Outlier

By Lourdes O. Pilar
Researcher

INVESTORS snapped up shares of International Container Terminal Services, Inc. (ICTSI) on news its subsidiary in Croatia has started a year-long expansion of its terminal at the Port of Rijeka to accommodate larger vessels.

A total of P1.809 billion worth of 12.571 million shares were traded during the June 10-14 period, making it the third most actively traded stock in the local bourse that week, data from the Philippine Stock Exchange (PSE) showed.

Shares in the Razon-led firm closed on Friday at P148 apiece, up 7.6% week on week from the P138 finish on June 7. Prior to this, ICTSI’s stock price has been on an uptrend most of the week, increasing to as high as P149 per share on Thursday.

For the year, the stock gained 48.7%.

“Investors’ appetite for ICTSI were piqued by news of its Croatian subsidiary, Adriatic Gate Container Terminal (AGCT), undertaking an expansion at the Port of Rijeka,” said Philstocks Financial, Inc. Research Head Justino B. Calaycay, Jr. in an e-mail.

“Once completed by mid next year, the port will be able to accommodate larger vessels and be the first terminal in the region able to berth 20,000 twenty-foot equivalent units (TEU) ships as well as provide more efficiencies,” said Mr. Calaycay.

In a statement last Monday, AGCT said it is implementing a two-phase dredging scheme to improve its operations at the Port of Rijeka, the first phase of which had already been approved.

Once completed by mid-2020, it is expected to make AGCT capable of accommodating vessels that have a capacity of 20,000 TEU, a length overall of 400 meters and a beam of 59 meters.

Financing for the infrastructure works, according to the Razon-led firm, has been provided by the European Union and the Port of Rijeka Authority, with ICTSI “undertaking all the associated necessary investment in quayside and landside handling systems, as well as the increased coverage of the terminal’s state-of-the-art IT systems.”

AGCT said that the capacity expansion will increase terminal yard capacity to 600,000 TEUs per year to address increasing demand. It expects to complete by end-2019 the upgraded on-dock rail yard of the terminal, which will offer an additional 360,000 TEUs in annual capacity.

ICTSI holds the 30-year contract to operate, maintain and develop the AGCT at the Port of Rijeka with its partner Luka Rijeka D.D.

Unicapital Securities, Inc. Technical Analyst Cristopher Adrian T. San Pedro likewise attributed the stock’s movement to the investors’ “positive reaction” surrounding the news, adding that the increase of net foreign buying this week also contributed to the increase.

Data from the PSE showed net foreign buying for ICTSI stood at P419.7 million last week, 165.3% more than its recorded P158.2 million the previous week.

The listed Razon-led firm posted an attributable net income of $72.4 million in the first quarter, up 77% from in the same period last year due to a strong operating income and lower financing charges. Its gross revenue stood at $383.78 million during the period, 17.9% more than the $325.38 million in the first quarter of 2018.

Philstocks’ Mr. Calaycay said that the Croatian port expansion “may provide a boost to the company’s numbers from first quarter’s 4.2% top line and 16% bottom-line growth momentum.”

“The only risk hanging over the port business overall is the threat of an escalation of (and possible contagion from) the US-China trade wars,” Mr. Calaycay said.

Unicapital’s Mr. San Pedro expects the company’s gross revenue to hit $1.5 billion this year, boosted by “strong operational improvements and higher contributions of new ports, particularly in Australia and Papua New Guinea.”

“I expect the trend to remain bullish and the stock will consolidate between P134.00 support and P148.90 resistance with the possibility of testing P160.00 and P170.00 resistance levels if it stays above P136.00 in the short term,” Mr. San Pedro said.

For Philstocks’ Mr. Calaycay, initial support is at the P133-P139 band “with psychological resistance at the P150 line.”

“This news may have already been discounted by the market and we expect little movements thenceforth either way. Nevertheless, ICTSI continues to be a potential long-term proposition as it falls towards the indicated support levels,” said Mr. Calaycay, noting its share price “has already risen significantly since the start of the year” from P99.5 to a 52-week high of P148.9.

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