MAYBULK (5077) - Malaysian Bulk Carriers - Ceasing coverage
CEASED COVERAGE
We are stopping coverage of Maybulk because the dry bulk industry downcycle is hurting Maybulk especially badly. Moreover, the chronic lack of disclosure and investor engagement makes forecasting the outlook for earnings frustratingly difficult. Switch to MISC.
What Happened
Maybulk released its 4Q14 results and hosted an analysts’ briefing yesterday, which only provided scant details of the company’s outlook. Reported net profit sank from RM45m in FY13 to RM12m in FY14, because bulk shipping operating losses rose from RM34m in FY13 to RM48m in FY14 on the back of a 5% yoy drop in average TCE rates, while 21.23%-owned offshore associate POSH saw its contribution to Maybulk decline from RM48m in FY13 to only RM14m in FY14 due to lower rates for offshore vessels, repair costs and other issues. The tanker arm contributed only RM1m-2m in operating profit for both years.
What We Think
The outlook for Maybulk is very poor, because the dry bulk freight rate outlook is weak. We estimate that average bulk fleet growth of 5.2% is set to exceed demand growth of 3.7% in 2015. Lacklustre minor bulk demand growth of 3% is expected to fall below expansion in the supramax/handysize fleet of 5.6% yoy while coal demand growth of 2-3% may be below the increase in the panamax fleet of 5%. On top of this, seven of Maybulk’s 19-strong bulk fleet comprises long-term time charters, with a remaining duration of about five years, by our estimate. These time charters are more expensively priced compared to today’s spot charter rates, and also cost more than they can earn in revenue. As such, these long-term time charters will continue to be a burden to Maybulk for many years to come. Meanwhile, POSH has been beset by weaker charter rates, and will face a lower volume of oil and gas service demand this year on the back of the substantial decline in oil prices.
What You Should Do
Maybulk’s SOP is estimated to be RM1.28, using today’s secondhand bulk ship values, and taking a 21.23% share of POSH’s end-2014 NTA. However, bulk ship values are expected to decline further in 2015, while POSH’s share price of S$0.535 is trading below its NTA. If we assume another 10% decline in bulk ship secondhand prices, and use POSH’s current market capitalisation as the basis for our calculation, Maybulk’s SOP will decline to RM1.06. Our last published report on Maybulk (Add, target: RM2.48) was on 28 February 2014.
Source: CIMB Daybreak - 26 February 2015
CEASED COVERAGE
We are stopping coverage of Maybulk because the dry bulk industry downcycle is hurting Maybulk especially badly. Moreover, the chronic lack of disclosure and investor engagement makes forecasting the outlook for earnings frustratingly difficult. Switch to MISC.
What Happened
Maybulk released its 4Q14 results and hosted an analysts’ briefing yesterday, which only provided scant details of the company’s outlook. Reported net profit sank from RM45m in FY13 to RM12m in FY14, because bulk shipping operating losses rose from RM34m in FY13 to RM48m in FY14 on the back of a 5% yoy drop in average TCE rates, while 21.23%-owned offshore associate POSH saw its contribution to Maybulk decline from RM48m in FY13 to only RM14m in FY14 due to lower rates for offshore vessels, repair costs and other issues. The tanker arm contributed only RM1m-2m in operating profit for both years.
What We Think
The outlook for Maybulk is very poor, because the dry bulk freight rate outlook is weak. We estimate that average bulk fleet growth of 5.2% is set to exceed demand growth of 3.7% in 2015. Lacklustre minor bulk demand growth of 3% is expected to fall below expansion in the supramax/handysize fleet of 5.6% yoy while coal demand growth of 2-3% may be below the increase in the panamax fleet of 5%. On top of this, seven of Maybulk’s 19-strong bulk fleet comprises long-term time charters, with a remaining duration of about five years, by our estimate. These time charters are more expensively priced compared to today’s spot charter rates, and also cost more than they can earn in revenue. As such, these long-term time charters will continue to be a burden to Maybulk for many years to come. Meanwhile, POSH has been beset by weaker charter rates, and will face a lower volume of oil and gas service demand this year on the back of the substantial decline in oil prices.
What You Should Do
Maybulk’s SOP is estimated to be RM1.28, using today’s secondhand bulk ship values, and taking a 21.23% share of POSH’s end-2014 NTA. However, bulk ship values are expected to decline further in 2015, while POSH’s share price of S$0.535 is trading below its NTA. If we assume another 10% decline in bulk ship secondhand prices, and use POSH’s current market capitalisation as the basis for our calculation, Maybulk’s SOP will decline to RM1.06. Our last published report on Maybulk (Add, target: RM2.48) was on 28 February 2014.
Source: CIMB Daybreak - 26 February 2015
