Kenanga IB Research starts coverage on Maybulk, target price RM2.53

Kenanga IB Research starts coverage on Maybulk, target price RM2.53
Business & Markets 2014
Written by theedgemalaysia.com
Tuesday, 04 March 2014 10:21

KUALA LUMPUR (March 4): Kenanga IB Research has initiated coverage on Malaysian Bulk Carriers Bhd (Maybulk) at RM2.09 with an Outperform rating and target price of RM2.53 based on forward FY14PBV of 1.3x.

In a note Tuesday, the research house said Maybulk’s valuation was still compelling despite the strong performance in 2013 as the stock is currently trading at close to 1.1x PBV which is below the six-year average forward PBV of 1.3x.
Kenanga IB Research said it selected the PBV methodology as its valuation basis as the cyclical shipping industry causes huge earnings volatility, thereby making the less volatile PBV valuation a more viable option.
“We like the Maybulk for its: (i) healthy net cash balance sheet position, (ii) efficient fleet management with average fleet age of 5.9 years, which is considered young, and (iii) exposure to the recovering dry bulk shipping market.
“We believe that Maybulk at current level is a compelling investment as the dry bulk shipping market has yet to fully recover to even half of precrisis level, which means more upside.
“Another highlight of this company is its 21%-owned, associate POSH, which provides Maybulk some exposure to the booming offshore marine vessel industry. Aside from robust earnings at associate level, Maybulk also has the option to list their associate, POSH, at favourable valuation due to the booming Offshore Support (OSV) vessel market driven by higher upstream oil and gas activities,” it said.