Maybulk had a poor 1Q2009

Maybulk reported a poor set of results for its 1Q2009 ended 31/3/2009. Excluding gains or losses from the disposal of vessels, Maybulk reported a pre-tax profit of RM22.2 million as compared to a loss of RM19.9 million in 4Q2008, while turnover was down 62% from RM138 million to RM53 million. The turnaround was attributable to lower net loss from Other Operating Income which dropped from RM26.9 million in 4Q2008 to RM3.6 million in 1Q2009 (due to decline in mark-to-market provisions for equities & foreign exchange) as well as increase in Share of Profit from Associates from RM12.7 million to RM24.1 million (partly due to the inclusion of the results from POSH).

The sharply lower turnover was attributable to lower hire days for both dry bulk tanker segment and a sharp decline in the average dry bulk rate of USD11807 per day (cf. USD28623 per day in 4Q2008). However, the average tanker rate was higher for 1Q2009 at USD19138 per day (cf. USD13546 per day for 4Q2008).



Maybulk may benefit from the improvement in the dry bulk shipping rates in the next few quarters as the global economy begin to slowly recover. As we can see from Chart 1 below, the Baltic Exchange Dry Index ('BDI') has already started inching higher.


Chart 1: BDI's weekly chart as at May 27, 2009 (courtesy of Investment.tools.com)

While Maybulk has broken above its downtrend line in early-April at RM3.00 level, the rally in the stock may be over since the MACD had crossed under. On weakness, Maybulk may re-test the RM3.00 psychological support. Overhead resistance at the horizontal line of RM3.50 should cap any rise in Maybulk until its financial performance has improved significantly.


Chart 2: Maybulk's weekly chart as at 28/5/2009_3.30pm (Source: Quickcharts)

Based on the poor results for 1Q2009 & weakening technical outlook, I believe Maybulk's medium-term outlook is likely to be negative. A good entry level for this stock is at RM3.00 or even RM2.60-70.