Takeaways from the analyst meeting. 1) Over 50% of operating days have been fixed by the end of February 2014, dry bulk TCE is over US$11,000 per day; 2) Iron ore price will decrease in 2014 and become more competitive against domestic iron ore in China, boosting the shipping activities; 3) the scrapping tonnage in 2014 may not further increase; 4) Sino-chat currently has tonnage of 6 to 7 million DWT, all are charted-in; 5) The absence of FY13 final dividend was primarily due to the low earnings basis, which leads to a quite small amount of dividend payout; 6) 2014 Capex is US$260 million, with certain undergoing new vessels projects.
FY13 results missed our and market expectations, due to 1) lower charter hire and freight rate; 2) decreased in container shipping revenue due to the disposal of aged ships; 3) decrease of operating leverage.
Revise FY14-FY15 earnings estimates to reflect: 1) changes of TCE assumptions, 2) changes of on hire operating days, and 3) more voyage chartering and less container shipping business. Our FY14-FY16 earnings estimates are US$19 million, US$45 million and US$63 million, respectively.
Maintain ‘Neutral’ with TP of HK$2.60. We think the downside of the Company is quite low given the current market condition. With the resume of international dry bulk shipping activities, the charter hire and freight rate are expected to increase going forward. However, in the short and median term, the Company lacks share price catalyst. Our TP represents 69.0x, 29.5x and 21.1x FY14-FY16 PER and 0.6x FY14 P/B ratio.