Maybulk

Market Watch

Recent Financial Results

Announcement Date		Financial Yr. End		Qtr	Period End		Revenue RM '000		Profit/Lost RM'000		EPS		Amended
23-Nov-11		31-Dec-11		3	30-Sep-11		44,379		921		0.04		-
24-Aug-11		31-Dec-11		2	30-Jun-11		69,653		22,554		2.19		-
25-May-11		31-Dec-11		1	31-Mar-11		84,914		53,092		5.27		-
23-Feb-11		31-Dec-10		4	31-Dec-10		84,725		68,711		6.77		-

Share Price Performance
	High   Low Prices 1 Month 1.960   (28-Oct-11) 1.580   (24-Nov-11)   Prices 3 Months 2.030   (24-Aug-11) 1.580   (24-Nov-11) Prices 12 Months 3.000   (08-Dec-10) 1.580   (24-Nov-11) Volume 12 Months 14,485   (04-Apr-11) 162   (26-Jul-11)

Malaysian Bulk Carriers sees revenue drop

Malaysian Bulk Carriers sees revenue drop
Published: 2011/04/19


Malaysian Bulk Carriers Bhd (MBC) expects to record a lower revenue this year amid the currently challenging market.

Its chief executive officer, Kuok Khoon Kuan said the shipping industry was very competitive and the company would need to spend more for growth and expansion in order to survive.

"We expect growth in terms of asset size, which we have already started last year," he told reporters after the company's annual general meeting here today, adding that the company planned to acquire more ships this year as well as rebuild its fleet.

While he did not disclose the budget for their expansion, he said the company would not miss out on a good buy.

"It is a matter of opportunity. You see a good ship, with a good price, you go in," he added.

For the financial year ended Dec 31, 2010, MBC's revenue grew 33 per cent to RM404.3 million from RM303.7 million in 2009.

The better performance was attributed to a firmer dry bulk market and increased hire days. - BERNAMA


Read more: Malaysian Bulk Carriers sees revenue drop http://www.btimes.com.my/Current_News/BTIMES/articles/20110419151950/Article/index_html#ixzz1JynYR3XO

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.

One Year Performance of Selected Stocks in KLSE (3)

Malaysian Bulk Carriers Bhd

Date announced 23/11/2010
Quarter 30/09/2010 Qtr 3 FYE 31/12/2010

STOCK Maybulk C0DE  5077 

Price $ 2.95 Curr. ttm-PE 11.39 Curr. DY 5.08%
LFY Div 15.00 DPO ratio 62%
ROE 15.7% PBT Margin 80.8% PAT Margin 80.5%

Rec. qRev 109027 q-q % chg 13% y-y% chq 11%
Rec qPbt 88069 q-q % chg 164% y-y% chq 25%
Rec. qEps 8.77 q-q % chg 178% y-y% chq 26%
ttm-Eps 25.91 q-q % chg 8% y-y% chq 63%

Using VERY CONSERVATIVE ESTIMATES:
EPS GR 3% Avg.H PE 11.00 Avg. L PE 10.00
Forecast High Pr 3.30 Forecast Low Pr 2.13 Recent Severe Low Pr 2.13
Current price is at Upper 1/3 of valuation zone.

RISK: Upside 30% Downside 70%
One Year Appreciation Potential 2% Avg. yield 6%
Avg. Total Annual Potential Return (over next 5 years) 9%

CPE/SPE 1.08 P/NTA 1.78 NTA 1.65 SPE 10.50 Rational Pr 2.72



Decision:
Already Owned: Buy, Hold, Sell, Filed; Review (future acq): Filed; Discard: Filed.
Guide: Valuation zones - Lower 1/3 Buy; Mid. 1/3 Maybe; Upper 1/3 Sell.

Aim:
To Buy a bargain: Buy at Lower 1/3 of Valuation Zone
To Minimise risk of Loss: Buy when risk is low i.e UPSIDE GAIN > 75% OR DOWNSIDE RISK <25%
To Double every 5 years: Seek for POTENTIAL RETURN of > 15%/yr.
To Prevent Loss: Sell immediately when fundamentals deteriorate
To Maximise Gain & Reduce Loss: Sell when CPE/SPE > 1.5, when in Upper 1/3 of Valuation Zone & Returns < 15%/yr


Stock Data: Recent Stock Performance:
Current Price (11/19/2010): 2.89
(Figures in Malaysian Ringgits)

Recent Stock Performance
1 Week -2.0% 13 Weeks -3.3%
4 Weeks 0.3% 52 Weeks -10.8%

Malaysian Bulk Carriers
Bhd Key Data:
Ticker: MAYBULK
Country: MALAYSIA
Exchanges: KUL
Major Industry: Transportation
Sub Industry: Shipping

2009 Sales 303,707,000 (Year Ending Jan 2010).
Employees: 371

Currency: Malaysian Ringgits
Market Cap: 2,890,000,000
Fiscal Yr Ends: December Shares Outstanding: 1,000,000,000
Share Type: Ordinary Closely Held Shares: 745,849,550

Maybulk

Date announced 24/08/2010
Quarter 30/06/2010 Qtr 2
FYE 31/12/2010

STOCK Maybulk
C0DE  5077 

Price $ 2.95 Curr. ttm-PE 12.24 Curr. DY 5.08%
LFY Div 15.00 DPO ratio 62%
ROE 14.7% PBT Margin 34.7% PAT Margin 32.9%

Rec. qRev 96067 q-q % chg -16% y-y% chq 36%
Rec qPbt 33369 q-q % chg -38% y-y% chq -55%
Rec. qEps 3.16 q-q % chg -39% y-y% chq -56%
ttm-Eps 24.10 q-q % chg -14% y-y% chq 4%

Using VERY CONSERVATIVE ESTIMATES:
EPS GR 3% Avg.H PE 11.00 Avg. L PE 10.00
Forecast High Pr 3.07 Forecast Low Pr 2.13 Recent Severe Low Pr 2.13
Current price is at Upper 1/3 of valuation zone.

RISK: Upside 13% Downside 87%
One Year Appreciation Potential 1% Avg. yield 6%
Avg. Total Annual Potential Return (over next 5 years) 7%

CPE/SPE 1.17 P/NTA 1.80 NTA 1.64 SPE 10.50 Rational Pr 2.53


Decision:
Already Owned: Buy, Hold, Sell, Filed; Review (future acq): Filed; Discard: Filed.
Guide: Valuation zones - Lower 1/3 Buy; Mid. 1/3 Maybe; Upper 1/3 Sell.

Aim:
To Buy a bargain: Buy at Lower 1/3 of Valuation Zone
To Minimise risk of Loss: Buy when risk is low i.e UPSIDE GAIN > 75% OR DOWNSIDE RISK <25%
To Double every 5 years: Seek for POTENTIAL RETURN of > 15%/yr.
To Prevent Loss: Sell immediately when fundamentals deteriorate
To Maximise Gain & Reduce Loss: Sell when CPE/SPE > 1.5, when in Upper 1/3 of Valuation Zone & Returns < 15%/yr

A quick look at Maybulk (18.5.2010)

A quick look at Maybulk (18.5.2010)
http://spreadsheets.google.com/pub?key=t_FY7rgxhGIW7AtIVKbgRig&output=html

Investor's Checklist: Hard-Asset-Based Businesses

Companies in the hard asset based subsector depend on big investments in fixed assets to grow their businesses.  Airlines, waste haulers and expedited delivery companies all fall into this subsector.  In general, these companies aren't as attractive as technology-based businesses, but investors can still find some wide-moat stocks and good investments in this area.

Industry Structure

Growth for hard asset based businesses inevitably requires large incremental outlays for fixed assets.  After all, once an airline is flying full planes, the only way to get more passengers from point A to point B is to acquire an additional aircraft, which can cost US $35 million or more.

Because the incremental fixed investment occurs before asset deployment, companies in this sector generally finance their growth with external funding.  Debt can be used to finance almost all of the asset's cost, so lenders generally require the asset to provide collateral against the loan.  With this model, high leverage is not necessarily a bad thing, provided that the company can make enough money deploying the asset to cover the cost of debt financing and earn a reasonable return for shareholders.

Subsector:  Airlines


(With this in mind, airlines are generally the least attractive investment of all the companies in this subsector.  Airlines must bear enormous fixed costs to maintain their fleets and meet the demands of expensive labour contracts, yet they sell a commodity service that's difficult to differentiate.  As a result, price competition is intense, profit margins are razor-thin - and often non-existent - and operating leverage is so high that the firms can swing from being wildly profitable to nearly bankrupt in a short time.  If you don't think this sounds like a recipe for good long-term investments, you're right - airlines have lost a collective $11 billion (excluding the impact of recent government handouts) between deregulation in 1978 and 2002.  Over the same time period, 125 airlines had filed for Chapter 11 bankruptcy protection and 12 of them filed for Chapter 7 liquidation.)

Hallmarks of Success for Hard-Asset-Based Businesses

Cost leadership:  Because hard-asset based companies have large fixed costs, those that deliver their products most efficiently have a strong advantage and can achieve superior financial performance, such as Southwest in the airline industry.  To get an idea about how efficiently a company operates, look at its fixed asset turnover, operating margins and ROIC - and compare its numbers to industry peers.

Prudent financing:  Remember, having a load of debt is not itself a bad thing.  Having a load of debt that cannot be easily financed by the cash flow of the business is a recipe for disaster.  When analysing companies with high debt, always be sure that the debt can be serviced from free cash flow, even under a downside scenario.

Investor's Checklist:  Hard-Asset-Based Businesses

• Understand the business model.  Knowing a company leverages on hard assets will provide insight as to the kind of financial results the company may produce.
• Look for scale and operating leverage.  These characteristics can provide significant barriers to entry and lead to impressive financial performance.
• Look for recurring revenue.  Long-term customer contracts can guarantee certain levels of revenue for years into the future.  This can provide a degree of stability in financial results.
• Focus on cash flow.  Investors ultimately earn returns based on a company's cash-generating ability.  Avoid investments that aren't expected to generate adequate cash flow.
• Size the market opportunity.  Industries with big, untapped market opportunities provide an attractive environment for high growth.  In addition, companies chasing markets perceived to be big enough to accommodate growth for all industry participants are less likely to compete on price alone.
• Examine growth expectations.  Understand what kind of growth rates are incorporated into the share price.  If the rates of growth are unrealistic, avoid the stock.

The Five Rules for Successful Stock Investing

by Pat Dorsey

A quick look at Maybulk

A quick look at Maybulk 2009
http://spreadsheets.google.com/ccc?key=t1cbkYBrl-qTfTAwdDlo6ZA
A quick look at Maybulk 2009 (Earnings normalised)
http://spreadsheets.google.com/ccc?key=teSUeL8rtSOTpKZ7hfAV0aw

Shipping industry starts to turn

The US economy is on the mend. So says Emil Wolter, head of regional strategy, Asian markets at RBS, who prefers to play developed market growth over emerging market growth. He is forecasting that US unemployment is going to fall to 8% from 10%. That would support a continued recovery in US consumption. As a consequence, global trade is poised to rebound by 6-8% in the next 12 month, Wolter says. While the shipping sector has supply issues, Wolter says “You can buy a lot of these companies at their NAVs and although some companies have problems with their balance sheets, there are also a lot of companies with strong balance sheets.” Moreover, pricing power is returning, and the shipping companies are operating more efficiently too.

That’s a view that Survo Sarkar, an analyst at DBS Group Research, agrees with. In a 32-page report on Neptune Orient Lines, DBS has re-initiated coverage with a price target of $2.40. According to Sarkar, the figure represents seven times FY11 EV/EBITDA, (enterprise value to earnings before interest, tax, depreciation and amortisation) and a price to book of 1.6 times. These valuations are conservative compared to peers’ average of about 10 times FY11 EV/EBITDA, the report says.

According to the report fundamentals for the shipping sector are indeed turning increasingly positive. “Year to date, container rates and volumes have both made a strong comeback — with rates on Asia-Europe routes now about 70% higher than last October levels,” Sarkar writes. NOL’s operating statistics for the first 10 weeks of FY10 reflect the improved fundamentals, the report says. Volumes have risen 52% y-o-y, and freight rates are up 7% and 10% on a sequential basis in the first two reporting periods, it adds. “According to our estimates, NOL’s container shipping business should return to profitability by 4Q10, on the back of 9% growth in trade volumes, a 10% growth in average freight rates/FEU and a 3% drop in average operating expenses/FEU for FY10,” Sarkar states in the report. NOL last traded at $2.01.

The Edge Singapore

Stocks to watch: Maybulk

Despite almost a halving of charter rates for vessels, Maybulk saw a significant jump in profits for the fourth quarter ended Dec 31, 2009 (4Q09), thanks to improvement in the group's quoted investments and higher contributions from associate companies.

http://www.theedgemalaysia.com/business-news/160134-stocks-to-watch-astro-mas-telekom-maybulk.html 


----

Maybulk's profit jumps despite fall in charter rates

Written by The Edge Financial Daily

Monday, 22 February 2010 23:24

KUALA LUMPUR: Despite almost a halving of charter rates for vessels, MALAYSIAN BULK CARRIERS BHD [] (Maybulk) saw a significant jump in profits for the fourth quarter ended Dec 31, 2009 (4Q09), thanks to improvement in the group's quoted investments and higher contributions from associate companies. Maybulk registered a net profit of RM88.4 million, which was a marked improvement compared to RM3.2 million in the corresponding quarter of 2008. The turnover in 4Q was RM82.6 million compared to RM138.1 million in 2008. The vastly improved earnings resulted in improved earnings per share (EPS) of 8.84 sen for 4Q09 compared to 0.32 sen in 2008. The board proposed a final single-tier dividend of 15 sen per share, amounting to RM150 million, for FY09. In the current quarter, the group's other operating income which mainly comprised a reversal of mark to market losses and gains realised from the disposal of quoted investments amounted to RM39.2 million while contributions from associates were RM19.1 million. Both administrative expenses and finance cost were also lower than last year's. Maybulk's associate companies are PACC Offshore Services Holdings Group, Eminence Bulk Carriers Pte Ltd and Novel Bright Assets Ltd. For the year ended Dec 31, 2009, Maybulk posted a net profit of RM243.8 million, a decline of 47% compared to a net profit of RM460.9 million recorded in 2008. This was on a revenue of RM303.7 million in the FY ended Dec 31, 2009 as compared to RM721.2 million in the corresponding period a year earlier. However, the FY08's results included gains from the disposal of four ships of RM327.3 million. In FY09, Maybulk sold its over-aged handy-size bulk carrier Alam Sempurna for a gain of RM8 million. Compared to 3Q09, revenue for the quarter in review was lower at RM82.6 million. In the preceding quarter, revenue was RM98 million. However, this was cushioned by reduced operating expenses of RM43.2 million against 3Q's RM59.1 million. In FY09, Maybulk's performance was affected by a decline in charter rates and its reduced fleet size. Maybulk stated that the Baltic Dry Index (BDI), which is an indicator of the charter rate, was volatile throughout the year resulting in lower comparative average Time Charter Equivalent (TCE) for the drybulk fleet of US$19,076 (RM64,858) per day versus 2008's time charter average of US$37,953 per day. Going forward, Maybulk stated that it will be challenging as indications of increased spending in exploration and production in the oil and gas sector have yet to translate into higher rates due to the current over-supply in the offshore segment.

Maybulk served claim

Maybulk served claim
Published: 2009/10/22

MALAYSIAN Bulk Carriers Bhd (Maybulk) said its unit Everspeed Enterprises Ltd received an arbitration claim from Raffles Shipping & Investment Pte Ltd.

Everspeed had chartered the Bunga Saga 9 vessel from Raffles and it cancelled the deal in accordance with the terms, Maybulk said.

Raffles did not say how much it is claiming but the total in dispute is US$28.5 million (RM96.61 million) less any sum that Raffles can recover by re-chartering the vessel to another party.

Lawyers have told Everspeed that it has reasonable prospects to win the dispute, Maybulk said in a statement to Bursa Malaysia.

http://www.btimes.com.my/Current_News/BTIMES/articles/20091022004519/Article/

Comment:  This is a very tough sector at least for the next 2 years.

Understanding the business model: Hard-Asset-Based Businesses

Companies in the hard-asset-based subsector depend on big investments in fixed assets to grow their businesses. Airlines, waste haulers (Waste Management, Allied Waste, Republic Services), and expedited delivery companies (FedEx, UPS) all fall into this subsector.

In general, these companies aren't as attractive as technology-based businesses, but investors can still find some wide-moat stocks and good investments in this area.

Industry Structure

Growth for hard-asset-based businesses inevitably requires large incremental outlays for fixed assets. After all, once an airline is flyinng full planes, the only way to get more passengers from point A to point B is to acquire an additional aircraft, which can cost $35 million or more.

Because the incremental fixed investment occurs before asset deployment, companies in this sector generally finance their growth with external funding. Debt can be used to finance almost all of the asset's cost, so lenders generally require the asset to provide collateral against the loan. With this model, high leverage is not necessarily a bad thing, provided that the company can make enough money deploying the asset to cover the cost of debt financing and earn a reasonable return for shareholders.

With this in mind, airlines are generally the least attractive investment of all the companies in this subsector. Airlines must bear enormous fixed costs to maintain their fleets and meet the demands of expensive labour contracts, yet they sell a commodity service that's difficult to differentiate. As a result price competition is intense, profit margins are razor-thin - and often non-existent - and operating leverage is so high that the firms can swing from being wildly profitable to nearly bankrupt in a short time. If you don't think this sounds like a recipe for good long-term investments, you're right - airlines have lost a collective $11 billion (excluding the impact of recent government handouts) between deregulation in 1987 and 2002. Over the same time period, 125 airlines had filed for Chapter 11 bankruptcy protection, and 12 of them filed for Chapter 7 liquidation.

But despite the terrible performance for airlines in general, a few carriers have fared very well. Southwest, for one, has been profitable for 30 consecutive years - an amazing achievement considering the cyclicality of its business and the dismal operating environment for the industry in 2002. Southwest's superior financial performance is largely because of its main strategic advantage: a low cost structure driven by its practice of flying one type of aircraft for all its no frills, point-to-point routes. In an industry with less-than-desirable fundamentals, Southwest has achieved superior financial results by deploying a different and dominant, business strategy.

Other characteristics of hard-asset-based businesses make this segment worth watching. The idea of limited or shrinking assets, for example, can go a long way to provide stability in the competitive landscape for these companies. Because of the NIMBY (not in my back yard) principle, it is very difficult to get approval for new landfill sites. As a result, it is highly unlikely that new competitors will enter the landfill side of the waste management business. That puts a company such as Waste Management, which owns 40 percent of the total U.S. disposal capacity via its 300 landfills, at an advantage.

The majority of hard-asset-based companies fall into the narrow- or no-moat buckets. With few, if any, competitive advantages for many of these companies, investors should look for a pretty steep discount to a fair value estimate before buying shares.

Hallmark of Success for Hard-Asset-Based Businesses

Cost leadership: Because hard-asset-based companies have large fixed costs, those that deliver their products most efficiently have a strong advantage and can achieve superior financial performance, such as Southwest in the airline industry. Firms don't usually advertise their cost structures per se, so to get an idea about how efficiently a company operatees, look at its fixed assets turnover, operating margins, and ROIC - and compare its numbers to industry peers.

Unique assets: When limited assets are required to fulfill the delivery of a particular service, ownership of those assets is key. For example, Waste Management's numerous, well-located landfill assets represent a significant competitive advantage and brrier to entry in the waste management market because it's unlikely that enough new landfill locations will get government approval to diminish its share of this business.

Prudent financing: Remember, having a load of debt is not itself a bad thing. Having a load of debt that cannot be easily financed by the cash flow of the business is a reccipe for disaster. When analyzing companies with high debt, always be sure that the debt can be serviced from free cash flow, even under a downside scenario.

(Some Malaysian companies in this hard-asset-based businesses are Air Asia, MAS, Maybulk and Transmile.)



Ref: The Five Rules for Successful Stock Investing by Pat Dorsey