Maybulk - Bulking on POSH

Broad market sentiment had continued to show bullishness as the DJIA had entered into challenging 17000 in the coming days. While the market are buying into the wave for a economy recovery, foreign market continued to be bullish, we will be seeing more participation into the local market once the foreign fund comes to pay a visit.

While market had been in hot talks for semiconductor related industries, thanks to the huge demand created from global tech company like Apple and Samsung, quite a number of heavy weight industry had been losing their shine and crawling lower, while some might had saw their bottom already. However, it had came to my interest on Maybulk despite the current outlook on the BDI, which is almost at it's year low.

Let's have a look at Maybulk recent price movement.

Maybulk had been trading above RM 2.00 on a couple of months back despite the volatile BDI which had been fluctuating in a huge manner. However, Maybulk did not manage to maintained above RM 2.00 after seeing the BDI dropping into a year low, resulting in Maybulk consolidating at the range of RM 1.85 for the past couple of weeks. Maybulk had saw a series of accumulation at the current level of RM 1.85 as the accumulation might be seeing a saturation which will be anticipating a coming strong volume in bringing the share price above RM 1.90 with a greater surge of volume.



Maybulk and POSH

Maybulk primary activities are doing Bulk Carriers, Tankers and Ship Management. However, Maybulk 21.23% stake in PACC Offshore Services Holdings Ltd (POSH) might be able to see the group diversify their exposure into the lucrative industry of Oil & Gas.

Maybulk had been sitting in a net cash position of RM155.19 million, translating to a total of RM 0.155 net cash worth per share. Maybulk net cash position in a heavy industry is a truly good advantage, as most are still struggling to repay their interest and debts.

Maybulk prized asset came into the limelight when POSH is listed in the SGX on 27th April 2014, enlarging their investment appreciation by a great leap. To date, POSH is sitting on a market capitalization of SGD  1.704 billion (RM 4.432 billion, SGD 1 = MYR 2.6), directly translating into Maybulk 21.23% in POSH worth RM 940.977 million. Maybulk's stake in POSH already accounted for RM 0.941 per share.

While many might not know about POSH, it is actually the Largest Asian based provider of offshore support vessels and one of the top 5 globally (according to industry consultant Infield’s data based on number of vessels operated), with a diversified fleet servicing offshore oil and gas exploration and production activities. POSH's offshore support vessels perform anchor handling services, ocean towage and installation, ocean transportation, heavy-lift and offshore accommodation services, as well as harbour towage and emergency response services. Revenue is earned from the time charters of its vessels, as well as lump sum project contracts for which its vessels are deployed. Customers include major oil companies and large international offshore contractors.

Currently, PACC Offshore Services Holdings Ltd (POSH) has won a US$80.5m (RM260m) charter for its semi-submersible accommodation vessel, named POSH Xanadu, for use by Petroleo Brasileiro SA (Petrobras). Petrobras would charter POSH Xanadu for a year beginning December 2014, with the option to extend for another year. If the charter is extended, the total contract value will be in excess of US$144m.

Coming up catalyst

POSH Arcadia had been in the final stages of negotiation and will be sealing the deal soon which might be seeing another US90m to US100m value of contract pumping into the balance sheet of POSH Ltd. Moving forward, the growth catalyst for POSH in FY15, with delivery of two 750-person DP3 SSAVs (semisubmersible accommodation vessels), estimated to potentially double its earnings base in FY15F assuming deliveries are on track and charter-out contracts are secured on time.

Should POSH run smoothly in their deliveries, POSH might be looking to soar to SGD 1.30 in the coming short term.


Maybulk should be a good investment to be considered at the current price based on:
- Strong net cash position of RM155 million (RM 0.155 net cash per share)
- Bottoming up BDI that will be seeing a reversal cycle in the coming days
- Maybulk diversified exposure in oil and gas industry through PACC Offshore Services Holdings Ltd (POSH)
- 21.23% stake in POSH, interpreting a stake that is worth RM 940.977 million (RM 0.941 per share) at the current price of SGD 1.15 in POSH share price
 - POSH Arcadia to secure a chartered contract in the coming days ahead
-  Robust oil and gas industry ahead, fueling demand for OSV.

By looking at the net cash value and the stake value from POSH, each share is worth RM 1.095, excluding the current fleet of asset that Maybulk is sitting on which is worth more than RM 2 billion. Maybulk NTA might be ringing more than RM 2.50, of which RM 1.095 is a liquid asset in cash or shares. Maybulk will be looking to see more contribution from POSH. Maybulk will be looking to challenge a short term price of RM 1.95, while a longer tenure outlook will suggest Maybulk to be above RM 2.10.

Bone's short term TP: RM 1.95

Cheers and happy trading