STX : Results in line in 2Q09; Maintain Sell

STX reported a loss of US$35.9m in 2Q09 with US$0.18 loss per share in-line with the market expectation. Total revenues US$805, down 70.1% yoy and up 4.7% qoq, of which revenues from bulk business up 24.5% qoq and that from non-bulk business (including container, tanker and pure car/truck carrier) down 2.7% qoq. Loss in gross profit expanded qoq, from US$4.1m in 1Q09 to US$52.3m in 2Q09.

Rebound in freight rate improves bulk business: BDI rebounded from 1562 in 1Q09 and 2714 in 2Q09 help STX's bulk business. STX's bulk revenue improved that much as BDI because, in our view, 1) STX reduced chartered-in activities 2) STX did not put all capacity in the spot market.

Weak non-bulk business contributed more to the loss: We saw a sharp decline in container freight rate as well as Tanker rate hit a historical low level in 2Q09. We think the non-bulk business contributed more loss when compared with 1Q09.

Outlook in supply-side needs to be verified: Management gave positive outlooks on both demand-side and supply-side. We do believe there is a strong demand for dry bulk shipping form China steel production, but we need to see the actual cancellation/delay from greenfield shipyards in China, which is the key factor impacting the fleet growth in 2H09 and 2010.

Maintain Sell but raise price target to SG$11.0. We raise the price target to SG$11.0 based on 1x 2010F P/B, on expectation of 1) strong commodity demand from China 2) recovery of global economy. The stock is current trading at 1.3X 2010F P/B. Maintain Sell.

Sponsored Links

Related Posts by Categories