Equity Research Analyst, Maritime sector, Drewry Maritime Financial Research

Ankush Kathuria CFA, FRM

Equity Research Analyst, Maritime sector

Maritime Sector, Equity & Credit Research

Drewry Maritime Financial Research

With no ties to other players in the shipping, finance or banking world, we provide a uniquely impartial view of the markets and companies we cover. Our parent organization, Drewry is a leading independent provider of research services to the maritime and shipping industry, employing over 100 professionals across an international network of offices in London, Delhi, Singapore and Shanghai. Combining our market-leading resources with seasoned sector expertise DFRS offers a highly differentiated and comprehensive range of investment and financial research services to lenders and prospective investors in publicly listed maritime and shipping companies. The full service of reports, supporting resources and sector orientated webinars provides our clients with the most complete picture of the organisations under coverage as is possible. We have been charting and analysing the world’s maritime markets for more than 40 years. This unrivalled intelligence and understanding provides the foundation of our research service. Our analysts have access to one of the most up-to-date, comprehensive and reliable sources of market insight and research data available today. We look at globally listed companies within the following sectors: Port Operators, Container Shipping, Container Manufacturing & Leasing, LNG Shipping, Dry Bulk Shipping and Tanker Shipping. Combine in-depth sector expertise with financial analysis focusing on over 50 stocks globally.

Equity Bottom-Up

Santos Brasil Participacoes Sa. / Equity Bottom-Up

Santos Brasil Participacoes Sa. (STBP11 BZ)

<p>In November 2018, Santos Brasil extended its contract with Maersk, and by association with Hamburg Sud, renewing hopes of improved synergy with the shipper by adding volumes 2019 onwards. While the volumes at Tecon Santos have been turbulent in recent times, Maersk’s contract renewal will add continuity to the throughput to March 2021. Slightly better FY18 results y/y managed to mitigate some concerns over efficiency however with an inevitable departure of Libra from port of Santos, DPW filling its spare capacity and BTP almost full, Santos may benefit from a tighter market in terms of price. </p><p>We estimate the DCF-derived fair value of BRL 2.79. We have also used the trailing twelve months (TTM) EV/EBITDA of 21.8x as our exit multiple for the DCF. On a separate note, this looks quite high compared with other regional ports which normally trade at EV/EBITDA range of 12-17x for our coverage companies. We attribute Santos’ high multiple to its EBITDA which has remained subdued since 2016, coupled with positive net cash that has led to inflated valuations.</p>

In November 2018, Santos Brasil extended its contract with Maersk, and by association with Hamburg Sud, renewing hopes of improved synergy with the shipper by adding volumes 2019 onwards. While the volumes at Tecon Santos have been turbulent in recent times, Maersk’s contract renewal will add continuity to the throughput to March 2021. Slightly better FY18 results y/y managed to mitigate some concerns over efficiency however with an inevitable departure of Libra from port of Santos, DPW filling its spare capacity and BTP almost full, Santos may benefit from a tighter market in terms of price. We estimate the DCF-derived fair value of BRL 2.79. We have also used the trailing twelve months (TTM) EV/EBITDA of 21.8x as our exit multiple for the DCF. On a separate note, this looks quite high compared with other regional ports which normally trade at EV/EBITDA range of 12-17x for our coverage companies. We attribute Santos’ high multiple to its EBITDA which has remained subdued since 2016, coupled with positive net cash that has led to inflated valuations.

Santos: One Swallow Does Not Make a Summer