Mitrabahtera Segara Sejati, Anti-shock against gloomy coal market

Company Profile
MBSS is a one-stop provider of sea-based coal transport with comprehensive services involving shore-based storage, barge loading, river and sea-based transport to off-shore loading of ocean-going vessels. Its source of income is derived from barging (69% of revenue as of 1Q13) and floating crane (31% of revenue as of 1Q13) segment. Its barging contract ranges from 1-7 years while its transshipment contract terms are mostly 5 years period.

More than 95% of revenue are tied to long-term contracts. 80% of its contracts are freight rate basis with agreed rate/tonne coupled with minimum guaranteed volume. Its long-term contract clients are well-known companies such as Adaro, KPC, Kideco, ITMG Banpu, Holcim and Indocement with areas of operations in South Kalimantan, East Kalimantan and Java.

Highlights
Defensive against external coal mining shocks
Out of all coal mining and coal supporting companies, MBSS is considered one of the most defensive players against external negative coal outlook shock which has been hurting the industry as a whole. Amid rising fuel price, MBSS is able to pass on its fuel price to its freight rate. This is one of the chunky reason why gross margin level for MBSS has been very consistent at the 40% level.

Potential tenders in 2H13
Although capex is at its minimum for 2013, we believe MBSS could still book a 15% earnings growth this year, driven by revenue realisation from its vessel acquisitions in late 2012. Should the coal outlook pick up, we see the likelihood of further upside risk than downside risk. There are potential tenders upcoming in 2H13 which is outside our 15% earnings growth. Should this be realized, capex allocation for this year and further upside risk on earnings growth in 2014 is highly imminent.

Healthy balance sheet
Given its strong receivables and working capital management, MBSS had a strong cash position of USD21m in 1Q13. The company’s 1Q13 net gearing position was at a low level of 41%. Should a coal turnaround occur or potential projects obtained, MBSS would not be worried in terms of financial capacity given its healthy balance sheet.