On February 12, Textainer Group Holdings (TGH) reported its Q4 and full year 2012 results. Textainer achieved record revenue, net income, and EBITDA for the quarter and full year. Textainer also declared a $0.45 per share quarterly dividend for Q1 2013, an increase of $0.01 from Q3 2012 levels, and its twelfth consecutive quarterly increase. However, after releasing earnings, shares of Textainer sold off about 5%. As of this writing, Textainer is trading for $40.65 per share and offers a dividend yield of 4.43%.
Back on December 6, I had previously written about Textainer and discussed why I thought it was undervalued at that time. Since then, the stock has been on fire, rising over 33%.
TGH data by YCharts
During Q4 2012, Textainer reported a record high quarterly revenue of $127M, an increase of 9.4% from 2011 levels. Net income also increased 10.3% to $60.5M. Textainer also saw its adjusted EBITDA climb 29%, to $115 million.
For FY 2012, Textainer spent over $1.2B in capex and has increase its ownership of its own fleet to 73%. Total fleet size increased 12.4%, to 2.77M TEU ("twenty-foot equivalent unit"). Textainer was aggressive increasing the percentage it owns of its fleet, as it only owned 59% of it at the start of 2012. Purchasing container that it manages is immediately accretive to cash flow. Below are a few quotes from Textainer CEO Phil Brewer which emphasizes this point:
John Mims - FBR Capital Markets
I think most of my questions have been answered. When you - let me just go back, Phil maybe when you look at this - the fact with 73% of the fleet is now owned, I guess intuitively that means the pool of managed acquisitioned that are possible is shrinking, right, and I know you don't know the timing and understanding that could happen at any point. Of those that are left, that are still managed, what percentage are you at least actively talking to which - there are potential that you could bring on if it's not this year in the next year or so?
100%. So anybody we managed containers for we're in a dialog with over the course of the year about whether or not they are interested in selling their containers when they might be interested in selling their containers. So that's ongoing. And then just to reiterate, why it's so hard to predict the sales, is that it has happened many times where we've had discussion with one of the owners who said no, they are not interested and literally within two weeks later, top calls up and said you know, actually now might be an interesting time to sell.
So it's very difficult for us to give any projections as we really don't know but it is very attractive business. You're right, the pool is smaller. Nonetheless we do expect to find those opportunities over the course of the year. They are immediate accretive, the containers are all out on lease, we don't have to put them out on lease. So it's very nice business for Textainer.
"Owning containers increases the value we deliver to our shareholders as we earn significantly more on owned containers than managed containers. Our 26% return on equity, which is impressive given that we are the least leveraged of all public container leasing companies, is a result of our focus on investing in immediately accretive assets that provide strong returns."
Since 2000, Textainer has been able to decrease its reliance on master and short-term leases and increase the share of its lease portfolio under long-term leases. As of December 31, 2012, Textainer had over 76% of its lease portfolio containers under long-term leases. Average fleet utilization has also held steady above 95% since 2010.
Textainer's 2013 outlook is very bullish. In it, Textainer emphasized increased demand for container leasing as the shipping lines remain cash-strapped. Lessors are expected to purchase 70% of the total expected container production of 2.7M TEU, up from 65% in 2012. Additionally, shipping lines are expected to continue increasing disposals of older containers, which provide opportunities for purchase leaseback and increases demand for new replacement containers.
As the World's largest container lessor, Textainer should benefit from increased demand for container leasing. The company should also see margins improve in 2013 due to owning a larger chunk of its fleet, which is more profitable than managing.
It is my opinion, that the recent decline in share price for Textainer is a buying opportunity.