Global Ports Holding (LSE: GPH), the world’s largest independent cruise ports operator, listed on the London market in May with a market cap of £465m but little fanfare. The IPO price of 740p a share was near the bottom of the prospectus’s indicative range of 735p to 875p, subsequent trading in the shares was relatively thin and the price had drifted down to 683p by the end of last week.
Generous yield
The shares dropped over 8% to 625p in early trading today after the company reported a 5.7% decline in first-half revenue and a bottom-line loss due to a non-cash amortisation expense. Nevertheless, operating cash flow was strong and management declared an interim dividend of 21.6p.
In the IPO prospectus, the company had said it intends to pay a “minimum” gross dividend of $25m for 2017 and that “the split of dividend between interim and final will be approximately 50/50.” So, we’re looking at a full-year payout of around 43.2p, giving a yield of 6.9%. With 62.83m shares in issue, and at current exchange rates, the gross dividend would be $35m. This is rather more generous than the $25m and 4.5% yield I was anticipating ahead of today’s results.
Expansion
The decline in revenue reported in the first half was down to “cruise lines deciding on short notice to substitute Turkish ports (mainly with Greek island ports) due to negative perception of Turkey among foreign tourists.” However, the company’s commercial ports in the country were “unaffected by Turkish geopolitical developments.”
With 14 ports in eight countries and management having identified a further 20 acquisition targets, geographical diversification will increasingly dilute the impact of negative events in any single country. However, expansion won’t come cheap. The company has said that 11 of the prioritised target ports would require capital expenditure of between $700m and $900m.
Dividend prospects
The company has cash of $124m but net debt of $215m. So further equity fundraisings — dilutive to existing shareholders — look on the cards. And while the dividend policy is for “dividends to grow in line with earnings,” the board has also said that “the timing and amount of any future dividend payments” is dependent on, among other things, the group’s “capital requirements.”
Global Ports could be a great dividend stock for the long term but the need for heavy capital expenditure and likely dilution mean that steadily increasing payouts for shareholders are by no means assured.
Big discount and healthy yield
I’m rather more confident about Ocean Wilsons Holdings (LSE: OCN) as it has a longer history on which it can be judged. Its operating subsidiary Wilson Sons is one of the largest port and maritime services operators in Brazil. The other part to Ocean Wilsons is a portfolio of international investments, mainly through collective funds and limited partnership vehicles.
Wilson Sons shares are listed on the Sao Paulo stock exchange and at their current price and exchange rates are worth around £9.75 per Ocean Wilsons share. The investment portfolio, at the last reported date (31 July) and current exchange rates, is worth around £5.67 per Ocean Wilsons share, giving a total of £15.42.
As Ocean Wilsons shares are trading at £10.85 — an attractive 30% discount to the sum of its two parts — and it offers a healthy yield of 4.5%, I rate the stock a ‘buy’.
