Brazil's Pull on Investors' Purse Strings
08/17/2010 10:18 am EST
Ocean Wilsons is a bargain given the share price of its South American subsidiary, writes Peter Shearlock in The IRS Report.
With plenty of [offshore oil,] other minerals and commodities, Brazil looks one of the safer long-term bets among the world’s emerging markets. One company quoted in London offers what amounts to a pure play on Brazil’s petro-fueled future.
Ocean Wilsons (London: OCN) owns 58.25% of Wilson Sons, the largest provider of towage services in Brazil. It also operates harbors, container terminals, an oil and gas terminal, and logistics in the country, and builds small vessels around the Brazilian ports of Rio Grande, Salvador, and Guarujá. Its fastest growing business is supporting and servicing the offshore oil industry.
Ocean Wilsons is a Bermuda-registered business and long ago sold all its other interests to focus on Wilson Sons. Its only non-Brazilian asset is an investment portfolio last valued at $247 million. The portfolio is managed in Guernsey by Hanseatic Asset Management, which has nearly doubled the money it started with nine years ago with big bets on emerging markets and a lot of hedge fund investments.
Wilson Sons has been a quoted company since 2007, when its parent floated it on the Sao Paulo and Luxembourg exchanges. Taking [those shares’] price, Ocean Wilson's 58.25% stake in the business is worth around £325 million. Add in the value of the Guernsey investment portfolio, and you have a value of £485 million—equivalent to £13.70 a share.
It is rare to find a trading company with such a substantial asset base as Ocean Wilsons—and particularly so in a fast-growing economy such as Brazil’s. Although the country experienced a shallow recession last year, it is slated to grow by between 5% and 6% this year, and the Tupi oilfields virtually guarantee continued strong growth over the next couple of decades.
It is not all plain sailing. Last year, the company weathered the downturn in the Brazilian economy by chalking up a huge gain on its investment portfolio. This year, investment gains are going to be more elusive. [And] while Wilson Sons’ revenues look to be rising again at double-digit rates, the Brazilian company is having to deal with sharply higher costs.
But Ocean Wilsons should be viewed as a long-term value play, not a short-term earnings story. On a three- to five-year view, its strong presence in the offshore oilfield support market and its ports and warehousing operations in one of the world's fastest-growing economies must surely prompt a rerating that reflects the true value of the underlying assets. (Ocean Wilsons closed at £942.50 yesterday—Editor.)