THE BUZZ
Maybulk announced yesterday that it has entered into a Sale and Purchase Agreement for the sale of three parcels of vacant land totaling RM18.4m. Maybulk will record an exceptional gain of RM8.92m from the disposals. The proceeds will be used to replenish cash for working capital purposes.
OUR TAKE
No urgency in selling land. Maybulk currently has net cash of RM250m, which is more than sufficient for its working capital needs at a time when there are vessels to pick up at a bargain out there. As the company’s land bank has been vacant for a very long time and there is a ready buyer for it, cashing out of its property investment at a handsome 80% return is a sensible move. The said land parcels will be disposed of progressively and their sale fully completed by 1QFY13.
Outlook still gloomy for dry bulk players. Although positive in boosting the company’s balance sheet, the land disposals do not change our outlook for the dry bulk shipping sector. The current demand and supply imbalance will continue to dictate dry freight rates, which remain depressed. The BDI, currently at 663, is close to the low of 647 hit in February.
Maintain SELL. We make no changes to our earnings given that the gains from selling off the land are exceptional in nature. Maybulk’s FV remains unchanged at RM1.27, premised on a P/B multiple of 0.7x, with our SELL call maintained. Although there is a possibility of management distributing these gains as dividends, we believe that in view of the depressed market, the company is likely to conserve the cash for bargain-hunting opportunities later on.
Source: OSK
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