Mitrabahtera Segara Sejati 1H13 Earnings Spot-On

MBSS’ 1H13 net profit was spot-on, representing 46% of our FY13 earnings estimate. We expect 4Q13 to be its peak quarter, spurred by China’s strong coal demand during the winter season. All in, the company’s outlook remains intact, with possible vessel expansion should the company secure new contracts in 2H13, though this is not yet included in our forecasts. Maintain BUY, with IDR1,500 TP for now.

Right on spot
MBSS’ 2Q13 net profit reached USD9m (-11.8% q-o-q; +10.9% y-o-y), bringing its 1H13 figure to USD20m (+7.1% y-o-y). This accounted for 46% of our FY13 net profit target, meeting our expectations. Meanwhile, the company’s 1H13 revenue grew 10% y-o-y while gross margin was relatively flat at 32% compared to that in 1H12. MBSS has been posting stable margins given its consistently high utilisation rate, efficient operational system, as well as solid demand from its long-term contracts.

Furthermore, should fuel prices increase, MBSS has the ability to pass the higher cost on to its customers. Despite the current coal market downturn, which has been coal prices declining to USD77/tonne from its earlier peak of USD133/tonne, MBSS has remained fundamentally and financially solid.

2H13 earnings to pick up
We expect 2H13 earnings to pick up to catch up to our FY13 earnings target, as coal demand typically peaks in 4Q13 given China’s strong demand during the winter season. We see potential upside to its earnings and capex allocation should the company obtain any new tenders in 2H13. Despite the coal market downturn, MBSS’ sales volume remains resilient, underpinning its solid fundamentals.

Cheap valuation
MBSS is currently trading at 4.8x and 4.5x 2013-2014 P/Es – steep discounts of 68.4% and 64.8% to 2013-2014 market valuations respectively. It is worth noting that MBSS’ idle cash stood at USD25m in 1H13, which reflects the company’s strong financial capability for potential vessel expansion.