Mitrabahtera Segara Sejati, Holding a Long Breath From Coal Downturn

MBSS’s 4Q13 net profit dipped 2.4% y-o-y but grew 14.6% q-o-q to USD10m, given a peak quarter which coincided with China’s winter. This brought FY13 net profit to USD38m, in line with our expectations at 95% of our FY13 estimate. We cut 2014-15 earnings by 7-5% on lower fee charges assumption amid further renegotiations. While lacking growth catalyst in the short and long run, MBSS’ USD44m cash pile in FY13 suggests a solid dividend payout (a 7.6% dividend yield).

4Q13 highlights
MBSS’s 4Q13 revenue grew 5.2% q-o-q and 2.4% y-o-y, on the back of higher delivery volume and rising rates from its floating crane division. 4Q13 floating crane delivery volume surged 18.2% q-o-q to 5.2m tonnes, while that of its barging division increased 2% q-o-q to 10.1m tonnes. Average tariff rates charged to customers in its barging division fell in 4Q13 (-3.7%; -37.6% y-o-y) 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 renegotiating fees
As we believe that coal miners will renegotiate for lower tariff fees, we reduce this year’s average fee by 30 cents to USD2.60/tonne (-10.5%) for its barging division and cut 10.1% of its average fee to USD1.80/tonne for its floating crane division. Incorporating the lower fees, we trim our 2014-15 net profit forecasts by 7% and 5% respectively.

Strong cash pile, low gearing
As of FY13, MBSS’ cash position stood at USD44m, arising from cash collected from its customers coupled with a very low capex allocation as MBSS was hitting the expansion break as it was caught in the downturn cycle of the coal industry. Given its strong cash position in FY13, we expect MBSS to distribute a higher dividend of 30% (from 25%) going forward.

Lower IDR1,000 TP; downgrade to NEUTRAL (from BUY)
MBSS currently has a comfortable total backlog of USD350m-400m comprising mostly long-term contracts. However, we do not see any exciting catalysts except for its dividend yield of 7.6%. We cut our DCF-based TP to IDR1,000 (from IDR1,400), after our earnings cuts and given a lack of growth catalyst in the long run.