Thursday, 24 February 2011

Choppy waters still for Maybulk

Choppy waters still for Maybulk

Written by Joy Lee
Thursday, 24 February 2011 12:20


KUALA LUMPUR: Grey clouds continue to loom over the prospects of the Baltic Dry Index and companies related to the carriage of dry bulk goods such as Malaysian Bulk Carriers Bhd (Maybulk).

“To be very frank, I think it [the BDI] is going to remain weak going forward. Over the last few months, due to the flooding problems, the market has picked up. But for how long or if it is going to pick up further, we are not sure,” Maybulk’s executive chairman Teo Joo Kim said at a media briefing yesterday.

The BDI, which tracks various drybulk rates over routes on a time charter and voyage basis, peaked at 11,793 points in May 2008 but collapsed shortly after to as low as 663 points in December due to the global financial crisis. The index averaged at 2,758 points in 2010, a 5% improvement from the average of 2,617 points in 2009.

The index has been on a downtrend but picked up slightly at the start of February this year. Nonetheless, industry observers have not been optimistic of its prospects.

Chief executive officer Kuok Khoon Kuan said the BDI has been largely dragged down by the Capesize segment, referring to vessels which are too big to ply the Panama and Suez Canals and have to circle the Cape of Good Hope in Africa and Cape Horn in Chile, South America.

Kuok added that the tankers market is expected to remain weak, which has already affected Maybulk’s earnings.

For the fourth quarter ended Dec 31, Maybulk posted net profit of RM67.7 million, a 23% decrease year-on-year from RM88.45 million in the previous corresponding quarter. Revenue, however, rose 2.6% to RM84.73 million from RM82.61 million.

For the full year, net profit slipped 2% to RM238.37 million from RM243.8 million in FY09 due to weak tanker earnings and lower contribution from associate, PACC Offshore Services Holdings Pte Ltd (POSH) which declined by 72% to RM18.2 million from RM63.9 million in the previous year due to reduced activities in the oil and gas sector and oversupply of vessels in the service sector.

Overcapacity remains a concern for the industry, Kuok said. Additionally, Kuok said the hike in oil prices could derail economic recovery which spells a bleak outlook for the industry.

“In the past two years, the industry has been very concerned about oversupply. But the Lehman Brothers incident brought about a fair bit of cancellation and slippage. Therefore the huge worry of overcapacity did not happen,” Kuok said.

However, the group noted that there were a lot of new ship yards in China and South Korea which were desperate for orders and this may lead to competitive pricing and more new orders.

Maybulk is expecting two new handysize vessels and four long-term charter vessels to join its fleet from now till 2013. Currently, the group has 14 vessels comprising 11 bulk carriers and three tankers.

Teo noted that quite a number of its medium- and long-term charter contracts, which were carried forward at good rates, were coming to an end and these contracts could be renewed at lower rates.

“If the market doesn’t improve, then [Maybulk may see lower contribution from its bulk revenue this year compared to last year],” he said.

But he expects the O&G sector to pick up after a very weak showing in 2010.

Other than its shipping arm, Maybulk has 21.23% equity interest in Singapore based PACC Offshore Services Holding Group.

Maybulk has proposed a dividend of 10 sen for FY10 which is lower than the 15 sen paid for FY09. The company’s stock closed at RM2.76, slipping two sen.


This article appeared in The Edge Financial Daily, February 24, 2011.

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