MAYBULK (FV RM1.60 - SELL) FY11 Results Review: Struggling With Sinking Rates

Maybulk’s FY11 core earnings of RM103.4m were 18% below our estimates but within consensus, with revenue in line.  The lower profit was in tandem with the lower  time charter earnings (TCE) at its  dry bulk division on the back of high bunkering costs. In view of the lower rates for Panamaxes, we expect revenue to drop 14.7% in FY12. We maintain our revenue forecast but cut our FY12 and FY13 earnings  numbers  by 13% and 7% on  persistent  pressure  on  bunker fuel.  We maintain our SELL call, but at  higher fair value of RM1.60,  premised  on  a 0.85x FY12 P/B,  due to the  lower  estimated  dividend (down from 8 sen to 3 sen for FY12).

Below. Save for the net exceptional loss of RM12m for FY11, Maybulk’s core earnings of RM103.4m (y-o-y:  -52%) were below our estimates by 18% but within consensus on the back of revenue of RM265.3m (y-o-y: -37% y-o-y), which were in line. In view of the lower earnings, the dividend declared was lower at 3 sen vs 10 sen in FY10.

Lower rates drag down earnings. The lower profitability was in tandem with the lower TCE (FY: USD16.5k/day, y-o-y:  -36%) recorded by its dry bulk division owing to higher bunkering costs. Although its tankers’ TCE was marginally higher by 2% at USD12.3k/day, the docking of its 3 product tankers caused its revenue to dive 24% y-o-y while revenue from the bulk side sank 39%. Despite the lower profits, MBC still recorded better rates across its fleet compared to its average peers due to its ability to lock in higher TCEs earlier. Its asset utilization remained healthy at 97.5% (vs 98.4% in FY10).

Outlook still bleak,  cutting  earnings. We expect slightly lower rates in 2012 on the Panamax side, while the Handymax and the Handysize segments will see TCE stabilize. However, as 48% of MBC’s total dwt comprises Panamaxes, we still expect revenue to decline by 14.7% y-o-y (revenue is maintained for FY12 and FY13). Meanwhile, its average capacity in dwt is expected to grow 9% in 2012 (with 3 vessels to be delivered this FY – one in Jan and the remaining 2 in April and Oct) with hiring days growing by the same quantum. Due to oversupply concerns and potential risk of further downside in asset value, the incoming capacity for the next 2 years will be on a charter basis, but with purchase options. Earnings-wise, management expects to be profitable in FY12. In view of the continued pressure from high bunker fuel, we trim our earnings forecasts for FY12 and FY13 by 13% and 7% respectively. The offshore vessel sector is seeing better vessel utilization although rates are still lagging. We expect better numbers from POSH.

Maintain SELL. We maintain our SELL call, with a higher FV of RM1.60 (premised on a 0.85x FY12 P/B), due to the lower dividends (reduced from 8 sen to 3 sen for FY12). 

Source: OSK188