- Shin Yang Shipping returned to the black in 3QFY14 core with a net profit of RM5.4mil, bringing the core earnings for 9MFY14 to RM4.8mil vs. a net loss of RM16.7mil a year earlier.

- The group’s annual revenue is on track to breach the RM1bil mark, but it is still beset by a challenging shipping environment amid rising costs, as well as facing stiff competitive in shipbuilding from builders in China.

- Notably, while revenue rose by 26.6% for the 9MFY14 period, net operating costs increased by 31%.

- The group said revenue rose in 3QFY14 mainly due to the ship new build and repair segments with 3 units of vessels delivered, as well as increases in vessels repair works and container shipping.

- The shipping segment’s losses narrowed to RM1.7mil in 3QFY14 vs. -RM8mil in 2QFY14 and -RM3.9mil a year earlier. This was mainly due to lower margins in international liquid bulk segment.

- The shipbuilding and ship repair segment posted a 71% rise in revenue to RM122mil (+1.5% QoQ) mainly due to the delivery of 3 high-end vessels.

- For 3QFY14, the segment posted a PBT of RM7.2mil (+121% QoQ) vs. a loss of RM0.6mil a year earlier. For the 9MFY14 period, the segment recorded a PBT of RM20.7mil vs. a loss of RM7.7mil a year earlier.

- For the quarter under review, the shipping agency segment’s revenue fell slightly by 0.7% YoY. The loss before tax was mainly due to the share of losses in its associate company.

- Shin Yang said its performance was exposed to the volatility of fuel prices and crew quality, and cost management will be an important priority in the next few quarters.

- It said vessel overcapacity would continue to exert pressure on bulk cargo and container freight rates over the short term, and the shipping industry continues to be challenging.

- Shin Yang said the demand for new build of high-value vessels to serve the oil and gas, infrastructure development, and resources-based industries has shown signs of improvement.

- For the near and medium term, we do not foresee any catalyst for the group.

Source: AmeSecurities