Global Ports Holding – The horizon is looking so much better

Yesterday morning the world’s largest independent cruise port operator announced its Trading Statement for the six months to end September – they showed a quite substantial increase.

The recent Canary Islands and St Lucia agreements have seen Global Ports Holding (LON:GPH) really boost its operating portfolio.

Adding in other cruise ports in the Canaries, in St Lucia and Puerto Rico takes its global network of award-winning ports and terminals up to 26.

It now is working in some 16 countries across the Caribbean, Mediterranean, the South Atlantic, Asia and Northern European cruise regions.

Unprecedented disruption

The last few years have not been too good to the group in the light of the unprecedented level of disruption to global trade and the cruise industry and the associated uncertainty created by the spread of the Covid-19 pandemic.

Understandably major operating losses were created in the year to end March 2021, losing $122.66m as cruise passenger numbers decreased globally.

However, trading improved markedly in the last year to end March 2022, with a significantly reduced loss of only $43.94m.

Encouragingly the group is performing markedly better in the current year.

Cruise passenger volumes are on the up again, with a return to pre-Covid levels being expected in the 2023/2024 trading year.

What is impressive is the fact that the group is coming out of the ghastly period with an even better portfolio of concessions.

The first-half year

Total passenger numbers were a massive 4.35m against just 0.56m six months earlier.

This strong growth in passenger volumes was mainly driven by the further easing of travel restrictions during the second quarter, higher cruise fleet deployment and a continued increase in occupancy levels, as well as the impact of seasonality.

Occupancy levels continue to remain below pre-pandemic levels but have significantly and continuously risen since calendar year 2021

Total interim adjusted revenues were up 334% to $64.1m ($14.8m), while adjusted EBITDA was $40.4m ($0.5m loss).

Looking back

The origins of the Group date back to 2003, when operations commenced at Ege Port in Kuşadası, Turkey.

Between 2006 and 2016, additional port operations within and outside of Turkey were added, totalling 13 cruise and two commercial ports by the time of the Company’s listing in May 2017.

Current operations

The £50m capitalised company has two segments, its Commercial and Cruise Business divisions.

It operates cruise ports for serving cruise liners, ferries, and mega-yachts, as well as individual passengers.

The company also engages in the commercial port operations that specialise in container, bulk, and general cargo handling activities; storage business and offers marine services.

There are differences between the services sought and handled for each of the ports contracted.

The group considers its cruise revenue is based on two defined sides:

Cruise services: its revenue is mainly derived from handling cruise ships and their passengers and crew through terminal and marine services.

These revenues are generated primarily through per passenger charges for a range of core services at each port.

Example of core port services: Landing fees; Security fees; and Luggage handling fees.

Ancillary services: revenue is generated from a portfolio of additional services offered at each port: Port services; Destination services; and Area management.

The company’s focus is on providing the most efficient, flexible and value-adding services at each port.

It provides its services direct to cruise lines, passengers, cruise ships and crew, as well as working with destination stakeholders such as retailers, office tenants and third-party service providers.

It also serves ferries and super- and mega yachts in some ports.

Brokers Views

Analyst Greg Johnson at Shore Capital Markets has current year estimates to end March 2023 showing $106.5m ($40.3m) revenues while its EBITDA could grow from, $7.0m to $55.6m, with a significantly lower adjusted pre-tax loss of only $15.4m ($43.4m), lowering the loss to just 18.2c (54.7c) per share.

Looking forward to the coming year Johnson sees $153.3m revenues, $92.5m EBITDA, $15.5m profit and 5.8c per share in earnings.

The broker has “a run-off based valuation that suggests the existing port network merits an 11-13x forward EBITDA multiple, consistent with similar travel infrastructure plays such as airports. This could value the group’s existing and new concessions at well over $1bn – or after debt, overheads and minorities at some 400p per share.”

My View

I am not put off by this £52m group’s massive net debt position of $462m, due to its continued investment in its new port operations.

It really is building its momentum back up again after being hit for six by Covid almost killing its business.

The passenger numbers are coming back now, lifting cruise revenues in the process.

The actual interim results will be published within the next month.

Pre-pandemic this group’s shares were trading at around 240p each but are now just 81.5p.

I can see the shares more than doubling in due course as the recovery and growth continues.

However, for now I am cautiously fixing a 100p Target Price.