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

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.

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

Maersk renewed its contract with Santos Brasil expiring in March 2021. We anticipate additional demand created by Maersk’s contract could deteriorate container handling efficiency impacting its top-line profitability. Santos' valuation appears expensive amid the company's chronic low earning results.

Maersk renewed its contract with Santos Brasil expiring in March 2021. We anticipate additional demand created by Maersk’s contract could deteriorate container handling efficiency impacting its top-line profitability. Santos' valuation appears expensive amid the company's chronic low earning results.

Santos Brasil (STBP3): Will Santos Turnaround and Deliver?

Incipient signs of recovery: There was a slight uptick in consolidated volumes of the three terminals operated by Santos Brasil in the first quarter of 2018. Tecon Imbituba and Tecon Vila do Conde registered sterling growth of 84.6% and 38.2% year on year, respectively. Volume growth at Santos Brasil’s flagship terminal Tecon Santos has remained anaemic since the loss of the ESA contract (which included carriers such as Cosco Shipping, Evergreen Marine Corp, Hapag-Lloyd AG and Hamburg Süd) to…

Incipient signs of recovery: There was a slight uptick in consolidated volumes of the three terminals operated by Santos Brasil in the first quarter of 2018. Tecon Imbituba and Tecon Vila do Conde registered sterling growth of 84.6% and 38.2% year on year, respectively. Volume growth at Santos Brasil’s flagship terminal Tecon Santos has remained anaemic since the loss of the ESA contract (which included carriers such as Cosco Shipping, Evergreen Marine Corp, Hapag-Lloyd AG and Hamburg Süd) to…

Santos Brasil: 1Q18 Update: Market Share on the Rise – Is It Enough to Push up the Stock Price?

Earnings revival on accounting gains: In 4Q17, Santos Brasil’s (STBP3 BZ) results reversed from a net loss position to record a USD 6.2m (BRL 20.4m) gain, helped by a one-off tax credit of USD 5.0m (BRL 16.5m). For the full year, net income stood at USD 0.8m (BRL 2.5m) compared with negative USD 6.0m (negative BRL 19.9m) in FY16. Operationally, the highlight was on the restructuring efforts that bore fruits, increasing the quarterly EBITDA margin of ports segment from 17.5% to 20.0%. The…

Earnings revival on accounting gains: In 4Q17, Santos Brasil’s (STBP3 BZ) results reversed from a net loss position to record a USD 6.2m (BRL 20.4m) gain, helped by a one-off tax credit of USD 5.0m (BRL 16.5m). For the full year, net income stood at USD 0.8m (BRL 2.5m) compared with negative USD 6.0m (negative BRL 19.9m) in FY16. Operationally, the highlight was on the restructuring efforts that bore fruits, increasing the quarterly EBITDA margin of ports segment from 17.5% to 20.0%. The…

Santos Brasil - FY17 Update - Share Price Stays Afloat, While Its Market Dominance Gets Chipped Away

Infrastructure Analyst - Ports & Terminals, Drewry Maritime Financial Research

Victor Wai, CFA

Infrastructure Analyst - Ports & Terminals

Depressed earnings: Santos Brasil (STBP3 BZ Equity) is in a perilous condition, swinging to profitability only with the aid of tax refunds. Investors longing for a sale of its slumping Tecon Santos terminal, which underpins the more than 50% increase in share price over the past 3 months, are likely to be disappointed, as the company has decided to bankroll its flagship terminal by selling ancillary, but promising, assets.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/039/424/original/SB_1.JPG?1511942947" class="editor-image img-responsive" data-smartkarma-image-id="39424"></figure><div class="content-caption">Earnings deteriorate, investors don't seem to care</div>Expensive concession…

Depressed earnings: Santos Brasil (STBP3 BZ Equity) is in a perilous condition, swinging to profitability only with the aid of tax refunds. Investors longing for a sale of its slumping Tecon Santos terminal, which underpins the more than 50% increase in share price over the past 3 months, are likely to be disappointed, as the company has decided to bankroll its flagship terminal by selling ancillary, but promising, assets.Earnings deteriorate, investors don't seem to careExpensive concession…

Santos Brasil: Valuation Decouples from Fundamentals

Brazil

Santos Brasil is a leading Brazilian logistics company specializing in port and integrated logistics operations. It manages and operates container terminals, vehicle terminals, general cargo terminals, and liquid bulk terminals across Brazil, including Tecon Santos, one of the largest container terminals in Latin America. The company also offers logistics services such as distribution centers and road transportation. Santos Brasil is headquartered in São Paulo, Brazil, and was established in 1997.

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Santos Brasil (STBP11 BZ)

Santos: One Swallow Does Not Make a Summer

In November 2018, Santos Brasil extended its contract with Maersk, and by association with Hamburg Sud, renewing hopes of improved synergy with the...

Drewry Maritime Financial Research

Santos Brasil (STBP3): Will Santos Turnaround and Deliver?

Maersk renewed its contract with Santos Brasil expiring in March 2021. We anticipate additional demand created by Maersk’s contract could...

Drewry Maritime Financial Research

Santos Brasil: Valuation Decouples from Fundamentals

Depressed earnings: Santos Brasil (STBP3 BZ Equity) is in a perilous condition, swinging to profitability only with the aid of tax refunds....

Drewry Maritime Financial Research

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Santos: One Swallow Does Not Make a Summer

In November 2018, Santos Brasil extended its contract with Maersk, and by association with Hamburg Sud, renewing hopes of improved synergy with the...

Drewry Maritime Financial Research

Santos Brasil (STBP3): Will Santos Turnaround and Deliver?

Maersk renewed its contract with Santos Brasil expiring in March 2021. We anticipate additional demand created by Maersk’s contract could...

Drewry Maritime Financial Research

Santos Brasil: 1Q18 Update: Market Share on the Rise – Is It Enough to Push up the Stock Price?

Incipient signs of recovery: There was a slight uptick in consolidated volumes of the three terminals operated by Santos Brasil in the first...

Drewry Maritime Financial Research

Santos Brasil - FY17 Update - Share Price Stays Afloat, While Its Market Dominance Gets Chipped Away

Earnings revival on accounting gains: In 4Q17, Santos Brasil’s (STBP3 BZ) results reversed from a net loss position to record a USD 6.2m (BRL...

Drewry Maritime Financial Research

Santos Brasil: Valuation Decouples from Fundamentals

Depressed earnings: Santos Brasil (STBP3 BZ Equity) is in a perilous condition, swinging to profitability only with the aid of tax refunds....

Drewry Maritime Financial Research