise
in ICTs cash operating expenses was below estimates, increasing by 2.5% to US$226.5Mil,
representing 48% of our full year forecast. EBITDA margin improved 100 basis points to 43.0%,
in line with our forecast.

100

90

80
11-May-15

11-Jun-15
ICT

11-Jul-15

11-Aug-15

PSEi

ABSOLUTE PERFORMANCE
ICT
PSEi

1M
-1.72
1.92

3M
-0.46
-2.95

YTD
-5.65
4.20

MARKET DATA

FORECAST SUMMARY
Year to Dec. 31
Sales
% change y/y
EBIT
% change y/y
EBIT Margin (%)
EBITDA
% change y/y
EBITDA Margin (%)
Net Profits
% change y/y
NPM (%)
EPS (cents)
% change y/y

2011E
664.8
26.1
212.5
17.5
32.0
281.4
13.6
42.3
130.5
32.8
19.6
0.063
30.7

2012
729.3
9.7
226.8
6.7
31.1
307.1
9.2
42.1
143.5
10.0
19.7
0.060
-5.4

2013
852.4
16.9
277.8
22.5
32.6
377.3
22.9
44.3
172.4
20.1
20.2
0.074
23.7

2014
1,061.2
24.5
321.3
15.7
30.3
443.0
17.4
41.7
182.0
5.6
17.2
0.079
6.4

2015E
1,131.6
6.6
353.9
10.1
31.3
489.5
10.5
43.3
197.0
8.2
17.4
0.097
23.1

2016E
1,260.2
11.4
396.1
11.9
31.4
553.4
13.1
43.9
227.6
15.5
18.1
0.112
15.5

RELATIVE VALUE
P/E(X)
P/BV(X)
ROE(%)
BVPS(P)
Dividend yield(%)

39.8
5.7
13.9
0.5
0.4

42.1
4.5
12.0
0.6
0.6

34.0
4.0
12.7
0.7
0.6

32.0
3.6
12.4
0.7
0.8

25.9
3.2
11.6
0.8
0.8

22.5
2.8
11.8
1.0
0.8

*Source: COL est imat es

110

Market Cap
Outstanding Shares
52 Wk Range
3Mo Ave Daily T/O

219,800.15Mil
2,025.81Mil
102.60 - 119.50
121.20MIl

George Ching
[email protected]

PHILIPPINE EQUITY RESEARCH

1H15 core earnings in line with COL forecast on lower than expected interest
and depreciation
ICTs 2Q15 net income declined 5.9% y/y to US$46.4Mil, bringing 1H15 net income to US$100.4Mil,
down 1.3% y/y. However, last years earnings included US$16.6Mil of one-off gains, vs 1H15s oneoff expenses of US$1.6Mil. Excluding one-off items, 1H15 rose 19.8% to US$102Mil, representing
51.8% and 54.9% of COL and consensus forecast. Core income was in line with COL forecast, but
higher than consensus forecast. Revenues were slightly below COL estimate, with 1H15 gross port
revenues up 8.2% to US$552.1Mil or 48.8% of our full year forecast. Earnings met our forecast as
interest and depreciation expenses during 1H15 were lower than expected. Interest expense rose
1.3% to US$27.8Mil, representing only 45% of our full year forecast, while depreciation expense rose
2.4% to US$62.3Mil, representing only 45.9% of our full year forecast. Cash operating expenses were
below estimates, increasing by 2.5% to US$226.5Mil, representing 48% of our full year forecast. This
brought 1H15 EBITDA to US$237.4Mil, up 11.9%, representing 48.5% of COLs full year forecast.
Exhibit 1: 2Q15 Results Summary
in US$Mil

2Q14

2Q15

%Change

1H15

Revenue
EBITDA
EBITDA margin (%)
Net Income
Net margin (%)

261.4
108.6
41.5
49.3
21.7

256.0
109.9
42.9
46.4
18.1

-2.1
1.2
1.4
-5.9
-3.5

552.1
237.4
43.0
100.4
18.2

% of FY Forecast
COL
Consensus
48.8
46.6
48.5
45.9
-0.3
-0.7
51.0
54.1
0.8
2.5

Source: ICT, COL estimates, Bloomberg

Exhibit 2: 2Q15 Revenue Breakdown


Revenue
2Q14
2Q15
Asia
123.9
135.5
Americas
111.7
95.7
EMEA
25.8
24.8
Total
261.4
256.0

% change
9.3
-14.3
-3.7
-2.1

Container volume
2Q14
2Q15
% change
891.6
1,004.5
12.7
692.2
684.8
-1.1
225.1
216.1
-4.0
1,808.9
1,905.4
5.3

2Q14
139.0
161.4
114.5
144.5

Implied yield
2Q15
% change
134.9
-2.9
139.7
-13.4
115.0
0.4
134.4
-7.0

Source: ICT, COL estimates, Bloomberg

Exhibit 3: 1H15 Revenue Breakdown


Revenue
1H14
1H15
Asia
246.2
297.0
Americas
212.2
203.4
EMEA
51.9
51.8
Total
510.3
552.1

% change
20.6
-4.2
-0.3
8.2

Container volume
1H14
1H15
% change
1,791.5
2,009.5
12.2
1,337.6
1,416.7
5.9
437.0
461.9
5.7
3,566.0
3,888.1
9.0

1H14
137.4
158.6
118.8
143.1

Implied yield
1H15
% change
147.8
7.6
143.6
-9.5
112.0
-5.7
142.0
-0.8

Source: ICT, COL estimates, Bloomberg

TUESDAY, 11 AUGUST 2015

ICT

EARNINGS ANALYSIS

page 2

PHILIPPINE EQUITY RESEARCH

Revenues slightly missed estimates due to Portland,


Poland and currency devaluation
1H15 revenues rose 8.2% to US$552.1MIl, slightly missing our estimate, representing 48.8% of our
full year forecast. Container volume grew by 9% to 3.88Mil TEU, representing only 46% of our full year
forecast. Container volume of flagship Manila International Container Terminal (MICT) rebounded
after the port congestion last year, growing by 9% y/y, although the yield in the flagship terminal also
declined as a result of lower ancillary service fees. Yantai terminal in China also performed strongly,
with container volume rising 28% y/y. Container volume growth was also boosted by the continuous
ramp up of the ports in Mexico and Honduras, and the first full year contribution of Iraq. However,
container volume still fell short of estimates due to the sharp decline in the volume of the port in
Portland due to the ongoing labor dispute. ICTs port in Poland also suffered a decline in volume due
to weakness in trade, while revenues from ICTs ports in Brazil and Madagascar were dragged down
by the devaluation of the Real and Euro.

EBITDA slightly below forecast due to revenues


Cash operating profits as measured by EBITDA grew 11.9% in 1H15 to US$237.4Mil, equivalent to
48.5% of our full year forecast. EBITDA slightly missed our estimate due to lower than expected
revenues. Meanwhile, the rise in ICTs cash operating expenses was below estimates, increasing
by 2.5% to US$226.5Mil, representing 48% of our full year forecast. EBITDA margin improved 100
basis points to 43.0%, in line with our forecast.

Maintaining HOLD rating


We currently have a HOLD rating on ICT with a FV estimate of Php110.6/sh. While near term
earnings growth outlook waned due to rising cost pressures, we still like ICTs long term outlook
given its successful track record of growing its port portfolio through acquisitions and greenfield
projects, and its focus on emerging economies which have a favorable long term growth outlook
compared to overall global economy, However, valuations are not compelling at this point. Based on
ICTs current price of Php108.5/sh, the stock is already fairly valued.

TUESDAY, 11 AUGUST 2015

ICT

EARNINGS ANALYSIS

page 3

PHILIPPINE EQUITY RESEARCH

Investment Rating Definitions

BUY

HOLD

SELL

Stocks that have a BUY rating have attractive


fundamentals and valuations, based on
our analysis. We expect the share price
to outperform the market in the next six to
twelve months.

Stocks that have a HOLD rating have either


1.) attractive fundamentals but expensive
valuations; 2.) attractive valuations but
near term earnings outlook might be poor
or vulnerable to numerous risks. Given the
said factors, the share price of the stock may
perform merely inline or underperform the
market in the next six to twelve months.

We dislike both the valuations and


fundamentals of stocks with a SELL rating.
We expect the share price to underperform in
the next six to twelve months.

Important Disclaimers
Securities recommended, offered or sold by COL Financial Group, Inc.are subject to investment risks, including the possible loss of the principal amount
invested. Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and it may
be incomplete or condensed. All opinions and estimates constitute the judgment of COLs Equity Research Department as of the date of the report and are
subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a
security. COL Financial ans/or its employees not involved in the preparation of this report may have investments in securities or derivatives of securities of
securities of the companies mentioned in this report, and may trade them in ways different from those discussed in this report.

2401-B East Tower, Philippine Stock Exchange Centre, Exchange Road, Ortigas Center, Pasig City, 1605 Philippines
Tel: +632 636-5411

TUESDAY, 11 AUGUST 2015

ICT

Fax: +632 635-4632

EARNINGS ANALYSIS

Website: http://www.colfinancial.com

page 4

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