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Mundra Port and SEZ Ltd Neutral
MPSE.BO, MSEZ IN
Finally forays on the East coast
• West coast leader makes East coast foray. MPSEZ has won a bid to
develop a coal import terminal at Vishakhapatnam (Vizag) – the largest
port on the East coast (65MPTA cargo volume handled in FY10) in the
southern state of Andhra Pradesh. It’s a relatively small ticket
investment and initial project cost estimates are pegged at Rs3bn. The
concession agreement will be signed after the project capex and terms
are finalized with the port authority. MPSEZ expects to develop
~6.5MTPA capacity coal terminal over next 24months.
• Not as attractive as current portfolio of projects. According to the
management, the bid on design-build-finance-operate-transfer (DBFOT)
basis includes a 40% revenue share for the Vizag port authority. In
Mormugao Port on West Coast where MPSEZ had won a LoI for
developing a 7MTPA coal terminal in Sep-2009, the revenue share was
20%. The Vizag bid provides further evidence of increasing competition
for developing berths at major ports in the country. In our estimate the
Vizag project may have EBITDA margins in the range of 30%, vs.
consolidated margins of ~68% for the business as a whole.
• Ticket to the East? According to the management, a pilot project like
Vizag will provide MPSEZ first-hand experience of competitive
dynamics, pricing on the East coast and an opportunity to understand the
market potential of the Eastern hinterland. This is necessary before
embarking on a big-ticket green-field port project in the East, as per
management.
• Impact on the stock: This development alone has marginal upside.
Assuming 70:30 D/E ratio and 2.0x BV, the upside is under Rs1/share.
However if this is a precursor to larger green-field opportunity on the
East Coast then it is a sentiment positive. In our est., MPSEZ will deliver
FCF of ~Rs5.9bn in FY12 and ~Rs10bn inFY13 (assuming no
investment for nascent proposals in Australia and Indonesia). In our
view, proven execution skills in port development and operation warrant
fresh investment in new projects.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Mundra Port and SEZ Ltd Neutral
MPSE.BO, MSEZ IN
Finally forays on the East coast
• West coast leader makes East coast foray. MPSEZ has won a bid to
develop a coal import terminal at Vishakhapatnam (Vizag) – the largest
port on the East coast (65MPTA cargo volume handled in FY10) in the
southern state of Andhra Pradesh. It’s a relatively small ticket
investment and initial project cost estimates are pegged at Rs3bn. The
concession agreement will be signed after the project capex and terms
are finalized with the port authority. MPSEZ expects to develop
~6.5MTPA capacity coal terminal over next 24months.
• Not as attractive as current portfolio of projects. According to the
management, the bid on design-build-finance-operate-transfer (DBFOT)
basis includes a 40% revenue share for the Vizag port authority. In
Mormugao Port on West Coast where MPSEZ had won a LoI for
developing a 7MTPA coal terminal in Sep-2009, the revenue share was
20%. The Vizag bid provides further evidence of increasing competition
for developing berths at major ports in the country. In our estimate the
Vizag project may have EBITDA margins in the range of 30%, vs.
consolidated margins of ~68% for the business as a whole.
• Ticket to the East? According to the management, a pilot project like
Vizag will provide MPSEZ first-hand experience of competitive
dynamics, pricing on the East coast and an opportunity to understand the
market potential of the Eastern hinterland. This is necessary before
embarking on a big-ticket green-field port project in the East, as per
management.
• Impact on the stock: This development alone has marginal upside.
Assuming 70:30 D/E ratio and 2.0x BV, the upside is under Rs1/share.
However if this is a precursor to larger green-field opportunity on the
East Coast then it is a sentiment positive. In our est., MPSEZ will deliver
FCF of ~Rs5.9bn in FY12 and ~Rs10bn inFY13 (assuming no
investment for nascent proposals in Australia and Indonesia). In our
view, proven execution skills in port development and operation warrant
fresh investment in new projects.
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