Mitrabahtera Segara Sejati, a Survivor Amid Downturn

MBSS 4Q13 net profit increased 14.6% q-o-q to USD10m given peak seasonality in 4Q13 from China’s winter season, yet down 2.4% y-o-y, bringing FY13 net profit amounting to USD38m, inline to our FY13 estimate (95%). We cut earnings by 7% and 5% for 2014-15 earnings as we lower our fee charges to its customers from further renegotiations. We see MBSS lack growth catalyst in the short and long-run, yet cash pile of USD44m in FY13 suggest solid dividend payout (7.6% div. yield)

4Q13 highlights
4Q13 revenue increased by +5.2% q-o-q and +2.4% y-o-y on the back of higher volumes and rates from its floating crane division. 4Q13 floating crane volumes went up 18.2% q-o-q to 5.2m tonnes while its 4Q13 barging division volumes increased 2% q-o-q to 10.1m tonnes. Average tariff rates charged to customers mostly fell for its barging division in 4Q13 (-3.7%; -37.6%) given shorter distance trips. 4Q13 gross margin declined to 37.0% from 41.8% in 3Q13 mainly driven by higher salary costs.

Earnings cut; coal miners further negotiating
We suggest that there would be further re-negotiations from coal miners for lower tariff fees, therefore we cut this year’s average fee by 30 cents to USD2.6/tonne (-10.5%) for its barging division and cut 10.1% of its average fee to USD1.8/tonne for its floating crane division. By this, we cut our 2014-15 net profit by 7% and 5% respectively as we incorporate the lower fees.

Strong cash pile, low gearing
As per FY13, MBSS cash position stood at USD44m contributed from its cash collected from its customers coupled with very low capex allocation as MBSS was hitting its expansion breaks as it was caught in the downturn cycle of the coal industry. With strong cash pile increased to USD44m in FY13, we suggest MBSS to distribute higher dividend (30% from 25% previously).

Lower TP to IDR1,000; NEUTRAL (from BUY)
Currently MBSS has a comfort total backlog of USD350-400m mostly comprises with long-term contracts. However, we do not see any exciting catalyst for this stock rather than its dividend yield of 7.6%. We cut our DCF based TP to IDR1,000 (from TP IDR1,400) as we cut earnings and see lack of growth catalyst in the long-run.