Santos Brasil (STBP3) announces long-awaited commercial agreement with Maersk and shares jump 6.5%; Analysts are waiting for the next steps

According to analysts, the Extraordinary General Assembly meeting scheduled for April 27, including a management proposal that includes amendments to regulations that may refer to mergers and acquisitions, is scheduled to take place.

Lara Rezirio

Apr 3, 2023 5:17 PM – Updated 35 minutes ago

Shipping in the port of Santos

The long-awaited announcement by the market leads to a rally in shares of Santos Brasil (STBP3) in Monday’s session (3). STBP3 assets closed 6.53% higher, at R$8.65, after rising more than 10% earlier.

After the market closed last Friday night (31), the company disclosed: (i) a material fact to confirm the conclusion of the contractual renegotiation with Maersk; and (ii) guidance for 2023.

The new contract with Maersk is valid for two years (from April 1, 2023 to March 31, 2025) and based on this material fact, Santos Brasil has also issued guidelines for container volumes from 1.2 million to 1.4 million (-8% to +8% YoY), EBITDA of RL 1 billion to RL 1.2 billion (+23% to +48% YoY) and investments of RL 500 million to RL 650 million.

The guidance for 2023 states that Santos Brasil has successfully increased its fund rate (basket of services) with Maersk Group between +20% and +100% with a midpoint at 60%. “This is a remarkable result, as the current scenario may indicate that the share of imported containers will deteriorate in 2023,” says Bradesco BBI analysts.

The Bank maintains a Buy Neutral recommendation (Outperformor above average market performance) of Santos Brasil shares and reached a new target price of R$13.00 (up from the previous target price of R$12.00) and with an upside potential of 60% compared to Friday’s close(31).

Along the same lines, XP analysts also noted two important developments.

The first, successful contract renegotiation with Maersk’s largest customer, followed by the announcement of guidance for 2023, with a midpoint in line with our estimate of R$1.1 billion and slightly above consensus of R$1.0 billion.

The second, Extraordinary General Meeting (AGE) scheduled for April 27, with management proposal including amendments to regulations which, in our opinion, may indicate potential confirmation of recent merger and acquisition news regarding the acquisition of Santos Brasil.

Analysts point out that there has been widespread media speculation about a possible sale of Santos Brasil’s controlling stake to Maersk or MSC (especially since the end of their joint operating venture). “We have analyzed management’s proposal for the next lifetime, which, in our opinion, may indicate a possible completion of the transaction at some point in the future,” they confirm.

Thus, analysts reiterate a positive view based on positive supply/demand, plenty of room for a dividend and a cheap valuation, pointing to XP.

One of the pillars of the positive vision of the house with Santos Brasil is the positive supply/demand scenario of the Port of Santos. In the latest round of contractual negotiations, Santos Brasil raised tariffs significantly (+45% total average tariff in 2021). Now, Home Analysts believe their latest guidance suggests average aggregate tariffs will grow 30% in 2023 (about 70% from the already strong tariff increase for 2021).

Itaú BBA also reinforced its recommendation Outperform It has incorporated the projected readjustment above into its model, maintaining forecasts of flat volumes in 2023 (the midpoint of Santos Brasil’s guidance). The price target has been raised from $10 to R$11 per share.