- Monday February 18, 2008
Maybulk rides on recovery in shipping rates
By IZWAN IDRIS
Shares in Malaysian Bulk Carriers Bhd (Maybulk) posted strong gains over the past two weeks, buoyed by a sharp recovery in international shipping rates for coal and iron ore.
Investors were also loading up the stocks ahead of its full year results – to be announced today – on high hopes for a bumper dividend payout for the period ended Dec 31, 2007 (FY07).
Maybulk share price gained 22 sen to close at RM4.24 last Friday on volume of 2.17 million shares. The stock hit a five month low of RM3.50 in intra-day trade on Jan 30.
Despite the price surge, the stock was still down 22% from its late October peak of RM5.40.
The recent upswing in Maybulk share price reflected the Baltic Dry Index's rebound to 7,355 points last Friday from a low of 5,615 points on Jan 29.
The index hit an all-time high of 11,039 points in mid November last year.
Historically, shares in dry bulk shipping companies moved in line with the performance of the Baltic Dry Index – the benchmark that measures global freight rates for commodities like sugar, wheat, iron ore and coal.
Most analysts projected that the Baltic Dry Index would average at 8,000 points this year.
Meanwhile, Maybulk is expected to release its full year FY07 results early this week.
Year-to-date, its cumulative nine months ended Sept 30 net earnings had reached RM388.6mil, or 38.86 sen per share versus RM206.6mil, or 20.67 sen per share reported a year earlier.
The company had so far paid an interim dividend of 8 sen per share.
The market is expecting a much bigger payout in the final quarter, with at least one brokerage expecting Maybulk's to post a gross dividend yield of around 13% for the full year.
Some of past blogs on this sector: Oh my, Baltic Dry! and Stocks In Our Baltic Sector
By the way, I would NOT hide the fact that I had posted the following posting, Dr. Marc Faber's commentary on Barron's 2008 Roundtable, in which Dr. Faber had mentioned the following.
- My next recommendation is a shipping short. I turned bearish about home-building stocks in 2005, and felt the troubles in the housing market would hurt the subprime-lending industry and spread to other sectors of the economy -- in particular, consumption. Private consumption now accounts for more than 70% of U.S. GDP, which is why I'm negative about the U.S. economy. The problems here will also affect other economies. The Chinese stock market is closely correlated with the Baltic Dry Index, a shipping index. Tanker rates have plunged, but the Baltic Dry Index is still in the sky. If you can't short the index, short DryShips [DRYS]. The BDI has fallen 28% since Jan. 7. Faber suggests remaining short DryShips.
Yes, Dr. Faber was bearish on the sector and he has recommended a short on the index.
That Barron's article was dated Jan 28th 2008. The BDI index was then 5692. The next day the index closed at a low of 5615. How ironic because as of today, that's the current 'bottom' for BDI.
How?
Did Dr. Faber got it all wrong?
Currently, with the BDI rebounding strongly, it would appear so. However, I would still respect his views and opinions. For me, I do feel that the charter rates are extensively high and that currently, the shippers are simply making insane money. If you would read the following posting, Baltic Dry Index And China Snowstorms? , note the following snippet from a news article posted.
- George Economou of DryShips said the profitability would not be affected due to recent fall in freight rates.
"On average, a capesize vessel would be getting $90,000 a day and the expense is about $6,000 a day and there is a huge margin" he added.
Dry bulk freight rates had touched record highs last year, reaching $200,000 levels for capesize vessels, on strong demand from China and other emerging economies and also due to tight supply of vessels.
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