London, UK, 8 September 2022
Ocean Wilson Holdings (OCN): Hit by markets, valuation eye-catching
Ocean Wilsons (OCN) reported a H122 loss of $34.7m (H121 profit of $39.5m), chiefly due to weak financial markets which led OCN's international investment portfolio (OWIL) to report a $48.9m loss. Despite headwinds in the container terminal business, some good operating trends allowed Wilson Sons (PORT3) to boost OCN's H122 revenue by 12% y-o-y and EBITDA by 2%. We are cutting our forecasts for FY22e (to a $14.8m net loss) and FY23e (22% EPS reduction). OCN is trading at 50% of the look-through value of its 56.5% PORT3 stake and OWIL portfolio. This discount seems excessive, especially as PORT3's market valuation is undemanding. To further highlight this valuation gap, we have introduced a valuation range for PORT3; at the mid-point of the range OCN's discount increases to 59%. OCN has a 6.8% dividend yield.
We are introducing a valuation range for PORT3 based on a FY22 EV/EBITDA ratio of 7-8x (it is trading on 6.0x on our numbers), which we think is reasonable given where its peers are trading. The mid-point of this range is 37% above the PORT3 trading price (BRL9.10 per share) and increases the look-through discount to 59%. The value of the OCN stake in PORT3 by itself is currently 20% more than OCN's market cap. At the mid-point of the PORT3 range this would rise to 65%.
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