Kingston Wharves Ltd. Analysis

Outlook and Recommendation

Kingston Wharves has shown the ability to consistently generate profitability over several years. Since the start-up of motor vehicle transshipment by KW in 2009, the business has outgrown the 18 acres of land it leased at the Tinson Pen aerodrome and filled up another 15 acres it bought near the wharf devoted to motor vehicle storage. The car business is now one of the most profitable business segments in the Company accounting for approximately 70% of the Company’s operating profits, which we believe was bolstered due to the diversification of car-making following a series of earthquakes in Japan. A lot of vehicles are no longer made in Japan and as such require the services provided by KW in order to reach their intended destination. The Company has expressed interest in working on improving Berth 3(a designated location at a port where a vessel may dock) with consideration being given to work on Berths 6 and 7 down the line should KW attract more business. Notable, Kingston Wharves has received notification of provisional approval from the Special Economic Zone (SEZ) which when approved will bring lower tax rates and other benefits and in turn improve profitability for the Company. However, despite the Company’s ability to grow consistently over the years, we believe the current price is not a true reflection of the Company’s growth rate. We recommend KW’s stock as a HOLD based on our estimated fair value of J$52.36 with an expected downside of ~14.72% over an 18-month horizon. Investors should be aware that even though the firm has done well in recent years and is still expected to improve in profitability over the next 18 months, the Company’s shares are closely held and may be difficult to purchase at an attractive price. We however advise you to consult an investment advisor at Barita Investments Ltd to discuss your individual circumstances before making any investment decision.

Market Statistics (Nov 1, 2019)
KW's Price/share 61.40
52Week High 100.00
52 Week Low 38.00
KW's 12 month trailing EPS to June 2019 3.48
KW's P/E 38.44X
KW's BV/Share 19.89
KW's P/BV 3.44X
KW's BV Growth 9.29%
Estimated Fair Value 55.75

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