Malaysian Bulk Carriers -
Benign tides ahead
Maybulk's 9M13 core profit was above expectations at 94% of our full year forecasts, as bulk shipping losses were lower than we expected.
We raise our FY13-15 forecasts after incorporating lower bulk losses, and maintain Outperform. Our SOP-based target price is rolled over to end-FY14, but reduced slightly due to housekeeping matters. Share price rerating catalysts include the expected narrowing of dry bulk losses over the medium term as freight rates recover on the back of a slower pace of newbuilding deliveries.
Highlights of 3Q13 results
Although the bulk division clocked its fifth consecutive quarter of losses, the magnitude has generally narrowed over these quarters. Bulk rates steadily improved throughout 2013 amid slowing bulk carrier supply growth, which eased the downward pressure on rates. Meanwhile, the tanker division surprisingly fell back into the red, posting an RM3m operating loss in 3Q13. But the loss should be temporary as all three vessels were sent for dry-docking during the quarter, reducing earning days and raising docking cost. Losses from both of Maybulk's core divisions were more than compensated by profits from its offshore associate POSH, which again contributed a laudable RM14.7m to the company, lifting overall core earnings to RM6m against a 3Q12 loss of RM2m.
Bulk TCE rates improved remarkably this year, with handysize and supramax rates rising by 56-90% since end-2012. Average rates for the two segments so far this quarter are 48-75% higher than those seen in the same period last year, suggesting that Maybulk may close the year with substantially narrower losses for its bulk division. Also, the tanker division may return to profit once the three vessels leave the docks and return to sea.
No news on POSH listing
Although talks of an IPO for POSH had surfaced in previous months, no public announcement has been made. Maybulk has the option to sell its 21.2% stake by end-2013 at a price 25% higher than its cost.
Publish date: 28/11/13