Arawak Port Development

A monopoly piece of national infrastructure trading at a full price that only makes sense once you know who is allowed to buy it. On a global cost of capital, APD is worth about $26 and looks roughly 49% overvalued. On the cost of capital of the Bahamian institutions that actually set its price, it is worth about $51 and is fairly valued, right about the market. The whole question reduces to whether the exchange controls that produce that gap will hold.

1. A global investor and a domestic investor see two different stocks. Discount the same cash flows at a global 11.4% WACC and fair value is about $26.21, roughly 49% below the $51 price. Discount them at the 7.5% a Bahamian institution actually faces and fair value is about $51.47, right about the price. Same company, same forecast, two buyers.
2. The gap is exchange controls, and it is measurable. Bahamian residents cannot freely move capital abroad, so local pension funds and insurers price APD against a Bahamas government bond, not a US Treasury. The 10-year Bahamas Registered Stock yields about 5.4%, only around 72 basis points over a US Treasury, while the country's Ba3 rating implies a spread closer to 330. The domestic market charges roughly a fifth of the sovereign risk the rating says a global investor should demand, because captive local savings have nowhere else to go.
3. The real question is policy, not the business. The monopoly is not in doubt. What decides whether APD is worth $26 or $51 is whether the capital controls that trap local savings persist. That is the swing factor, and it belongs in the open rather than buried in a discount rate.