Maybulk's 9MFY12 core earnings of RM24.1m were  within  our  FY12  estimates  of RM30.8m but significantly below consensus' RM49.5m. Its 3QFY12 core earnings contracted  sharply  by  61%  y-o-y  in  tandem  with  the  15.3%  y-o-y  drop  in  revenue while operating costs were flat amid high bunkering costs. We have yet to see any recovery  for  the  sector  as  the  global  economic  slowdown  had  given  rise  to  the  supply-demand imbalance for dry bulk vessels. We remain bearish on the dry bulk segment and slash our FV further to RM1.10, based on 0.6x P/B. Maintain SELL.  

Saved  by  associate.  Maybulk's 9MFY12 core earnings of RM24.1m were  within  our FY12 RM30.8m estimate but significantly below consensus' RM49.5m. Its 3QFY12 core earnings  contracted  by  a  sharp  61%  y-o-y  in  tandem  with  the  15.3%  y-o-y  drop  in revenue  while  operating  costs  remained  flat  in  view  of  high  bunkering  costs. Operationally, Maybulk is still in the red,  posting an EBIT loss of RM6.4m although this was  significantly  offset  by  higher  combined contribution  of RM30.6m  from  its  associate and JV, POSH. The company booked a gain of RM9.1m during the quarter as a result of vessel disposals and fair value gains in its investments. 

Rate  movement.  The  Baltic Dry  Index  (BDI)  and  Baltic  Tanker  Index  (BTI)  tumbled  by 45%  y-o-y  and  20.5%  y-o-y  respectively  in  3QFY12,  resulting  in  the  time  charter earnings of its bulker division dropping by 30% y-o-y although the tanker segment saw rates  inch  up  by  8.4%  y-o-y.  Panamax  vessel  rates  hit  a  record  low  on  the  aggressive deliveries of new buildings amid  reduced grain shipments due to  the drought in the US and  the  Black  Sea  region.  Coupled  with  losses  from  the  three  new  vessels  delivered, Maybulk's dry bulk segment posted a  PBT  of  RM0.9m  YTD  vs  the  RM63.6m  it  earned last  year.  Similarly,  earnings  on  the  tanker  side  came  in  lower,  again  due  to  the  lower rates.

Another downgrade on bleak outlook. A recovery in the sector remains distant as the supply and demand imbalance of dry bulk vessels persists coupled with the slowdown in the global economy. Dry bulk trade is projected to grow at 5% in 2012 and 4% in 2013 vs  a  supply  a  growth  of  12%  in  2012  and  6%  in  2013.  The  stellar  earnings  posted  by POSH  indicate  that  outlook  in  the  offshore  segment  remains  promising,  driven  by  oil exploration activities.
 
Downgrade  again.  We  remain  bearish  on  the  dry  bulk  segment.  While  we  retain  our earnings  projections,  we  cut  our  FV  further  to  one  premised  on  0.6x  book  value  per share from 0.7x previously. This nudges down our FV to RM1.10, providing a downside bias of 16%. Maintain SELL. 

Source: OSK