VOPAK: Estimates and taget price slightly raised

In recent weeks, Vopak announced several large new projects, including yesterday’s news on new build terminals in Panama and Malaysia. Consequently, we raise our estimates for 2013 (EPS +2%) and 2014 (EPS +6%). The rise is bigger for 2014 because 2013 earnings should to some extent be hampered by pre-operating costs related to new build capacity under construction. As a result, we lift our target price to € 36 (from € 35), which is the average outcome of the fair values from our DCF-model, average historical multiples, and replacement valuation. We maintain our neutral stance on the stock.

More expansion: acquisition of LNG import terminal in Mexico
A JV between Vopak (60%) and Enagas (40%) has reached agreement with current owners Shell, Total, and Mitsui to buy an LNG import and re-gasification terminal in Altamira, Mexico. The terminal has been operational since 2006 and facilitates imports by Shell and Total. It has two fully operational tanks with a capacity of 150,000 cbm each. This represents 0.9% of Vopak's gross network capacity and 0.7% of its net capacity. The terminal is fully contracted for a long period of time. Control is expected to be handed over in Q3-11. Financial details were not disclosed. We believe the impact on earnings will be possible, yet small given the size of the terminal.

Future expansion seems likely:
There is the possibility to expand the terminal with a 3rd tank and the outlook for gas consumption in Mexico seems promising, according to Vopak: “Located on the east coast of Mexico adjacent to the Vopak Chemicals Terminal in Altamira, the terminal has excellent connections to the existing Mexican gas infrastructure securing the supply of gas to power plants in the vicinity as well as to Mexico City. The Mexican gas usage is expected to grow in the coming decades mainly due to new gas fired power plants coming on stream which will lead to increasing imbalances between local demand and supply. The terminal will be able to facilitate the expected additional LNG imports resulting from this imbalance by expanding its capacity.”


{RATING: HOLD ; TARGET PRICE: € 36.00}