Wednesday, March 02, 2016

Maybulk: Massive kitchen-sinking!

Results Update

For QE31/12/2015, Maybulk reported a huge net loss of RM1.17 billion mainly due to the following reasons:
  • segmental loss of RM465 million in the Shipping Bulkers division
  • impairment loss on an associate of RM496 million. (The associate in question is POSH.)
  • share of losses  of an associate of RM106 million. (Again, the associate is POSH.)

Table: Maybulk's last 8 quarterly results

Maybulk's losses for last quarter are off the chart!

Chart 1: Maybulk's 31 quarterly results

POSH No More!

POSH (or, PACC Offshore Services Holdings Ltd) is a 21%-owned associate of Maybulk. POSH is involved in the provision of offshore support vessels ('OSV')- a business that has been severely affected by the slowdown in the Oil & Gas sector. Since its listing on the SGX in May 2014, POSH's share price had slowly declined from S$1.15 to S$0.30 today.  

Chart 2: POSH's weekly chart as at Mar 1, 2016 (Source: ShareInvestor) 

Shipping Rate Outlook

The excitement of the rally in shipping rates in 2013 had long faded (here). Thanks to the fear of a slowdown in China, BDI plunged in the past 3-4 months to a new all-time low (here). It is so low that chartering "a 1,100-foot merchant vessel would set you back less than the price of renting a Ferrari for a day".

Chart 3: BDI's monthly chart as at Mar 2015 (Source:

Financial Position

Maybulk's financial position is mixed as at 31/12/2015. Its liquidity position is weak as reflected by its current ratio stood at 0.73X. Its leverage position is slightly elevated (due to its huge losses in the past few quarters) as shown by its total liabilities to equity stood at 0.70X. While we can take comfort in the fact that Maybulk will likely to survive a severe downturn due to the support of its major shareholder, Robert Kuok, shareholders may have to support fund-raising exercise in the next 12 months.


Maybulk (closed at RM0.54 yesterday) is now trading at a PBR of 0.46 time (based on NTA pf RM1.18 as at 31/12/2015). With negative earning, PER is not meaningful.

Technical Outlook

Maybulk is in a downward channel, with support at RM0.50. Unless this is a breakdown, the share price is likely to stay within the channel- possibly rebound back a bit.

Chart 4: Maybulk's monthy chart as at Mar 1, 2016 (Source: ShareInvestor)

I like make a small observation here! You may be a bit surprise that the stock lost only 2 sen yesterday after the result announcement of a loss of RM1.17 billion over the weekend!! Why is the drop so small?! The reason is the stock is now deeply oversold. In the past, such situation is a set-up for a decent rebound. 

Chart 5: Maybulk's weekly chart as at Mar 1, 2016 (Source: ShareInvestor)


Despite the huge loss and the uncertainty of Maybulk's two main businesses (shipping & O&G) and the marginal financial position, the share price has dropped so much that the stock could be a rewarding long-term buy. If you choose to do so, you must be mindful that the time horizon will be very long and the risk will be moderately high (notwithstanding Robert Kuok's support for the company)..

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, Maybulk.


OXtrader said...

If no support from robert...maybulk may end up like transmile and hexagon. Seem like he prefers this approach

Alex Lu said...

Hi OXtrader

I am not sure how was Robert Kuok involved in Hexagon. As for Transmile, that was just an investment gone bad.

Maybulk is a different animal. It's deep within the Kuok Brothers group. I don;t think they will give up a company that's managed by a Kuok without a fight nor would they let it drown without throwing it a lifeline.

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