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ICTSI, shares are overvalued

ICTSI, shares are overvalued
MANILA's International Container Terminal Services Inc (ICTSI) continues to attract investors mainly due to the company's continuing profitability of the container terminal management sector, according to Drewry Maritime Equity Research (DMER).

The box terminal management business is far from straight forward, as evidenced by the forthcoming opening of ICTSI's new container terminal in Manzanillo (Mexico). Its 34-year management concession, involving a planned total investment of US$565 million, was won as long ago as 2009, yet its first phase will only open in the second half of this year. 

But in the meantime world trade growth has collapsed, APM Terminals has started to build a competing facility in nearby Lazaro Cardenas, and Maersk has taken the industry into a new era with a surprise order for a fleet of twenty 18,000 TEU vessels, forcing everyone to think bigger.

DMER ranks the company positive on its bespoke risk ranking implying solid fundamentals. Key risk the company faces stems from its operations and expansions in emerging economies. 

Most of these economies carry higher social, economic and political risks than the developed world. One of the recent examples where the operations have landed in trouble is in Syria, where ICTSI had to pull out because of civil unrest and violence in the country.

Despite the aggressive expansion spree, the company is still a small player compared to industry leaders such as DP World, PSA and APM terminals, said Drewry. It is still dependent on its Manila operations from where it derived close to 40 per cent of its revenues in 2012. Current share price valuations do not support further upside potential given the higher risk profile of its assets, DMER said.



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