CIMB Securities is urging investors to be cautious when buying stocks of Thai bulker owner Precious Shipping, anticipating higher losses all the way to 2017.
Precious Shipping had a net loss of THB335.69 million (USD10 million) in its first-quarter 2015 results. This contrasts sharply with a net profit of THB139.62 million in the same period in 2014.
Giving a “reduce” call to Precious Shipping’s stocks, CIMB analyst Raymond Yap said Precious Shipping will “suffer this year” from its high exposure to continuing weak spot markets.
“The bulk markets are suffering from intense oversupply and weak Chinese import demand, and we have had to cut our rate assumptions to reflect this,” Yap said in a research note.
Exacerbating the situation is that Precious Shipping is scheduled to take delivery of up to 17 newbuildings this year, requiring what CIMB calls a dilutive one-for-two rights issue that will increase the share base by 50%.
Related news:Precious Shipping posts $10m loss in 1Q15
“Originally, Precious Shipping had planned to sell 21 of its older ships for estimated proceeds of at most USD100 million [but probably less given how far ship prices have fallen], but demand for second-hand vessels is very weak right now, and the company would have to offer huge discounts,” the analyst said.
CIMB Securities also flagged another upcoming problem between Precious Shipping and shipyards.
The company has refused to take delivery of two 64,000 dwt Ultramax ships built by Sainty Marine, claiming the fuel consumption of the vessels is higher than earlier estimates. The shipbuilder is disputing this.
Previously, Precious Shipping got its money back from India’s ABG Shipyard after it failed to deliver ships ordered. “We hope it [Precious Shipping] will have similar good luck with Sainty Marine,” Yap opined.