Aug
12
NCSP: Good, but expensive - July 27, 2009
Filed Under Bullet-moments |
We revised our financial model of Novorossiysk sea trade port (NMTP) basing on the financial results by IAS for 2008 and for 1Q 2009, and also the operating results of NMTP for 1H 2009. In 2008-2009 the branch of sea transport, and also the sea port infrastructure, faced some serious problems. Late last year the global demand for the sea transport dropped 90% and the index of freight costs of Baltic Dry – by 95%.
Along with that NMTP managed to close the 2008 properly. The sales of the company grew by 35% to 654 mn USD, EBITDA formed 357 mn USD versus 191 mn USD a year before. The net profit lowered due to loss from currency exchange to 90 mn USD from 94 mn USD in 2007. In 1Q 2009 NMTP has also showed positive dynamics on sales: the income grew by 4.5% to 157 mn USD. In its turn, the lowering of global oil prices versus 1Q 2008 leaded to savings on the expenses and to the increase of operating profit and EBITDA. In 1Q 2009 the operating profit totaled 102 mn USD (+64%), and EBITDA – 112 mn USD (+45%). However, the non-operating items brought to reduction of the net profit estimate by 40.6% versus the estimate within the similar period of 2008 to 31.6 mn USD.
Note that the cargo turnover of Novorossiysk port continued climbing in 2008 and in 1H 2009. So, in 2008 the sum total cargo transshipment grew by 2.8% and within the six months of 2009 – by 11%. At the same time we would like to outline that the significant adding was indicated in the highly profitable transshipment of corn on behalf of the additional capacity at NZT terminal. The share of transshipping corn grew versus the sum total cargo turnover within the half year to 11% from 2.8% within the similar period of the previous year. At the same time the transshipping of the less profitable containers reduced by 58% due to macroeconomic conditions.
The important moment worth paying attention to is the debt load level of NMTP. The credit portfolio of NMTP in 2008 decreased by 6% versus 2007, and in 1Q 2009 – by another 3.5%. At the same time more than 90% of liabilities are the long-term ones. Debt / EBITDA ratio is at the low level: in 2008 it formed 1.42, and according to our forecasts in 2009 it will be 1.28.
Despite the above-mentioned positive moments and high profitability of the port, we have revised our estimation of the company down. First of all, we considered the new economic conditions, under which NMTP is operating. Primarily those conditions reflect on the structure of the port’s cargo turnover. So, the prospect containers’ shipping, which was so reliant on, will not be climbing that actively, and that deprives the company of additional income. Second, we accepted a rather high level of WACC. In the conclusion we would like to outline, that we assume the shares of NMTP are expensive. That is confirmed by the coefficients, provided in the public comparables estimation. As a result of the conducted research, we assign a fair value of NMTP’s shares at the level of 0.090 USD, and GDP – 6.72 USD. According to the current market quotes that indicates the 42% overestimation. We lower the recommendation from ACCUMULATE to SELL on the shares of NMTP.