Price (15 Oct 13 , HK$) 5.22
TP (prev. TP HK$) 5.65 (5.65)
New-ish broom sweeps clean: PB Towage on the block
● Pacific Basin (PB) has confirmed media speculation that it is in the early stages of a sale of its Australian unit, PB Towage...this would be the second such divestment in about a year that CEO Mats Berglund has overseen since he took the helm in 2012.
● At this point, the company has given no guidance as to valuation, which we put at around US$460 mn on the basis of estimated 2013 earnings and the multiples of its nearest comparable listed company, Mermaid Marine...also based in Australia
● We view a divestment of this asset as consistent with PB's traditional management of its asset portfolio—essentially selling near the peak and buying (as it has been in the dry bulk S&P market) when asset prices are low. The towage unit has been the cornerstone of PB's profits for the past three years, but we suspect further growth will be hard-won.
● Our target price of HK$5.65/share includes an estimate of PB Towage's value but, was it to be sold, cash could be better put to work in PB's renascent dry bulk business. OUTPERFORM.
The quiet achiever
Since CEO Mats Berglund commenced work as CEO in June 2012, PB has seen its stock price rise 48%, has acquired 31 handysize/handymax/supramax vessels and divested the albatross around its neck that was the PB RoRo unit, mistakenly acquired in early 2008 as part of its diversification attempts. Any sale of the Towage unit would be in line with its rediscovered focus on dry bulk shipping and essentially "sticking to its knitting".
We think that the unit has a value of around US$460 mn simplistically calculated as follows:
The P/E used is Mermaid Marine's for 2013, based on consensus estimates and our own estimate of what PB Towage will contribute to 2013's earnings.
As important as the sale is what PB will do with the proceeds. We think that it will stay the course with its announced strategy of purchasing physical dry bulk assets (given its preference for 5-10 year old, Japanese built vessels) rather than companies where the fleet mix might not be complementary. While second-hand dry bulk tonnage of the vintage that PB operates has risen in value by an average 20% since the beginning of the year, it remains 14% below where it was two years ago and 72% off its peaks. Recycling cash into ships at this point in the cycle looks like a no-brainer.
Confirmation that this transaction is being considered reinforces our faith in PB management and board as robust stewards of capital, astute managers of assets and lessens the likelihood that any equity issuance occurs while this alternative source of funds exists.
Source/Extract/Excerpts/来源/转贴/摘录: Credit Suisse