Shipping Stocks Rise as BDI Passes 3,000, Analyst Expects Sector’s Earnings Rebound in 1Q

Thai shipping stocks edged higher Wednesday morning (May 5) as the Baltic Dry Index (BDI) surpassed 3,000, led by Regional Container Lines Public Company Limited (RCL) rising ฿4.00/share or 10.74% to ฿41.25/share, with a trading value of 1,071 million baht.

 

Followed by Thoresen Thai Agencies Public Company Limited (TTA), the share surged ฿ 1.50/share or 10.27% to ฿16.10/share as of 11:48 local time in Thailand, with a trading value of 685 million baht.

 

Lastly, Precious Shipping Public Company Limited (PSL) gained ฿0.30/share or 1.64% to ฿18.60/share, with a trading value of 264 million baht.

 

Capital Nomura Securities (CNS) said as demand for logistics in China and the US is recovering, thus it expects the shipping sector’s performance to rebound this year, but supply will remain flat. Moreover, the freight rates continue to rise and recently the BDI index has passed 3,000 to its peak since 2010.

 

KTBST Securities (KTBST) reiterated a BUY rating on TTA but raised a target price to ฿19.00 from ฿13.00 and 2021E PER multiples from 31.5x to 45x (+3 SD above its 4-yr average), which is equivalent to 2x PBV, as it expect freight rate to remain high in the long term given rising  BSI. 

KTBST forecasted 1Q21E net profit of 224 million baht, recovering from a net loss of 459 million baht in 1Q20 and up +103% QoQ. Total revenue is projected to increase +9% YoY, +8% QoQ as revenue from freight charges is expected to surge +36% YoY, +41% QoQ, assuming that 1) TCE rate will be an average of USD13,645/day, and 2) voyage day will increase +1% QoQ, +9% YoY following an addition of one ship to its fleet. 2021E net profit forecast is maintained at 752 million baht as 1) total revenue is forecasted to grow +21.5% YoY to 15.6 billion baht based on an average TCE rate of USD13,324/day (USD9,517 in 2020), and 2) blended gross profit margin is expected to widen to 20.0% (13.2% in 2020) given rising freight rate and the offshore business hitting its breakeven.