Monday, July 15, 2013

BDI, MISC & Maybulk- signs of bottoming?

With global trade remained subdued at a growth of 3.3% for 2013 (revised down from 4.5% by WTO), there is no strong reason to expect shipping rates to recover anytime soon. Nevertheless, BDI (Baltic Dry Index) staged a strong rebound in late June to early July (see Chart 1). The rebound was sufficiently strong to cause the index to break above its long-term downtrend line (see Chart 2). (Note: Charts 1 & 2 are  the exponential or semi-log charts). Is this a sign of a bottom for the shipping rates?

Chart 1: BDI's daily cahrt as at July 12, 2013 (Source:

Chart 2: BDI's weekly chart as at July 12, 2013 (Source:

The shipping rates for Very Large Crude Carriers (VLCCs) is strong at about USD25,000 a day - nearing the breakeven point for ship-owners - while the daily rate for Capesize dry bulk carriers has eased off to about USD6,000. The improved shipping rates for oil tankers is attributed to strong demand as refiners stock up on their crude requirements. If the recent rise is due to seasonal demand, we can expect shipping rates to normalize once the peak demand season is over. we will have to wait & see.

Meanwhile, we can see both MISC and Maybulk have rallied up from their recent low and tested their downtrend line. If they can surpass the downtrend line (at RM5.40 for MISC and RM1.90 for Maybulk), we can then expect both stocks to begin their bottoming phase & follow by recovery in the near future. Will that happen soon?

Chart 3: MISC's monthly chart as at July 15, 2013_12.30pm (Source: Quickcharts)

Chart 4: Maybulk's monthly chart as at July 15, 2013_12.30pm (Source: Quickcharts)

In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, MISC & Maybulk.


K C said...

For a company having huge amount of excess cash (RM1.28 per share), and trading at PE of 14 like Plenitude can be considered as cheap rather than fairly valued.

Similarly a company with huge debts trading at a PE say 5 may not necessary be cheap.

A better measurement should be enterprise value over Ebit, or Ebitda for valuation of a firm, not just the equity; where excess cash is excluded, but debts are included in the computation of EV.

In Plenitude's case, EV is less than 4 times Ebit, and hence could be considered as very cheap.

Alex Lu said...

Hi K C,

You point noted. Valuation matrix can come in many forms- PE, PB, DY, etc. I was looking at PE only. If I was less than positive on this stock, I would not take the trouble to post it. I think there is something positive on the way and it will show up in the PE a few quarters later.

Thank you for sharing.