PSL foresees rise in freight rates as world outlook improves
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Precious Shipping Plc expects freight rates to rise this quarter in line with the global economic recovery.
Khalid Hashim, managing director of the pure dry-cargo shipper, which operates in the small handy-size segment of the tramp freight market, said yesterday that the US projects a 1-per-cent rise in harvested crops from October-May relative to the same period last year.
Projected economic growth in China, Japan, the UK, France and Germany look encouraging.
Freight rates are projected to rise, but it is difficult to specify the figures due to several factors, he said. The company plans to raise the proportion of long-term contracts, currently at 17.4 per cent, if freight rates are at a satisfactorily high level.
This year, PSL will negotiate to end two ship-assembly contracts worth US$36 million (Bt1.12 billion), which will be booked as a gain this quarter and next July, and one ship assembly contract termination, which will be recorded as a gain in the third quarter of next year, he added.
An analyst at Krungsri Securities Plc said PSL’s third-quarter operating results were below forecasts, due to lower freight rates and higher operating costs. The company posted Bt20 million in net profit for the third quarter, down by 88 per cent from the second quarter and by 91 per cent from the same quarter last year.
PSL would incur a loss of Bt177 million if profits from the sale of ship-assembly contracts are worth Bt194 million and there is a Bt3 million foreign exchange gain. It would be the fifth straight quarter of losses, the longest losing streak ever.
The higher-than-expected loss last quarter could make it difficult to revert to profitability this quarter. However, the medium-term outlook for PSL remains positive. Analysts expect freight rates to bottom-out next year, while ship operating days will continue to rise in line with the delivery of new vessels.
This would improve PSL’s operating results next year and significantly lower its P/E ratio.
PSL’s stock would be appropriate for short-term investment for the following factors – the drop in the price following disappointing third-quarter operating results, the purchase of a significant number of used vessels and freight rates falling in the remaining months of this year due to seasonal factors.
