Quick Take
Navios South American Logistics (NSAL) has filed to raise $100 million in an IPO of its common shares, according to an F-1 registration statement.
The firm provides waterborne transportation services in South America
NASL appears well-positioned within the Hidrovia Waterway ecosystem, although it has been negatively affected by the COVID-19 pandemic’s effect on regional trade.
I’ll provide a final opinion when we learn more IPO information from management.
Company
Montevideo, Uruguay-based Navios was founded to develop a network of logistics services for the eastern seaboard region of South America, primarily the Hidrovia Waterway.
The company provides its logistics services for producers of dry cargo (for example, cereals), liquid cargo (ex. oil or vegetable oils), and liquified cargo (ex. liquified natural gas).
Management is headed by Chairman Ms. Angeliki Frangou, who has been with the firm since inception and holds numerous positions with other maritime or financial organizations, including Navios Maritime Partners (NMM) and (NM).
Below is a brief overview video of the Hidrovia in Uruguay (in Spanish):
Source: Naranja Mecanica
The company’s primary offerings include:
Port storage
Port transfer
Ship transport via barge, pushboat, and vessels
Navios has received at least $233 million from investors including Navios Maritime Holdings Inc.
Customer Acquisition
The firm pursues large customers through direct outreach and counts a number of major agriculture, raw materials, and fossil fuel companies as customers.
Navios says it has many long-term, multi-decade relationships with customers and that almost all of its contracts are denominated in U.S. dollars, reducing currency risk for U.S. investors.
Administrative expenses as a percentage of total revenue have dropped as revenues have decreased, as the figures below indicate:
Administrative | Expenses vs. Revenue |
Period | Percentage |
2020 | 6.3% |
2019 | 7.8% |
Source: Company registration statement
The Administrative efficiency rate, defined as how many dollars of additional new revenue are generated by each dollar of Administrative spend, was negative (0.9x) in the most recent reporting period.
Market & Competition
According to a 2020 market research report by Allied Market Research, the Latin American market for logistics services was valued at an estimated $542 billion in 2019 and is expected to exceed $784 billion by 2027.
This represents a forecast CAGR of 6.2% from 2020 to 2027.
The main drivers for this expected growth are continued development of e-commerce and adoption of technology-driven logistics services are expected to drive demand increases over the forecast period.
Also, lack of adequate infrastructure investments in various countries along with higher logistics costs, as a result, may hinder growth of the market.
Major competitive or other industry participants include:
Atria Logistics
Hidrovias do Brasil
Interbarge
P&O
Imperial Shipping
Fluviomar
Customer self-shipping
Land-based shipping companies
Financial Performance
Navios’ recent financial results can be summarized as follows:
Contracting topline revenue
Reduced gross profit and gross margin
Lowered operating income and net income
Reduced cash flow from operations
Below are relevant financial results derived from the firm’s registration statement:
Total Revenue | ||
Period | Total Revenue | % Variance vs. Prior |
2020 | $ 215,023,000 | -5.4% |
2019 | $ 227,209,000 | |
Gross Profit (Loss) | ||
Period | Gross Profit (Loss) | % Variance vs. Prior |
2020 | $ 71,301,000 | -20.9% |
2019 | $ 90,085,000 | |
Gross Margin | ||
Period | Gross Margin | |
2020 | 33.16% | |
2019 | 39.65% | |
Operating Profit (Loss) | ||
Period | Operating Profit (Loss) | Operating Margin |
2020 | $ 57,357,000 | 26.7% |
2019 | $ 67,871,000 | 29.9% |
Net Income (Loss) | ||
Period | Net Income (Loss) | |
2020 | $ 11,669,000 | |
2019 | $ 30,154,000 | |
Cash Flow From Operations | ||
Period | Cash Flow From Operations | |
2020 | $ 60,983,000 | |
2019 | $ 68,135,000 | |
Source: Company registration statement
As of December 31, 2020, Navios had $132 million in cash and $619 million in total liabilities.
Free cash flow during the twelve months ended December 31, 2020, was $56 million.
IPO Details
Navios intends to raise $100 million in gross proceeds from an IPO of its common shares, although the final figure may differ.
No existing shareholders have indicated an interest to purchase shares at the IPO price.
Management says it will use the net proceeds from the IPO as follows:
to fund capital expenditures, including investments in vessels or our existing port terminal facilities, the development of our planned Port Murtinho and Nueva Palmira Free Zone port terminal facilities or other plans or projects that we may develop in the future;
to fund the repayment of outstanding indebtedness, which may include the partial redemption or repurchase of the 2025 Notes and/or repayment of any of the Notes Payable, the BBVA Loan, the Term Bank Loan, the Nazira Loan or other indebtedness that we may incur in the future. Up to $175.0 million of 2025 Notes may be redeemed at a redemption price of 110.75% with the net cash proceeds of this offering.
retain the balance, if any, on our balance sheet to be used in our ordinary course operations.
Management’s presentation of the company roadshow is not available.
Listed bookrunners of the IPO are BofA Securities, Itau BBA, UBS Investment Bank, BTG Pactual, and S. Goldman Advisors.
Commentary
Navios is seeking U.S capital market funding for its continued expansion initiatives in Latin America as well as to pay down debt.
The firm’s financials show a contraction in topline revenue in 2020, as well as reduced gross profit, operating profit, net income, and cash flow from operations.
Free cash flow was an enviable $56 million for 2020.
Administrative expenses as a percentage of total revenue fell as revenue dropped; its Administrative efficiency rate was a negative (0.9x) due to decreasing topline revenue during 2020.
The market opportunity for logistics services in Latin America is robust and expected to grow at a reasonable rate in the coming years, so the firm has positive industry dynamics in its favor.
BofA Securities is the lead left underwriter and IPOs led by the firm over the last 12-month period have generated an average return of 70% since their IPO. This is a mid-tier performance for all major underwriters during the period.
The primary risk to the company’s outlook is the cyclicality and seasonality of the transportation industry as well as continued progress on its construction projects for new port facilities could be delayed due to unforeseen circumstances.
Navios appears well-positioned within the Hidrovia ecosystem as a long-time player, although it has been hurt by the COVID-19 pandemic’s effects on trade in the region.
I’ll provide an update when we learn management’s assumptions on IPO pricing and valuation.
Expected IPO Pricing Date: To be announced.
Gain Insight and actionable information on U.S. IPOs with IPO Edge research.
Members of IPO Edge get the latest IPO research, news, and industry analysis.
Get started with a free trial!
