Expansion plans, index rebalancing lift ICTSI stock price

By Mark T. Amoguis
Researcher
INTERNATIONAL CONTAINER Terminal Services, Inc. (ICTSI) was one of the most actively traded stocks in the Philippine Stock Exchange (PSE) last week with analysts pointing to ICTSI Chairman Enrique K. Razon, Jr.’s interest in taking over a bankrupt Subic-based shipbuilder, the company’s expansion plans abroad, and the rebalancing of a global equity index that increased the stock’s weight as driving factors.
A total of P1.913 billion worth of 16.064 million shares were traded during the Feb. 18-22 period, data from the PSE showed.
Shares in the Razon-led firm closed P119.40 apiece last Friday, 3.8% up week on week from the P115 finish on Feb. 15.
Since the start of the year, ICTSI’s share price has risen 20%.
Cristopher Adrian T. San Pedro, certified securities representative at Unicapital Securities, Inc. noted speculations on Mr. Razon’s interest in developing Hanjin Heavy Industries and Construction Philippines’ (HHIC-Phil) facilities in Subic Bay into a possible industrial complex with container port facilities, a liquefied natural gas (LNG) terminal, dry bulk handling facilities, and an LNG power plant.
Several “white knights” are currently in discussion to rescue HHIC-Phil., which filed for corporate rehabilitation before an Olongapo court last month. It has around P20 billion in debt with the country’s big banks.
“When it comes to international expansion, ICTSI also confirmed that they are reviewing and exploring profitable investment opportunities on privatization deals in the container port industry including ports in Thailand and Cameroon,” Mr. San Pedro said.
The analyst also noted the workers’ strike at Port Sudan last Monday against the privatization deal of ICTSI and Sea Ports Corp. (SPC) may have contributed to the stock’s trading activity last week. However, Mr. San Pedro said investors’ reaction to these developments “have been generally positive” judging from last week’s stock price movement.
In a disclosure to the local bourse last Jan. 4, ICTSI, through its wholly owned subsidiary ICTSI Middle East DMCC, signed a 20-year concession agreement with Sudan’s SPC to operate, manage, and develop the South Port Container Terminal at the Port of Sudan.
ICTSI will assume the operational and development responsibility for SPC’s existing container terminal infrastructure and terminal handling equipment, while SPC will become the landlord of the terminal.
Transfer of the facilities to the management of ICTSI will take place in the first quarter of 2019, the disclosure said.
In a separate disclosure last Tuesday, ICTSI said it is keeping an eye for “profitable investment opportunities” with the company looking to secure more port projects in Thailand and Cameroon.
Meanwhile, AP Securities, Inc. research analyst Rachelle C. Cruz attributed ICTSI’s trading activity last week to the MSCI rebalancing.“They were the only company to receive an upweight [in the index],” she said in a phone interview, ascribing it to the stock’s “higher foreign float factor.”
The rebalancing of the MSCI Philippines index released on Feb. 12 saw the index weight of ICTSI increase by 1.518%. Meanwhile, downweights were seen in SM Prime Holdings, Inc. (-0.203%), Ayala Land, Inc. (-0.168%), BDO Unibank, Inc. (-0.129%), SM Investments Corp. (-0.120%), Ayala Corp (-0.117%), and JG Summit Holdings, Inc. (-0.097%)
Meanwhile, the Philippines saw its index weight in the MSCI Emerging Markets index increase by 0.012%. The MSCI world equity index tracks large and mid-cap equity performance across 23 developed markets. The index covers approximately 85% of the country’s stock universe.
Ms. Cruz added that following the news of the rebalancing, ICTSI’s stock price increased to as much as P122 per share, which is a 52-week high. “I think this is the all-time high for the stock,” she said.
ICTSI’s attributable net income reached $153.287 million in the nine months to September, up by 2.7% from $149.316 million in the same period last year due to a 10% increase in revenues from port operations reaching $1 billion.
For the full year 2018, Unicapital’s Mr. San Pedro expects ICTSI’s bottomline to range between $150 million to $160 million driven by “robust growth” from its port terminals in the Americas, Asia, Europe, Middle East, and Africa. As of Nov. 7, 2018, ICTSI and subsidiaries are involved in 31 terminal concessions and port development projects in 18 countries worldwide.
AP Securities’ Ms. Cruz pegged ICTSI’s resistance price for the near term at P122, and its support at “around P115.”
“I expect the stock to consolidate between P113.70 support and P122.00 resistance with the possibility of testing P125.00 and P130.00 if it stays above P115.00 in the short term,” Unicapital’s Mr. San Pedro said.