Maybulk Q2 result update

We predicted Maybulks Q2 result and market price would not be favorable sighting the BDI and Price divergence as the reason. (Click: Price-BDI divergence) Has this come true?

We believe so. Lets look at it's core Business earnings. As anticipated, the core dry bulk earning has reduced 18.5% in tandem with the 30% QoQ drop in BDI (exclude capsize). This is also inline of our observation that earnings are almost always lags behind BDI figure 1-2 quarters.

Lets look at the market price. Maybulk's price has dropped from RM1.88 when we last wrote to the current price of  RM1.69, a 10% drop. This reduction is still not as significant. we recall when the BDI was at the lowest of 650, Maybulk was at RM1.30.

 It only experience a 10% drop in price when not only BDI has came down, but also contribution from POSH dropped significantly sighting challenges in Mexico as the reason.

Again we ask the same question, is this price sustainable?

As always, We are interested in Maybulk's Dry bulk business, so it is obvious we should keep an eye at BDI index.

From Chart 1, the BDI (ex-capsize) in Q2 is lower then Q1. Since, Dry Bulk revenue lags behind, we can expect the coming Q3 result will be poor as well.

we are now 2 months into Q3, and the index has rebounded from its low. Worth to continue monitoring the BDI.

Inline with the take away from the AGM, (AGM take away) we will be monitoring the scraping and deliveries of fleet around the world.

 According to RS Platou, a leading marine information provider, the fleet expansion for this year is expected to be around 5-6% which is lower then expected demand of 7-8%. If  this is true then, BDI is expected to rise as supply is lower then demand.

Past year records:

In 2013, fleet has expended by 8%, YTD, is 4.6%. If this stays it course, while demand remain steady, BDI is expected to rise further. We have not seen significant rise in scrapping rate yet.

Note: I am NO Longer share owner of Maybulk.

Happy Investing !

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