UBS initiates Vopak coverage with ‘sell’ rating

11 January 2013 12:26  [Source: ICIS news]

LONDON (ICIS)--UBS has initiated coverage of the Dutch tank storage service provider Vopak with a 'sell' rating, stating that the company faces problematic headwinds despite having a good performance record, the investment bank said on Friday.

UBS said Vopak has “arguably the best long-term track record in the transport sector”, with a 16% earnings before interest, tax depreciation and amortisation (EBITDA) compound annual growth rate (CAGR) since 2004 and incremental returns well above cost of capital.

However, the investment bank added that capacity is growing fast in tank storage because of attractive investment characteristics, which is creating overcapacity in certain locations, including the important region of northern Europe.

“We believe tank storage is fundamentally an attractive business, given its infrastructure characteristics and relative insensitivity to volume,” UBS said.

“However this success may now be a problem, as investment in the sector has grown substantially, which may mean lower returns going forward,” it added.

UBS said over-investment in tank storage may result in too much supply in 2014-15, which is likely to impact Vopak to some degree.

In November, Vopak announced it will jointly build a chemical terminal at King Fahd Industrial Port in Jubail, Saudi Arabia, with petrochemical major SABIC.

Once completed in early 2015, the first phase of the new terminal will have an initial storage capacity of about 250,000 cubic metres (cbm), the company said in a statement.

By: Franco Capaldo
+44 (0)20 8652 3214

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