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Mercantile Ports & Logistics (LON:MPL)

(formerly called SKIL Ports & Logistics) 

Market Cap  £32.2 million

Current Price 61.5p                                                  


       "A case study for the greater fool theory".

Description of Company

"An Indian company which is building its first port  near Navi Mumbai, where the Directors intend to develop and operate a modern and efficient port and logistics complex on approximately 200 acres of land with a sea frontage of approximately 1,000 metres." 

The company was listed on AIM late 2010 at £2.50 per share.

Comment

This is typical of a share which is founded on hope against reality.  I spent 60 minutes reviewing this company, and it appears that it is a candidate for even greater losses going forward for shareholders. Ports as a business are fine, but shareholders in this instance are unlikely to see any financial benefit, but rather a disappointment with an array of delays, cost overruns, increased unforeseen charges by MMB, and possibly eventually the de-listing from AIM at the final death.

Points to Consider

  • The port project is already 4 years behind schedule with obvious cost overruns and currency depreciation.  Supposed to have been originally finished in 2012.
  • The shareholders don't appear to even own a port at the end of the extended construction period. They simply only have permission to lease the port they constructed until the year 2039. At the end of the lease, it is all handed back for free to MMB, the 200 acres of land and the new modern port in place.  Apparently, it is done on a Boot basis. Boot basis means to build, own, operate and transfer.
  • Rental payment each year, has to be paid to MMB which increases by 10% each year at a compound rate.  The amount in sterling is relatively small early on but ultimately costs millions even at the minimum level.
  •  Further charges are payable regardless of cargo quantities to a minimum guaranteed annual amount.
  • Royalties also have to be paid to MMB with a minimum guarantee regardless of the volume of shipping.

Quotes from the company

 “The Project, which the Deed of Lease provides that the Group cannot sell, will be developed on a BOOT basis and will be transferred free of charge to MMB at the end of…

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