Thailand’s logistics firm Precious Shipping (PSL) is expected to report stronger earnings in 2021 from the return of dry bulk demand, analysts at Krungsri Securities said.
PSL is a dry bulk shipping company operating 36 dry bulk vessels with around 1,586,000 of Deadweight tonnage (DWT) capacity.
Krungsri’s research said that dry bulk trade would grow by 5 per cent this year driven by growth in the trade of iron ore, grains, and minor bulk cargoes which will be boosted by economic stimulus from China.
Currently, PSL is focusing on this market segment.
There have been reports that the Baltic Dry Index (BDI) is set to rise. The BDI is a benchmark for the price of moving raw materials by sea. The index rose 5 per cent to 1,849 points on Wednesday and surged more than 100 per cent over the past year.
“PSL and TTA will continue to enjoy higher stock prices as freight indexes rise,” Krungsri’s research said.
Despite the positive news, the share price of PSL dropped 0.75 per cent to 8.75 baht per share on Thursday when trading began, after dropping 2.22 per cent on Wednesday.
Slow supply volume in 2021
The research team said that the “Handy Size” class of dry bulk carriers, including PSL are experiencing a rise in rate – but not much.
“On the contrary, a shortage of containers due to various imbalances in goods movements may cause these companies to have reduced volume.”
“We expect slower supply growth in the second half of 2020 and in 2021 because of fewer newbuild deliveries. The dry bulk order book is at a multi-decade low,” said the analysts. The PSL supply will likely grow by only 1.4 per cent in 2021.
Krungsri analysts rated PSL with a ‘Buy’ rating at the target price for 9.50 baht per share as they expected the operations would improve from 2020’s year-end, along with positive momentum in the BDI.
“PSL would deliver 83 million baht loss for the fourth quarter in 2020 but turn to gain 743 million baht of net profit for the 2021 fiscal year.”