ICTSI shares fall despite developments --[Reported by Umva mag]

SHARES in Razon-led International Container Terminal Services, Inc. (ICTSI) fell last week following a South African court’s injunction against the port operator’s bid for Durban Container Terminal Two (DCT2), as well as global macroeconomic factors, according to analysts.

Data from the Philippine Stock Exchange showed that ICTSI was the second most actively traded stock in terms of value turnover, with P2.71 billion worth of 6.36 million shares exchanging hands from Oct. 7 to 12.

The listed port operator’s shares closed at P407.80 each on Friday, which was 2.9% lower than its Oct. 4 close of P420. Year to date, the stock has increased by 65.2%.

Andrei Jorge G. Soriano, research associate at China Bank Securities Corp., said in an e-mail that the major development which affected the listed port operator is the South African court’s decision to issue an injunction against ICTSI’s bid for the Durban Container Terminal Two.

He added that investors are likely concerned given that DCT2 is a major terminal in South Africa with an annual capacity of two million twenty-foot equivalent units.

For Arielle Anne D. Santos, equity analyst at Regina Capital Development Corp., the port operator was driven by operational developments and global macroeconomic factors.

“While [ICTSI] has announced significant growth moves, like its expansion in Batangas and its increased capacity in Iloilo, the global shipping and logistics sector remains vulnerable to fluctuations in trade volumes, global interest rates, and currency risks,” Ms. Santos said in an e-mail.

ICTSI said it will challenge the ruling of the Kwazulu Natal Division of the High Court of South Africa, which has issued an injunction against Transnet, halting the privatization of Durban Container Terminal Pier 2.

According to international reports, DCT2 is Transnet’s largest container terminal, handling 72% of the Port of Durban throughput and 46% of South Africa’s traffic.

Back in July 2023, ICTSI won a tender process conducted by Transnet to invest in and operate the terminal under a 25-year concession.

Though ICTSI was the selected bidder and secured its contract in March this year, APM Terminals contested the award, citing concerns about ICTSI’s solvency calculation.

APM Terminals is a unit of Maersk’s Transport and Logistics Division.

This deal then faced opposition, which delayed its implementation.

The injunction prevents Transnet from finalizing the contract or engaging in any negotiations with ICTSI or third parties until a final ruling is made.

ICTSI said that they fully respect this decision but disagree with the court ruling.

Meanwhile, other reports also show that ICTSI’s business unit, Visayas Container Terminal in Iloilo, started using two new mobile harbor cranes. The use of these cranes is expected to improve the efficiency and competitiveness of the Iloilo port as a trade gateway for Western Visayas.

Additionally, its East Java Multipurpose Terminal (EJMT) operations in Lamongan Regency, Indonesia began on Oct. 2. Its construction began in March 2023, and within 18 months, the terminal was fully equipped to serve diverse trade needs. EJMT is a sought-after and versatile addition to Indonesia’s port infrastructure.

Recent news also said that the port operator has acquired a 27-hectare property in Batangas to expand its 900-meter berth terminal, which will be used for its expansion plans, especially for its new 900-meter berth terminal, although the exact amount of the transaction was not disclosed.

Ms. Santos said that the introduction of these mobile harbor cranes is expected to improve efficiency at the Iloilo port and may have a positive impact on ICTSI’s long-term competitiveness in regional markets, likely boosting both sentiment and operations in the domestic sphere.

Moreover, its operations at EJMT in Indonesia mark a significant milestone in expanding ICTSI’s global footprint.

“The facility’s ability to handle diverse trade needs is well-aligned with Indonesia’s growing export-import market, potentially driving future revenue growth in [Southeast Asia],” she said.

Additionally, the acquisition in Batangas is likely a signal to expand capacity at a key domestic port.

Ms. Santos added that while the market is still digesting the news of expansion, this strategic move aims to capture more volume and is likely to improve long-term revenue streams.

The overall market conditions, including inflation pressures, slowing global trade, and persistent interest rate hikes in major economies, may have dampened enthusiasm toward global port operators in general, she added.

“Furthermore, the mixed performance of other PSE-listed stocks, driven by broader market sentiment, would likely influence ICT as part of a macro-driven sell-off or rebound,” Ms. Santos said.

For Mr. Soriano, these developments bode well with respect to the port operator’s prospects, such as additional services, possible tariff increases, and margin expansion, but said that market players have primarily focused on the port operator’s DCT2 bid.

“While the resolution of the DCT2 case is the utmost consideration among investors right now, we are still upbeat on ICT given continued tariff increases in certain terminals and expansion opportunities to boost earnings prospects,” he said.

Additionally, he said that attractive dividend yields would also be a key consideration among investors to consider ICTSI.

In the second quarter, ICTSI’s attributable net income grew by 32.3% to $210.67 million from $159.19 million a year earlier. Meanwhile, consolidated revenues increased by 13.6% to $714.11 million.

For the first half of the year, net income grew by 34% to reach $420.55 million, whereas consolidated revenues for the six-month period grew by 14.6% to $1.4 billion.

Mr. Soriano sees earnings forecasts for the full year 2024 will reach $814 million, while for the full year 2025 at $884 million.

“We see current support at P400 while resistance at P420,” Mr. Soriano said.

For Ms. Santos, given the global reach of the Razon-led port operator, earnings for the third quarter could likely reflect some operational improvements from these expansions.

“The Visayas and East Java terminal enhancements should drive incremental revenue growth, while cost efficiency measures may also protect margins,” she said.

Ms. Santos added that earnings growth for the current quarter is expected to be in the mid- to high single digits, while full-year earnings growth could be around the teens.

She pegged support levels at P404 while resistance levels at P419.80, respectively. — Abigail Marie P. Yraola

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