A news item in the Business-Standard (here) referred to an Ernst & Young study, where the consulting firm are seeing an increased interest among investors in ports. The study found that ports are in favour as they provide a steady source of income. Ports, the study says, generate steady cash flows and operate on high margins.
Mundra Port has risen by 40% in the last 1 month. Running on a mammoth rupees 29,516 crores of market capitalisation, the Mundra Port management is quite upbeat about their projections for the company in the next few years. (here). I further read an ICICI Securities report (here) published when the scrip was priced at Rs. 580. The analyst awarded an upside of 44% (Rs. 835) from those levels. At a CMP of Rs. 736 today, there is still way for the stock to move.
Not too many ports in India are listed in the stock exchanges. However, I agree that ports will more important in the future as supplies move more frequently from port to port. This is quite the economic moat that Ben Graham often talks about. A port is a bit like the immigration desk at your airport ... without that stamp you cannot legally leave the country. With ports looking towards giving a unified, self-sustained ecosystem for industries and export units to flourish - their importance cannot be ruled out. My take on the sector is strong. However this doesnt mean that Mundra Port is a good buy (or a bad one). I just dont have an opinion as I have too little information to work on.
Tuesday, April 29, 2008
Ports on the rise
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Being one among the earliest investors in a port, I am eagerly waiting for the listing of Gujarat Pipavav Port Ltd, where the promoter is Maersk. Ports and airports have moats but they are so capital intensive and requires years to develop and make profits. But once it starts making profits, it is an avalanche.
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