1 British Maritime Technology Workshop on Valuing a Container Terminal BMT Maritime Consultants TOC Asia 2005 Hong Kong
May 25, 2015
1British Maritime Technology
Workshop on Valuing a Container Terminal
BMT Maritime Consultants
TOC Asia 2005Hong Kong
2British Maritime Technology
Introduction
Business Opportunities
HOW TO MAKE 600 mins of Local Outgoing Calls FREE. Ask me How? Call me Now!!
50 LEADERS NEEDED FOR GLOBAL INTERNET BIZ. Call Now
ASIAN CONTAINER TERMINAL for sale. Operating terminal, 125,000 TEU pa. Tenders wanted. Call Richard Szuflak +61 7 3221 1066
NEED LITTLE CAPITAL. Start you own biz to build your career. Call Henry HP for arrangement
STOCK & OPTION Seminar $650 2 days. Trade US Mkt Live. Free CD.
Computer Courses$50 PC ASSEMBLY, Networking Web Design/ HTML, Red Hat Linux
This workshop will provide and insight into how a container terminal can be valued
This provides a seller with an idea of the price they should receive and a buyer with a price they pay for a terminal
3British Maritime Technology
Should You Use a Black Box Model for a Container Terminal Valuation?
We believe you shouldn’t!
– Different objectives of the vendors
• Encourage economic regional development
• Obtain operating expertise / Infrastructure investment
– Different objectives of the purchasers
• To generate return on investment
• Strategic geographical location
– Different environmental aspects
– Ownership structures of the concession
4British Maritime Technology
Should You Use a Black Box Model for a Container Terminal Valuation?
Different ownership structures that can occur:
Marine Approach
Quay (Depth)
Land
Civil Infrastructure
CT Operations
Full ownership
PortO
wner Port O
wner
Port Ow
ner
Concessionaire
Concessionaire Concessionaire
5British Maritime Technology
The Way We Assess a Concession’s Real Value
To do this BMT develops three coupled models:
–– Throughput modelThroughput model – which forecasts container throughput
–– Operational modelOperational model – which simulates the operations and development of the terminal against throughput
–– Financial modelFinancial model – which constructs P&L and Balance Sheets on an annual basis for the valuation period
A valuation period of between 20 and 30 years is most common to match the concession period
From these models we can provide a financial value
6British Maritime Technology
Valuation Process
7British Maritime Technology
Throughput ModelHinterland Assessment
Hinterland supply and demand forecast
– Short Term (0-5years)
• Current export/import demand in the region
• Local infrastructure (Road/Rail/Inland waterways)
• Direct competition
• Historical Growth Rates
– Medium Term
• Expected trends – specific to container industry
• Growth and development of industries conducive to container volumes
• Growth of logistics centres at the port
• Growth and development of infrastructure to container volumes
• Development of intermodal connectivity and logistics chain alliances
– Long Term
• Gross Domestic Product and long term expectations
8British Maritime Technology
Throughput ModelTariff Assessment
The tariff levels are also generated:
– For the ports:
• Terminal handling
• Port dues
• Storage
• Miscellaneous charges
– For distribution:
• Transport costs
• Distribution costs
– Customer Study
• Interview terminal customers to determine their expectations on pricing
9British Maritime Technology
Throughput ModelExample Figures
Typical handling charges vary between USD60 and USD330
Approximate Average Container Handling Charges
328
259 250228
202 201 200 199 190 173 163 156 140 120 118 117 110 93 75
050
100150200250300350
Brazil
United S
tates
Japa
nIta
lyChile
France
Spain
Austra
liaCana
da
United K
ingdom
German
y
Netherla
nds
Taiwan
Belgium
Philipp
inesSing
apore
ChinaTha
iland
Malays
ia
US$
/TEU
World Bank
10British Maritime Technology
Throughput ModelRegulatory/Competition Assessment
To determine the appropriate tariff a detailed study of the competition in the vicinity is undertaken
– Direct competition – Other container and break bulk terminals
– Indirect competition – other modes of transport such as road, rail, barging operations
Regulatory study
– Taxes and trade legislation obtained
11British Maritime Technology
Throughput ModelBMT Freight Model
BMT uses its proprietary Freight Flow simulation model (EFM) to forecast future freight volumes through a port under various competitive scenarios
The Asian Freight Model (AFM) is under development
It is a logistics model that establishes trade flows at minimum costs
Allows an accurate forecast of future freight through a port
Simulate impact of tariff changes on trade flows
BMT Freight Flow Simulation Model
TradeCapture
12British Maritime Technology
Throughput ModelAdded Value
Gives the concessionaire a better understanding of future throughput
Gives a platform to produce throughput scenarios and establishesincome drivers
Value can be added through the development of road, rail and inland shipping into the terminal hinterland. In the case of transshipment terminals, feeder and barging operations can be looked at
Identify where weak strong links lie in the logistics chain
This has an impact on the potential income which flows through to the financial evaluation model
13British Maritime Technology
Operational ModelKey Objectives and Capability
Model needs to be able to calculate/estimate
– Cost of the current operation
– Identify and integrate the main cost drivers such as throughput and productivity
– Evaluate the cost impact for different equipment choices or container handling systems
– Evaluate berth and yard capacities
– Establish capital expenditure requirements based on the cost drivers
14British Maritime Technology
Operational ModelStep 1
Model the current container terminal operation
– Identify variable and fix cost components
– Model current operational processes and work practices
– Establish current productivities of the main operational functions i.e. Vessel operation, road/rail exchange
– Calibrate with current operational costs to establish the accuracy of the model
15British Maritime Technology
Operational ModelStep 2
Establish alternative equipment choices and model their operational costs under different throughput and productivity scenarios
– Top lift, reach stacker direct/indirect
– Straddle carrier
– RTG
– Automated RMG + AGV (Trailer or straddle carrier)
For all the options personnel and equipment requirements need to be established
16British Maritime Technology
Operational Model Step 2 Example Vessel Operation
Costs are related to the time a container crane is deployed and its personnel paid.
Gross crane productivity is the best measure although it does not incorporate costs that are incurred when the vessel starts or ends during shifts
What is the effect on costs per vessel move?
Simple comparison reach stacker versus straddle carrier handling system
17British Maritime Technology
Productivity & Cost for Different Resource Deployment
20.00
25.00
30.00
35.00
40.00
45.00
50.00
55.00
15 20 25 30 35
productivity
EU
RO
per
mov
e
Reach stackerStraddle carriers
Reach stacker
Straddle carrier
18British Maritime Technology
Operational ModelStep 3 Capacity Evaluation
Berth capacity
– Quay length
– Number of cranes
– Working hours
– Productivity
– Utilisation factors
Yard capacity
– Available space
– Stacking system
– Dwell times
– Yard utilisation factors
These capacities are critical to determine at what stages additional equipment or change to a different handling system is required
19British Maritime Technology
Operational Model Example CAPX
Step changes in infrastructure requirements
Growth in terminal corresponds to a higher requirement and use of infrastructure
Infrastructure
0
5
10
15
20
25
30
35
2005
20
07
2009
20
11
2013
20
15
2017
20
19
2021
20
23
2025
Amou
nt o
f Equ
ipm
ent
Trailers Tractors Rail Mounted GantriesRubber Tyred Gantries Reach Stackers/Forks Ship to Shore CranesMobile Harbour Cranes
20British Maritime Technology
Operational ModelStep 4 Risk Analysis
Example labour environment
Ideally a container terminal operator wants full control and responsibility of its personnel
– Direct employment
– Enterprise agreements that cover personnel costs, deployment and flexibility
Worst case scenario (hypothetical)
– Labour pool where the conditions are negotiated between the union and a third party
– Many unions with specific work coverage
– No opportunity for enterprise specific deployment
This will reduce the enterprise/concession value
21British Maritime Technology
Financial Model
The goal of the financial model is to determine a value for the concession based on free cash flows (FCF) and provide analysis toolsDefined as the cash in the business that is available to financiersCreated from the throughput and operational modelsDefined as: Net Profit – Capital Expenditure – Change in Working CapitalFree Cash Flows and other indicators are then analysed to develop a value for the concession– Multiple of EBITDA (Enterprise Multiples)
• High infrastructure intensive firms• Good before financing comparison
– Internal Rate of Return– Net Present Value– Financial Ratio Analysis
22British Maritime Technology
Financial Model Case Study
Heavy Capital Expenditure in assets causes the free cash flow in initial years to be negative. This provides an insight as to when expenditure is payable
Inflows of capital is required to get the terminal into operating condition
– In later years this can be repaid
Free Cash Flow
-8,000-6,000-4,000-2,000
02,0004,0006,0008,000
10,00012,00014,000
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Year
EUR
'000
Expected Financing Requirements
01,0002,0003,0004,0005,0006,0007,0008,0009,000
10,00011,00012,00013,00014,000
2006 2007 2008 2009 2010 2011 2012 2013
Year
EU
R '0
00
Required Debt Required Share Capital
23British Maritime Technology
Financial Model Example of operating costs over the concession
Staffing costs are found to make up a high proportion of expenses in a container terminal
Operating revenue often lies between 50% and 75% in European container terminals
Operating Expenses Make Up
0%10%20%30%40%50%60%70%80%90%
100%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Energy and Lubes Maintenance Costs per AnnumOperating Insurance Staff Costs per Annum
Operating Income Make Up
0%10%20%30%40%50%60%70%80%90%
100%
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Revenue Expenses
24British Maritime Technology
Financial Model Example of CAPX over life of Concession
Initial acquisition and replacement of infrastructure is high
– Varies as per operational model
Growth in terminal corresponds to a higher requirement and use of infrastructure
Capital Expenditure Schedule
-2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Year
EU
R '0
00
Infrastructure Container Handling Intangibles IT System IT Hardware
Depreciation and Net Book Value
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Depr
ecia
tion
(EUR
'000
)
05,00010,00015,00020,00025,00030,00035,00040,00045,000
Net
Boo
k V
alue
(EU
R '0
00)
Total Depreciation Total NBV
25British Maritime Technology
Financial Model Processing of the Results
Pesimist ic Basic Opt imist icAggressive Compet it ion
Logical
Minimal Compet it ion
NPV
Throughput Volume
Tariff Assumption
NPV For Operating Scenarios
0-50,000 50,000-100,000 100,000-150,000 EUR '000
0% 50% 100%7%
9%
15%
IRR
Gearing
Loan Interest Rate
IRR For Financial Scenarios
0%-5% 5%-10% 10%-15%15%-20% 20%-25%
Important phase is to investigate the results of the valuation
– Scenario Analysis
– Sensitivity Analysis
26British Maritime Technology
Financial Model Sensitivity of input Variables
The impact of various variables on the model is investigated
The degree of influence can correlate to the actual operations of the terminal
– Impact of a number of cranes could show the impact on value if it breaks down
– Impact of the interest rate to the companies cash flow
Allows for mitigation planning
NPV sensitivity to a 10% change in variable
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
Size
of s
iteBe
taM
arke
t Ris
kR
isk
Free
Rat
eD
ebt T
o Eq
uity
Taxe
sTe
rmIn
tere
st R
ate
Mob
ile H
arbo
urSh
ip to
Sho
reR
ail M
ount
edR
ubbe
r Tyr
edR
each
Trac
tors
Trai
lers
Infra
stru
ctur
eIn
tang
ible
sPo
wer
Fuel
and
Lub
esIT
sys
tem
sO
/H's
Mob
ile H
arbo
urSh
ip to
Sho
reR
ail M
ount
edR
ubbe
r Tyr
edR
each
Trac
tors
Trai
lers
Infra
stru
ctur
eTe
rmin
alTh
ird p
arty
Pow
er fi
xed
Busi
ness
Tax
Insu
ranc
eM
anag
emen
tLa
nd T
axO
pera
tions
Man
agem
ent
Mid
dle
Oth
erAd
ditio
nal S
taff
Stor
age
Con
gest
ion
Net
wor
king
Max
. cra
ne#
of d
ays
per
Max
. Cra
nes
/Li
fts p
er h
our
Max
. RTG
Variable
Sens
itivi
ty
NPV Low % NPV High %
27British Maritime Technology
Financial Model Example Enterprise Value Calculation (Based on EBITDA)
Enterprise Value of the firm (Takeover price) can be determined
– Forecast cash flows– Comparable enterprise multiple
Enterprise multiple of comparable firmsSelect an firm similar to its state of development/marketEnterprise multiple should increase as value increasesEnterprise value = Market Value + Debt –CashEstimate that after 5 years the firm is in steady stateDebt: 16 mill Cash: 28 millEstimate the this firm is comparable to ECT/HPH (x6.9)Enterprise Value approx 65.6 mill (9.5 mill EBITDA x 6.9)
Market Value 77.6 mill (65.6-28+16)
Discount back at WACC over 5 years 48.9 million value
EV/EBITDA Multiples of Businesses in the Port Industry
13.9
11.7 11.3 11.39.9 9.7
9 8.88 7.8
6.9
4.8 4.7 4.1
Port of
Tauran
ga
* Pelin
do III
/P&O Ports
* HMM/H
PH
* TCB/Sha
reholders
Ports o
f Auc
kland
* Ameri
can Port
/ABP
* Hes
se N
oord N
atie/PSA
P&O
* Powell
Duff
ryn/N
ikko
* ICTS/H
PH* E
CT/HPH
Northpo
rtJo
hor P
ortIC
TSI
EV Enterprise Value* Acquisitions
Earnings before Interest, Taxes, Depreciation and Amortization
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
EUR
'000
28British Maritime Technology
Financial Model Example of IRR and NPV
Pesimist ic Basic Opt imist icAggressive Compet it ion
Logical
Minimal Compet it ion
NPV
Throughput Volume
Tariff Assumption
NPV For Operating Scenarios
0-50,000 50,000-100,000 100,000-150,000 EUR '000
Net present value of the cash flows describes 40 million
Internal rate of return 20%
Value under different operating and financial scenarios and sensitivity
If there have been recent sales in the industry these can also be valued forward to a comparative point in this model
Pesimistic Basic OptimisticAggr essive Competi tion
Logical
Minimal Competi tion
IR R
Thro ughput V o lume
Tarif f A ssumpt ion
IRR For Operating Scenarios
0.0%-10.0% 10.0%-20.0% 20.0%-30.0%
30.0%-40.0% 40.0%-50.0%
29British Maritime Technology
Expected Rates of Return
30British Maritime Technology
Conclusion
Upper bound for buyer is 40-50 million euro.
Seller also knows this is the upper bound based on accepted assumptions
Number of techniques can be employed to give a basis for investment
Mr Szuflak would be able to update his ad with a 50 million Euro price tag
Business Opportunities
HOW TO MAKE 600 mins of Local Outgoing Calls FREE. Ask me How? Call me Now!!
50 LEADERS NEEDED FOR GLOBAL INTERNET BIZ. Call Now
ASIAN CONTAINER TERMINAL for sale. Operating terminal, 125,000 TEU pa. EUR 50,000,000. Call Richard Szuflak +61 7 3221 1066
NEED LITTLE CAPITAL. Start you own biz to build your career. Call Henry HP for arrangement
STOCK & OPTION Seminar $650 2 days. Trade US Mkt Live. Free CD.
Computer Courses$50 PC ASSEMBLY, Networking Web Design/ HTML, Red Hat Linux