In March 2012, it was announced that a unit of International Container Terminal Services Inc. (ICTSI), a company based in Philippines, intends to acquiring 35% to 55% shares of PICT. It was subsequently announced that ICTSI entered into a Share Purchase Agreement with the majority shareholders of PICT for acquisition of 35% shares at a price of PKR 150 per share.
In light of the above development, I thought it would be interesting to have an overview of the performance of PICT to better understand the valuation of PKR 150 per share.
PICT is engaged in the construction and engineering industry. The Company has a Build Operate Transfer (BOT) contract with Karachi Port Trust for the construction, development, operations and management of a common user container terminal at Karachi Port for a period of twenty-one years commencing June 18, 2002.
The container's storage capacity is 15,000 twenty-foot equivalent units (TEU) per day. During the fiscal year ended June 30, 2011, the Company handled 669,806 TEU. As of June 30, 2011, the Company also had one wholly owned subsidiary, Pakistan International Bulk Terminal (Private) Limited.
As will be a common trend on this website and a departure from regular equity analysis reports, the financial performance is categorized into Growth, Quality, Consistency, Risk and Valuation. The objective of this approach is to present the performance of any company on an easy to understand basis for meaningful and hopefully quick jargon free fundamental analysis.
A quick overview of the presented table makes it easy to understand the performance of PICT.
The company has 5 year average EPS growth of 38.55%, including 2010 when the growth was negative, beating the rate of inflation.
Quality of earnings of the company are high reflected by significant profit margins. There are tight control on costs as well considering relatively smaller gap in gross and operating margins.
The company has also consistently beaten any investment instrument for the past 5 years by having an annual return on equity of over 25%.
Risk profile of the company has improved as represented by a healthy current ratio and maintaining a level of debt manageable by operating earnings.
In terms of valuation, the company has been trading at a significant premium to P/BV and P/E ratios. At the offer price of PKR 150, the P/BV is 4.78x and P/E is 13.11x both of these offer multiples are at a premium to the reported P/BV of 4.31x and P/E multiple of 11.80x
This clearly seems like a good deal for shareholders, high returns would be earned specially by those shareholders who would have bought shares in 2011 or earlier.
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