Much Lower Earnings And Much Less Dividends From Maybulk

Maybulk announced its earnings last night.And no, it was not a shocker. Not for me. Do refer to last September's posting (it's a must read) : Maybulk: Does poor corporate governance have a negative impact on a stock?  ( I wonder why some consider Maybulk as an investment grade stock given it's horrific corporate governance! )

Today Maybulk was featured on BTimes: Maybulk confident of staying profitable

• Maybulk confident of staying profitable
  
  By : GOH THEAN EU Published: 2012/02/29
  
  MALAYSIAN Bulk Carriers Bhd (Maybulk) is expected to take advantage of the current depressed freight market by acquiring more vessels this year.
  
  "We are monitoring the situation. We plan to reinvest our profits and to take opportunity of the current depressed freight market.
  
  "If the current situation continues, we expect to see more shipping companies to be in financial distress and maybe face bankruptcy," said chief executive officer Kuok Khoon Kuan briefing yesterday.
  
  He added that the value of vessels were at "rock bottom" and that buyers could "choose and pick" the vessels they want.
  
  Maybulk, which now owns and operates a fleet of 17 vessels, including dry bulk carriers and product tankers, is due to take delivery of three new vessels this year, all of which are under long-term charters.
  
  Currently, the industry is facing lower charter rates due to the oversupply of vessels in the market.
  
  For Maybulk, the average charter rates of its dry bulk carriers were down by 36 per cent to US$16,519 (RM49,781) a day.
  
  "The problem we are facing now is oversupply. There's still growth in the market but there's too much tonnage.
  
  "During such times, too many players will be squeezed and there will be too many bloodbath," said executive chairman Teo Joo Kim.
  
  Nevertheless, Teo believed that the situation will correct itself over time.
  
  Kuok and Teo was speaking to the media and analysts during its full-year financial results briefing.
  
  The company posted a fourth quarter net profit of RM16.81 million, a 75 per cent decline from the same quarter a year ago.
  
  For the full-year, its net profit fell by 61 per cent to RM93.37 million. Full-year revenue declined by about 36 per cent to RM256.31 million.
  
  "Although we reported lower numbers, we are thankful that we managed to stay profitable, especially in such challenging times," Teo said.

Yup, lower dividend and much lower set of earnings.

Maybulk: Does poor corporate governance have a negative impact on a stock?

From fellow blogger M.A. Wind's posting: Bursa: long term returns

• My best overall guess of the long term yield including dividends and costs incurred of a portfolio is in the range of 4-5% per year. This is rather disappointing given the GDP growth of Malaysia. Western countries have had less growth in GDP but higher returns on investing in shares. I think that the reason for this is the lower degree of Corporate Governance in Malaysia, which is directly influencing these returns. Related Party acquisitions at (highly) inflated prices and General Offers with delisting threats at (very) low prices are directly lowering returns.

Aren't you curious about the issue of lower degree of Corporate Governance and how Related Party Transactions is directly lowering returns?

Yes....

Does poor corporate governance have a negative impact on a stock?

Let's take a well known stock, a stock where some have claims as an 'investment grade' stock,

I certainly wasn't impressed.

Company makes 62 million losses and it doesn't even attempt to explain how these losses incurred.

And by Dec 2008, I was wondering Why Is Maybulk So Active In the Share Market?

Let me reproduce that entire posting here again...

Yes, why is Maybulk so active in the share market?

Caught the following announcement on Bursa Malaysia: Dealings in quoted securities pursuant to Paragraph 9.21 of the Listing Requirements

• Malaysian Bulk Carriers Berhad ("MBC” or "the Company”) wishes to announce that the MBC Group has, for the period from 31 January 2008 to 22 December 2008, purchased quoted securities from the open market. These purchases have exceeded 5% of MBC's latest audited consolidated net assets ("NA") as at 31 December 2007, details of which are set out below:-
  
  1. The aggregate purchases for the period from 31 January 2008 to 22 December 2008 amount to RM91.38 million. This represents 5.15% of NA;
  
  2. The total cost of all investments in quoted securities as at 22 December 2008 is RM143.80 million;
  
  3. The total book value of all investments in quoted securities as at 22 December 2008 is RM122.12 million;
  
  4. The market value of all investments as at 22 December 2008 is RM122.93 million; and
  
  5. There were sales of quoted securities during the current financial year and the losses on disposal amounted to RM11.23 million.
  This announcement is dated 23 December 2008.

Fact from 31 January 2008 to 22 December 2008, Maybulk purchased shares amounting to RM91.38 million.


Aren't you shocked at what it is doing?


Don't you think that the amount is way too much?

Someone once mentioned that Maybulk's management is highly 'reputable'. Well that the fact that Maybulk chose NOT to disclose what they bought and the fact that they bought more than 5% of its total Net Assets as of its audited accounts as at 31st Dec 2007 places a massive question mark over the management. Won't you agree?


And honestly, what do the management of the company think they are? Is Maybulk a securities trading firm?


Does the management reckons that they are super traders or super investors?

Well, the fact that they loss some rm 11.23 million speaks volumes about their stock market skills!


Seriously, don't you reckon that Maybulk should stop this?


Look they aren't good, are they? And if so, why dabble in the share market?


Does Maybulk have so much money to lose in the share market?


And if you are a minority shareholder, do you honestly like what you see?


Aren't you appalled by all this?

==>>>

I was certainly appalled with all these. I dislike the idea of our listed companies dabbling in the share market. This is a no-no for me. I feel the management should always focus on its core business.

Well that's my flawed thinking.

And then of course there is that massive related party transaction issue between Maybulk and POSH.

Unfortunately, I did not post anything on it.

However, many thanks to blogger M.A. Wind, he is kind enough to share his horrific experience.

Do read the following posting: Maybulk/POSH: What happened to the Cash?

According to Wind:

So far we have seen the following significant breaches of rules:

• no mentioning of the purpose of Maybulks investment in POSH
• no recently audited accounts (less than 6 months old)
• incomplete financial picture leaving out (for instance) non-interest bearing debts
• incorrect calculation of the gearing ratio

And according to Wind there is more! (Do check out his blog http://cgmalaysia.blogspot.com/ for more updates based on his personal experience on Maybulk.

This is however only the top of the iceberg. The next two episodes will be:

• Clarkson, the valuer who didn't believe his own valuation
• the magical accounting tricks of KPMG

And so we have here... Maybulk, a stock, flush with massive corporate governance issues.

So how?

Does poor corporate governance have a negative impact on a stock?


My say?

I would always avoid stocks that have poor corporate governance.

When I invest in a stock, I regard myself as being a small business partner of the business. And as a business partner, how can I trust my business partners who have poor corporate governance? Am I a business partner for them to take advantage of? Yes, would I be short changed the very minute I turn my back? How could this equate to a smart investment for me?

And with the poor performance of Maybulk the stock, it appears that this isn't such a poor decision!

Maybulk Earnings And Its Marketable Securities

Malaysian Bulk Carriers (Maybulk) reported its earnings tonight.

Given the fact the market had been doing great and given the fact that I had stated so many times before Maybulk had been way too over aggressive in its investments ( yes at such rate, some would call it wild trading!), I was keen to see how Maybulk fared.

By the way, this issue was asked back in Dec 2008: Why Is Maybulk So Active In the Share Market?

Are we going to see a shocker?

Those shares cost around 107 million. The current market value is worth 154 million. My, that works out to 'paper gains' of over 47 million!

Impressive?

My answer is a FLAT NO!

Now.. now.. don't call this as being as being sour grapes but let me show you why.

Here is Maybulk Annual Report for its recent fiscal year 2009 posted on Bursa Malaysia website: Annual Report 2009

The following snap shot is taken from page 8 of the Annual report.

So 2008, they lost 95.3 million!!!!! That's realized losses ok.

And in 2009, they made rm 52.9 million! Now they are sitting on a nice chunk of paper profits.

But what good is all these shenanigan for the minority shareholders?

Nada! Nothing! Zilch!

It brings no value for the minority shareholder and it only gives the minority shareholder huge amounts of concern. What concerns you may asked. Well the minority shareholder knows absolutely nothing on what the company is doing!

Now take a look at the following statements. Page 42.

• (f) Investment securities
  Investment securities are classified as financial assets at fair value through profit or loss. The accounting policy for financial assets at fair value through profit or loss is stated Note 2.2(e)(i).
  
  (g) Determination of fair value
  The fair values of quoted financial assets are based on quoted market bid prices at balance sheet date. If the market for a financial asset is not active, the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to the current market value of other instruments that are substantially the same, discounted cash flow analysis or other valuation models.
  
  

Which is fine.... but....but... but.... let's look at page 59 of Maybulk's annual report and see how Maybulk describe their investments.

Can you see how it states "Quoted securities outside Malaysia" to be worth a massive 109 million.

Hello Mr. Transparency and Hello Ms. Integrity!

If Maybulk does not describe in detail what these quoted securities are, where is the transparency?

See, it's simple. When things like this are not described in details, how does the investing public know what exactly is happening? Would you blame the investing public if they start suspecting something smelly is going on? Yes how does the investing public knows if everything is done fairly and at 'arms length'? And surely Maybulk should understand the very simple logical thing which is they need to be more transparent here!

Anyway, for comparison with the quarterly earnings announcements, here is Maybulk's Q4 announcement back in Feb 2010: Quarterly rpt on consolidated results for the financial period ended 31/12/2009

Now this is where it gets funky. (Should be since I am not a qualified accountant and I have never studied accounts before. Yeah. Please note that. Meaning? I could be wrong!)

Anyway, compare the 2009 Q4 marketable securities with Maybulk's 2009 Annual Report 'Investments'. I don't understand why the numbers differ.

And then compare 2009 Q4 with 2010 Q1 (reported yesterday.)

2009 Q4.

2010 Q1.



By the way, from the 2009 Annual Report, I was looking at Maybulk's subsidiaries and the last 2 entries was interesting (for me). MBC Equity Management Sdn Bhd and Gaintrack Sdn Bhd whose main activities is TRADING IN MARKETABLE SECURITIES. (ps: so many 'investment holding' subsidiaries Maybulk has.)

Incredible eh?

A Look At Maybulk's Quarterly Earnings

Maybulk recently announced its quarterly earnings. It said it made some 69.5 million.

I was not impressed at all.

Firstly, in its balance sheet, I was not impressed to see the LOAN TO ASSOCIATES.

Here is the screen shot.

A loan of 40.273 million to its associate!

Why was such a loan made?

Why so much?

Secondly, as you can see at the bottom most, cash balances has really shrunk and not to mention this fiscal year, Maybulk did not pay out any interim dividends at all.

Now, assuming if one is a dividend investor and one puts the loan of 40.273 million to its associate into consideration, surely one is not happy. Would you be happy?

And then there is the quoted securities thingy.

I had posted before on Maybulk's dabbling in the share market. Posted back in November 2008, Maybulk Had 'Investment' Losses Of Over 62 Million! and in December 2008, Why Is Maybulk So Active In the Share Market?

Ok, as the market recovered, Maybulk's quoted securities investment also recovered but is the recovery of its quoted securities investment enough to justify Maybulk's involvement in such activity?

A current realised gain of rm16.4 million. Look at the screen shot below.

Are you impressed with the amount of purchases and disposal of quoted securities?

Are you impressed with how much of quoted securities Maybulk has in its balance sheet?

I am not.

I see no reason to see why Maybulk is so active in such activity!

What are these 'quoted securities'?

Again, does Maybulk reckon they are the super trader of the share market?

Why do I call them 'super trader'? Since they are so active in buying and selling quoted securities, surely they cannot be considered as investors, yes?

And last but not least, who is actually in charge of making the decision to buy and sell these quoted securities?

Is it the big boss?

Does the big boss have nothing else better to do than to dabble in 'quoted securities' all the time?

How?

Me? I am not impressed at all.

Malaysian Bulk Carrier Earnings And Dry Bulk Shipping Prospects

I had been blogging a lot on Baltic Dry Index. You can view past blog postings via the following search link: http://whereiszemoola.blogspot.com/search?q=baltic+dry+index

Today Malaysian Bulk Carrier or Maybulk reported its earnings.

It was not nice and it clearly reflected the earlier massive plunge seen in the dry bulk index.

The previous quarter Maybulk reported net earnings of 143 million!!

So a net of earnings of only 3.238 million is pretty darn drastic!

I was more interested in what the company has to say about future prospect in the shipping industry. This is what the management wrote.

• The outlook for the world economy is grim and expectations are for the global economic slowdown to be protracted and severe. This is corroborated by the latest International Monetary Fund’s (“IMF”) forecast wherein global growth is now slashed to 0.5% for 2009. In its report the IMF expects the world economy to gradually recover only in 2010 and the growth rate to be around 3%. "A sustained economic recovery will not be possible until the financial sector's functionality is restored and credit makers are unclogged," the IMF said.
  
  The BDI plummeted 94% from 11,793 in May 20th to 663 on December 5 last year as global trade slowed sharply. However, recent restocking orders from China have caused the Cape-size rates to firm as China resumed iron ore shipments from Australia and Brazil. Consequently the BDI has recovered substantially from its December lows. But the fundamentals in the other industries such as steel, automobiles and shipyards are still bleak and recent freight market’s strength does not appear sustainable especially since substantial new-building deliveries and laid up tonnage continue to be an overhang in the market. The tanker market, though not as bad as the dry bulk is also weak and is expected to continue to be weak.
  
  The ongoing financial crisis is restricting credit for companies and consumers, and is aggravating the current world economic condition. With the financial sector gripped by their de-leveraging and recapitalizing concerns, credit overall remains tight. Amid all the grim background, it is encouraging to note that the governments of the major countries are taking steps to inject substantial financial stimulus into their respective economies so as to stem the economic slide. Despite the bleak economic outlook for 2009, MBC is well placed to weather the difficulties. The collapse of the dry-bulk market will provide opportunities for the Group to consider acquisitions and MBC along with its strategic partners have been active in exploring same. The shareholders have supported the Group’s diversification into offshore oil and gas services which continue to outperform other shipping sectors.
  
  The freight market faces uncertainty in FY2009. The recent recovery in the freight market does not appear sustainable and as such offer little prospect for over-aged tonnage to benefit from the next up cycle. In this respect, the Group completed the disposal of its 25 year old Alam Sempurna in January 2009 for a very modest gain of RM8.1m. Whilst the four quarters in FY2009 may present uneven results, the Board is generally satisfied that FY2009 will be profitable, albeit substantially lower compared to FY2008.

footnote.

I am indeed aware of Maybulk's investment in quoted securities. As had argued before I do not like it one bit and I am utterly disappointed at the lack of information. As it is, if you read Maybulk's earnings it is sitting on a sizable paper loss! Yeah, company might argue that paper loss is not real since they have not sold. But as you can also see, there is lacking of information and without the information how could one be convinced?

Why Is Maybulk So Active In the Share Market?

Yes, why is Maybulk so active in the share market?

Caught the following announcement on Bursa Malaysia: Dealings in quoted securities pursuant to Paragraph 9.21 of the Listing Requirements

• Malaysian Bulk Carriers Berhad ("MBC” or "the Company”) wishes to announce that the MBC Group has, for the period from 31 January 2008 to 22 December 2008, purchased quoted securities from the open market. These purchases have exceeded 5% of MBC's latest audited consolidated net assets ("NA") as at 31 December 2007, details of which are set out below:-
  
  1. The aggregate purchases for the period from 31 January 2008 to 22 December 2008 amount to RM91.38 million. This represents 5.15% of NA;
  
  2. The total cost of all investments in quoted securities as at 22 December 2008 is RM143.80 million;
  
  3. The total book value of all investments in quoted securities as at 22 December 2008 is RM122.12 million;
  
  4. The market value of all investments as at 22 December 2008 is RM122.93 million; and
  
  5. There were sales of quoted securities during the current financial year and the losses on disposal amounted to RM11.23 million.
  
  This announcement is dated 23 December 2008.
  

Fact from 31 January 2008 to 22 December 2008, Maybulk purchased shares amounting to RM91.38 million.

Aren't you shocked at what it is doing?

Don't you think that the amount is way too much?

Someone once mentioned that Maybulk's management is highly 'reputable'. Well that the fact that Maybulk chose NOT to disclose what they bought and the fact that they bought more than 5% of its total Net Assets as of its audited accounts as at 31st Dec 2007 places a massive question mark over the management. Won't you agree?

And honestly, what does the management of the company thinks they are? Is Maybulk a securities trading firm?

Does the management reckons that they are super traders or super investors?

Well, the fact that they loss some rm 11.23 million speaks volumes about their stock market skills!

Seriously, don't you reckon that Maybulk should stop this?

Look they aren't good, are they? And if so, why dabble in the share market?

Does Maybulk have so much money to lose in the share market?

And if you are a minority shareholder, do you honestly like what you see?

Aren't you appalled by all this?

Maybulk Had 'Investment' Losses Of Over 62 Million!

I had posted some postings on companies dabbling in the share market. ( see Regarding CSC Steel'sCurrent Earnings And Its Investments In Marketable Securities, Apollo Food's'Investments' In The Share Market and Listed Companies Investments: Yung Kong Galvanised Steel )

From last night announcement, we have a whopper in Maybulk's earnings.

And this one was not easily detected for one has to scrutinise the company's earnings notes to see the big stinking whopper!





And to be honest, I missed it myself too and I was not aware of it till I read OSK comments on Maybulk!

• Below expectation. MBC’s annualised 9M core net profits (excluding RM303m gains from sale of 2 bulkers and 1 tanker YTD) were 38% below our expectations and 42% below consensus. The poor results were partly due to RM32.3m in unrealised losses in investments, RM23.1m in forex losses and high MI, which we believe was due to a high number of third party in-charters done through subsidiaries. Its balance sheet remains strong, with net cash per share now at RM1.06. NTA per share also rose to RM1.84.
  
  
  

Maybulk Is Cut To Underperform Target Price of 1.80

Saw the following note on Dow Jones News wire.

• Credit Suisse downgrades Maybulk (5077.KU) to Underperform from Neutral, cuts target to MYR1.80 from MYR3.80; this after reducing Baltic Drybulk Index (BDI) FY08 forecast by 64% to 2500 and FY10 by 70% to 1500. As a result, cuts Maybulk net profit estimate by 15%-56%, dividends reduced in FY09 by 50% and FY10 by 73%, lowering yields to 5.9% in FY09 and 3.2% in FY10. Analyst Annuar Aziz also turns mildly cautious following company's proposed $221 million related party transaction to buy 22% stake in PACC Offshore Services as no future profitability disclosed. Shares +6% at MYR2.49.

Cuts target to only rm 1.80.

Justifiable? BDI at this moment of time is below 900.

Secondly, that PACC thingee. It's a related party transaction. RELATED.

And when no future profitability is disclosed, analyst Annuar Aziz does have a very strong point, a $221 million point, yes?

Do you like related party transactions?

I don't! I just cannot stand all this related party transactions!

The Clear Underperformance of Maybulk when compared to other BDI Shippers

My dearest Jamesy or otherwise known as James Bull has left me an very interesting comment on "Dryships, Maybulk and Dry Baltic Index (BDI)":

Actually i wanted to show the comparative performance for bdi shippers but i had a difficulty to upload it yesterday.Here is the comparative performance since Feb08, where BDI rebounded from its bottom: ttp://img98.imageshack.us/img98/4540/comparativeperformance1iu1.gif

Here is the comparative performance since April08, where BDI rebounded from its higher low: http://img98.imageshack.us/img98/8214/comparativeperformance2zj8.gif

As usual, our kampung saham always has tendency to be a lagger, and that make us unique :D

~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~

And here is the bigger picture of what Jamesy is saying to me. ( I took out the other shippers mentioned by Jamesy because there are rather smallish shippers. )

The comparison of BDI Shippers since Feb 08.

The comparison of BDI shippers since April 08.

As pointed out by my dearest Jamesy, it's rather so clear that Maybulk has been a terrible laggard when compared to other BDI shippers.

And this is where it gets tricky, if you ask me.

In my honest opinion my dearest Jamesy, if you strongly believe that the current situation where Maybulk is underperforming other BDI shippers, equates to a buying opportunity and that there should be no reason why Maybulk should not move in tandem with other BDI shippers, then this is where the issue of trust is so very important.

I had actually made a rather short note on MooTakTrade yesterday called Eternity

• "A man must think for himself, must follow his own convictions...Self-trust is the foundation of successful effort."

Of course, it's so important that one needs to understand that own owns convictions needs to be spot on in the very first place and blind self convictions can equally kill when one fails to acknowledge one's own short comings.

So do you trust your reasoning that the current situation represent an opportunity?

If so... trust is indeed a must, yes?

Dryships, Maybulk and Dry Baltic Index (BDI)

January 8th 2008.

That was when I was blogged on the Baltic Dry Index: Regarding the Dry Bulk Shipping Sector

One of the stock that was featured by Ms.Teresa Lo, from Invivoanayltics.com (see dry bulk shipping industry ) was DryShips.

A month later, I had made another update. Update on Baltic Dry Index

• Since the Baltic Dry Index has recorded some decent recovery (see most recent quotes above), I only think that it's appropriate that I also make an update on my past BDI postings ( Regarding the Dry Bulk Shipping Sector., Maybulk And The Baltic Index and Another update on Maybulk ).

And by March 8th, I had posted yet another update. Do They Know It's Christmas Time for ...

• Yes, since hitting the peak, the index for the Baltic Dry Index had tumbled. And as stated precisely, cargo shipments were indeed impacted by bad weather condition (severe snow storms in China to be precise) and this had put a huge damper in the charter rates. However, at this moment of time, this has clearly passed. The charter rates had certainly rebounded extremely strongly and as can seen above, the BDI closed at 8536.
  
  Yes, the plunge of the BDI from 11k has spooked the shipping shares. The index fell to a low of a 5615 on Jan 29th 2008.
  
  But the BDI is now at 8536!
  
  Oh, that's a recovery of some 2921 points or a whopping 52% from its Jan 29th lows!
  
  How?
  
  Do you reckon that Maybulk, whose earnings depending heavily on the index, should rate much higher?
  
  Ah yes, if you read Maybulk's earnings, there's a proposed 30 sen dividend. And if you use historical fiscal years as an indicator, Maybulk's dividend should go ex in April and payment would be made in May.

And here is latest update for the BDI.

Yes the BDI is now 10,354 pts! Which means the BDI has recovered an incredible 84% since its lows in January 2008.

And the following shows the trylu amazing recovery of the Index.

Why the sudden spike in this Baltic Dry Index? (Note this is just an index and it's not a tradeable thingee!)

The following Bloomberg News article offered some clues: Shipbuilding Torpedoed by Subprime Causes Cost Surge

• ``Cancellations would certainly be bullish for rates because the ships won't be there,'' Natasha Boyden, an analyst at Cantor Fitzgerald in New York, said.


• Freight rates have risen as fewer vessels have been delivered. The Baltic Dry Index, a measure of rates, has risen 58 percent in the last year as an index tracking the number of cargo ships under construction has fallen 21 percent in that time, using Lloyd's Registry Fairplay data.

And other shipping giant such as Mitsui OSk is feeling really bullish. Mitsui O.S.K. to Beat Profit Forecast on Higher Rates

• Mitsui O.S.K is benefiting from China's demand for iron ore as the country builds more cars, ships and factories. China's economy grew at the fastest pace in more than a decade last year and the country's imports of iron ore jumped 17 percent, the China Metallurgical Mining Enterprise Association said in April.
  
  ``Given the increase in rates, it wouldn't be unusual to see profits come in higher than forecast,'' said Osuke Itazaki, an analyst in Tokyo at Credit Suisse Group.
  
  Mitsui O.S.K rents 22 of its 100 large so-called ``capesize'' vessels at daily rates. It can quickly raise prices for those ships in response to fluctuations in demand. The other ships are contracted out for longer periods with fixed rates.
  
  The Baltic Dry Index, a measure of commodity-shipping rates, last week rose to the highest this year. It rose 53 percent to 10,220 in the past 12 months and touched a record 11,039 in November.
  
  `Strongest' in History
  
  ``The strongest dry-bulk commodities market in history is extending this run of higher prices,'' said Yonetani. ``Operating profit is likely to exceed our expectations.''
  
  The company plans to add 53 iron-ore carrying ships to its fleet over the next six years, it said today in a statement. Mitsui O.S.K. currently operates 125 such ships and plans to retire some of the older vessels. It had 364 bulk commodity ships in its fleet at the end of March.

And over in Thailand, folks are getting bullish on Brokers bullish on Thoresen Thai (note this a current news!)

• Given the level of the Baltic Dry Index - now above 10,000 points for the first time since December - and strong demand for dry bulk shipping, most brokers have recommended "buy" on Thoresen Thai Agencies' stock.
  
  Of 20 brokers in the Securities Analysts Association's consensus, 14 brokers recommend "piling up" TTA's stock, four brokers recommend "trading buy", while one each advises" hold" and "sell". The target price in the consensus ranges between Bt48.50 and Bt79 per share.
  
  TTA is Thailand's largest dry bulk shipper, owning 45 general cargo vessels and bulk carriers as at the end of last year. It has expanded into offshore oil and gas-related services through its subsidiary, Mermaid Maritime, which owns four offshore supply and support vessels and two tender drilling rigs.

Now let's our leading dry bulk carrier stock, Maybulk Carriers.

Firstly, the chart had been adjusted to account for the 30 sen dividend that was paid in late April.

Maybulk last traded at 4.26 and if you use the January low of 3.50 as the low, the stock had appreciated some 76 sen. Adding back the 30 sen dividend, this would mean that the stock has appreciated by some 30%.

Now let's compare Maybulk's performance to Dryships performance.

Back on Jan Dryships was trading at 52.18. It closed at 98.40 yesterday. Dryships has increased by a whopping 88.5%! (Which is about correct when one consider that BDI had increased some 84%) ( Dryships was also blogged by Chris Perruna,DryShips (DRYS) Drying up?. )

The below chart shows the incredible disconnect between Maybulk's performance and Dryships performance.

So why is Maybulk so under performing?

Is there something wrong with Maybulk?

Why is Maybulk being ignored by our local market?

How now my dearest MooMooCow?

Bottom Fishing!

My Dearest MooMooCow,

Yes, stocks have retreated a lot and I can see where you are coming from when you said you wanted to go value investing or bottom fishing for some stocks.

However, do realise that you do not really have to buy stocks at their bottoms to make money. Bottom fishing is dangerous simply because in the markets, bottoms takes much longer time to form than tops. A stock could be cheap at 10.00. It could even be cheaper at 9.00. And it could be much cheaper at 8.00. How? Average down mah, so says the super investing sifu (most kung fu sifu dies in the movies). Since at 10.00 it is cheap, at 8.00 you should average down by buying more! Yeah, and then the stock goes down more to 7.00. Well at 7.00 the stock should now be super cheap. Buy even more? And at 6.00 it could be extremely super cheap. And I could go on and on how cheap this could get. The obvious question is do you have enough capital to buy the stock all the way down?

And what if your stock selection is flawed? By buying the stock at each single step down would ultimately mean that you just had multiplied your flawed stock selection or investing mistake all the way.

Of course, you would argue that how could the great cow could have flawed? Well, stocks are usually deemed attractive based on what it would earn in the future. Hence, you make your earnings guesstimation on how much this business would earn the following five or ten years.

The next five or ten years? So long? Are you kidding man?

Well you wanna be a buy-and-hold long term investor yes?

Value investing, yes?

Here's a simple explanation. Take a stock that I blogged recently. Maybulk. Commonsense would suggest that a higher BDI would indicate higher charter rates and it should ultimately equate to higher profits for Maybulk, yes?

However, this index had been really volatile. Back in Jan 2008 I blogged the following post. Update on the Baltic Index. Look at the Baltic Dry Index chart from 1985 to 2007. On that chart, it indicated that the Baltic Dry Index had been under the 2000 level from 1985 to 2003. Then things really picked up in 2006-2007 when the BDI soared past 11,000. But the index swiftly plunged to 5600 back in Jan 2008. And it had rebounded past 8600 early this weak but the last few days, the index again corrected swiftly, falling back down to 7972.

Mighty confusing?

Now if you want to buy-and-hold this stock for the long term ( or forever) than surely it make sense that you need to have a guesstimate on how much the stock would earn say the next five to ten years.

And for Maybulk, it's future depends so much on the BDI. As mentioned, the index had been so rather volatile the past few months. So the key issue is do you know what the fair value of this index now? Is it 5600? Is it 1100? Is it 8000? or is it 3800?

And how much would you guesstimate the index for the next five or ten years?

If we do not have a reasonable answer then how would you know that whether your investment now in Maybulk is considered cheap? Would it even make sense?

Last but not least, please do not bottom fish based on how high the stock price traded recently! That isn't bottom fishing from an investing perspective!

Remember bottom fishing if practised wrongly could and would cause severe damage to one's personal wealth and health!

Especially when one employs an aggressive average down approach while bottom fishing!

Average down is so rather risky. Well, if the markets are kind, then you would look incredibly smart when the market recovers shortly after you had averaged down. But life is never always kind. Sometimes we could be correct but the markets can be so un-kind. Sometimes we are simply wrong and averaging down simply mean multiplying the mistakes!

Yeah some say, tommorow never die!

Some say die another day!

Some simply say die faster!

Stephen Chow says

or would you prefer Madonna?





ps. any tipsi?

Do They Know It's Christmas Time for ...

The BDI closed at 8536, up another 1.58%!



And yet the leading stock, Maybulk, in this sector has done absolutely nothing!

Maybulk closed yesterday trading flat at 4.10.



Truly amazing!

Well is this an opportunity or is this an trap? Trap? The below is a snapshot of Maybulk's segmental earnings.



How?

Interestingly enough, if one reads the earnings notes, this was what's said by the company in regards to the company's future prospects.

• PROSPECTS
  
  Since achieving a historical peak of 11,039 on 13 November 2007, the BDI has declined by more than 30%. Charterers’ suspension of cargo shipments in an effort to reduce port congestion, bad weather closing ports and mines affected cargo availability. Furthermore the annual iron ore price negotiations between China and the major suppliers resulted in significant decline of iron ore shipments. These adversely affected the cape-size market and the resultant negative influence across the freight market. However, the declining BDI against the backdrop of a global weakening equity market, the subprime mortgage woes, a tightening credit market in reaction to the subprime crisis and heightened concerns over the state of the United States’ economy is clearly exacerbating the negative market sentiment....

Yes, since hitting the peak, the index for the Baltic Dry Index had tumbled. And as stated precisely, cargo shipments were indeed impacted by bad weather condition (severe snow storms in China to be precise) and this had put a huge damper in the charter rates. However, at this moment of time, this has clearly passed. The charter rates had certainly rebounded extremely strongly and as can seen above, the BDI closed at 8536.

Yes, the plunge of the BDI from 11k has spooked the shipping shares. The index fell to a low of a 5615 on Jan 29th 2008.

But the BDI is now at 8536!

Oh, that's a recovery of some 2921 points or a whopping 52% from its Jan 29th lows!

How?

Do you reckon that Maybulk, whose earnings depending heavily on the index, should rate much higher?

Ah yes, if you read Maybulk's earnings, there's a proposed 30 sen dividend. And if you use historical fiscal years as an indicator, Maybulk's dividend should go ex in April and payment would be made in May.

Baltic Dry Index and Maybulk Again.

On Feb 13th 2008, I blogged the following: Another Update on Baltic Dry Index

What interest me the most was the chart of the BDI then. BDI on that day was at 6712 points. See below:



And on that day, the leading BDI stock in our market, Maybulk, was at 3.98.

So how is BDI doing now?



BDI closed at 8403!

Here is the incredible one month chart of the BDI.



Let's see on Feb 13th, BDI was at 6712. it's now at 8403.

Oh.. it's up only some 1691 points.

And Maybulk now is at 4.02.

Up a mere 4 sen from Feb13th 2008????

Macam Mana Ni?

Rational or Irrational?

Saw this set of commentary.

• Baltic Freight Rate Gain Supports Commodities Story
  
  FN Arena News - March 07 2008
  
  By Chris Shaw
  
  Having hit a low in late January the Baltic Dry Index, which is an indicator of the cost of moving raw materials by sea, has run significantly higher, hitting a level this week up more than 45% from those lows earlier in the year.
  
  According to TD Securities global strategist Stephen Koukoulas the fall in January was nothing more than a seasonal blip, a view supported by the fact the index is now up around 300% from its lows of 2006 and around 860% from its lows of 2001.
  
  This has important implications for commodity prices as the index is seen as a reasonable proxy for commodities demand and the latest gains in the index suggest there has been little sign of any slowdown in the global demand for commodities and by extension, global economic activity.
  
  This implies global growth rates should remain at solid levels despite the recent volatility in financial markets, which Koukoulas suggests will also mean the current inflationary pressures evident in a number of economies around the world are unlikely to go away any time soon. ( http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=868B898C-1871-E587-E1A46D8B77BB2002 )
  
  
  

Maybulk and BDI again.

A couple of news clip yesterday.

From Bloomber news clip ( Japan's Commodities Shares Gain on Metal Prices; Refiners Fall )

• Nippon Yusen K.K. and Mitsui O.S.K. Lines Ltd., Japan's two largest shipping lines, gained after the Baltic Dry Index, a measure of commodity shipping costs, rose to the highest in almost two months.
  
  Nippon Yusen jumped 3.2 percent to 993 yen, breaking a four- day losing streak, while Mitsui O.S.K. climbed 3.8 percent to 1,375 yen. The Topix Marine Transportation Index was the biggest gainer among the 33 industry groups on the benchmark.

From Reuters ( Singapore's NOL moves 17 pct more cargo in Dec-Feb )

• SINGAPORE, March 3 (Reuters) - Singapore's Neptune Orient Lines (NEPS.SI: Quote, Profile, Research), the world's eighth-biggest container shipping firm, said it carried 17 percent more containers on its ships in the six weeks from Dec 29 to Feb 8, compared with the same period a year ago.
  
  The company said in a statement on Monday that its shipping arm APL carried the equivalent of 289,400 forty-foot containers on its ships in that period.
  
  The average revenue on each container carried by the state-controlled firm rose 17 percent to $2,989, from $2,562 in the same period a year ago. (Reporting by Daryl Loo, editing by Neil Chatterjee)

Here is the how the BDI is looking the past one month!

On the local front, there isn't any action yet on Maybulk. Last traded 4.12.

Maybulk's Recovery

Maybulk is featured in today's Star Biz.Maybulk rides on recovery in shipping rates

• 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.

Stocks In Our Baltic Sector

Thought I update both the 2 stocks on our the Baltic Dry Sector.

Here are some current charts on how they are performing at the time of posting.

Maybulk is now at 4.12.




Hubline is now at 0.49.



How my dearest MooMooCow?

Another update on Maybulk

Here's an update on Maybulk.

Previously, I had posted on the Regarding the Dry Bulk Shipping Sector, in which I had made an update on it here: Update on the Baltic Index.

I then had highlighted the sharp decline on Maybulk on the posting, Maybulk And The Baltic Index.

This morning, OSK released a report on Maybulk, acknowledging the sharp decline on the Baltic Dry Index but reckons that it's just a temporary blip!

Here is the snippet of what's being said in the report.

• Malaysian Bulk Carriers
  Between a Rock and a Hard Place
  
  BUY Maintain
  Price RM3.94
  Target RM5.90
  
  The recent sharp drop in the BDI according to sources has been attributed to protracted iron ore price negotiations with buyers and sellers supposedly keeping away from booking ships to create opposing perceptions of a shortage in demand and supply. We expect the BDI to rebound sharply in May when negotiations are resolved. For now, even at current levels, shipping rates are excellent when compared to historical averages. We downgrade our earnings for MBC slightly to account for recent BDI volatility but the company remains a Buy with 49% upside.
  
  Sharp drop in BDI. As the BDI had exceeded expectations on the way up, so too has the severity of its fall. Share prices of dry bulk shipping companies have retraced together with the BDI and MBC is no exception.
  
  Probably due to iron ore price negotiations. Indications from industry sources are that iron ore sellers may be holding back cargoes and buyers may be holding back orders as both sides negotiate on the new iron ore prices for the shipping year beginning 1st April 2008. Sellers were reportedly looking for a 50-70% hike while buyers were only keen on accepting a 20-30% hike. The current high price of coal has also led to some parties holding off new orders until February.
  
  Temporary blip in the BDI. Indications point to demand for iron ore from Chinese steelmakers still being strong and it appears only a matter of time before ore prices are agreed upon and shipping orders come flooding back into the market. Freight forward agreements, which show an uptick in May, seem to support this view.
  
  Rates at this level still very profitable. Even at below the 6500 pts level, the shipping rates that dry bulk ships will enjoy is still very good. To note that Panamax and Handymax rates have held better than for Capesize vessels.
  
  Still a Buy. Undeniably, sentiment on MBC has been hit by the sharp slide in the BDI. But with the BDI expected to rebound in May, an excellent set of earnings and a bumper dividend to be announced in February, we maintain a Buy recommendation on MBC. We have tweaked our earnings down by 2% to account for BDI volatility and our fair value is adjusted down to RM5.90.

Now, here's an issue not to be discounted. The BDI has dropped a 37% Since Mid November! And in OSK report, it said they had 'tweaked our earnings down by 2%' to account for the BDI volatility.

Just 2%?

Anyway, here is the earnings tables from OSK.

Now if you look at the 2007F and 2008F forecast numbers, don't you think that OSK is still extremely bullish on the stock?

Maybulk And The Baltic Index

Thought I do a posting highlighting the impact on the Baltic Index on Maybulk ( See Update on the Baltic Index posting this morning )

The following is the chart of Maybulk done on Jan 8th 2008.

Compared that to the current chart of Maybulk. ( Screenshot taken moments ago)

How?

Pretty ugly, right? Maybulk is now at 3.94 compared to 4.42 a few days ago!

Let me say this... if I am interested in this stock or sector, I probably better NOT discount what the Baltic Index is suggesting to me!