Target Price: SGD0.61
52-wk Price low/high (SGD) 0.53 - 0.73
Good News First, Or The Bad?
Jaya’s FY13 results surprised owing to USD17.6m in net one-offs, excluding which its core earnings of USD28.4m were in line, just 3% shy of our prior USD29.3m forecast. The 3.5 cent dividend is a new positive but vessel disposals and further delays may hurt near-term growth. As its shares have fallen 14% since we initiated coverage three months ago, upgrade to NEUTRAL, with SGD0.61 TP.
• Exceptionally-high utilisation buoys returns. 4QFY13 was a bumper quarter, with fleet utilisation at a record 91% while charter revenue came in at USD29.8m and gross margin at 40%. The USD24.7m in pretax income can be split into USD17.2m from one-off gains and losses, and core earnings of USD7.5m (See Figures 1 and 2 for details).
• High dividend reminiscent of 2011-2012 Vard Holdings. The 3.5 cent dividend is a positive, but we see a direct parallel in Vard Holdings (VARD SP; BUY; TP SGD1.10), which had paid out a higher than normal dividend while its major shareholder(s) looked to exit the company. To be fair, this dividend should be sustained by Jaya’s recurring earnings, although the payout ratio appears high.
• Vessel disposals hamper near-term growth. The disposals of the Jaya Scout and Jaya Pioneer surprised us as both were profitable, with the latter being the fleet’s crown jewel. Their sale boosted Jaya’s 4Q13 profit but at the expense of recurring income for FY14F and beyond.
• Further delays in shipbuilding hurt medium term growth. There has been more vessel delivery delays since our 16 May report, Delays In Vessel Deliveries Hurt Future Growth. Four vessels were delayed by 1-2 months and another three by 4-11 months. This prompts us to lower our FY14F/15F forecasts by 3%/17% respectively.
• Upgrade to NEUTRAL, SGD0.61 TP. Jaya has fallen by 14% since we initiated coverage three months ago, and its FY13 results are a mix of good and bad news. We think its valuations can be supported by its high yield, but significant growth is still elusive. Upgrade to NEUTRAL, with a TP of SGD0.61, as we roll over to 9.5x FY14F EPS.
Publish date: 16/08/13