Maybulk 2014 AGM Take away

Maybulk's AGM was held on the 23th of May at the KLGCC, below are summary of what I could take away.

1. As stated in the annual report, due to unexpected vessel buying by Private Equity funds in a big way, turn around for charter rates is expected to be delayed. Additional information not found in the annual report regarding the recovery is: The board is expecting recovery in 18-24 months. This perhaps provide a time frame for investor. (To recap, middle of 2013,  the board anticipated a supply shortage in the coming years due to closing down of many shipping companies. This is brought about by very low charter rates. Banks are unwilling to fund new vessel purchases. New vessel price has dropped to a all time low. The board, took the opportunity and ordered new vessel. However, Private equity funds, with it's cheap money due to QE, started to jump into buying new vessel as well. Supply of vessel are expected to increase while pushing down charter rates again.)

2. POSH, as reported in almost all media and annalists, POSH is Maybulk's savior. we all know that. In this AGM, during a private chat, Mr.Kuok, the CEO, expects POSH to 'fly' come 2015 with the confirmation of the Accommodation vessel charters. Maybulk's Chairman and another director Mr.Teo is on the board of POSH. the most recent quarter report, POSH contributed RM25million in 2014 Q1, while 2013 Q4 was 8 million.

3. Mr.Teo Joo Kim, a current Executive Director and the previous Executive Chairmen, gave many more insights and business information compared to any other directors. Things that he highlighted:

     a.The golden era of shipping industry of 2003-2008 is over and might never return ( a comment Mr.Kuok agrees.) Investors, please check your expectations.

    b.The key sign and worth monitoring as an indicator for recovery is the up tick of ship scraping. he recons, since private equity funds are not ship industry guys, they are in for the quick bucks. If the charter rates remains low, they might give up and head the exit. If they can't find buyers for the vessels, or other smaller shippers cant survive, scrapping is the only solution.  

     c.He strongly believe, BDI of 500-600 as was seen in 2013 will be lowest.

     d.All vessels (2014 maybulk has 24 vessels) are fully booked for the year. (The problem is the rates are low, hence poor profits. The vessels directly own are making profit, the jointly owns are the one dragging down the overall numbers.) Maybulk, has strong affiliation with its customers, no problem in chartering its vessels.

4. Mr.Kuok Khoon Kuan, CEO after the AGM was also available to share some of his take when I spoke with him:

     a. India might provide a bright spot. So it pays to watch out for India's import/export of commodity.

     b. Although iron ore import into China has slowed, but coal export has picked up as it exports cheaper coal to around the world.

     c. No major capex moving forward.

All in all, one can sense the unhappiness of some share holders while some are hard core fans. The tone of the Board is also some what cautious. 2014 will be a quiet year for Maybulk. 

However, undoubtedly, this guys really know their turf. They kept ample amount of cash when they made huge pile of it. Invested in a subsidiary when things started to look bad, then went on to buy vessels almost at the lowest price when USD was still low. They also sent vessels for early dry docking when the rate were very low in anticipation of maximizing charter days with rebound in rates. 

Note: I am a share owner of Maybulk.

Happy Investing !

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