Higher freight rates boost TTA

Back Feb 16, 2008

Thoresen Thai Agencies yesterday reported better-than-expected first-quarter results thanks to rising freight rates.

The integrated shipping group told the Stock Exchange of Thailand that its net profit in the fiscal quarter ended December 31 was Bt2.5 billion, up 129 per cent on year and 123 per cent on quarter. The results included an exchange gain of Bt115 million.

Total operating revenues were Bt8 billion.

The company saw its average time charter equivalent (TC) increase 102 per cent from US$12,799 (Bt425,880) per vessel per day in the first quarter of the 2007 fiscal year to $25,902 per vessel per day. The TC rate rose due to high utilisation and strong freight or day rates in the dry bulk shipping and offshore services businesses.

The company also enjoyed a gain on the sale of one dry bulk vessel.

Due to the stellar quarterly performance, several brokerages will upgrade their forecasts for the company's full-year net profit.

KGI Securities said in a note that TTA's first-quarter result accounted for 46 per cent of KGI's full-year earnings forecast and 50 per cent of the market consensus.

This should be the key driver to support the share price and KGI would revise up TTA's earnings.

KGI said TTA's shipping gross margin rose by 45 per cent year on year as freight rates shot up more than its operating costs.

The fundamental outlook of TTA remains strong after the Baltic Dry Index (BDI) rebounded recently due to the acceleration in Chinese bulk volume after the Chinese New Year. In addition, there was an increase in iron shipments after Brazil's port came back on line, the broker said.

KGI reiterates "outperform" for TTA, with a target price of Bt53.

An analyst from Sicco Securities said that the BDI (spot bulk freight rate) last November had climbed to its highest record, at 11,000 points. That was the crucial factor supporting TTA's big profit gain. The BDI is an indicator for TTA, which influenced the company's freight rate reaching $21,000 per vessel per day at the moment.

However, the analyst said Sicco forecasts that the company's freight rates will soften in the second half of its fiscal year after the Olympic Games in China end. The broker recommends "buy" for TTA with a fair price at Bt54.

Kim Eng Research said TTA's freight revenue in the first quarter was up by 90 per cent on year and 42 per cent on quarter. The group's offshore business also grew by 9.7 per cent on year and 18 per cent on quarter to Bt1.09 billion, as it added two more vessels for submarine engineering work.

The BDI rebounded by 28 per cent from its bottom of 5,615 points on January 29 to 7,212 points.

The research house forecasts that the BDI should be on the rise, as demand for shipping gathers steam. China, after battling snowstorms and suspending its coal exports over the past two months, is expected to resume and speed up its coal exports. This will cause congestion in Australia's ports and drive the freight rate up.

If Brazil and China enter into a successful trade negotiation for steel, that will push the freight rate up even more.

Yesterday, TTA stock surged by Bt2.75 or 5.82 per cent to Bt50 on volume worth Bt1.9 billion.


Source: The Nation by Nalin Viboonchart
Saturday February 16, 2008