Thursday, December 29, 2011

Maybulk advances on rising volume despite cautious outlook

KUALA LUMPUR (Dec 29): MALAYSIAN BULK CARRIERS BHD [] (Maybulk) share price advanced in late afternoon trade on Thursday, climbing to a high of RM1.59, despite concerns about a tough 2012 environment for the dry bulk shipping industry.

At 3.57pm, Maybulk was up 13 sen to RM1.58. There were 5.09 million shares done at prices ranging from RM1.46 to RM1.59.

In a recent report, TA Securities Research said its Underweight stance on the dry bulk shipping industry remained intact as it believed the global shipping market was posed for a tough 2012.

'Indeed, Malaysian Bulk Carriers Berhad (Maybulk)'s management foresee a challenging operating environment going forward. Capacity glut and unstable operating costs, primarily due to volatile bunker costs will continue to threaten shipping line profit margins,' it said.

TA Research said the situation may be exacerbated by unusual weather conditions and natural disasters.

Due to the lacklustre industry outlook and the industry's chronically low profitability, it believed the share price appreciation potential is limited for Maybulk. It added the recurring problem in the shipping sector was still the oversized orderbook as there would be another wave of big ships coming to the industry next year.

'We reiterate our Sell recommendation on Maybulk with a target price of RM1.10 based on Sum-of-Parts valuation methodology. We believe Maybulk appears fully valued within the sector with the recent increase in share prices.

'Potential catalysts to upgrade our target price include: (i) a strong and sustained rebound in Baltic Dry Index, (ii) a faster-than-expected economic recovery; and (iii) better than expected earnings contribution from POSH (PACC Offshore Services Holdings Pte Ltd),' TA Research said.

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