Highlight Maybulk to continue sailing in rough seas

by **Cals** Fri 29 May 2015, 00:18

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Maybulk to continue sailing in rough seas

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By Yimie Yong / The Edge Financial Daily | May 28, 2015 : 10:26 AM MYT

KUALA LUMPUR: [size=14]Malaysian Bulk Carriers Bhd (Maybulk) ([You must be registered and logged in to see this image.] Financial Dashboard), which slipped into the red in the first quarter, expects 2015 to be another challenging year as overcapacity and low fuel prices are likely to keep dry bulk shipping freight rates low.

Its chief executive officer Kuok Khoon Kuan said the shipping firm is expecting lower dividends from its 21.23%-owned associate, PACC Offshore Services Holdings Ltd (POSH) ([You must be registered and logged in to see this image.] Financial Dashboard) in financial year 2015 (FY15) after the Singapore-listed company reported a lower net profit for the first quarter of FY15 ended March 31 (1Q15). POSH saw its net profit for 1QFY15 plunge 99% to S$21,000 (RM56,706) from S$36.67 million a year ago.

Kuok said the weaker performance of POSH will affect Maybulk. “[It is] obviously going to affect … as far as [POSH’s] share price relative to what we have invested and the dividends [we will get from POSH] are likely to reduce. These are the two negatives we see,” he told reporters after Maybulk’s annual general meeting yesterday. “There will still be dividends [from POSH], but lesser,” he added.

Based on Maybulk’s FY14 annual report, POSH contributed RM36.73 million to the group’s earnings for the year, as opposed to its loss-making dry bulk shipping segment. Maybulk bought a 21.23% stake in POSH in 2008 to diversify into offshore marine support services (OSV). It further invested RM218.4 million in the company in April last year to maintain its stake when POSH undertook its listing exercise in Singapore.

Kuok declined to say whether Maybulk can stay profitable in FY15, except that 2015 looks “difficult”. “We still have the rest of the year, but on the face of it, it looks very difficult. Last year we were still profitable, but on a much reduced scale,” he added.

Maybulk posted a net profit of RM12.15 million in FY14, down 72.71% from RM44.53 million in FY13. Revenue, however, rose 3.64% to RM255.72 million from RM246.74 million. The shipping firm posted a net loss of RM22.75 million in 1QFY15 compared to a net profit of RM23.02 million a year ago mainly due to “extremely depressed” dry bulk rates and lower contribution from POSH. This translated into a loss per share of 2.27 sen compared to an earnings per share of 2.3 sen in 1QFY14. Revenue for 1QFY15 fell 27.8% to RM51.75 million from RM71.72 million a year earlier.

Commenting on the dry bulk shipping rates, Kuok said while the Baltic Dry Index (BDI) — which measures the rates for chartering ships that transport dry bulk cargo — has moved above the low of February this year, it is “struggling to rise”.

BDI came to a low of 509 on Feb 18, and has been hovering between 587 and 634 since May 1. “It is going to be a very tough year. Last year the market was quite good in the early part, but it never really came up. In fact, it started progressively to get worse until right now,” said Kuok.

Currently, Maybulk owns 23 ships, of which 20 are dry bulk carriers and the rest product tankers.

Kuok said the ships are “pretty new” and it has no plans to scrap them. The average age of ships is six years. As for newbuildings, Kuok said there will be ships delivered, progressively into 2018.

Earlier, Maybulk said it was building five new ships to expand its fleet size to 27 vessels by 2018, and has set aside some RM400 million for capital expenditure in the next three years for expansion. On news of the construction of Kra Canal, Kuok said: “Until they start building, it’s just a ‘project’. Whether it comes to fruition or not, it has got to be tested.”

But according to a report on Channel News Asia dated May 20, 2015, Thai government officials denied reports that Bangkok signed an agreement with Beijing to construct a shipping canal through the Kra Isthmus that could allow ships to bypass the Strait of Malacca.

This article first appeared in The Edge Financial Daily, on May 28, 2015.
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