PTCL, as the name suggests, is a logistic company. It's main businesses involves transportation and bulk cargo and warehousing. They also own several investment properties in which they lease for rental income.
Personally, I believe that logistics is an extremely interesting business to look at, especially in Singapore. As the developing nations continues to grow (China, India, Indonesia, etc), trade activity in Singapore is bound to expand. However, given limited space in Singapore and near vessels, logistic company becomes relevant, especially those with warehousing capabilities.
In addition, the market in which PTCL targets is an interesting and niche one. Chemicals. PTCL have a warehouse in Jurong Island which have storage and drumming capabilities for chemicals which allows them to charge premiums for its services. The chemical industry is also one which seems to be undergoing a period of renaissance with the advent of hydraulic fracturing. Thus I believe that PTCL should experience additional tailwinds in this aspect.
However, the market do not seem to recognize PTCL competitive advantage and opportunity as the core PTCL (Logistics and warehousing) trades at a normalized 4.0x EV/FCFE, 4.0x EV/EBITDA.
Assuming a 2% growth rate (below expected inflation) and a 10% RRR (above PTCL ERP of 6%), the fair value for the core PTCL comes up to be $0.78 per share.
Including the value of the investment properties less a 25% haircut on value, total value of PTCL comes up to be $0.95 per share. or a 40% upside to current prices.
Below is my analysis on PTCL.
For a company which have a ~25% ROIC, 3.6% growing dividend yield and book value growth over time, PTCL is a highly attractive opportunity.
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