Thursday, July 25, 2013

Malaysian Bulk Carriers : Set to sail (Hwang)

Malaysian Bulk Carriers Bhd
Trading Buy
Set to sail

• More upside, less downside. Malaysian Bulk Carriers (Maybulk; stock code 5077; RM1.80) offers an interesting trading proposition for investors to ride on an earnings rebound-cum-value unlocking play. The Group’s fundamentals were previously hit by depressed bulk shipping charter rates. But its fortunes appear to be turning up as charter rates in the dry bulk shipping industry could have hit bottom already. Tracking this, the Baltic Dry Index (a global barometer for freight rates for dry bulk carriers) – after slumping from a 3-year high of 2,995 in Sep 2010 to a recent low of 801 in early Jun – has since climbed 41% (see Chart 1).

On the assumption that the shipping charter rates recovery would persist, our research team anticipates Maybulk’s earnings to jump from a trough of RM49m in FY13F going forward. In particular, we have projected a net profit of RM74m (+51% year-on-year) for 2014 and RM113m (+53% year-on-year) for 2015 after penciling in an annual rise in average charter rate of 5% next year and 10% the following year.

Our existing fundamental rating for the stock is Buy with a target price of RM2.10 (based on a forward P/BV multiple of 1.2x, which represents its mean valuation post-listing in Dec 03). Thus, given its current undemanding FY14F P/BV of 1.0x (just slightly above its historical low), we reckon upside potential for Maybulk outweighs its downside risks. An added catalyst in this financially-strong group (net cash of RM96.5m or 9.6 sen per share as of end-Mar 13) is its plan to unlock value by listing its 21%-owned PACC Offshore Services Holdings (a provider of offshore marine support services in the oil & gas industry) in Singapore by end of this year or early next year. We estimate Maybulk’s stake may conservatively worth RM870m (pegged at FY13F P/E of 12x) or 87 sen per Maybulk share.

• Positive technical outlook. Technically speaking, Maybulk could be on its way to advance further after bouncing up from a double-bottom pattern (see Chart 2). Following a recovery from a low of RM1.29 in late Dec last year, the stock reached a fresh 17-month high of RM1.89 on Tuesday. Riding on the positive momentum, the share price is set to plot higher highs and higher lows possibly within an upward sloping channel going forward. We have set resistance targets at RM2.10 (first) and RM2.65 (second), translating to potential upsides of 17% and 47%, respectively. Trading Buy. The shares will likely find support in the RM1.48-RM1.70 area (representing downside risks of 6%-18%).

Source/Extract/Excerpts/来源/转贴/摘录: HWANGDBS Vickers Research
Publish date: 25/07/13

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Warren E. Buffett(沃伦•巴菲特)
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高估期间, 卖对, 不卖也对, 买是错的。
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Tan Teng Boo

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