PSL
stock
Precious Shipping Company Update
Underperform (16E TP Bt5.70) Close Bt6.55
Transport & Logistics April 8, 2016
Earnings upgrade/Earnings downgrade/Overview unchanged
Poor results expected in 1Q16E Price Performance (%)
Maintain “Underperform” rating with TP lowered to Bt5.70 Although PSL’s share price has increased recently following the BDI turnaround owing to the seasonal pattern, we maintain our “Underperform” rating as we believe the BDI pickup will not be sustained due to a continued sluggish in the dry‐bulk industry. Based on our downward earnings revision, we slightly lower PSL’s P/BV‐based target price to Bt5.70, vs. Bt6.00 previously, based on P/BV of 0.6x (‐1SD). Gained cash from selling ships/cancelling shipbuilding contracts in 1Q16 In 1Q16, PSL sold five old ships for scrap at a price below book value despite having already marked an impairment loss on some of the vessels last year. Hence, PSL is likely to book a loss from the transactions. The low selling price was due to the sluggish dry‐bulk industry, which has caused many operators to have negative earnings and reserve cash to support loan agreements with banks. We expect PSL to receive cash of around Bt231mn from the transactions. In 1Q16, PSL also negotiated with shipyards to cancel eight shipbuilding contracts and is likely to have been refunded the cash advance it paid of around Bt1.3bn.
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
‐0.712
‐0.497
KT ZMICO vs. consensus Share data
65.7%
‐59.8%
Reuters / Bloomberg
PSL.BK/PSL TB
Paid‐up Shares (m)
1,559.28
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
10.00/290.00
Foreign limit / actual (%)
49.00/28.08
52 week High / Low (Bt)
11.23/4.66
Avg. daily T/O (shares 000) NVDR (%)
3,747.00 5.86
Estimated free float (%)
39.25
Beta
0.97
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
Expected to still report poor earnings in 1Q16E Based on the continued weakening of the BDI, we expect PSL to report a net loss of almost Bt1bn in 1Q16E, including a normalized loss of Bt588mn and a loss from vessels sold of Bt374mn. We assume the TC rate (per vessel per day) at US$4,500, falling by 26% YoY and 24% QoQ, in line with the average BDI of 358 points (‐42% YoY, ‐44% QoQ). In 1Q16E, PSL’s fleet likely stood at 40 vessels, vs. 45 as of the end of 2015. Revise down net profit estimate in 2016E In 2016E, PSL targets to sell twelve old vessels and receive five newly built vessels. Considering the ongoing sluggishness of the industry, we expect PSL to continue selling old ships at prices below book value. As such, we revise up our net loss estimate in 2016E for PSL to Bt1.8bn, vs. Bt1.1bn previously, to include an expected net loss of around Bt749mn from the sale of old vessels. Meanwhile, we lower PSL’s fleet to 38 at the end of 2016 vs. 45 previously expected. Although operating days are likely to decline, the fleet rejuvenation should be positive to OPEX owing to a younger fleet. 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) EV/EBITDA (x) P/BV (x) Dividend yield (%) ROE (%) Net gearing (%)
2014 4,585 (80) (0.08) (76) (0.40) (81.87) 0.20 14.70 2014 n.m. 11.40 0.45 3.01 (0.49) 74.44
2015 4,257 (2,426) (1.56) (1,286) (0.07) n.m. 0.00 10.57 2015 n.m. 27.40 0.63 0.00 (8.09) 87.07
2016E 4,743 (1,843) (1.18) (1,094) (0.70) (14.89) 0.00 9.39 2016E n.m. 18.53 0.71 0.00 (7.03) 93.00
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2017E 5,488 (304) (0.20) (304) (0.20) (72.19) 0.00 9.20 2017E n.m. 9.20 0.72 0.00 (2.10) 84.41
2018E 6,445 679 0.44 679 0.44 n.m. 0.30 9.33 2018E 15.27 5.43 0.71 4.58 4.70 67.27
Figure 1: PSL’s P/BV band and sensitivity of market prices based on P/BV at different standard deviation levels (X) 4.0
2016E +1.0SD +0.5SD Average ‐0.5SD ‐1.0SD ‐1.5SD
3.5 3.0
+2 S.D.
2.5 +1 S.D.
2.0
+0.5 S.D. Avg.
1.5 1.0
-0.5 S.D.
Mar-16
May-15
Jun-14
Sep-12
Aug-13
Nov-11
Dec-10
Apr-09
Feb-10
May-08
Jul-07
Oct-05
Jan-04
Nov-04
0.0
Aug-06
-1S.D.
0.5
P/BV (x) 1.85 1.54 1.23 0.92 0.61 0.30
Implied market price* (Bt) 17.41 14.50 11.59 8.68 5.76 2.85
Upside/Downside vs. current market price (%) 159.8 116.4 72.9 29.5 (14.0) (57.4)
Source: Bloomberg
Figure 2: Dry bulk regional peers COUNTRY
PER (x)
PBV (x)
Yield (%)
15 16E 17E 0.6 0.5 0.4
ROE (%)
15 16E 17E 0.0 4.2 3.9
15 (44.8)
EV/EBITDA (x)
NOBLE GROUP LTD
Hong Kong
15 16E 17E n.a. 5.8 5.0
16E 8.6
17E 9.2
15 16E 17E n.a. 8.1 7.5
PACIFIC BASIN SHIPPING LTD
Hong Kong
n.a.
n.a.
16.2
0.4
0.3
0.3
0.0
6.9
10.3
(1.9)
(2.8)
(2.0)
8.8
7.7
6.1
SINOTRANS SHIPPING LTD
Hong Kong
n.a.
n.a.
41.3
0.4
0.3
0.3
0.0
1.8
1.8
(3.2)
(1.0)
0.8
2.9
4.5
2.0
GREAT EASTERN SHIPPING CO
India
7.4
4.8
5.6
0.7
0.6
0.5
3.0
3.4
3.4
10.5
12.9
10.0
6.0
MALAYSIAN BULK CARRIERS
Malaysia
n.a.
n.a.
n.a.
0.7
0.5
0.5
0.0
1.1
1.1
(75.2)
n.a.
n.a.
n.a.
88.7
KOREA LINE CORP
S. Korea
8.2
6.4
5.3
0.8
0.7
0.6
0.0
n.a.
n.a.
9.7
11.2
12.0
10.3
3.5 212. 9 7.9
PAN OCEAN CO LTD
S. Korea
32.6
7.3
6.3
0.6
0.6
0.5
n.a.
n.a.
n.a.
1.6
7.9
8.4
7.1
7.0
6.6
n.a. 177. 1 14.3
0.3
n.a.
n.a.
0.0
n.a.
n.a.
(51.9)
n.a.
n.a.
n.a.
n.a.
n.a.
0.8
0.8
n.a.
n.a.
2.3
4.0
3.0
(0.2)
n.a.
13.5
13.6
9.8
n.a.
0.6
n.a.
n.a.
5.1
5.0
n.a.
4.4
4.2
n.a.
6.1
6.2
MERCATOR LINES SINGAPORE
Singapore
n.a.
n.a.
U‐MING MARINE TRANSPORT
Taiwan
27.8
n.a.
SINCERE NAVIGATION
Taiwan
12.1
14.9
THORESEN THAI AGENCIES PCL
Thailand
Average (simple)
3.8 6.8
n.a.
32.5
21.1
0.7
0.3
n.a.
0.6
1.1
1.3
(49.2)
1.6
3.7
n.a.
6.0
4.9
17.6
12.0
32.5
0.6
0.5
0.5
0.4
2.9
3.4
(19.7)
3.4
4.5
11.2
26.7
14.1
Source: Bloomberg
Figure 3: Baltic Dry Index (BDI) ‐ Seasonality
Source: PSL
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Figure 4: 1Q16E Earnings Preview 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 Gains (loss) from affiliates 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 (%)
1Q15 981 (100) (99) 151 (135) 0 ‐ 1 ‐ (3) (336) (337) (0.32)
4Q15 1,095 (148) (115) 145 (151) 1 (0) (0) (1,102) 4 (1,512) (410) (0.97)
1Q16E 797 (361) (74) (18) (155) ‐ ‐ ‐ (374) 2 (962) (588) (0.62)
% YoY (18.8) 259.7 (25.4) (112.0) 14.8 (100.0) ‐ (100.0) n.m. n.m. 186.6 74.4 91.1
% QoQ (27.2) 143.2 (35.9) (112.5) 2.5 (100.0) ‐ (100.0) (66.0) (54.0) (36.4) 43.5 (36.4)
2015 4,257 (338) (392) 776 (565) 2 (2) (25) (1,115) 8 (2,426) (1,286) (1.56)
2016E 4,743 (121) (437) 1,108 (547) 1 ‐ ‐ (749) 9 (1,843) (1,094) (1.18)
% YoY 11.4 (64.0) 11.4 42.7 (3.2) (32.6) (100.0) (100.0) (32.8) 13.7 (24.0) (14.9) (24.0)
YTD % of 16E 16.8 297.2 16.9 (1.6) 28.3 ‐ ‐ ‐ 50.0 21.3 52.2 53.7 52.2
(10.2) 15.3 (34.3) 0.1 (1.5) 0.9 14.2 (9.0)
(13.6) 13.2 (37.4) 0.2 (1.7) 0.9 10.6 (9.5)
(45.3) (2.3) (73.8)
(7.9) 18.2 (30.2) 0.2 (1.3) 0.9 10.6 (8.1)
(2.6) 23.4 (23.1) 0.6 (1.0) 1.0 9.4 (7.0)
Source: PSL, KT ZMICO Research
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)
2013 3,869 (3,528) 341 (330) 1,158 (1,146) 12 (459) 11 (436) 13 935 528 0.51 0.51 (421) (0.40) 0.40
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
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
2013 2,942 102 20,050 2,416 25,510 654 8,619 9,879 10 15,621 25,510
2014 535 115 26,085 1,173 27,909 812 11,101 12,625 (1) 15,285 27,909
2015 454 143 29,782 2,080 32,458 5,604 9,206 15,972 (2) 16,488 32,458
2013 528 1,146 220 (880) 1,013 (3,125) 4,325 1,200 (756) 0 (415) (1,171) 1,041 2,213 2.13
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)
2015 (2,426) 1,506 780 1,186 1,046 (4,422) 860 (3,561) 359 2,076 0 2,435 (81) (2,516) (1.61)
2013 10.6 (1.9) 165.1 8.8 29.9 0.3 (10.9) (2.0)
2014 18.5 38.6 (81.9) 12.9 35.0 7.3 (1.7) (2.9)
2015 (7.2) (51.6) 1,023.4 (7.9) 18.2 (17.1) (30.2) (0.1)
2013 0.37 0.41
2014 0.44 0.74
2015 0.47 0.87
2016E 4,743 (4,864) (121) (437) 1,108 (1,667) (559) (547) 1 (1,104) 0 (749) (1,843) (1.18) (1.18) (1,094) (0.70) 0.00 2016E 468 90 27,094 2,157 29,809 1,262 12,830 15,166 (2) 14,645 29,809 2016E (1,843) 1,667 (112) 749 461 (2,231) 2,502 271 (718) 0 0 (718) 14 732 0.47 2016E 11.4 42.7 (14.9) (2.6) 23.4 (11.8) (23.1) 0.0 2016E 0.49 0.93
2017E 5,488 (4,747) 742 (506) 2,068 (1,832) 236 (553) 2 (315) 0 0 (304) (0.20) (0.20) (304) (0.20) 0.00
2018E 6,445 (4,674) 1,771 (594) 3,075 (1,898) 1,177 (514) 4 666 0 0 679 0.44 0.44 679 0.44 0.30
2017E 724 82 25,362 2,206 28,375 1,262 11,567 14,036 (2) 14,341 28,375
2018E 1,783 78 23,326 2,271 27,458 1,262 10,305 12,915 (2) 14,545 27,458
2017E (304) 1,832 91 0 1,619 (100) 0 (100) (1,262) 0 0 (1,262) 256 1,519 0.97
2018E 679 1,898 81 0 2,658 (100) 0 (100) (1,262) 0 (238) (1,500) 1,058 2,558 1.64
2017E 15.7 86.6 (72.2) 13.5 37.7 4.3 (5.5) 0.0
2018E 17.4 48.7 n.m. 27.5 47.7 18.3 10.5 0.0
2017E 0.47 0.84
2018E 0.44 0.67
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investment in the securities of KTB and ZMICO, investor should consider 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, PACE, PLE, TPOLY. KT ZMICO is a co‐underwriter of TPBI.
Anti‐corruption Progress Indicator
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 BUY: Expecting positive total returns of 15% or more over the next 12 months OUTPERFORM: Expecting total returns between ‐10% to +15%; returns expected to exceed market returns over a six‐month period due to specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to be below market returns over a six‐month period due to specific catalysts SELL: Expecting negative total returns of 10% or more over the next 12 months
SECTOR RECOMMENDATIONS OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 5
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th
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KT•ZMICO Securities Company Limited
st
8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
Phaholyothin Branch
rd
Fax. (66-2) 631-1709
Ploenchit Branch
th
nd
2
Sindhorn Branch
3 Floor, Shinnawatra Tower II,
8 Floor, Ton Son Tower,
1291/1 Phaholyothin Road,
900 Ploenchit Road, Lumpini,
Floor, Sindhorn Tower 1, 130-132 Wireless Road, Lumpini,
Phayathai, Bangkok 10400
Pathumwan, Bangkok 10330
Pathumwan, Bangkok 10330
Telephone: (66-2) 686-1500
Telephone: (66-2) 626-6000
Telephone: (66-2) 627-3550
Fax. (66-2) 686-1666
Fax. (66-2) 626-6111
Fax. (66-2) 627-3582, 627-3600
Nakhon Pathom Branch 1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
Chachoengsao Branch
Viphavadee Branch
Phitsanulok Branch
G Floor, Lao Peng Nguan 1 Bldg.,
Krung Thai Bank, Singhawat Branch
333 Soi Cheypuand, Viphavadee-Rangsit Road,
114 Singhawat Road,
Ladyao, Jatujak, Bangkok 10900
Muang, Phitsanulok 65000
Telephone: (66-2) 618-8500
Telephone: 083-490-2873
Fax. (66-2) 618-8569
th
Chonburi Branch
Pattaya Branch
108/34-36 Mahajakkrapad Road,
4 Floor, Forum Plaza Bldg.,
382/6-8 Moo 9, T. NongPrue,
T.Namuang, A.Muang,
870/52 Sukhumvit Road, T. Bangplasoy,
A. Banglamung, Cholburi 20260
Chachoengsao 24000
A. Muang, Cholburi 20000
Telephone: (038) 362-420-9
Telephone: (038) 813-088
Telephone: (038) 287-635
Fax. (038) 362-430
Fax. (038) 813-099
Fax. (038) 287-637
Khon Kaen Branch
5th Floor, Charoen Thani Princess Hotel,
Hat Yai Branch
Sriworajak Building Branch
200/301 Juldis Hatyai Plaza Floor 3,
1st – 2nd Floor, Sriworajak Building, 222
260 Srichan Road, T. Naimuang,
Niphat-Uthit 3 Rd,
Luang Road, Pomprab,
A. Muang, Khon Kaen 40000
Hatyai Songkhla 90110
Bankgok 10100
Telephone: (043) 389-171-193
Telephone: (074) 355-530-3
Telephone: (02) 689-3100
Fax. (043) 389-209
Fax: (074) 355-534
Fax. (02) 689-3199
Central World Branch
Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
422/49 Changklan Road, Changklan
22/61-63, Luang Por Wat Chalong Road,
16th Fl., Rama 1 Rd, Pathumwan,
Subdistrict, Amphoe Meuang,
Talat Yai, Mueang Phuket,
Bangkok 10330
Chiang Mai 50100
Phuket 83000
Telephone: (66-2) 673-5000,
Telephone: (053) 270-072
Tel. (076) 222-811,(076) 222-683
(66-2) 264-5888 Fax. (66-2) 264-5899
Fax: (053) 272-618
Fax. (076) 222-861
Pak Chong Branch
Cyber Branch @ North Nana
173 175, Mittapap Road,
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict , Wattana District, Bangkok 10110 Telephone: 083-490-2871
Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Tel. (044) 279-511 Fax. (044) 279-574
Nakhon Ratchasima Branch
Bangkhae Branch
6th Floor The Mall Group Building Bangkhae 275 Moo 1 Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Tel. (66-2) 454-9979 Fax. (66-2) 454-9970
624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171 Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.
Precious Shipping Company Update
Underperform (16E TP Bt5.70) Close Bt6.55
Transport & Logistics April 8, 2016
Earnings upgrade/Earnings downgrade/Overview unchanged
Poor results expected in 1Q16E Price Performance (%)
Maintain “Underperform” rating with TP lowered to Bt5.70 Although PSL’s share price has increased recently following the BDI turnaround owing to the seasonal pattern, we maintain our “Underperform” rating as we believe the BDI pickup will not be sustained due to a continued sluggish in the dry‐bulk industry. Based on our downward earnings revision, we slightly lower PSL’s P/BV‐based target price to Bt5.70, vs. Bt6.00 previously, based on P/BV of 0.6x (‐1SD). Gained cash from selling ships/cancelling shipbuilding contracts in 1Q16 In 1Q16, PSL sold five old ships for scrap at a price below book value despite having already marked an impairment loss on some of the vessels last year. Hence, PSL is likely to book a loss from the transactions. The low selling price was due to the sluggish dry‐bulk industry, which has caused many operators to have negative earnings and reserve cash to support loan agreements with banks. We expect PSL to receive cash of around Bt231mn from the transactions. In 1Q16, PSL also negotiated with shipyards to cancel eight shipbuilding contracts and is likely to have been refunded the cash advance it paid of around Bt1.3bn.
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
‐0.712
‐0.497
KT ZMICO vs. consensus Share data
65.7%
‐59.8%
Reuters / Bloomberg
PSL.BK/PSL TB
Paid‐up Shares (m)
1,559.28
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
10.00/290.00
Foreign limit / actual (%)
49.00/28.08
52 week High / Low (Bt)
11.23/4.66
Avg. daily T/O (shares 000) NVDR (%)
3,747.00 5.86
Estimated free float (%)
39.25
Beta
0.97
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
Expected to still report poor earnings in 1Q16E Based on the continued weakening of the BDI, we expect PSL to report a net loss of almost Bt1bn in 1Q16E, including a normalized loss of Bt588mn and a loss from vessels sold of Bt374mn. We assume the TC rate (per vessel per day) at US$4,500, falling by 26% YoY and 24% QoQ, in line with the average BDI of 358 points (‐42% YoY, ‐44% QoQ). In 1Q16E, PSL’s fleet likely stood at 40 vessels, vs. 45 as of the end of 2015. Revise down net profit estimate in 2016E In 2016E, PSL targets to sell twelve old vessels and receive five newly built vessels. Considering the ongoing sluggishness of the industry, we expect PSL to continue selling old ships at prices below book value. As such, we revise up our net loss estimate in 2016E for PSL to Bt1.8bn, vs. Bt1.1bn previously, to include an expected net loss of around Bt749mn from the sale of old vessels. Meanwhile, we lower PSL’s fleet to 38 at the end of 2016 vs. 45 previously expected. Although operating days are likely to decline, the fleet rejuvenation should be positive to OPEX owing to a younger fleet. 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) EV/EBITDA (x) P/BV (x) Dividend yield (%) ROE (%) Net gearing (%)
2014 4,585 (80) (0.08) (76) (0.40) (81.87) 0.20 14.70 2014 n.m. 11.40 0.45 3.01 (0.49) 74.44
2015 4,257 (2,426) (1.56) (1,286) (0.07) n.m. 0.00 10.57 2015 n.m. 27.40 0.63 0.00 (8.09) 87.07
2016E 4,743 (1,843) (1.18) (1,094) (0.70) (14.89) 0.00 9.39 2016E n.m. 18.53 0.71 0.00 (7.03) 93.00
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2017E 5,488 (304) (0.20) (304) (0.20) (72.19) 0.00 9.20 2017E n.m. 9.20 0.72 0.00 (2.10) 84.41
2018E 6,445 679 0.44 679 0.44 n.m. 0.30 9.33 2018E 15.27 5.43 0.71 4.58 4.70 67.27
Figure 1: PSL’s P/BV band and sensitivity of market prices based on P/BV at different standard deviation levels (X) 4.0
2016E +1.0SD +0.5SD Average ‐0.5SD ‐1.0SD ‐1.5SD
3.5 3.0
+2 S.D.
2.5 +1 S.D.
2.0
+0.5 S.D. Avg.
1.5 1.0
-0.5 S.D.
Mar-16
May-15
Jun-14
Sep-12
Aug-13
Nov-11
Dec-10
Apr-09
Feb-10
May-08
Jul-07
Oct-05
Jan-04
Nov-04
0.0
Aug-06
-1S.D.
0.5
P/BV (x) 1.85 1.54 1.23 0.92 0.61 0.30
Implied market price* (Bt) 17.41 14.50 11.59 8.68 5.76 2.85
Upside/Downside vs. current market price (%) 159.8 116.4 72.9 29.5 (14.0) (57.4)
Source: Bloomberg
Figure 2: Dry bulk regional peers COUNTRY
PER (x)
PBV (x)
Yield (%)
15 16E 17E 0.6 0.5 0.4
ROE (%)
15 16E 17E 0.0 4.2 3.9
15 (44.8)
EV/EBITDA (x)
NOBLE GROUP LTD
Hong Kong
15 16E 17E n.a. 5.8 5.0
16E 8.6
17E 9.2
15 16E 17E n.a. 8.1 7.5
PACIFIC BASIN SHIPPING LTD
Hong Kong
n.a.
n.a.
16.2
0.4
0.3
0.3
0.0
6.9
10.3
(1.9)
(2.8)
(2.0)
8.8
7.7
6.1
SINOTRANS SHIPPING LTD
Hong Kong
n.a.
n.a.
41.3
0.4
0.3
0.3
0.0
1.8
1.8
(3.2)
(1.0)
0.8
2.9
4.5
2.0
GREAT EASTERN SHIPPING CO
India
7.4
4.8
5.6
0.7
0.6
0.5
3.0
3.4
3.4
10.5
12.9
10.0
6.0
MALAYSIAN BULK CARRIERS
Malaysia
n.a.
n.a.
n.a.
0.7
0.5
0.5
0.0
1.1
1.1
(75.2)
n.a.
n.a.
n.a.
88.7
KOREA LINE CORP
S. Korea
8.2
6.4
5.3
0.8
0.7
0.6
0.0
n.a.
n.a.
9.7
11.2
12.0
10.3
3.5 212. 9 7.9
PAN OCEAN CO LTD
S. Korea
32.6
7.3
6.3
0.6
0.6
0.5
n.a.
n.a.
n.a.
1.6
7.9
8.4
7.1
7.0
6.6
n.a. 177. 1 14.3
0.3
n.a.
n.a.
0.0
n.a.
n.a.
(51.9)
n.a.
n.a.
n.a.
n.a.
n.a.
0.8
0.8
n.a.
n.a.
2.3
4.0
3.0
(0.2)
n.a.
13.5
13.6
9.8
n.a.
0.6
n.a.
n.a.
5.1
5.0
n.a.
4.4
4.2
n.a.
6.1
6.2
MERCATOR LINES SINGAPORE
Singapore
n.a.
n.a.
U‐MING MARINE TRANSPORT
Taiwan
27.8
n.a.
SINCERE NAVIGATION
Taiwan
12.1
14.9
THORESEN THAI AGENCIES PCL
Thailand
Average (simple)
3.8 6.8
n.a.
32.5
21.1
0.7
0.3
n.a.
0.6
1.1
1.3
(49.2)
1.6
3.7
n.a.
6.0
4.9
17.6
12.0
32.5
0.6
0.5
0.5
0.4
2.9
3.4
(19.7)
3.4
4.5
11.2
26.7
14.1
Source: Bloomberg
Figure 3: Baltic Dry Index (BDI) ‐ Seasonality
Source: PSL
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Figure 4: 1Q16E Earnings Preview 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 Gains (loss) from affiliates 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 (%)
1Q15 981 (100) (99) 151 (135) 0 ‐ 1 ‐ (3) (336) (337) (0.32)
4Q15 1,095 (148) (115) 145 (151) 1 (0) (0) (1,102) 4 (1,512) (410) (0.97)
1Q16E 797 (361) (74) (18) (155) ‐ ‐ ‐ (374) 2 (962) (588) (0.62)
% YoY (18.8) 259.7 (25.4) (112.0) 14.8 (100.0) ‐ (100.0) n.m. n.m. 186.6 74.4 91.1
% QoQ (27.2) 143.2 (35.9) (112.5) 2.5 (100.0) ‐ (100.0) (66.0) (54.0) (36.4) 43.5 (36.4)
2015 4,257 (338) (392) 776 (565) 2 (2) (25) (1,115) 8 (2,426) (1,286) (1.56)
2016E 4,743 (121) (437) 1,108 (547) 1 ‐ ‐ (749) 9 (1,843) (1,094) (1.18)
% YoY 11.4 (64.0) 11.4 42.7 (3.2) (32.6) (100.0) (100.0) (32.8) 13.7 (24.0) (14.9) (24.0)
YTD % of 16E 16.8 297.2 16.9 (1.6) 28.3 ‐ ‐ ‐ 50.0 21.3 52.2 53.7 52.2
(10.2) 15.3 (34.3) 0.1 (1.5) 0.9 14.2 (9.0)
(13.6) 13.2 (37.4) 0.2 (1.7) 0.9 10.6 (9.5)
(45.3) (2.3) (73.8)
(7.9) 18.2 (30.2) 0.2 (1.3) 0.9 10.6 (8.1)
(2.6) 23.4 (23.1) 0.6 (1.0) 1.0 9.4 (7.0)
Source: PSL, KT ZMICO Research
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)
2013 3,869 (3,528) 341 (330) 1,158 (1,146) 12 (459) 11 (436) 13 935 528 0.51 0.51 (421) (0.40) 0.40
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
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
2013 2,942 102 20,050 2,416 25,510 654 8,619 9,879 10 15,621 25,510
2014 535 115 26,085 1,173 27,909 812 11,101 12,625 (1) 15,285 27,909
2015 454 143 29,782 2,080 32,458 5,604 9,206 15,972 (2) 16,488 32,458
2013 528 1,146 220 (880) 1,013 (3,125) 4,325 1,200 (756) 0 (415) (1,171) 1,041 2,213 2.13
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)
2015 (2,426) 1,506 780 1,186 1,046 (4,422) 860 (3,561) 359 2,076 0 2,435 (81) (2,516) (1.61)
2013 10.6 (1.9) 165.1 8.8 29.9 0.3 (10.9) (2.0)
2014 18.5 38.6 (81.9) 12.9 35.0 7.3 (1.7) (2.9)
2015 (7.2) (51.6) 1,023.4 (7.9) 18.2 (17.1) (30.2) (0.1)
2013 0.37 0.41
2014 0.44 0.74
2015 0.47 0.87
2016E 4,743 (4,864) (121) (437) 1,108 (1,667) (559) (547) 1 (1,104) 0 (749) (1,843) (1.18) (1.18) (1,094) (0.70) 0.00 2016E 468 90 27,094 2,157 29,809 1,262 12,830 15,166 (2) 14,645 29,809 2016E (1,843) 1,667 (112) 749 461 (2,231) 2,502 271 (718) 0 0 (718) 14 732 0.47 2016E 11.4 42.7 (14.9) (2.6) 23.4 (11.8) (23.1) 0.0 2016E 0.49 0.93
2017E 5,488 (4,747) 742 (506) 2,068 (1,832) 236 (553) 2 (315) 0 0 (304) (0.20) (0.20) (304) (0.20) 0.00
2018E 6,445 (4,674) 1,771 (594) 3,075 (1,898) 1,177 (514) 4 666 0 0 679 0.44 0.44 679 0.44 0.30
2017E 724 82 25,362 2,206 28,375 1,262 11,567 14,036 (2) 14,341 28,375
2018E 1,783 78 23,326 2,271 27,458 1,262 10,305 12,915 (2) 14,545 27,458
2017E (304) 1,832 91 0 1,619 (100) 0 (100) (1,262) 0 0 (1,262) 256 1,519 0.97
2018E 679 1,898 81 0 2,658 (100) 0 (100) (1,262) 0 (238) (1,500) 1,058 2,558 1.64
2017E 15.7 86.6 (72.2) 13.5 37.7 4.3 (5.5) 0.0
2018E 17.4 48.7 n.m. 27.5 47.7 18.3 10.5 0.0
2017E 0.47 0.84
2018E 0.44 0.67
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investment in the securities of KTB and ZMICO, investor should consider 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, PACE, PLE, TPOLY. KT ZMICO is a co‐underwriter of TPBI.
Anti‐corruption Progress Indicator
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 BUY: Expecting positive total returns of 15% or more over the next 12 months OUTPERFORM: Expecting total returns between ‐10% to +15%; returns expected to exceed market returns over a six‐month period due to specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to be below market returns over a six‐month period due to specific catalysts SELL: Expecting negative total returns of 10% or more over the next 12 months
SECTOR RECOMMENDATIONS OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 5
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th
th
th
KT•ZMICO Securities Company Limited
st
8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
Phaholyothin Branch
rd
Fax. (66-2) 631-1709
Ploenchit Branch
th
nd
2
Sindhorn Branch
3 Floor, Shinnawatra Tower II,
8 Floor, Ton Son Tower,
1291/1 Phaholyothin Road,
900 Ploenchit Road, Lumpini,
Floor, Sindhorn Tower 1, 130-132 Wireless Road, Lumpini,
Phayathai, Bangkok 10400
Pathumwan, Bangkok 10330
Pathumwan, Bangkok 10330
Telephone: (66-2) 686-1500
Telephone: (66-2) 626-6000
Telephone: (66-2) 627-3550
Fax. (66-2) 686-1666
Fax. (66-2) 626-6111
Fax. (66-2) 627-3582, 627-3600
Nakhon Pathom Branch 1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
Chachoengsao Branch
Viphavadee Branch
Phitsanulok Branch
G Floor, Lao Peng Nguan 1 Bldg.,
Krung Thai Bank, Singhawat Branch
333 Soi Cheypuand, Viphavadee-Rangsit Road,
114 Singhawat Road,
Ladyao, Jatujak, Bangkok 10900
Muang, Phitsanulok 65000
Telephone: (66-2) 618-8500
Telephone: 083-490-2873
Fax. (66-2) 618-8569
th
Chonburi Branch
Pattaya Branch
108/34-36 Mahajakkrapad Road,
4 Floor, Forum Plaza Bldg.,
382/6-8 Moo 9, T. NongPrue,
T.Namuang, A.Muang,
870/52 Sukhumvit Road, T. Bangplasoy,
A. Banglamung, Cholburi 20260
Chachoengsao 24000
A. Muang, Cholburi 20000
Telephone: (038) 362-420-9
Telephone: (038) 813-088
Telephone: (038) 287-635
Fax. (038) 362-430
Fax. (038) 813-099
Fax. (038) 287-637
Khon Kaen Branch
5th Floor, Charoen Thani Princess Hotel,
Hat Yai Branch
Sriworajak Building Branch
200/301 Juldis Hatyai Plaza Floor 3,
1st – 2nd Floor, Sriworajak Building, 222
260 Srichan Road, T. Naimuang,
Niphat-Uthit 3 Rd,
Luang Road, Pomprab,
A. Muang, Khon Kaen 40000
Hatyai Songkhla 90110
Bankgok 10100
Telephone: (043) 389-171-193
Telephone: (074) 355-530-3
Telephone: (02) 689-3100
Fax. (043) 389-209
Fax: (074) 355-534
Fax. (02) 689-3199
Central World Branch
Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
422/49 Changklan Road, Changklan
22/61-63, Luang Por Wat Chalong Road,
16th Fl., Rama 1 Rd, Pathumwan,
Subdistrict, Amphoe Meuang,
Talat Yai, Mueang Phuket,
Bangkok 10330
Chiang Mai 50100
Phuket 83000
Telephone: (66-2) 673-5000,
Telephone: (053) 270-072
Tel. (076) 222-811,(076) 222-683
(66-2) 264-5888 Fax. (66-2) 264-5899
Fax: (053) 272-618
Fax. (076) 222-861
Pak Chong Branch
Cyber Branch @ North Nana
173 175, Mittapap Road,
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict , Wattana District, Bangkok 10110 Telephone: 083-490-2871
Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Tel. (044) 279-511 Fax. (044) 279-574
Nakhon Ratchasima Branch
Bangkhae Branch
6th Floor The Mall Group Building Bangkhae 275 Moo 1 Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Tel. (66-2) 454-9979 Fax. (66-2) 454-9970
624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171 Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.
