Thursday, August 22, 2013

Malaysian Bulk Carriers : Riding on O&G boom (DBSV)

Malaysian Bulk Carriers
BUY RM1.75
KLCI : 1,744.85
Price Target : 12-Month RM 2.10
Riding on O&G boom

2Q13 result was within expectations
Impressive earnings from POSH set to drive a successful IPO in Singapore
Maintain BUY with RM2.10 TP

Highlights
2Q13 in line. MBC reported 2Q13 earnings of RM13.1m (+45% qo- q, +>1000% y-o-y), taking 1H13 profit to RM22.1m (-31% y-o-y) which is 45% of our FY13 projection. The strong performance was largely attributable to the impressive earnings from its 21%-owned OSV associate, PACC Offshore Services Holdings (POSH) which contributed RM18.2m (+36% q-o-q, +387% y-o-y) – the highest since FY10.


Improving shipping business. MBC’s 2Q13 revenue grew 9% q-oq and 2% y-o-y to RM65.8m, in tandem with the improved charter rates as evident in the higher Baltic Dry Index (+11% q-o-q, -13% yo- y). Losses from dry bulk operations reduced to RM4.1m (vs - RM9.6m in 1Q13) while tanker EBIT came in at RM2.2m (vs RM0.5m in 1Q13), suggesting better prospects going forward.

Our View
Vessel acquisitions to ride on turnaround. MBC has taken delivery of a new supramax under long-term charter in Jun13 and there are an additional 6 new vessels in the pipeline, to be delivered progressively in 2014/2015. We believe that the worst is over for the dry bulk sector and it is at an inflection point of gradual recovery from FY13 onwards.

Impending catalyst from POSH Semco’s IPO. We believe that the impending listing of POSH Semco will be MBC’s major re-rating catalyst. While details on POSH Semco’s listing remains sketchy at this juncture, our back-of-envelope calculation indicates that MBC’s stake in POSH Semco could be worth RM190m, assuming POSH Semco contributes 70% of POSH Group’s earnings. Nevertheless, our assumption may be conservative given the robust outlook in the offshore market.

Recommendation
Maintain BUY and RM2.10 TP, based on 1.2x P/BV multiple, its mean valuation since IPO. The stock is currently trading at -1SD of its mean P/BV valuation, almost the lowest in its trading history.




Source/Extract/Excerpts/来源/转贴/摘录: DBSV-Research,
Publish date: 22/08/13

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