ICTSI stocks drop on lower-than-expected third-quarter earnings

RAZON-LED International Container Terminal Services, Inc. (ICTSI) was among the most traded stocks last week as investors reacted to the company’s third-quarter earnings that fell below expectations.

A total of P639.8-million worth of 5.21 million ICTSI shares exchanged hands from Nov. 11-15, making it the 12^th most traded issue in the local bourse, the Philippine Stock Exchange data showed.

The stock was lower by 1.29% on a week-on-week basis to P122.2 per share last Friday from P123.8 per share. Year to date, the stock has risen by 22.8%.

“ICTSI was sold down on the day of its earnings release, which shows that some investors were disappointed with the company’s financial performance for the third quarter,” said RCBC Securities, Inc. Equity Analyst Jessica S. Pineda in an e-mail.

Ms. Pineda noted that the stock’s price drop that day “may have been seen as a bargain by traders to enter.”

In a separate e-mail, Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said that the stock was adversely affected by the past week’s “overall market sentiment” that was clouded by uncertainties surrounding the US-China trade negotiations.

“Investors worried that the talks may get derailed, which could consequently lead to a further escalation of the trade war and global economic slowdown. This, in turn, would drag the market in general, and ICTSI in particular given that the said company’s nature of business is greatly exposed to global trade,” Mr. Tantiangco said.

On the day the company’s earnings report was disclosed, the stock’s share price went as low as P122 per share from its opening price of P126 per share before closing at P123.9 per share. Bargain hunters took positions the day after, sending the stock’s closing price up slightly to P124 per share.

ICTSI reported a 7% increase in net income attributable to equity holders in the third quarter to $56.4 million amid a three-percent growth in revenues from port operations. This brought the nine-month bottom line to $184.9 million, which was 29% higher than a year ago.

The company attributed the profit growth to several factors such as the “strong operating income contribution” from the terminals in the Democratic Republic of Congo, Iraq, Mexico, and Manila and Subic in the Philippines; “new contracts with shipping lines and services” at the Victoria International Container Terminal in Melbourne, Australia; the “continuing ramp-up” at the new terminals in Papua New Guinea; and a “decline in equity in net loss” at Sociedad Puerto Industrial Aguadulce S.A., which is ICTSI’s joint venture terminal project with PSA International Pte. Ltd. in Buenaventura, Colombia.

However, ICTSI noted that the growth was tempered by the “acceleration of debt issue costs” associated with the partial prepayment of Euro-denominated term loan in July as well as the “non-recurring gain” from the “interest rate swap related to the prepayment of the project finance loan at its terminal operations in Manzanillo, Mexico in 2018.”

The company said that excluding these one-off items, its bottom line during the January to September period would have grown by 34%.

Given the company’s year-to-date net income of $184.9 million, Ms. Pineda forecast ICTSI’s full-year 2019 attributable net income to reach $226.4 million, which is around two-percent higher than last year’s $221.5 million.

“The conservative forecast is due to the expectation that ICTSI’s revenues will be dragged by high levels of costs, especially in terms of manpower brought by rate adjustments and depreciation and amortization brought by their expansion projects,” she said.

Ms. Pineda placed the stock’s support and resistance levels at P115 and P125, respectively.

“This is due to the tight consolidation of the stock in that area since the beginning of October,” she said.

For Philstocks’ Mr. Tantiangco, support is set at P120 while its resistance is set from P136-137.50.

“The robust earnings are expected to be driven by strong port operations especially now that we’re in the fourth quarter, which is usually the highest in terms of global trade in a year. At the same time, ICTSI has the new contracts with shipping lines and services at its terminals in Australia, Poland, Croatia, and Mexico, as well as the upgrades in its terminal in Papua New Guinea, all of which have already given a big boost to the port operator’s 2019 performance,” he said. — Edwin C. Aruta, Jr.