Gleaming 2008 performance, boosted by Chembulk acquisition
The year 2008 was an impressing year for BLTA’s performance which was mainly bolstered by Chembulk Tankers LLC acquisition in late 2007. The company’s revenue grew significantly by 92.4% YoY in FY08, reached Rp 7.01 trillion compared to FY07 of Rp 3.64 trillion. We noted that around 74% of its total revenue was coming from Chemical tanker’s revenue which has soared by 159% YoY, attaining to Rp 5.17 trillion, fuelled by Chembulk acquisition.
Quarterly profitability dropped in 4Q08
On quarterly basis, the company’s revenue was able to book 8% QoQ growth, shoved by Chemical tanker and Gas tanker revenues hike by 8.7% QoQ and 36.6% QoQ, respectively. Nevertheless, we noted that the company’s margin in 4Q08 has significantly dropped on average 90.7 – 261.3 bps caused by direct cost and operating expense hike, mainly driven by the hike of bunker price which was not compensated by its revenue hike. Meanwhile, the bottom line booked net margin decline in the same period and knocked to -9.63% level which was dragged by 1421.9% QoQ forex loss and 64.5% QoQ interest expense hike reaching to Rp 409 billion and Rp 1.31 trillion, respectively.
Prospect and projection
We view that year 2009 could be not a good year for shipping industry amid global crisis and freight rate decline as vessels supply excess. The prospect would be better in 2010 which is fuelled by freight rate recovery, tightened MARPOL Anex II regulation and Cabotage implementation for Oil and Gas per 1 January 2010. Therefore, we forecast the 2009 operational performance will grow by 4.4% YoY – 8.5% YoY while net profit is projected to drop by 49.9% YoY becoming Rp 781 billion as higher in financial cost and forex loss book. For year 2010, we forecast the company’s financial performance will be increase on average 7% YoY – 23.4% YoY amidst recovering in shipping industry.
Valuation – Maintain HOLD recommendation
Amid financial crisis global, we are much concern on BLTA’s borrowing of Rp 16.53 trillion which would expose BLTA with high interest expense which would potentially slashed the company’s bottom line. In addition, it is worried to re-encroach 3.5x Net DER covenant in FY09 amidst rising in Net DER. Therefore, we maintain our HOLD recommendation with new target price at Rp 690,- per share from previous TP of Rp 480,- per share which is calculated by 19.3% WACC assumption in DCF model. This TP reflects valuation PE09-PBV09 at 3.69x – 0.40x and represented 4% loss potential compared to yesterday’s closing price.
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