Kingston Wharves Limited Equity Report

Valuation Summary

In order to ascertain a fair value for KWL, the price-to-earnings (P/E) and price-to-book (P/B) valuation methods were applied to our forecasted earnings and book value for FY 2021.

Our forecast for FY 2021 is based on the economic environment we believe best represents a post-COVID environment. Specific to KWL, the resumption of global trade to near pre-COVID levels will significantly bolster their performance relative to what is expected in 2020. We foresee growth in 2021 being stronger than 2020 as the logistic services industry would have implemented key health measures such as to prevent any spread of the virus via ships; a potential vaccine being found could also be an important tailwind. Given the importance of global trade to the overall economic framework of the global demand and supply, we foresee the importance of the KWL’s services as being crucial for the recovery of regional trade.

Based on the collective impact of the factors mentioned above, our base case forecast for KWL is that they will earn approximately J$3.80 billion in FY 2021 which translates to an estimated Earnings Per Share of J$2.66. We expect book value to increase in FY 2021 to J$31.11 billion with an estimated book value per share of J$21.76. Utilizing the justified P/E and P/B while yielded multiples of 21.37X and 1.87X, respectively. Utilizing these P/E and P/B valuation method, we estimate our fair value range for KWL between J$40.61-56.88. We complemented this methodology by applying the Dividend Discount Model which yielded J$36.69. Utilizing the average of these valuation methodologies, we obtain a fair value of J$49.12 Comparing this to the current price of J$44.57, the stock is currently fairly valued. Given the underlying economics of the Company coupled with COVID-19 pandemic, Barita Investments Limited recommends Market weight.

Last Price (J$) $44.57
Year to Date Return -27.19
Dividend Yield 0.98%
Price/Book 2.58
Forward P/E 16.74
Estimated Fair Value $44.73
Estimated Share Holder Return Updside 1.34%
Recommendation Marketweight

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