Results below expectations
Samudera's 3Q15 net profit of US$1.2m (-77% YoY) was affected by the slowdown in trade across the region resulting in lower charter rates (mainly from its bulk carriers) and container volumes. Excluding the US$2.6m in impairment expenses, core net profit would have improved from the previous quarter by 5.1%, to US$3.8m. 9M15 core net profit makes up 72% of our full year forecasts. We slash our forecasts by 20-25% for FY15-17 as we take a more cautious view. Despite the weaker than expected results, the current share price does not justify Samudera's healthy positive free cash flow that continues to strengthen its balance sheet (net gearing now at 0.28x vs 0.33x, 0.52x and 0.66x in FY14/13/12), allowing the group to grow inorganically and providing upside rerating catalyst. Thus, we reiterate our BUY recommendation but with a lower TP of $0.29, pegged to 8x FY16F P/E. Even at our TP of $0.29, Samudera would be trading at an attractive 0.43x FY15F P/B, still one of the lowest among its peers.
The world catches a cold when China sneezes
China's third quarter GDP growth came in at the lowest since 2009 as exports faltered, putting pressure on shipping rates. The Shanghai Containerized Freight Index has dropped back to trough levels of 500 (vs ~1000 a year ago) after rebounding slightly in July-August. Drewry has also revised global container volume to decline by 4.3% YoY in 2015. However, intra-Asia has continued to fair relatively better compared to the other major trading routes. The ASEAN Economic Community (AEC) scheduled to be fully implemented by the end of December 2015 is expected to help boost intra-Asia trade, although we see a delayed effect of 1-2 years to see the full benefits.
Rerating catalyst from opportunities in the region
Rerating catalyst may come from Samudera's strong balance sheet and healthy free cash flows that would allow it to tap on opportunities in the region. Its parent company in Indonesia recently won a US$70m contract to supply LNG to a power station in Indonesia and is currently bidding for more projects, which Samudera Singapore may eventually take stakes in. (Read Report)
Source : KGI Fraser Research