Analyst Expects PRM’s Profit to Hit Higher on Strong FSU Performance, Giving a TP at ฿9.7

KTB Securities (Thailand) (KTBST) has maintained the recommendation of Prima Marine Public Company Limited (PRM) to “BUY” with an upgrade target price of ฿9.70/share on strong FSU performance.

 

Net profit to hit higher highs in 2Q-3Q20E on strong FSU performance

 

KTBST reiterates a BUY rating on PRM by rising a target price to ฿9.70 from ฿8.30 and re-rate 2020E PER multiples to 20.0x (-0.25 SD below its 2-yr average) from 18.0x (-0.5 SD) following an upgrade in 2020-21E earnings forecast. KTBST has a positive view of the company’s guidance and thereby upgrades 2020-21E net profit forecast by 7-10% to ฿1.22bn (+19% YoY) and ฿1.46bn (+20%). The FSU business (45% of total revenue) appears brighter after the company raised the rent rates of six ships by an average of 28% from the previous levels for one-year contracts. Strong IMO2020 demand and the oil price collapse have spurred demand for crude oil tankers, which is expected to offset the impact from weaker-than-expected demand in the domestic oil trading unit (38% of total revenue) due to the COVID-19 outbreak. KTBST expects the domestic oil trading business to return to its normal growth in 2021E.

 

PRM’s share price advanced in three months and thereby significantly outperformed the SET Index by 41%. Apart from the strong 1Q20 earnings performance and the crude oil price collapse, KTBST believes downside risk from the current share price will be limited as 1) KTBST forecasts 2Q-3Q20E net profit to hit a record high given 1) an increase in the rent rates for FSU ships in 2Q20, 2) a slowdown in the pace of baht weakness, which may result in FX loss narrowing compared to a loss of Bt77mn in 1Q20, and 3) a potential recovery in the domestic oil trading unit in 3Q20E.