Piraeus Port Authority: A vessel strong enough to endure headwinds (stays BUY)
A year after our initiation, and with a clearer view on the port’s fundamentals post privatisation, we are issuing an update on Piraeus Port Authority, reiterating our BUY recommendation on the stock. Our new 12M price target (PT) is EUR 23.0/share, incorporating the FY18 results and our fine-tuned estimates for 2019-22E, given the updated status of the masterplan. PPA had a very strong year in 2018, as the port managed to outperform our already-bullish estimates for 2018, demonstrating its dynamics and potential. A major driver for profitability was the container business, which achieved a total throughput of 4.63m TEU*. Going forward, we retain a positive outlook for the 2019-21E period, as we believe there is more than meets the eye in terms of revenue performance and efficiency. We anticipate an EPS CAGR of 9.2% for 2019-22E. The potential remains strong. There is still room for improvement, however, and the marathon does have a bumpy road ahead of it. Recent delays in the approval of its master plan by the Port Design and Development Committee (PDDC) makes us sceptical on the timing of the realisation of the complete plan. We remain BUYers of PPA, as we believe the stock remains cheap for what is offers in the long term, at EV/EBITDA of 5.6x in 2020E, based on our estimates.Piraeus Port Authority SA is a Greece-based company engaged in the management and operation of Piraeus port. The main activities of Piraeus Port Authority SA are ships' anchoring services, handling cargo, loading and unloading services as well as goods storage and car transportation. The Company is also responsible for the maintenance of port facilities, the supply of port services (water, electric current and telephone connection, among others), for services provided to travelers and for renting space to third parties. Piraeus Port Authority SA has two wholly owned subsidiaries, Nafsolp SA and Logistics OLP SA. Nafsolp SA is mainly engaged in ship repairing services and Logistics OLP SA is mainly engaged in the development of combined transportations as well as port facilities and services.
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