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  • Writer's pictureMark Watson-Mitchell

Wading ‘in play’ in overseas waters  

Today I am going international with a feature on an undervalued group with a London and a Bermudian quote - Ocean Wilsons Holdings (LON:OCN)


On the face of it I believe that the shares of this £472m capitalised group are trading well below their value at the current 1335p – yes unusually for me a heavier market capitalisation with a very heavy share price – but it looks cheap to me, which readers will identify in due course. 


With results due within the next month, it is expected to report a 10% uplift in 2023 revenues to £372m, with a 178% better profit of £84m. 


For this year that could rise by another 10% in turnover to £411m, with a 27% increase in pre-tax profits £107m. 


The Business 


The company's principal activities are the management of a diverse global investment portfolio and the provision of maritime and logistics services in Brazil. 


In outlining its Purpose and Strategy the company robustly states that its objective is, through its investments, to create long-term capital growth without pressure to produce short-term results at the expense of long-term value creation. 


It operates through two primary investments - Ocean Wilsons (Investments), an actively managed investment fund, and Wilson Sons, a Brazilian maritime services company. 


The maritime services segment provides towage and ship agency, port terminals, offshore, logistics and shipyard services in Brazil.  


The investment segment holds a diverse global portfolio of international investments with an investment strategy of a balanced thematic portfolio of funds and is a Bermuda-based company. 


Ocean Wilsons (Investments) Limited 


The investment strategy for its managed portfolio is to generate real returns through long-term capital growth, whilst emphasising the preservation of capital without respect to short-term moves in equity markets.  


Its investment portfolio is invested in both publicly quoted and unquoted assets in diversified components.  


Working alongside expert managers in specialised sectors or markets allows it to have access to the best opportunities to achieve its strategy. 


This longer-term view directs an OWIL investment strategy that its investments are made in a balanced thematic portfolio of funds which leverage long-standing relationships. 


Wilson Sons SA 


Wilson Sons is one of the largest providers of maritime services in Brazil with activities including towage, container terminals, offshore oil and gas support services, small vessel construction, logistics and ship agency. 


The Wilson Sons strategy is to grow the business on the basis of its skills and existing assets, strengthening the businesses and looking for new opportunities in the maritime and transport sector, focusing on Brazil and Latin America.  


It looks to develop its businesses by maximising economies of scale and efficiency and improving the quality and range of services that it provides to customers. 


Major Strategic Review Now Well Underway 


On 12th June last year, the group responded to some Brazilian media speculation by stating that: 


“The Board notes recent Brazilian media speculation to the effect that the Company is negotiating the sale of its 57% owned subsidiary, Wilson Sons SA. 


The Company confirms that it is undertaking a strategic review involving the Company's investment in Wilson Sons.  


That review, which will consider all potential strategic options, is currently at an early stage and there can be no certainty as to its outcome. 


The Company has not received any formal proposals from any third party with regard to a potential transaction involving Wilson Sons.” 


The Board recognises that there are divergent views among the group’s shareholders regarding its non-correlated asset holdings.  


The review is intended to provide a platform for it to optimise the asset mix, to enhance returns, and to drive growth in the longer term. 


On 15th November last year, the group issued its Q3 Quarterly including an Update on its strategic review regarding its investment in Wilson Sons:  


“The company has retained Banco BTG Pactual S.A. as adviser to Ocean Wilsons Overseas Limited, the holding company for the Group's indirect investment in OW Overseas (Investments) Limited and in Wilson Sons.  


The company confirmed that BTG Pactual has received a number of indicative non-binding offers for its indirect investment in OWOIL and in Wilson Sons. 


“As the strategic review process remains ongoing, there can be no certainty as to its outcome and the indicative non-binding offers received by the company are highly conditional.  


The Board continues to evaluate all potential strategic options and will update shareholders further in due course.” 


The Equity 


There are some 35.36m shares in issue. 


The larger investors include Hansa Investment Company (26.45%), ICM Investment Management (12.95%), Dynamo Internacional (4.99%), City of London Investment Management (4.94%), Unicorn Asset Management (3.04%), Menhaden Capital Management (1.02%) and Chelverton Asset Management (0.85%). 


Two Board members also represent large holdings - William Salomon (13.18%) and Christopher Townsend (11.42%), both of whom are Directors of Hansa Capital. 


Analyst’s Views 


A consensus of analysts suggests an average Price Objective for the group’s shares is 1,675p, with the highest view seeking 1,750p a share. 


Andy Murphy at Edison Investment Research has a value realisation of 2,564p per share on the group’s equity. 


For the year to end December 2023 he estimates that group revenues will have risen to $472.6m ($440.01m) with a massive pre-tax profit of $107.2m ($38.5m), lifting earnings to 159.2c (loss 51.9c), while maintaining its 70.0c per share dividend. 


The year now underway could see it boost revenues to $521.7m, taking profits up to $135.5m, earnings of 214.7c, enabling a 100c a share dividend. 


My View – Looking For 1,600p Very Soon 


Within the next four weeks or so we should be seeing the group declare its 2023 Final Results, which going on the Edison estimates should be well received. 


We should also get some confirmation on just how well the current year is perceived by the group’s Management. 


But of much more interest, just what is going on in terms of the ongoing Strategic Review and the number of offers that were previously mentioned for both parts of the company. 


That helps to give the low p/e and healthy yielding shares, currently 1,335p, quite a bit of a sparkle valuing the company at just £472m. 


Despite them having risen from 820p last June and having already seen quite a swift ascent, I now fix a Target Price of 1,600p on the shares, hoping for some early positive news. 



At that time is it possible that we might also get a more enlightening detail on the strategic review and its potential outcome, especially if any of the offers have progressed? 

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