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magazinePort operator looks like a great investment
We’re enthused by Global Ports’ plan to acquire more cruise ports and generate additional revenue via retailing on top of standard port and service fees. The company joins the London stock market on 12 May and looks a decent investment, in our opinion.
The company currently owns 14 ports in eight countries. Two of these sites are commercial shipping ports and the rest are used by cruise ships. Global Ports has identified a large number of potential acquisitions, nearly all owned by governments or states seeking to privatise assets.
It wants to expand in Europe, the Caribbean and Asia. ‘We want to buy existing ports where we can make money from day one,’ says chief executive Emre Sayin.
‘Our model is to run them more efficiently and add retail outlets to make more money from customers, just like the airport industry did in the past.’
Sole consolidator
He says the group is the only consolidator in the market actively seeking to buy more cruise-focused ports. Its two commercial ports provide steady profit and generate cash to support expansion on the leisure side.
Global Ports made $115m revenue in 2016 and $81m earnings before interest, depreciation and amortisation (EBITDA). Net debt is presently 3.7 times EBITDA which is at the higher end of most investors’ comfort range.
Head of corporate finance Jan Fomferra says the money raised at IPO should help the net debt to EBITDA ratio move closer to the company’s targeted 2.0 to 2.5 range.
It is hoping to raise $75m in new money, which excludes additional cash raised for existing shareholders who are selling part of their stake at the IPO. The exact amount raised will be confirmed on 12 May.
‘We’re comfortable with the leverage at the moment as this is a profitable business generating lots of cash,’ explains Fomferra.
‘We have high visibility of earnings as cruise ships typically publish their itinerary one to two years in advance. Cruise operators make sure they always fill their ships and our fees are based on passenger numbers per ship.’
Plans for bumper dividends
Global Ports’ IPO is expected to be priced in the range of 735p to 875p, implying a £462m to £539m market cap. It intends to pay at least $25m (£19.3m) in dividends for the 2017 financial year. That implies a potential dividend yield between 3.6% and 4.2%.
The company will start off with a standard listing on the London Stock Exchange before moving ‘in the not so distant future’ to a premium listing, according to Sayin. That would make the company eligible for inclusion in FTSE indices – the implied market cap would certainly be big enough to put Global Ports in the FTSE 250 index.
Get ready to buy on day one. (DC)
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