Thursday, August 1, 2013

Malaysia Bulk Carriers : Impending IPO of associate Revised (MIDF)

Malaysia Bulk Carriers
Maintain NEUTRAL
Price (30 March 2013) RM1.91
Target Price RM1.90
Impending IPO of associate Revised

• Impending IPO of POSH Semco bodes well for the prospect of Maybulk.
• Global capacity glut in dry bulk shipping may ease and this will likely help Maybulk to register a meaningful turnaround by FY14.
• Maintain NEUTRAL with revised TP of RM1.90 (from RM1.53), derived from Sum-of-Parts method.

Listing of associate. Media reported that Maybulk’s associate, POSH Semco is seeking a public listing on SGX by September or October this year. The IPO size is estimated at a range of SGD300-500m (equivalent to RM762-1,270m) with market capitalisation of USD1.0b upon listing. We are positive on the newsflow as it will realize the shareholders’ value while the IPO proceed will be utilized to grow further in the thriving offshore industry.

Early investment turns fruitful. To recap, Maybulk subscribed 21.23% of POSH Semco’s stake in 2008 with initial proceeds of USD221m. Maybull later injected another USD31.8m through the subscription of RCPS issuance. Riding on the expanding marine offshore and rig construction in Singapore, POSH Semco has developed into a fullfledged offshore marine support services player with 123 vessels in operation. The associate had consistently contributed to the group’s bottomline at times when Maybulk’s core dry bulk shipping business faced strong headwinds in the last few years.

Near bottom of the earnings cycle for dry bulk business. The rate of increase in global supply of dry bulkers decelerated to +3.7%ytd in 2013 (to 607 million DWT) in contrast to the growth of 6.9% over the same period in FY12 (source: Bloomberg). The orderbook for bulkers hit rockbottom at 16.5% in May 2013, down from the historical high of 74% in early 2009. The latest iron ore port inventory at China ports fell to 70.5mmt from the 90-100mmt level in FY11-12 period due to the targeted spending on rail construction. Silver lining may be in sight as the slower supply in bulkers buildup and projected increase in demand growth should help improve the utilization of dry bulk vessels.

Bargain hunting for Japanese vessels. Tapping on the yen’s weakness and the historical low prices for new bulkers, Maybulk has ordered two Supramax-class vessels from Japan which are expected to be delivered in FY15/16. In addition, one Supramax and two Handysize vessels are due to be delivered in FY13-14.

Maintain NEUTRAL recommendation with revised TP of RM1.90. We remove our discount factor on SOP valuation to reflect the better prospect of dry bulk sector and subsequently raise our TP to RM1.90 (from previously RM1.53). Nonetheless, we maintain NEUTRAL stance despite the potential gain on associate IPO and more promising recovery in dry bulk sector by FY14. The current share price had performed well so far with YTD gain by +43.61%ytd (KLCI: +6.28%).

Source/Extract/Excerpts/来源/转贴/摘录: MIDF-Research,
Publish date: 31/07/13

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