May
22
We now begin to report activities of Dalnevostochnoye Morskoye Parokhodstvo (Far-east Sea Shipping Company), now known as FESCO shipping group. Starting with year 2005 company actively develops intermodal shipments, which include not only the sea shipping, but railroad and automotive cargo delivery. Thus – FESCO aims at delivering goods from “doorstep to doorstep”. FESCO’s assets include trains, trucks and container terminals in addition to cargo ships.
FESCO’s control is held by Industrial Investors Group, led by Sergei Generalov. Industrial Investors hold FESCO through Holland’s SVG Holdings S.A. – a specialist of bulked cargo and treacle.
During 2006 company had most of the income coming from sea shipping, forming about 80% of group’s total sales. Income of railroad complex has formed just 4%. In 2007 we expect the company to change its income structure. During April 2007 company purchased remainder 50% of Transgarant. Thanks to consolidation of its financial assets – group’s sales off railroad cargo delivery is to form about 41%, in our estimates. While shipping income should be reduced to 57%.
Thanks to consolidation of Transgarant’s financials, we expect year 2007 to bring a considerable growth of company’s business effectiveness. Back in 2006 EBITDA’s margin has formed 24.4%, while during 2007 this value should add an additional +10.2% to 34.6% TOTAL. However, FESCO’s invested capital effectiveness is still below its sector counterparts. ROIC of 2007 may form 9.4% versus prior year’s 6.5%. At the same time – Novoship’s ROIC of 2007 may form up to 15.6%. Base period’s ROIC of Novoship was still several times above one of FESCO: 23.5% in 2005 and 16.1% in 2006.
Today, FESCO’s stocks are traded with a premium to the fair price. We have estimated that fundamental price of one common stock of FESCO forms 0.64 USD, which forms 36.52% of overrating above fair price, under current market quotes. The comparison of FESCO with its counterparts has proved our estimation based on DCF method. We give “SELL” recommend concerning company’s securities.
FESCO: Any caprice for your big cash - May 22, 2008 (PDF Stock Report)
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