Malaysian Bulk Carriers - Better 2Q09 (Results Note)
Price: RM3.13
Target Price: RM3.00
Recommendation: HOLD
· Still below expectation. Despite significant bulk rates improvement in 2Q09, 1H09 core net profit of RM61.5m accounted only 39.5% of our forecast and 40.4% of consensus. Our core net profit excludes RM4.6m forex gain, RM11.7m investment gain and RM8.0m gain on vessel disposal. No interim divided was declared as opposed to a 10sen interim dividend in 1H08.
· QoQ, 2Q09 revenue improved 33.6% while EBITDA soared 318.5% to RM23.4m, underpinned by strong bulk rates recovery (+42.6%). Rising 2Q bulk rates was in tandem with a higher Baltic Dry Index which average 2713 in 2Q vs 1561 in 1Q.
· YoY, 1H09 turnover and EBITDA was still significantly lower due to sharply lower freight rates, reduced fleet size and lower charter-in activities. POSH, a 22% associate involved in offshore marine support services contributed RM38.4m, which was c.44% of group’s 1H09 pre-tax profit.
· Outlook challenging with management guiding 2H09 to be tough as China’s frenzy commodities import is unlikely to continue. Bulk rates are therefore likely to stay volatile. As recent vessel prices are still holding despite depressed rates, management guided that they are therefore not in a hurry for acquisition as yet. While POSH’s 2Q was sequentially weaker, its performance was more stable compared to group’s dry bulk operation. POSH’s management expects E&P activities to pick up only in 2H10 as most oil majors continue to review capex spending. POSH’s young fleet of 70 vessels (average of <5 years) will expand to 123 by 2012 in accordance to its order book.
· Lowering our FY09 and FY10 earnings projection by 28.5% and 17.3% respectively to account for the lower freight rates. Maintain HOLD with unchanged target price of RM3.00.
