Goldman Sachs Group raised its earnings estimates for Adani Ports and Special Economic Zone (APSEZ) due to its divestment from the Ahlone International Port Terminals 2 (AIPT 2), in addition to organic port volume growth, fresh investments in Sri Lanka port, and minimal disruption for Haifa Port in Israel amid ongoing conflict, according to BQ Prime.
The brokerage maintains a “buy” rating on the stock and increased the target price by 4.3% to INR855 from INR820.
"The management's focus is shifting towards balancing growth and debt. We believe the stock should do well from hereon, especially if growth in second half surprises," the brokerage said in a note on 22 November.
BQ Prime noted that 19 out of the 20 analysts tracking Adani Ports maintain a “buy” rating on the stock, while one recommends a 'hold'.
In May this year, APSEZ announced that it had completed the sale of its AIPT 2 project to Solar Energy for $30m. The project was held via APSEZ’s Singapore-registered subsidiary Coastal International Terminals Pte. Ltd.
Little is known about the buyer and Reuters reported that it was not clear where it was based.
The $30m sale value is significantly less than APSEZ has invested in the project. Company filings dated to May 2021 show the company has invested $127m in the project, although various reports suggest the actual figure is closer to $190-200m.
APSEZ involvement in AIPT 2 was criticised due to the project being built on military-owned Myanmar Economic Corporation land under BOT terms. The project was named in the UN’s Fact-Finding Mission on Myanmar report on the business interests of the Myanmar military.
In October 2021, Adani announced it would exit the project.
Earlier in June 2021, Norway’s largest pension fund KLP announced it was divesting from APSEZ because the port is being built on land owned by the military and that there was an “imminent danger” the armed forces could use the port to import weapons and equipment.
KLP had an investment worth NOK9m ($1.05m) at the time of its decision.
About AIPT 2
AIPT 2 was being built on 54 acres on 50-year BOT terms. The port would have been fully owned and developed by APSEZ as an independent container terminal with no JV partners. It sits adjacent to MEC-owned AIPT 1.
The first phase of the new terminal was expected to start operations by end 2020 with a capacity to handle 150,000 twenty-foot equivalent units but was delayed due to the COVID-19 pandemic and military takeover.
The AIPT 2 will be part of the Yangon Port Cluster, which currently includes Asia World Port Terminal and Myanmar Industrial Port. Along with Myanmar International Terminals Thilawa further south, the Yangon cluster handles 90% of the country’s exports and imports.
The project was given Myanmar Investment Commission approval in April 2019. APSEZ has reportedly invested up to $200m in the project. It was expected to cost $290m in total.
