Good for Maybulk to hold on to its ‘crown jewel’

by **Cals** Wed 05 Mar 2014, 13:20

[size=22.22222328186035]Good for Maybulk to hold on to its ‘crown jewel’[/size]

Business & Markets 2014

[size=11.111111640930176]Written by Kenanga Research [/size]

[size=11.111111640930176]Wednesday, 05 March 2014 11:58[/size]

[size=12.222222328186035]Malaysian Bulk Carriers Bhd
March 4, (RM2.06)
Initiating coverage with outperform call, with target price of RM2.53: We are initiating coverage on Maybulk with an “outperform” call based on forward financial year 2014 ending Dec 31 (FY14) price-to-book value (P/BV) of 1.3 times at a target price of RM 2.53.

We believe its valuation is still compelling despite the strong performance in 2013 as the stock is currently trading at close to 1.1 times P/BV which is below the six-year average forward P/BV of 1.3 times.

We selected the P/BV methodology as our valuation basis as the cyclical shipping industry causes huge earnings volatility, thereby making the less volatile P/BV valuation a more viable option.

We like Maybulk for its healthy net cash balance sheet position, efficient fleet management with average fleet age of 5.9 years which is considered young, and exposure to the recovering dry bulk shipping market.

We believe that Maybulk at its current level is a compelling investment as the dry bulk shipping market has yet to fully recover to even half of pre-crisis level, which means more upside.

Another highlight of this company is its 21%-owned associate, PACC Offshore Service Holdings (Posh), which provides Maybulk some exposure to the booming offshore support vessel industry.

Posh was rumoured to be a listing potential late last year but it has yet to materialise. Given that the put option has lapsed, we opine that the best option for Maybulk is to hold on to its crown jewel for the time being, unless it is able to fetch a much higher valuation. — Kenanga Research, March 4

[You must be registered and logged in to see this image.]

This article first appeared in The Edge Financial Daily, on March 05, 2014.[/size]