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Last close As at 30/03/2023
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Research: Investment Companies
Ocean Wilsons (OCN) reported a H122 loss of $34.7m (H121 profit of $39.5m), chiefly due to weak financial markets which led OCN’s international investment portfolio (OWIL) to report a $48.9m loss. Despite headwinds in the container terminal business, some good operating trends allowed Wilson Sons (PORT3) to boost OCN’s H122 revenue by 12% y-o-y and EBITDA by 2%. We are cutting our forecasts for FY22e (to a $14.8m net loss) and FY23e (22% EPS reduction). OCN is trading at 50% of the look-through value of its 56.5% PORT3 stake and OWIL portfolio. This discount seems excessive, especially as PORT3’s market valuation is undemanding. To further highlight this valuation gap, we have introduced a valuation range for PORT3; at the mid-point of the range OCN’s discount increases to 59%. OCN has a 6.8% dividend yield.
Ocean Wilsons Holdings |
Hit by markets, valuation eye-catching |
2022 interims |
Investment companies |
6 September 2022 |
Share price performance
Business description
Next events
Analysts
Ocean Wilsons Holdings is a research client of Edison Investment Research Limited |
Ocean Wilsons (OCN) reported a H122 loss of $34.7m (H121 profit of $39.5m), chiefly due to weak financial markets which led OCN’s international investment portfolio (OWIL) to report a $48.9m loss. Despite headwinds in the container terminal business, some good operating trends allowed Wilson Sons (PORT3) to boost OCN’s H122 revenue by 12% y-o-y and EBITDA by 2%. We are cutting our forecasts for FY22e (to a $14.8m net loss) and FY23e (22% EPS reduction). OCN is trading at 50% of the look-through value of its 56.5% PORT3 stake and OWIL portfolio. This discount seems excessive, especially as PORT3’s market valuation is undemanding. To further highlight this valuation gap, we have introduced a valuation range for PORT3; at the mid-point of the range OCN’s discount increases to 59%. OCN has a 6.8% dividend yield.
Year end |
Revenue (US$m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/20 |
352.8 |
74.6 |
109.5 |
70.0 |
9.5 |
6.8 |
12/21 |
396.4 |
110.4 |
180.1 |
70.0 |
5.7 |
6.8 |
12/22e |
432.4 |
33.6 |
(41.8) |
70.0 |
N/A |
6.8 |
12/23e |
478.3 |
111.5 |
148.0 |
70.0 |
7.0 |
6.8 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
PORT3 operating trends
Container terminal handling fell by 15% y-o-y, affected by a shortage of empty containers, global logistics bottlenecks and lockdowns in China. On the plus side, the towage business was resilient and the offshore support vessels business outperformed. Looking ahead, we expect the container business to gradually start to normalise and the pickup in the other businesses to gather pace. We are forecasting 11% and 14% growth in revenue and EBITDA for PORT3 in FY23e. PORT3 remains a well-diversified Brazilian maritime services company that is highly competitive in all its key segments.
Financial markets uncertainty
The outlook for financial markets remains challenging despite some recovery in Q322. The uncertainty regarding inflation, interest rates and economic growth remains elevated. We note that OWIL’s manager (Hansa Capital Partners) has decreased its long-only equity positions in the portfolio. We are now assuming a 4% return on the portfolio in H222 (taking FY22 to negative 9.3%) and a 7% return in FY23. However, we expect there could be great variance to these assumptions.
Valuation: PORT3 fair value boosts OCN discount
We are introducing a valuation range for PORT3 based on a FY22 EV/EBITDA ratio of 7–8x (it is trading on 6.0x on our numbers), which we think is reasonable given where its peers are trading. The mid-point of this range is 37% above the PORT3 trading price (BRL9.10 per share) and increases the look-through discount to 59%. The value of the OCN stake in PORT3 by itself is currently 20% more than OCN’s market cap. At the mid-point of the PORT3 range this would rise to 65%.
H122: Financial markets hurt results
OCN reported a loss of $34.7m, mostly driven by weak and volatile financial markets during the first half of 2022. Despite OWIL containing market-neutral funds and private assets, the impact of these markets was hard to avoid. These losses were largely paper losses, and we note that markets have recovered some of the negative territory so far in the second half of 2022.
OWIL still outperformed equity indices
The OWIL portfolio declined by 14.1% (14.5% net of fees) during H122. Despite this drop, OWIL outperformed relevant equity indices such as the MSCI All Country World and Frontier Markets Index and MSCI Emerging Markets Index, which fell by 20.2% and 17.6% respectively. OWIL bases its internal absolute benchmark on the US Consumer Price Index for All Urban Consumers (not seasonally adjusted) plus 3% pa. In H122 the index rose by 7.7%. OWIL performance was helped by the private equity exposure and defensive assets
PORT3 hit by container terminal headwinds
PORT3’s contribution to OCN’s income was affected by container terminals facing continued headwinds including shortages of empty containers and global logistics bottlenecks. This has led to cancelled shipping lines especially affecting the Rio Grande terminal in Brazil. Another challenge has been rising costs, especially fuel prices, although PORT3’s good competitive position allowed it to mitigate this damage.
Offshore support vessels doing better than expected
The offshore support vessels joint venture (WSUT) business (the third-biggest pro-forma EBITDA contributor to PORT3 and OCN after container terminals and towage) is doing better than expected (even after adjusting for the stronger US dollar) with a very positive trend of new vessel contracts and higher prices. These new contracts started to kick-in in H122 and will further boost results in the second half of 2022. The towage business has remained resilient with good margins, which is another positive. We note that the US dollar’s appreciation against the Brazilian real (which began in Q222 following the start of the war in Ukraine) did lead to adjustment on the real-denominated monetary assets and deferred tax assets, which affected the equity participation in the joint venture and Q2 net profit for the company.
All of this is reflected in Exhibit 1, which shows the progression in the recent semester with the caveat that the second half of a year is usually stronger for PORT3 while OWIL numbers are by nature more influenced by financial market conditions.
The PORT3 business is the main revenue and costs generator above the EBITDA line, while OWIL’s revenue and management costs are below this line. OCN’s revenue grew 12% y-o-y in H122, while EBITDA and operating profit grew 2% and 3%, respectively. This was helped by the stronger US dollar.
The OWIL portfolio losses of $48.9m led to OCN reporting a $9.7m loss after taxes. The taxes and minority interests are from PORT3; OWIL is fully owned by OCN.
Exhibit 1: OCN semester progression
$m |
H120 |
H220 |
H121 |
H221 |
H122 |
y-o-y % |
Revenue |
174.2 |
178.6 |
188.9 |
207.5 |
211.0 |
11.7 |
Cash costs |
(104.0) |
(113.1) |
(109.3) |
(128.0) |
(126.7) |
19.1 |
EBITDA |
70.2 |
65.5 |
79.6 |
79.5 |
84.2 |
2.1 |
Depreciation and amortisation |
(26) |
(25) |
(25) |
(21) |
(25) |
(1.5) |
Amortisation of right to use |
(5.3) |
(5.4) |
(6.0) |
(6.1) |
(6.8) |
13.8 |
Impairment charge (goodwill & intangibles) |
0.0 |
0.4 |
0.0 |
(2.7) |
0.0 |
n.m. |
Profit/loss on fixed assets |
0.3 |
(0.6) |
0.0 |
(0.5) |
0.1 |
n.m. |
Operating profit |
39.3 |
35.1 |
48.4 |
48.9 |
52.6 |
2.7 |
Share of results of JVs |
(5.2) |
1.1 |
(0.7) |
(4.3) |
0.5 |
n.m. |
Investment portfolio returns |
(12.4) |
45.7 |
29.5 |
19.9 |
(48.9) |
n.m. |
Other investment income |
(1.4) |
(1.7) |
(2.9) |
(2.1) |
(1.6) |
(43.4) |
Portfolio performance and mgmt fees |
0.9 |
0.7 |
1.3 |
2.8 |
3.7 |
182.6 |
Finance costs |
(11.4) |
(11.8) |
(14.6) |
(15.6) |
(18.1) |
23.9 |
Exchange gains/losses on monetary items |
(11.7) |
4.1 |
2.3 |
(5.4) |
2.0 |
(12.8) |
Profit before tax |
(1.8) |
76.4 |
66.2 |
44.2 |
(9.7) |
n.m. |
Income tax |
(16.6) |
(10.0) |
(14.4) |
(13.5) |
(10.7) |
(25.7) |
Profit before minorities |
(18.4) |
66.4 |
51.8 |
30.7 |
(20.4) |
n.m. |
Non-controlling interests |
0.6 |
(9.9) |
(12.3) |
(6.5) |
(14.2) |
16.1 |
Net attributable profit |
(17.8) |
56.5 |
39.5 |
24.2 |
(34.7) |
n.m. |
Source: Ocean Wilsons Holdings
PORT3’s container terminals (34% of EBITDA in H122) saw container volumes fall by 15% y-o-y in the first six months of 2022. Rio Grande was most affected by shipping line cancellations and full container volumes fell by 22% in that period, compared with only 7% in Salvador, Brazil. Revenue grew 6%, while the EBITDA margin remained relatively resilient at 53% (56% in FY21), given the cost pressures.
Towage (43% of EBITDA) revenue grew 10% y-o-y in H122 and EBITDA rose by 1%, while harbour manoeuvres fell only 1%. Towage results were affected not only by higher fuel and staff costs, but also by the weaker US dollar since towage revenue is mostly dollar based. Despite the dollar strength in Q222, the dollar still ended H122 down compared to the end of FY21. The reported EBITDA margin was 48%.
WSUT’s (16% of EBITDA) revenue rose by 39% y-o-y and was one of the highlights of H122, with EBITDA increasing by 62% y-o-y. Although oil and gas explorations remain at relatively low levels of activity, business is picking up and the improved operating days of offshore vessels and operation of pipe-laying support vessels boosted the results, especially in Q222.
Exhibit 2: PORT3 revenue analysis (H122) |
Exhibit 3: PORT3 EBITDA analysis (H122) |
Source: Wilson Sons. Note: Offshore vessels is the pro forma share of the joint venture, EBITDA adjusts for corporate centre. |
Exhibit 2: PORT3 revenue analysis (H122) |
|
Exhibit 3: PORT3 EBITDA analysis (H122) |
|
Source: Wilson Sons. Note: Offshore vessels is the pro forma share of the joint venture, EBITDA adjusts for corporate centre. |
Exhibit 4: OWIL portfolio % returns and result ($m) |
Exhibit 5: OWIL analysis of portfolio (H122) |
Source: Ocean Wilsons Holdings |
Source: Ocean Wilsons Holdings |
Exhibit 4: OWIL portfolio % returns and result ($m) |
Source: Ocean Wilsons Holdings |
Exhibit 5: OWIL analysis of portfolio (H122) |
Source: Ocean Wilsons Holdings |
Valuation
OCN’s discount to its look-through valuation is a hefty 50%. The look-through value consists of its 56.5% stake in listed PORT3 and the OWIL global investment portfolio. The discount has widened from 39% a year ago and the usual range of mid-30s to low-40s.
Exhibit 6: OCN’s share price discount to look-through valuation
|
p |
£m |
Value contribution |
Last OWIL value per Ocean Wilsons share (30 June 2022) |
695.8 |
246.1 |
40% |
Wilson Sons market value per Ocean Wilsons 56.5% share |
1,046.0 |
369.9 |
60% |
Ocean Wilsons look-through value |
1,741.8 |
615.9 |
100% |
Ocean Wilsons share price and market cap |
870.0 |
307.7 |
|
Discount (%) |
(50%) |
(50%) |
Source: Refinitiv, Ocean Wilsons, Edison Investment Research. Note: $1.19/£.
We do accept investor concerns that OCN’s relatively small market capitalisation and the fact that three shareholders, Hansa Investment Company, Victualia and Chris Townsend, in total own 50.21% of the company, reduce liquidity. Positively, this ownership position enables both OWIL and PORT3 to maintain their long-term approaches to investment and operating the businesses. We feel, however, that the discount seems quite wide. The value of OCN’s stake in PORT3 by itself is now 17% greater than OCN’s market cap, which is not only unusual, but seems unwarranted to us. We also note the 6% dividend yield.
PORT3 valuation range
Most of OWIL’s investments are in liquid instruments that are marked to market. However, we have introduced a valuation range for PORT3. This is driven by our opinion that PORT3’s market valuation is unreasonably lower than its peers and that the shares seem to offer decent upside potential.
Exhibit 7 compares PORT3 with a selection of Brazilian and international port and shipping companies. PORT3 is trading on an historic FY21 EV/EBITDA discount of 27% and a 26% FY22e discount versus its peers, despite the sample including some China companies with share prices that have been hit particularly hard due to the China lockdowns.
Although PORT3 shares have significantly outperformed the peer group average (see Exhibit 8) over the year to date, PORT3’s market multiples are still noticeably lower. The ratings are lower than Santos Brasil, its closest peer, whose key asset is the container terminal in the Santos port in the Brazilian state of São Paulo and whose shares have performed relatively well this year. Both companies have relevant free floats, and both are trading in the Novo Mercado segment (which requires companies to adopt additional corporate governance standards) of the Brazilian stock exchange. PORT3 is the better diversified of these two companies and, in our opinion, it deserves to trade on ratios closer to those of Santos Brasil ((EV/EBITDA FY22 of 8.3x). PORT3 is trading on a P/E premium to its peers. Its profit was exceptionally affected by exchange variations of balance sheet items, but we note that its EPS growth is quicker and the premium narrows significantly.
Exhibit 7: PORT3 selected comparators
Company |
Market cap ($m) |
P/E |
P/E |
P/E |
EV/EBITDA FY21 (x) |
EV/EBITDA FY22e (x) |
Price book |
ROE (%) |
Wilson Sons |
793 |
19.5 |
14.4 |
11.4 |
7.0 |
6.0 |
1.6 |
11.8 |
Santos Brasil (BRA) |
1,395 |
35.0 |
18.0 |
14.6 |
12.2 |
8.3 |
2.9 |
17.4 |
China Merchants Ports (HKG) |
5,921 |
5.7 |
5.4 |
5.3 |
11.1 |
11.6 |
0.4 |
7.9 |
Cosco (CHN) |
2,194 |
5.9 |
5.7 |
5.1 |
11.1 |
10.2 |
0.4 |
6.6 |
Shanghai Int'l Port (CHN) |
18,230 |
8.5 |
7.2 |
7.4 |
8.4 |
5.7 |
1.1 |
15.0 |
Hamburger Hafen (GER) |
884 |
10.4 |
10.1 |
11.7 |
4.4 |
4.3 |
1.4 |
13.5 |
Intl Container Term Svcs (PHI) |
6,562 |
18.3 |
14.3 |
13.1 |
10.0 |
8.4 |
7.4 |
55.9 |
Average |
14.0 |
10.1 |
9.6 |
9.5 |
8.1 |
2.3 |
19.4 |
|
Wilson Sons vs average (%) |
39.5 |
42.5 |
19.3 |
(26.6) |
(25.7) |
(29.3) |
(39.1) |
|
Wilson Sons vs Santos Brasil (%) |
(44.4) |
(19.9) |
(22.1) |
(42.4) |
(27.4) |
(44.8) |
(32.4) |
Source: Refinitiv, Edison Investment Research. Note: Prices at 30 August 2022.
Exhibit 8: PORT3 and comparators’ absolute share price performance (%)
Company |
One month |
Three months |
One year |
Ytd |
From 12-month high |
Wilson Sons |
10 |
6 |
(13) |
(2) |
(22) |
Santos Brasil (BRA) |
25 |
12 |
8 |
26 |
(4) |
China Merchants Ports (HKG) |
(7) |
(21) |
(10) |
(17) |
(27) |
Cosco (CHN) |
(13) |
(14) |
(21) |
(23) |
(29) |
Shanghai Int'l Port (CHN) |
(1) |
(13) |
(3) |
(17) |
(17) |
Hamburger Hafen (GER) |
(10) |
(25) |
(35) |
(34) |
(44) |
Intl Container Term Svcs (PHI) |
(7) |
(16) |
(2) |
(11) |
(23) |
Average |
(2) |
(13) |
(11) |
(13) |
(24) |
Source: Refinitiv, Edison Investment Research. Note: Prices at 30 August 2022.
Given the current market conditions and its valuation versus its peers, we think that a FY22 EV/EBITDA multiple range of at least 7–8x is appropriate for PORT3 and, with potential for increases in share liquidity, could continue to improve. This would result in a valuation range for PORT3 equity of $964m to $1.2bn. This is equivalent to a PORT3 share price of BRL11.2 to BRL13.8, 23% to 51% above the current share price. The mid-point would be BRL12.5 per share.
Exhibit 9 also shows the impact on the OCN discount to its look-through value. The discount would increase from 50% to 59% (the mid-point of the range). The value of OCN’s stake in PORT3 by itself would increase from 20% above OCN’s current market value to a 65% premium.
Furthermore, although financial markets are hard to predict, we note that they recovered significantly during Q322, which is positive news for the OWIL portfolio.
Exhibit 9: PORT3 valuation range and impact on OCN look-through value
PORT3 fair value |
Lower |
Mid-point |
Upper |
Adjusted EV/EBITDA (FY22e) |
7.0 |
7.5 |
8.0 |
Implied EV ($m) |
1,530.3 |
1,639.6 |
1,748.9 |
Net debt, adjusted (FY22e, $m) |
566.1 |
566.1 |
566.1 |
Equity fair value ($m) |
964.2 |
1,073.5 |
1,182.8 |
Equity fair value (BRLm) |
4,937 |
5,496 |
6,056 |
PORT3 share price fair value (BRL) |
11.2 |
12.5 |
13.8 |
Potential upside to PORT3 share price (%) |
23 |
37 |
51 |
Impact on OCN look-through value |
|||
OCN 57% stake in PORT3 FV (£m) |
455.3 |
506.9 |
558.6 |
Ocean Wilsons look-through value with PORT3 at fair value (£m) |
701.4 |
753.0 |
804.6 |
Ocean Wilsons look-through value with PORT3 at fair value per share (p) |
1,983.4 |
2,129.3 |
2,275.3 |
OCN discount with PORT3 at fair value (%) |
56 |
59 |
62 |
Source: Refinitiv, Edison Investment Research
Financials
OCN forecast changes
We have increased our revenue forecasts by 1% and 4% for FY22e and FY23e while cutting our earnings forecasts. The earnings cuts in FY22e are mostly driven by financial markets assumptions and the margin pressure at PORT3 due to costs and the lower volumes in the container businesses. We expect PORT3’s operating environment (bottlenecks, China lockdowns and costs) to improve and we assume that financial markets will be better in FY23e, although we still see some pressure and risks in both.
We estimate OCN’s pro forma net debt to EBITDA ratio to be 2.7x in FY22e (2.9x in FY21) and this seems a reasonable level of debt in our opinion.
Exhibit 10: OCN’s FY21 and FY22 forecast changes
Revenue ($m) |
Normalised PBT ($m) |
Normalised EPS (c) |
|||||||
Old |
New |
% chg. |
Old |
New |
% chg. |
Old |
New |
% chg. |
|
2022e |
426.4 |
432.4 |
1.4 |
99.7 |
33.6 |
(66.3) |
146.2 |
(41.8) |
N/A |
2023e |
458.2 |
478.3 |
4.4 |
123.3 |
111.5 |
(9.5) |
190.3 |
148.0 |
(22.2) |
Source: Ocean Wilsons Holdings, Edison Investment Research
PORT3 forecast
Exhibit 11 details our forecasts and assumptions for PORT3, which drive the revenue and operating costs for OCN. We have increased our pro forma (including the offshore vessels joint ventures) FY22 and FY23 revenue from $485m and $519m to $517m and $577m respectively. The revenue uplift is mostly due to offshore vessels (eg from $61m to $99m in FY23e) and logistics ($36m to $54m). FY22 and FY23 EBITDA was increased from $163m and $184m to $219m and $252m respectively. Offshore vessels again drive most of the upgrade from $21m and $23m to $45m and $54m respectively, reflecting the new contracts and better trading conditions.
Total revenue and EBITDA percentage growth is estimated in the teens for FY22e and FY23 with total pro forma EBITDA margins remaining good at PORT3 – at 42% and 44% for FY22 and FY23e, within the usual 40–44% range.
Exhibit 11: PORT3’s segmental revenue analysis and estimates
$m |
2019 |
2020 |
2021 |
2022e |
2023e |
Divisional net revenues |
|||||
Container Terminals |
167.8 |
132.2 |
141.8 |
152.4 |
172.6 |
O&G Offshore Base Support |
19.4 |
8.0 |
7.3 |
9.3 |
10.7 |
Towage |
159.5 |
173.6 |
199.1 |
206.6 |
223.5 |
Shipyards |
4.5 |
2.2 |
4.4 |
5.9 |
7.0 |
Shipping Agency |
9.2 |
8.1 |
8.9 |
9.3 |
10.5 |
Logistics |
45.7 |
28.7 |
35.2 |
49.2 |
54.0 |
Corporate |
0.0 |
0.0 |
0.0 |
(0.5) |
0.0 |
Total revenue (IFRS) |
406.1 |
352.8 |
396.7 |
432.2 |
478.3 |
Offshore vessels* |
61.2 |
60.9 |
57.8 |
84.8 |
98.5 |
Total revenue (pro-forma) |
467.3 |
413.7 |
454.5 |
517.0 |
576.8 |
y-o-y (%) |
(9.7) |
(11.7) |
9.9 |
13.7 |
11.6 |
Divisional EBITDA |
|||||
Container Terminals |
85.2 |
68.7 |
79.8 |
80.3 |
95.0 |
O&G Offshore Base Support |
2.2* |
(0.5) |
(0.4) |
0.4 |
1.1 |
Towage |
75.8 |
85.8 |
99.0 |
99.5 |
109.5 |
Shipyards |
(0.1) |
(2.7) |
0.6 |
1.6 |
1.8 |
Shipping Agency |
1.5 |
2.3 |
2.4 |
2.2 |
2.5 |
Logistics |
10.2 |
4.5 |
7.2 |
11.1 |
10.8 |
Corporate |
(20.6) |
(15.7) |
(23.6) |
(21.8) |
(23.0) |
Total EBITDA (IFRS) |
154.2 |
142.4 |
165.0 |
173.3 |
197.6 |
Offshore vessels* |
30.0 |
31.2 |
22.6 |
45.8 |
54.1 |
Total EBITDA (pro-forma) |
184.3 |
173.6 |
187.6 |
218.6 |
251.7 |
y-o-y (%) |
(1.8) |
(5.8) |
8.0 |
16.5 |
15.2 |
Divisional EBITDA margins (%) |
|||||
Container Terminals |
50.8 |
52.0 |
56.3 |
52.7 |
55.0 |
O&G Offshore Base Support |
11.3 |
(6.3) |
(5.5) |
4.2 |
10.0 |
Towage |
47.5 |
49.4 |
49.7 |
48.2 |
49.0 |
Shipyards |
(1.7) |
(122.7) |
13.6 |
26.3 |
25.0 |
Shipping Agency |
16.4 |
28.4 |
27.0 |
23.9 |
24.0 |
Logistics |
22.4 |
15.7 |
20.5 |
22.6 |
20.0 |
Offshore vessels* |
47.9 |
51.2 |
39.1 |
53.5 |
55.0 |
Total EBITDA margin (pro-forma) |
39.3 |
42.0 |
41.3 |
42.3 |
43.6 |
Source: Edison Investment Research, PORT3 data. Note: Offshore vessels is PORT3’s pro forma 50% share of the joint venture. *We add back the $13m one-off asset write-down in Offshore Base Support in 2019 for better comparison purposes.
OWIL assumptions
Although the financial markets have been recovering in Q322, they remain volatile, and the macroeconomic uncertainty remains elevated. Any assumption of returns in the OWIL portfolio is subject to a good degree of deviation.
We have assumed a 4% positive portfolio return for the second half of the year. We calculate this will take the FY22 performance to a 9.3% negative return for the full 12 months. We are then assuming a 7% return for FY23e. This means a $36.6m portfolio loss for FY22e and a $21.7m positive return for FY23e, excluding fees and investment income.
OCN’s reported earnings are quite sensitive to OWIL’s performance. If we were to flex our 7% base assumption by 5% (ie 12% and 2% portfolio returns), the impact on profit before tax would be about 13% in either direction for our FY23e forecasts, for example.
The investment management noted in its report that while ‘some comfort’ could be taken from the fact that shares had already fallen so much by the end of June, there is the risk of central banks engaging ‘in more aggressive policy measures in their battle against inflation’. It sees the outcome for the rest of the year as ‘very dependent on the path of inflation and interest rates, although continued volatility in markets seems likely, whatever happens’. The report also reminds readers that the OWIL portfolio is a mix of risk-on and risk-off assets as well as a blend of growth and value sectors.
Exhibit 12: Financial summary
Year-end December |
US$m |
2020 |
2021 |
2022e |
2023e |
|
PROFIT & LOSS |
||||||
Revenue |
|
|
352.8 |
396.4 |
432.4 |
478.3 |
Cash costs |
(213.9) |
(234.4) |
(264.2) |
(285.7) |
||
EBITDA |
|
|
138.8 |
162.0 |
168.2 |
192.6 |
Depreciation and amortisation |
(50.6) |
(49.3) |
(49.6) |
(49.4) |
||
Amortisation of right to use (IFRS 16) |
(10.7) |
(12.1) |
(14.0) |
(13.2) |
||
Profit/loss on PPE & intangibles |
0.1 |
(0.5) |
0.1 |
0.0 |
||
Share of results of JVs |
(4.1) |
(5.0) |
3.5 |
5.0 |
||
Investment portfolio returns |
33.4 |
49.5 |
(36.6) |
21.7 |
||
Other investment income |
1.6 |
4.1 |
3.7 |
5.0 |
||
Portfolio performance and mgmt fees |
(3.1) |
(5.0) |
(3.7) |
(4.5) |
||
Finance costs |
(23.2) |
(30.2) |
(40.1) |
(45.7) |
||
Exchange gains/losses on monetary items |
(7.6) |
(3.1) |
2.0 |
2.0 |
||
Extraordinary goodwill impairment charge |
0.0 |
0.0 |
0.0 |
0.0 |
||
Profit Before Tax |
74.6 |
110.4 |
33.6 |
111.5 |
||
Profit Before Tax (norm) |
|
|
74.6 |
110.4 |
33.6 |
111.5 |
Income tax |
(26.6) |
(27.9) |
(22.4) |
(30.1) |
||
Non-controlling interests |
(9.3) |
(18.8) |
(25.9) |
(29.1) |
||
Profit After Tax (norm) |
|
|
38.7 |
63.7 |
(14.8) |
52.3 |
Average Number of Shares Outstanding (m) |
35.4 |
35.4 |
35.4 |
35.4 |
||
EPS - normalised (c) |
|
|
109.5 |
180.1 |
(41.8) |
148.0 |
Dividend per share (c) |
70.0 |
70.0 |
70.0 |
70.0 |
||
EBITDA Margin (%) |
39.4 |
40.9 |
38.9 |
40.3 |
||
ROE (%) |
6.9% |
11.1% |
(2.6%) |
9.1% |
||
BALANCE SHEET |
||||||
Current Assets |
|
|
492.8 |
518.5 |
439.3 |
464.0 |
Cash |
63.3 |
28.6 |
13.0 |
15.0 |
||
Trading investments |
347.5 |
392.9 |
310.5 |
326.0 |
||
Debtors |
70.3 |
84.7 |
99.2 |
105.0 |
||
Stocks |
11.8 |
12.3 |
16.6 |
18.0 |
||
Fixed Assets |
|
|
861.1 |
861.8 |
914.8 |
924.2 |
Investments & other fixed assets |
102.3 |
112.6 |
117.7 |
126.6 |
||
Tangible assets |
579.1 |
563.1 |
582.9 |
583.5 |
||
Right to use assets |
149.3 |
157.9 |
186.1 |
187.0 |
||
Intangible assets |
30.4 |
28.3 |
28.1 |
27.1 |
||
Total Assets |
|
|
1,353.9 |
1,380.3 |
1,354.1 |
1,388.2 |
Current Liabilities |
|
|
124.3 |
131.3 |
133.6 |
140.0 |
Payables and other liabilities |
47.4 |
66.6 |
58.6 |
65.0 |
||
Short term borrowings |
58.7 |
45.3 |
55.0 |
55.0 |
||
Financial leases |
18.2 |
19.4 |
20.0 |
20.0 |
||
Long Term Liabilities |
|
|
485.9 |
465.4 |
468.8 |
455.7 |
Longer term borrowings |
284.0 |
256.3 |
232.2 |
218.1 |
||
Financial leases |
139.7 |
148.4 |
175.0 |
175.0 |
||
Other long-term liabilities |
62.2 |
60.7 |
61.6 |
62.5 |
||
Net Assets |
|
|
743.7 |
783.7 |
751.7 |
792.6 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
153.2 |
159.2 |
163.3 |
192.9 |
Net Interest |
(22.7) |
(25.2) |
(21.7) |
(24.2) |
||
Tax |
(29.1) |
(27.9) |
(9.1) |
(29.7) |
||
Capex |
(62.0) |
(47.4) |
(77.5) |
(78.0) |
||
Acquisitions/disposals |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net acq/disposals of financial assets |
(18.6) |
0.3 |
29.0 |
0.0 |
||
Equity financing |
0.0 |
0.0 |
0.0 |
0.0 |
||
Dividends |
(39.7) |
(43.2) |
(43.2) |
(43.2) |
||
Other (including divs from JV, fx effects) |
41.7 |
(19.4) |
(86.7) |
(31.5) |
||
Net Cash Flow |
22.8 |
(3.6) |
(48.3) |
(13.7) |
||
Net debt/(cash) including leases |
|
|
437.3 |
440.9 |
489.2 |
502.9 |
Source: Ocean Wilsons, Edison Investment Research
|
|
Research: TMT
The Pebble Group’s H122 figures are strong, as indicated in July’s trading update. Facilisgroup (the SaaS offering supporting promotional products for North American SMEs) grew recurring revenues 21% in US$ terms (£: +30%) and its new Commercio offering is making encouraging early progress. Brand Addition, supporting global brands with promotional products, lifted revenues 29% over H121, from both new and longer-established customers. Group FY22 consensus forecasts were raised in July and management indicates that these will be ‘at least’ met. Pebble has a strong balance sheet funding investment in technology and sustainability to drive future growth.
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