Outperform (17E TP Bt9.80)
stock
Precious Shipping Company Update
Outperform (17E TP Bt9.80) Close Bt9.45
Transport & Logistics May 2, 2017
Earnings upgrade/Earnings downgrade/Overview unchanged
On the way to recovery Price Performance (%)
Upgrade to “Outperform” with revised TP of Bt9.80 We decide to upgrade PSL’s TC rate and earnings in 2017E owing to the bright prospects of the dry‐bulk industry. As a result, we upgrade the 2017E TP for PSL to Bt9.80 (vs. Bt6.00 previously), based on P/BV of 1.1x (+0.5SD of historical average P/BV) to reflect the uptrend cycle of PSL’s earnings and the BDI. We thus switch PSL’s rating to Outperform (from Sell). Small net loss in 1Q17 with TC rate of US$8,588 (+79% YoY, +5% QoQ) PSL reported a small net loss of Bt59mn in 1Q17, including FX loss of Bt7mn and extra gains of Bt19mn (gains from the sale of equipment, gains from cancellations of contract for newly‐built ships, and gains from reversal of a doubtful debt provision). Stripping out extra items, PSL delivered a norm. loss of Bt71mn, significantly lower both YoY and QoQ owing mainly to the improvement of the TC rate (per vessel per day) to US$8,588, +79% YoY and +5% QoQ, in line with the BDI expansion (to 925 points, +158% YoY, ‐6% QoQ). Meanwhile, PSL’s OPEX fell to US$4,208 (‐7% YoY, 7% QoQ) with the fleet standing at 36 vessels as of 1Q17.
Source: SET Smart Consensus EPS (Bt) KT ZMICO vs. consensus Share data Reuters / Bloomberg
FY17
FY18
‐0.507
‐0.163
‐125.6%
‐382.2%
PSL.BK/PSL TB
Paid‐up Shares (m)
1,559.28
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
15.00/426.00
Foreign limit / actual (%)
49.00/24.99
52 week High / Low (Bt)
11.80/5.05
Avg. daily T/O (shares 000) NVDR (%)
5,360.00 6.45
Estimated free float (%)
48.08
Beta
1.17
URL
www.preciousshipping.com
CGR Anti‐corruption
Level 4 (Certified)
Note: An executive of KT ZMICO Securities is also a member of PSL’s board.
Raenoo Bhandasukdi Analyst no. 17989 [email protected] 66 (0) 2695‐5836
BDI turning around owing to better demand from China According to PSL, the reason for the strong BDI in 4Q16‐1Q17 was better‐ than‐expected demand in dry‐bulk vessels, especially from China (higher steel exports, higher coal and iron ore imports, etc.). PSL also believes the demand will likely be sustained in 2H17 as China plans to produce more high grade steel (leading to more imports of iron ore and high grade coal). Meanwhile, China’s policy to ban imports of coal from North Korea will lead China to import from much farther away, adding to ton‐ mile demand on coal. The strong demand is likely to offset the negative impact on the supply side from lower scrapping activities. Upgrade to making net profit in 2017E, 2018E earnings maintained We upgrade PSL’s TC rate in 2017E to US$9,000 (from US$7,500 previously). As a result, we now expect PSL’s earnings to turn to net profit of Bt202mn in 2017E (vs. an expected net loss of Bt490mn previously). We decide to maintain our net profit estimate of Bt724mn in 2018E for PSL with a TC rate assumption of US$10,000. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) Norm. profit (Btmn) Norm. EPS (Bt) Norm. EPS growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec Norm. PER (x) P/BV (x) EV/EBITDA (x) Dividend yield (%) ROE (%) Net gearing (%)
2015 4,257 (2,426) (1.56) (1,286) (0.82) n.m. 0.00 10.57
2016 3,690 (2,665) (1.71) (1,284) (0.82) n.m. 0.00 8.74
2017E 5,022 202 0.13 183 0.12 n.m. 0.00 8.87
2018E 5,664 724 0.46 724 0.46 295.25 0.32 9.01
2019E 6,130 1,056 0.68 1,056 0.68 45.93 0.47 9.21
2015 n.m. 0.89 31.15 0.00 (8.09) 87.07
2016 n.m. 1.08 29.50 0.00 (8.53) 106.70
2017E 80.49 1.07 9.58 0.00 1.33 95.34
2018E 20.36 1.05 7.19 3.44 5.19 82.91
2019E 13.95 1.03 5.81 5.02 7.43 66.41
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
Figure 1: PSL’s P/BV band and sensitivity of market prices based on P/BV at different standard deviation levels (X)
2017E +1.5SD +1.0SD +0.5SD Average ‐0.5SD ‐1.0SD ‐1.5SD
2.5 2.0 +2 S.D. 1.5
+1 S.D. +0.5 S.D.
Avg.
1.0 -0.5 S.D. -1S.D.
0.5
Apr-17
Mar-16
Sep-16
Aug-15
Jul-14
Feb-15
Jan-14
Jun-13
Dec-12
Nov-11
May-12
Oct-10
Apr-11
Mar-10
Mar-09
Sep-09
Aug-08
Jul-07
Feb-08
Jan-07
0.0
P/BV (x) 1.43 1.28 1.13 0.98 0.83 0.68 0.53
Implied market price* (Bt) 12.73 11.40 10.07 8.73 7.40 6.07 4.74
Upside/Downside vs. current market price (%) 34.7 20.6 6.5 (7.6) (21.6) (35.7) (49.8)
Source: Bloomberg
Figure 2: Dry‐bulk regional peers COUNTRY
PER (x)
PBV (x)
16 17E 18E 6.2 n.a. 9.0
Yield (%)
16 17E 18E 0.4 0.4 0.4
ROE (%)
16 17E 18E 0.0 0.0 0.0
EV/EBITDA (x)
16 17E 18E (0.5) 4.6 6.3
16 17E 18E 18.2 10.1 8.4
NOBLE GROUP LTD
Hong Kong
PACIFIC BASIN SHIPPING LTD
Hong Kong
n.a.
14.5
12.8
n.a.
1.1
1.0
n.a.
n.a.
n.a.
4.0
7.6
7.9
10.1
10.3
9.6
SINOTRANS SHIPPING LTD
Hong Kong
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
GREAT EASTERN SHIPPING CO
India
n.a.
n.a.
n.a.
0.9
n.a.
n.a.
n.a.
n.a.
n.a.
(3.4)
n.a.
n.a.
17.3
n.a.
n.a.
MALAYSIAN BULK CARRIERS
Malaysia
n.a.
27.6
18.6
n.a.
0.8
n.a.
n.a.
2.8
3.7
n.a.
2.8
3.7
n.a.
10.0
7.6
KOREA LINE CORP
S. Korea
n.a.
n.a.
23.0
0.6
0.8
0.8
0.0
1.0
1.4
(8.6)
(1.3)
4.9
25.6
11.5
8.2
PAN OCEAN CO LTD
S. Korea
n.a. 118.4
16.9
0.4
0.5
0.5
2.7
0.0
n.a.
(12.0)
0.4
2.6
n.a.
5.3
2.8
MERCATOR LINES SINGAPORE
Singapore
4.5
6.9
7.0
0.6
0.7
0.6
4.3
3.2
3.0
13.2
9.7
9.0
3.2
4.3
4.4
U‐MING MARINE TRANSPORT
Taiwan
14.1
11.0
8.0
0.7
0.9
0.8
0.0
n.a.
n.a.
5.1
8.4
10.3
13.2
10.5
9.2
SINCERE NAVIGATION
Taiwan
n.a.
45.0
21.9
1.0
n.a.
n.a.
0.0
0.0
1.3
(52.0)
n.a.
n.a.
n.a.
n.a.
n.a.
n.m.
33.2
14.8
0.7
0.8
0.7
1.0
1.0
2.2
(7.0)
3.6
6.3
16.2
9.2
7.1
Average (simple)
Source: Bloomberg
Figure 3: 1Q17 earnings review Profit and Loss (Btmn) Year‐end 31 Dec Revenue Gross profit SG&A expenses EBITDA Interest expenses Other income Income tax Forex gain (loss) Other extra items Net profit (loss) Normalized profit (loss) Reported EPS (Bt) Gross margin (%) EBITDA margin (%) Net margin (%) Current ratio (x) Interest coverage (x) Debt/equity (x) BVPS (Bt) ROE (%)
1Q16 803 (275) (116) (5) (199) 31 ‐ 27 (676) (1,211) (562) (0.78)
4Q16 1,029 145 (91) 367 (207) 10 (0) 22 (2) (118) (139) (0.08)
1Q17 1,046 223 (86) 423 (213) 2 ‐ (7) 19 (59) (71) (0.04)
% YoY 30.2 n.m. (26.2) n.m. 7.5 (92.0) ‐ n.m. n.m. n.m. n.m. n.m.
% QoQ 1.7 53.2 (5.2) 15.1 3.3 (75.0) (100.0) n.m. n.m. n.m. n.m. n.m.
2016 3,690 (168) (373) 826 (798) 54 (0) 45 (1,426) (2,665) (1,284) (1.71)
2017E 5,022 1,280 (377) 2,403 (774) 37 0 ‐ 19 202 183 0.13
% YoY 36.1 n.m. 0.9 190.9 (2.9) (31.1) (114.3) (100.0) n.m. n.m. n.m. n.m.
YTD (% of 17E) 20.8 17.4 22.8 17.6 27.6 6.7 ‐ ‐ 100.0 (29.3) (39.0) (29.3)
(34.2) (0.6) (70.0) 0.3 (2.0) 1.1 9.5 (14.3)
14.1 35.7 (13.5) 2.5 0.3 1.3 8.7 (4.1)
21.3 40.4 (6.8) 0.7 0.6 1.3 8.4 (2.1)
(4.5) 22.4 (34.8) 2.5 (0.7) 1.3 8.7 (8.5)
25.5 47.8 3.8 1.9 1.2 1.2 8.9 1.3
Source: PSL, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Figure 4: Major assumptions behind earnings forecasts for PSL 2017E
Number of vessels (yearend) Average TC rate (US$/day) Operating expenses (US$/day) Net profit (Btmn)
New 36 9,000 4,500 202
Previous 36 7,500 4,500 (490)
2018E
% chg 20.0 0.0 n.m.
New 37 10,000 4,616 724
Previous 37 10,000 4,616 724
% chg 0.0 0.0 0.0
Source: PSL, KT ZMICO Research
Figure 5: Baltic Dry Index (BDI) ‐ Seasonality
Source: PSL
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Financial tables PROFIT & LOSS (Btm) Revenues Cost of sales and service Gross profit SG&A EBITDA Depreciation & amortization EBIT Interest expense Other income / exp. EBT Forex gain (loss) Extra items Net profit Reported EPS Fully diluted EPS Core net profit Core EPS Dividend (Bt) BALANCE SHEET (Btm) Cash and equivalents Inventories PP&E‐net Other assets Total assets ST debt & current portion Long‐term debt Total liabilities Minority interests Shareholder equity Total liab. & shareholder equity CASH FLOW (Btm) Net income Depreciation & amortization Change in working capital FX, non‐cash adjustment & others Cash flow from operations Capex (Invest)/Divest Others Cash flow from investing Debt financing (repayment) Equity financing Dividend payment Cash flow from financing Net change in cash Free cash flow FCF per share (Bt) PROFITABILITY Revenue growth (%) EBITDA growth (%) Norm. EPS growth (%) Gross margin (%) EBITDA margin (%) Operating margin (%) Core profit margin (%) Effective tax rate (%) FINANCIAL QUALITY Total debt to capital employed (x) Net debt to equity (x)
2014 4,585 (3,995) 590 (254) 1,604 (1,268) 336 (425) 5 (84) 4 (8) (80) (0.08) (0.08) (76) (0.07) 0.20 2014 535 115 26,085 1,173 27,909 812 11,101 12,625 (1) 15,285 27,909 2014 (80) 1,268 101 55 1,345 (7,019) 1,507 (5,512) 2,081 0 (321) 1,759 (2,407) (4,167) (4.01) 2014 18.5 38.6 n.m. 12.9 35.0 7.3 (1.7) (2.9) 2014 0.44 0.74
2015 4,257 (4,594) (338) (392) 776 (1,506) (730) (565) 2 (1,292) (25) (1,115) (2,426) (1.56) (1.56) (1,286) (0.82) 0.00
2016 3,690 (3,858) (168) (373) 826 (1,367) (541) (798) 54 (1,285) 45 (1,426) (2,665) (1.71) (1.71) (1,284) (0.82) 0.00
2017E 5,022 (3,742) 1,280 (377) 2,403 (1,499) 904 (774) 37 166 0 19 202 0.13 0.13 183 0.12 0.00
2015 454 143 29,782 2,080 32,458 5,604 9,206 15,972 (2) 16,488 32,458
2016 2,712 41 28,384 1,179 32,316 887 16,371 18,683 0 13,633 32,316
2017E 2,845 53 27,155 1,298 31,352 1,404 14,631 17,517 (0) 13,835 31,352
2015 (2,426) 1,506 780 1,186 1,046 (4,422) 860 (3,561) 359 2,076 (1) 2,434 (81) (2,516) (1.61)
2016 (2,665) 1,367 512 1,479 693 (2,689) 1,884 (806) 2,334 0 0 2,334 2,222 (112) (0.07)
2017E 202 1,499 (74) 0 1,627 (867) 597 (270) (1,223) 0 0 (1,223) 134 1,357 0.87
2015 (7.2) (51.6) n.m. (7.9) 18.2 (17.1) (30.2) (0.1)
2016 (13.3) 6.4 n.m. (4.5) 22.4 (14.7) (34.8) (0.0)
2017E 36.1 190.9 n.m. 25.5 47.8 18.0 3.6 (0.0)
2015 0.47 0.87
2016 0.56 1.07
2017E 0.54 0.95
2018E 5,664 (3,780) 1,884 (477) 2,985 (1,578) 1,407 (745) 41 704 0 0 724 0.46 0.46 724 0.46 0.32 2018E 3,373 52 25,945 1,331 30,701 1,433 13,590 16,651 (1) 14,052 30,701 2018E 724 1,578 114 0 2,415 (622) 0 (622) (1,013) 0 (253) (1,266) 527 1,793 1.15 2018E 12.8 24.2 295.3 33.3 52.7 24.8 12.8 (0.0) 2018E 0.52 0.83
2019E 6,130 (3,923) 2,207 (516) 3,335 (1,643) 1,692 (706) 48 1,034 0 0 1,056 0.68 0.68 1,056 0.68 0.47 2019E 4,048 54 24,284 1,355 29,742 1,433 12,157 15,376 (3) 14,369 29,741 2019E 1,056 1,643 132 0 2,831 (100) 0 (100) (1,433) 0 (623) (2,056) 675 2,731 1.75
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
2019E 8.2 11.7 45.9 36.0 54.4 27.6 17.2 (0.0) 2019E 0.49 0.66
Note:
KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, M‐CHAI, POMPUI, TFD, TTL, NMG.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD)
Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Anti‐corruption Progress Indicator
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy DISCLAIMER
This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 5
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
Precious Shipping Company Update
Outperform (17E TP Bt9.80) Close Bt9.45
Transport & Logistics May 2, 2017
Earnings upgrade/Earnings downgrade/Overview unchanged
On the way to recovery Price Performance (%)
Upgrade to “Outperform” with revised TP of Bt9.80 We decide to upgrade PSL’s TC rate and earnings in 2017E owing to the bright prospects of the dry‐bulk industry. As a result, we upgrade the 2017E TP for PSL to Bt9.80 (vs. Bt6.00 previously), based on P/BV of 1.1x (+0.5SD of historical average P/BV) to reflect the uptrend cycle of PSL’s earnings and the BDI. We thus switch PSL’s rating to Outperform (from Sell). Small net loss in 1Q17 with TC rate of US$8,588 (+79% YoY, +5% QoQ) PSL reported a small net loss of Bt59mn in 1Q17, including FX loss of Bt7mn and extra gains of Bt19mn (gains from the sale of equipment, gains from cancellations of contract for newly‐built ships, and gains from reversal of a doubtful debt provision). Stripping out extra items, PSL delivered a norm. loss of Bt71mn, significantly lower both YoY and QoQ owing mainly to the improvement of the TC rate (per vessel per day) to US$8,588, +79% YoY and +5% QoQ, in line with the BDI expansion (to 925 points, +158% YoY, ‐6% QoQ). Meanwhile, PSL’s OPEX fell to US$4,208 (‐7% YoY, 7% QoQ) with the fleet standing at 36 vessels as of 1Q17.
Source: SET Smart Consensus EPS (Bt) KT ZMICO vs. consensus Share data Reuters / Bloomberg
FY17
FY18
‐0.507
‐0.163
‐125.6%
‐382.2%
PSL.BK/PSL TB
Paid‐up Shares (m)
1,559.28
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
15.00/426.00
Foreign limit / actual (%)
49.00/24.99
52 week High / Low (Bt)
11.80/5.05
Avg. daily T/O (shares 000) NVDR (%)
5,360.00 6.45
Estimated free float (%)
48.08
Beta
1.17
URL
www.preciousshipping.com
CGR Anti‐corruption
Level 4 (Certified)
Note: An executive of KT ZMICO Securities is also a member of PSL’s board.
Raenoo Bhandasukdi Analyst no. 17989 [email protected] 66 (0) 2695‐5836
BDI turning around owing to better demand from China According to PSL, the reason for the strong BDI in 4Q16‐1Q17 was better‐ than‐expected demand in dry‐bulk vessels, especially from China (higher steel exports, higher coal and iron ore imports, etc.). PSL also believes the demand will likely be sustained in 2H17 as China plans to produce more high grade steel (leading to more imports of iron ore and high grade coal). Meanwhile, China’s policy to ban imports of coal from North Korea will lead China to import from much farther away, adding to ton‐ mile demand on coal. The strong demand is likely to offset the negative impact on the supply side from lower scrapping activities. Upgrade to making net profit in 2017E, 2018E earnings maintained We upgrade PSL’s TC rate in 2017E to US$9,000 (from US$7,500 previously). As a result, we now expect PSL’s earnings to turn to net profit of Bt202mn in 2017E (vs. an expected net loss of Bt490mn previously). We decide to maintain our net profit estimate of Bt724mn in 2018E for PSL with a TC rate assumption of US$10,000. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) Norm. profit (Btmn) Norm. EPS (Bt) Norm. EPS growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec Norm. PER (x) P/BV (x) EV/EBITDA (x) Dividend yield (%) ROE (%) Net gearing (%)
2015 4,257 (2,426) (1.56) (1,286) (0.82) n.m. 0.00 10.57
2016 3,690 (2,665) (1.71) (1,284) (0.82) n.m. 0.00 8.74
2017E 5,022 202 0.13 183 0.12 n.m. 0.00 8.87
2018E 5,664 724 0.46 724 0.46 295.25 0.32 9.01
2019E 6,130 1,056 0.68 1,056 0.68 45.93 0.47 9.21
2015 n.m. 0.89 31.15 0.00 (8.09) 87.07
2016 n.m. 1.08 29.50 0.00 (8.53) 106.70
2017E 80.49 1.07 9.58 0.00 1.33 95.34
2018E 20.36 1.05 7.19 3.44 5.19 82.91
2019E 13.95 1.03 5.81 5.02 7.43 66.41
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
Figure 1: PSL’s P/BV band and sensitivity of market prices based on P/BV at different standard deviation levels (X)
2017E +1.5SD +1.0SD +0.5SD Average ‐0.5SD ‐1.0SD ‐1.5SD
2.5 2.0 +2 S.D. 1.5
+1 S.D. +0.5 S.D.
Avg.
1.0 -0.5 S.D. -1S.D.
0.5
Apr-17
Mar-16
Sep-16
Aug-15
Jul-14
Feb-15
Jan-14
Jun-13
Dec-12
Nov-11
May-12
Oct-10
Apr-11
Mar-10
Mar-09
Sep-09
Aug-08
Jul-07
Feb-08
Jan-07
0.0
P/BV (x) 1.43 1.28 1.13 0.98 0.83 0.68 0.53
Implied market price* (Bt) 12.73 11.40 10.07 8.73 7.40 6.07 4.74
Upside/Downside vs. current market price (%) 34.7 20.6 6.5 (7.6) (21.6) (35.7) (49.8)
Source: Bloomberg
Figure 2: Dry‐bulk regional peers COUNTRY
PER (x)
PBV (x)
16 17E 18E 6.2 n.a. 9.0
Yield (%)
16 17E 18E 0.4 0.4 0.4
ROE (%)
16 17E 18E 0.0 0.0 0.0
EV/EBITDA (x)
16 17E 18E (0.5) 4.6 6.3
16 17E 18E 18.2 10.1 8.4
NOBLE GROUP LTD
Hong Kong
PACIFIC BASIN SHIPPING LTD
Hong Kong
n.a.
14.5
12.8
n.a.
1.1
1.0
n.a.
n.a.
n.a.
4.0
7.6
7.9
10.1
10.3
9.6
SINOTRANS SHIPPING LTD
Hong Kong
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
GREAT EASTERN SHIPPING CO
India
n.a.
n.a.
n.a.
0.9
n.a.
n.a.
n.a.
n.a.
n.a.
(3.4)
n.a.
n.a.
17.3
n.a.
n.a.
MALAYSIAN BULK CARRIERS
Malaysia
n.a.
27.6
18.6
n.a.
0.8
n.a.
n.a.
2.8
3.7
n.a.
2.8
3.7
n.a.
10.0
7.6
KOREA LINE CORP
S. Korea
n.a.
n.a.
23.0
0.6
0.8
0.8
0.0
1.0
1.4
(8.6)
(1.3)
4.9
25.6
11.5
8.2
PAN OCEAN CO LTD
S. Korea
n.a. 118.4
16.9
0.4
0.5
0.5
2.7
0.0
n.a.
(12.0)
0.4
2.6
n.a.
5.3
2.8
MERCATOR LINES SINGAPORE
Singapore
4.5
6.9
7.0
0.6
0.7
0.6
4.3
3.2
3.0
13.2
9.7
9.0
3.2
4.3
4.4
U‐MING MARINE TRANSPORT
Taiwan
14.1
11.0
8.0
0.7
0.9
0.8
0.0
n.a.
n.a.
5.1
8.4
10.3
13.2
10.5
9.2
SINCERE NAVIGATION
Taiwan
n.a.
45.0
21.9
1.0
n.a.
n.a.
0.0
0.0
1.3
(52.0)
n.a.
n.a.
n.a.
n.a.
n.a.
n.m.
33.2
14.8
0.7
0.8
0.7
1.0
1.0
2.2
(7.0)
3.6
6.3
16.2
9.2
7.1
Average (simple)
Source: Bloomberg
Figure 3: 1Q17 earnings review Profit and Loss (Btmn) Year‐end 31 Dec Revenue Gross profit SG&A expenses EBITDA Interest expenses Other income Income tax Forex gain (loss) Other extra items Net profit (loss) Normalized profit (loss) Reported EPS (Bt) Gross margin (%) EBITDA margin (%) Net margin (%) Current ratio (x) Interest coverage (x) Debt/equity (x) BVPS (Bt) ROE (%)
1Q16 803 (275) (116) (5) (199) 31 ‐ 27 (676) (1,211) (562) (0.78)
4Q16 1,029 145 (91) 367 (207) 10 (0) 22 (2) (118) (139) (0.08)
1Q17 1,046 223 (86) 423 (213) 2 ‐ (7) 19 (59) (71) (0.04)
% YoY 30.2 n.m. (26.2) n.m. 7.5 (92.0) ‐ n.m. n.m. n.m. n.m. n.m.
% QoQ 1.7 53.2 (5.2) 15.1 3.3 (75.0) (100.0) n.m. n.m. n.m. n.m. n.m.
2016 3,690 (168) (373) 826 (798) 54 (0) 45 (1,426) (2,665) (1,284) (1.71)
2017E 5,022 1,280 (377) 2,403 (774) 37 0 ‐ 19 202 183 0.13
% YoY 36.1 n.m. 0.9 190.9 (2.9) (31.1) (114.3) (100.0) n.m. n.m. n.m. n.m.
YTD (% of 17E) 20.8 17.4 22.8 17.6 27.6 6.7 ‐ ‐ 100.0 (29.3) (39.0) (29.3)
(34.2) (0.6) (70.0) 0.3 (2.0) 1.1 9.5 (14.3)
14.1 35.7 (13.5) 2.5 0.3 1.3 8.7 (4.1)
21.3 40.4 (6.8) 0.7 0.6 1.3 8.4 (2.1)
(4.5) 22.4 (34.8) 2.5 (0.7) 1.3 8.7 (8.5)
25.5 47.8 3.8 1.9 1.2 1.2 8.9 1.3
Source: PSL, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Figure 4: Major assumptions behind earnings forecasts for PSL 2017E
Number of vessels (yearend) Average TC rate (US$/day) Operating expenses (US$/day) Net profit (Btmn)
New 36 9,000 4,500 202
Previous 36 7,500 4,500 (490)
2018E
% chg 20.0 0.0 n.m.
New 37 10,000 4,616 724
Previous 37 10,000 4,616 724
% chg 0.0 0.0 0.0
Source: PSL, KT ZMICO Research
Figure 5: Baltic Dry Index (BDI) ‐ Seasonality
Source: PSL
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Financial tables PROFIT & LOSS (Btm) Revenues Cost of sales and service Gross profit SG&A EBITDA Depreciation & amortization EBIT Interest expense Other income / exp. EBT Forex gain (loss) Extra items Net profit Reported EPS Fully diluted EPS Core net profit Core EPS Dividend (Bt) BALANCE SHEET (Btm) Cash and equivalents Inventories PP&E‐net Other assets Total assets ST debt & current portion Long‐term debt Total liabilities Minority interests Shareholder equity Total liab. & shareholder equity CASH FLOW (Btm) Net income Depreciation & amortization Change in working capital FX, non‐cash adjustment & others Cash flow from operations Capex (Invest)/Divest Others Cash flow from investing Debt financing (repayment) Equity financing Dividend payment Cash flow from financing Net change in cash Free cash flow FCF per share (Bt) PROFITABILITY Revenue growth (%) EBITDA growth (%) Norm. EPS growth (%) Gross margin (%) EBITDA margin (%) Operating margin (%) Core profit margin (%) Effective tax rate (%) FINANCIAL QUALITY Total debt to capital employed (x) Net debt to equity (x)
2014 4,585 (3,995) 590 (254) 1,604 (1,268) 336 (425) 5 (84) 4 (8) (80) (0.08) (0.08) (76) (0.07) 0.20 2014 535 115 26,085 1,173 27,909 812 11,101 12,625 (1) 15,285 27,909 2014 (80) 1,268 101 55 1,345 (7,019) 1,507 (5,512) 2,081 0 (321) 1,759 (2,407) (4,167) (4.01) 2014 18.5 38.6 n.m. 12.9 35.0 7.3 (1.7) (2.9) 2014 0.44 0.74
2015 4,257 (4,594) (338) (392) 776 (1,506) (730) (565) 2 (1,292) (25) (1,115) (2,426) (1.56) (1.56) (1,286) (0.82) 0.00
2016 3,690 (3,858) (168) (373) 826 (1,367) (541) (798) 54 (1,285) 45 (1,426) (2,665) (1.71) (1.71) (1,284) (0.82) 0.00
2017E 5,022 (3,742) 1,280 (377) 2,403 (1,499) 904 (774) 37 166 0 19 202 0.13 0.13 183 0.12 0.00
2015 454 143 29,782 2,080 32,458 5,604 9,206 15,972 (2) 16,488 32,458
2016 2,712 41 28,384 1,179 32,316 887 16,371 18,683 0 13,633 32,316
2017E 2,845 53 27,155 1,298 31,352 1,404 14,631 17,517 (0) 13,835 31,352
2015 (2,426) 1,506 780 1,186 1,046 (4,422) 860 (3,561) 359 2,076 (1) 2,434 (81) (2,516) (1.61)
2016 (2,665) 1,367 512 1,479 693 (2,689) 1,884 (806) 2,334 0 0 2,334 2,222 (112) (0.07)
2017E 202 1,499 (74) 0 1,627 (867) 597 (270) (1,223) 0 0 (1,223) 134 1,357 0.87
2015 (7.2) (51.6) n.m. (7.9) 18.2 (17.1) (30.2) (0.1)
2016 (13.3) 6.4 n.m. (4.5) 22.4 (14.7) (34.8) (0.0)
2017E 36.1 190.9 n.m. 25.5 47.8 18.0 3.6 (0.0)
2015 0.47 0.87
2016 0.56 1.07
2017E 0.54 0.95
2018E 5,664 (3,780) 1,884 (477) 2,985 (1,578) 1,407 (745) 41 704 0 0 724 0.46 0.46 724 0.46 0.32 2018E 3,373 52 25,945 1,331 30,701 1,433 13,590 16,651 (1) 14,052 30,701 2018E 724 1,578 114 0 2,415 (622) 0 (622) (1,013) 0 (253) (1,266) 527 1,793 1.15 2018E 12.8 24.2 295.3 33.3 52.7 24.8 12.8 (0.0) 2018E 0.52 0.83
2019E 6,130 (3,923) 2,207 (516) 3,335 (1,643) 1,692 (706) 48 1,034 0 0 1,056 0.68 0.68 1,056 0.68 0.47 2019E 4,048 54 24,284 1,355 29,742 1,433 12,157 15,376 (3) 14,369 29,741 2019E 1,056 1,643 132 0 2,831 (100) 0 (100) (1,433) 0 (623) (2,056) 675 2,731 1.75
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
2019E 8.2 11.7 45.9 36.0 54.4 27.6 17.2 (0.0) 2019E 0.49 0.66
Note:
KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, M‐CHAI, POMPUI, TFD, TTL, NMG.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD)
Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Anti‐corruption Progress Indicator
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy DISCLAIMER
This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 5
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
