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Thoresen Thai Agencies Plc
Kim Eng Securities (Thailand) has upgraded its recommendation on the stock of shipping services company Thoresen Thai Agencies from "buy on weakness" to "buy", with a fair value of Bt32.75 per share.
The broker says the dry-bulk shipping sector is driven by strong demand from China, India and the Middle East. With limited new vessel additions to world fleets, it expects to see a decrease in the world shipping fleet over the next few years and this will support charter rates at high levels, as in 2004. Currently, Thoresen Thai has 43 per cent of its fleet on fixed contracts at average rates of US$12,000 (Bt447,000) per day. It does not pay for fuel on fixed contracts, so oil prices are not an issue. Liner services occupy 30 per cent of its fleet and the rest are on voyage charters. With second-hand vessels fetching high prices and new-vessel costs remaining high, Thoresen Thai has been spending on maintenance costs. If the company does not scrap many of its vessels, the broker expects to see maintenance costs of between Bt410 million and Bt680 million next year. The broker has a more positive outlook for Thoresen Thai's 2007 earnings and has revised the average time charter rate up from $10,454 per day to $11,000 per day, growth of 5 per cent. It has also revised upwards its 2007 normalised earnings forecast for Thoresen Thai by 13 per cent to Bt3.51 billion.
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