By Abigail Marie P. Yraola, Researcher
SHARES in Razon-led International Container Terminal Services, Inc. (ICTSI) increased last week on profit taking, driven by the Morgan Stanley Capital International (MSCI) rebalancing and the suspension of the US debt ceiling.
Data from the Philippine Stock Exchange showed ICTSI ranking ninth in value turnover with P1.45-billion worth of 7.33 million shares exchanging hands from May 29 to June 2.
ICTSI shares closed at P202.80 apiece on Friday, 4% higher than its May 26 close of P195.00. Year to date, the stock has inched up by 1.4%.
Analysts said ICTSI’s price movement was mainly driven by MSCI rebalancing and developments in the US debt ceiling.
“We think price action for [ICTSI] this week was heavily influenced by broad-based selling pressure amid tepid trading activity given the overhang from the MSCI rebalancing and US debt ceiling developments,” Rastine Mackie D. Mercado, research director at China Bank Securities Corp., said in an e-mail.
The MSCI rebalancing resulted in foreign outflows and worsened selling pressures, he added. The index is designed to measure the performance of the large and mid-cap segments of the Philippine market, covering about 85% of the local equity market. It is reviewed and rebalanced twice a year.
In a Viber message, Aniceto K. Pangan, equity trader at Diversified Securities, Inc., said that aside from the income growth reported in the first quarter, profit taking prevailed in the local market as US debt ceiling negotiations continue and amid uncertainties on whether US Fed policy rates would pause or increase.
The US Senate passed legislation backed by President Joseph R. Biden, Jr. that lifts the government’s $31.4 trillion debt ceiling, averting what would have been a first-ever default, Reuters reported.
The Senate voted 63-36 to approve the bill that had been passed last Wednesday by the House of Representatives, as lawmakers raced against the clock following months of partisan bickering between Democrats and Republicans, the report said.
The legislation resulted in the statutory limit on federal borrowing, suspending it until Jan. 1, 2025. The debt ceiling sets the maximum amount of outstanding federal debt the US government can incur or can borrow by issuing bonds.
Over the years, the debt ceiling has been raised or suspended numerous times to avoid default, or the failure to make the required interest or principal repayments on a debt, whether it is a loan or a security.
“On the US debt ceiling, uncertainty among investors was high through the week even as [President Biden] and House Speaker Kevin McCarthy struck a deal last weekend due to the need for Congress to approve any debt limit legislation,” China Bank Securities’ Mr. Mercado said.
He added that, generally, the market doesn’t like uncertainties, and this factors into a weak buying appetite and higher selling pressure.
Last week, the Enrique K. Razon, Jr.-led company saw developments that include ICTSI adding an eighth berth to its Manila terminal — the Manila International Container Terminal (MICT) — worth P15 billion.
The project is beyond the company’s contractual commitments to the Department of Transportation and the Philippine Ports Authority.
Berth 8 will be constructed in phases and is expected to increase MICT’s capability to service foreign ultra container vessels of up to 18,000 twenty-foot equivalent units (TEUs).
This berth will create another 400 meters of quay and 12 hectares of yard space, which is expected to bring an additional annual capacity of 200,000 TEUs.
In other reports, ICTSI partnered with a unit of San Miguel Corp. (SMC) to enable a faster and more seamless gate process.
The partnership is with SMC’s subsidiary Intelligent E-Processes Technologies Corp. (IETC), which manages the Autosweep RFID, and ICTSI’s MICT.
These developments, Mr. Mercado said, had only a modest impact on the listed stock’s price performance but overall equity market sentiment continues to be influenced by near-term risk events.
“We think that additional capacity for [ICTSI] should positively impact profitability prospects (e.g., better volumes and yields), especially considering improving global supply chain conditions,” he said.
As for the partnership with IETC, he believes that the move complements the listed port operator’s capacity expansion and enables a more efficient flow of goods at MICT.
Mr. Pangan said ICTSI’s outlook becomes more positive as volume is expected to grow by double-digits given the company’s plan to add another berth.
“Aside from this, the partnership with SMC’s subsidiary, IETC, will continue to improve their operational efficiencies,” he added.
In the first quarter, ICTSI reported an 8.7% year-on-year rise in its attributable net income to $154.61 million. Its revenues from port operations also grew by 8.3% to $572.25 million.
For Mr. Mercado, ICTSI’s full-year 2023 attributable net income could reach $634 million.
“We think that investors may consider looking at [ICTSI] given [its] prospects of resilient yields owing to its ability to pass on inflationary costs through tariff hikes in some of its terminals,” he said.
He also pointed to the listed port terminal operator’s active consideration of brownfield opportunities to further drive profit growth and potential margin windfall from the continued easing of global fuel and energy prices from peak levels.
“Immediate support is at P194.50 while resistance is at P220.00,” Mr. Mercado said.
Mr. Pangan expects ICTSI to sustain its earnings growth into the second quarter. He added that the port terminal’s expansion in Australia, Congo and Rio would serve as key growth drivers.
He pegged support and resistance levels at P195.00 and P209.00, per share, respectively.
