Investors mull ICTSI unit, Pampanga firm logistics venture

SHARES in Razon-led International Container Terminal Services, Inc. (ICTSI) moved sideways last week as investors assessed its subsidiary’s partnership agreement with Pampanga-based Prime Alta Holdings, Inc. to form a freight forwarding and logistics business.

Data from the Philippine Stock Exchange (PSE) showed ICTSI ranking seventh in value turnover with P816.76 million worth of 4.48 million shares having exchanged hands on the trading floor from Sept. 5 to 9.

ICTSI shares closed at P184.30 apiece on Friday, inching up 0.7% from its Sept. 2 close. For the year, the stock has fallen by 5.5%.

“ICTSI moved sideways for the week as investors digested news on its newly formed joint venture with Prime Alta Holdings, Inc. and the sharp decline in Asia-US shipping rates,” RCBC Securities, Inc. Research Analyst Inzaghi Rafael D. Cabacungan said in an e-mail.

“The shipping rates went down because of slower global trade from lower demand for goods,” he added.

In a separate e-mail, IB Gimenez Research Securities, Inc. Research Head Joylin F. Telagen said ICTSI is consolidating at this price level that closed this week at P184.30 apiece.

“Investors are on the sidelines [last] week. However, this joint venture news will fundamentally improve the company’s bottom line over the long term. But I think traders are waiting for a technical breakout before buyback,” said Ms. Telagen.

For Mr. Cabacungan, the joint venture is beneficial for the port operator.

“We’re still waiting for further disclosures to assess the impact to the stock’s earnings,” he added.

Last week, the Enrique K. Razon, Jr.-led port operator saw developments that include ICTSI’s subsidiary, Abbotsford Holdings, Inc., signing a partnership deal with Prime Alta Holdings, Inc. to put up a freight forwarding and logistics business.

The joint venture is to be named Fortune Logistics Corp., which aims “to reduce costs and improve operational efficiency associated with the processing of cargo that are intended to be used by ICTSI for its various operations in the Philippines,” as said in a disclosure to the stock exchange.

Fortune Logistics will primarily operate, engage in and carry on the business of domestic and international ocean, air and land freight forwarding and logistics.

The two companies expect regulators to issue permits and licenses within one to two months after the signing of the shareholders’ agreement for the joint venture.

The deal has an initial capitalization of P25 million, where Abbotsford will invest an initial subscription of P12.75 million or owning 51%, while Prime Alta will invest P12.25 million, owning 49%.

ICTSI said that this joint venture will distribute a percentage of its available distributable cash flow and such dividends will be paid to the shareholders pro rata based on their respective shareholding.

Based on a report published in PortCalls, the Freightos Baltic Global Index, Asia-US East Coast prices decreased by 4% to $8,688 per forty-foot equivalent unit last week and were 61% lower compared with rates last year.

“This decrease reflects falling demand for freight, both because of excess inventories among some importers as inflation reduces spending among some consumers and others shift to other types of goods and services as the pandemic recedes, and because many retailers pulled peak season orders earlier in the year to avoid delays,” Freightos said.

ICTSI reported a 42.3% increase in its attributable net income to $152.200 million in the second quarter from $106.592 million in the same period in 2021.

This brought its attributable net income in the first half of the year to $294.475 million, up by 49.7% from the $196.662 million a year ago.

Likewise, gross revenues from port operations in the second quarter grew by 19.5% to $534.642 million from $447.037 million in the same period last year.

For the first half, port operations revenue went up by 20.4%, to $1.063 billion from $882.624 billion previously.

“With ICTSI’s impressive [first-half] performance from improved volumes due to loosening of COVID-19 restrictions and additional terminals, its first half earnings already account for 63% of our full year 2022 forecasts at P25.9 billion,” Mr. Cabacungan said.

“It may surpass our forecasts,” he said. “However, it may face headwinds as a possible recession in the US may cause a slowdown in global trades.”

ICTSI has a diverse portfolio of ports all around the world such as Europe, Middle East, Africa, Asia-Pacific, and America.

Ms. Telagen sees earnings for the third quarter reaching $155.62 million while $600-million net income attributable to equity holders of the parent for the entire year.

“At this point, with possible risk of stagflation and a few days before the Fed meeting this month, I think it’s better to stay on the sidelines and wait for technical breakout,” she said.

She noted for market players to trade and invest cautiously.

“While ICTSI continues to trade sideways near its 52-week low at P168.50, immediate resistance is at P190.00 while support is at P80.00,” Mr. Cabacungan said.

Meanwhile, Ms. Telagen pegged support and resistance levels at P173.00 and P194, respectively. — Abigail Marie P. Yraola