Shares of container lessor CAI International (CAP) have languished this year as larger rivals TGH (+29%) and TAL (+56) have kept apace and outperformed the overall market. But things may be getting ready to change.
CAP is outright cheap according to any comparison with its container leasing peers. It trades at a price/earnings multiple of 7.6, and price/book of 1.3 versus 10.8 and 2 for TGH, 12.3 and 2.7 for TAL. CAP's five year CAGR is a robust 22 compared to 14 for TGH and 11 for TAL. So what gives?
In addition to its smaller market capitalization, CAP has yet to initiate a dividend. Management has expressed frustration with the company's share price in the last two quarter's earnings calls and has discussed various methods to enhance shareholder value, including a share buyback or the initiation of a dividend.
It should be noted that shares of TAL are up 242% since initiating its dividend. TGH is up a whopping 534%. William Blair analyst Robert Napoli believes CAP could easily pay and sustain a $1 dividend, about a 30% payout ratio which would represent a 4.6% yield.
Even without a capital return, shares are poised to improve as global trade resumes to normal levels. China's PMI (China represents 30% of containerized trade volume) has been expanding steadily and now stands in expansion territory at 52.6.
FBR analyst John Mims calls the stock "an intriguing value play", and believes that a "sharp reduction (in 2013) in container manufacturing and investment will leave the industry under supplied in an improving demand environment in 2014, thus driving outsized demand for new leased containers."