Monday, December 2, 2013

Malaysian Bulk Carriers : Better days ahead (DBSV)

Malaysian Bulk Carriers
BUY RM1.72
KLCI : 1,798.46
Price Target : 12-Month RM 2.10
Better days ahead

3Q13 results missed estimates
Higher charter rates offset by higher docking charges for three vessels
Strong POSH performance to sustain near-term profit
Maintain BUY rating and RM2.10 TP

Highlights
3Q13 results below expectation. MBC booked RM8.5m profit in 3Q13 (-35% q-o-q, -50% y-o-y), taking 9M13 profit to RM30.7m (-37% y-o-y) or 63% of our full year forecast. The weaker result was due to higher docking costs for three vessels in the quarter and fewer hire days, which offset the marginal increase in charter rates. As a result, revenue dipped 4% q-o-q and 3% y-o-y to RM62.8m and operating loss widened slightly to RM5.7m from RM3.2m in the previous quarter.


Sustained optimism in O&G. Meanwhile, its associate, PACC Offshore Services Holdings (POSH), booked RM13.9m profit in 3Q13 (-24% q-o-q, +44% y-o-y). This takes POSH’s 9M13 profit contribution to RM45.5m, up 112% from a year ago.

Our View
Improving outlook. While the near-term outlook for dry bulk sector remains challenging with supply outpacing demand, FY14 will be an inflection point with much better sector dynamics. This is reflected in the Baltic Dry Index which has surged 116% this year. Also, MBC has six new vessels for delivery over the next three years, which supports the management’s positive outlook.

Cut FY13-15F earnings by 12%/9%/6%. This was after accounting for higher docking charges and lower ‘other operating income’. MBC’s 4Q13 results could benefit from potentially higher rates lifted by seasonally higher bulk agriculture exports from North America.

Recommendation
Maintain BUY and RM2.10 TP, pegged to 1.2x P/BV, its mean valuation since IPO. The stock is currently trading at -1SD of mean valuation, almost the lowest in its trading history. The
impending listing of POSH will be a major re-rating catalyst for MBC, although details remain sketchy currently.



Source/Extract/Excerpts/来源/转贴/摘录: DBSV-Research,
Publish date: 28/11/13

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