The Nation



Thoresen Thai Agencies

1Q14 core profit beat estimate; weaker quarter ahead

Thoresen Thai Agencies Plc (TTA)

Core profit beat estimates

TTA posted a 1Q14 (Oct-Dec 2013) net profit of Bt250m, a turnaround from net losses for 1Q13 and 4Q13. Stripping out gains of Bt42m on FX and Bt4m on asset sales, core earnings would be Bt203m against a core loss in 1Q13 and up 61% QoQ. The core profit was somewhat above our estimate and the consensus, due to higher-than-expected equity income (from AOD) and lower-than-assumed SG&A expenses.

Results highlights

The core earnings improvement was led by: 1) a better shipping performance, 2) a greater profit contribution from the offshore service business, 3) a bigger contribution from Baconco and 4) lower SG&A expenses. The shipping business's average freight rate rose by 39% YoY and 27% QoQ to US$10,446/day/ship, while the number of vessels rose to 33 from 29 in 1Q13 and 31 in 4Q13. In addition, the shipping business's GM turned around to 8percent from -9% in 1Q13 and 3% in 4Q13.

Mermaid Maritime posted a net profit of Bt238m, a turnaround from a net loss in 1Q13 and up 1,313% QoQ, driven by AOD revenues. In addition, Baconco's net profit rose by 24% YoY to Bt88m, driven by a fatter GM (to 20percent from 15% in 1Q13). However, UMS reported a net loss of 35m, a reversal from a net profit in 1Q13 (but the loss was shallower QoQ).


The average QTD BDI has dived 27% QoQ to 1,354 points—led by the Capesize (down 38% QoQ) and Supramax (down 19% QoQ) indices, as we are in a period of low seasonal demand. Meanwhile, the Handysize Index has been stable QoQ. Note that in YoY terms the average QTD BDI is up 70% with rises across all vessel classes. The key factor behind the YoY rebound is an improved demand-supply balance. We, therefore, expect TTA's 2Q14 (Jan-March 2014) core profit to soften QoQ on seasonality, but improve significantly YoY, driven by higher YoY freight rates, a greater number of operating vessels and increased equity income.

What's changed?

We have revised up our FY14 net profit forecast by 45% to Bt771m to fine-tune for the street-beating 1Q14 earnings. Our end-Sept 2014 target price rises to Bt22.20 (from Bt22), pegged to TTA's long-term PBV of 0.9x.


Expectations of weaker QoQ core operational numbers in the Jan-March quarter may weigh down sentiment toward TTA in the short-term. But upcoming high seasonal demand in April together with a better dry bulk shipping market outlook and good prospects for Mermaid Maritime in 2014 will later boost the share price. The stock is currently heavily discounted—an end-Sept 2014 PBV of 0.6x, (0.5SD below its long-term mean) and a discount to the Asian average of 1.0x. Downside risk appears to be limited.

Comments conditions

Users are solely responsible for their comments.We reserve the right to remove any comment and revoke posting rights for any reason withou prior notice.