Maybulk

History tend to repeat itself and in the case of Maybulk share prices, it is no different.

A good 6 months have past since I started monitoring the counter after some introduction from Stock Market forums about it's healthy dividend policy and profitability as a company with good management.

Known as a Kuok company because of it's major shareholder by the 'sugar king' Robert Kuok, where mere mention of his name would entice investors to hold the shares solely because Kuok is the major shareholder. They are betting more on his name and reputation for credible management rather than fundamental facts such as profit and sustainability of revenue. Not advisable since another Kuok affiliated company Transmile has run into accounting scandals that saw it's share prices drop to 15% of it's former glory days of RM12 a share.

Looking at it's business model, Maybulk main trade is it's shipping business of bulk carriers and tankers. A side business of selling and buying ships also seem to earn it quite a consistent sum of one-off gains. Since shipping depends largely on global trade and the rates people are willing to pay to charter a ship for transportation of raw materials, a good indication of Maybulk's earning capability is the Baltic Dry Index (BDI). This index basically shows how much ship charterers are willing to pay for services of ships to transport materials.

A peak of 11k points last year boosts earnings of most shipping companies and Maybulk enjoyed a good year in 2007 from it. But a sudden fall of index triggered a sell-off of the share after rising in tandem with the index, add also a few of share market's minor crashes saw Maybulk prices dipping as low as RM3.00 last August. Recent share market volatility also tested the counter's support where RM3.50 is the lowest for 2008 with RM3.80 as it's first line of defence.

With a declared dividend of RM0.30 FYE 2007 due this coming April 24th coupled with the steadying rise of the BDI after stabilizing, Maybulk share prices have started appreciating slowly in tandem. At the moment, the audited annual report for 2007 has not been released yet but the un-audited last quarterly report showed promising results for the future albeit a lower expectation than last quarter due to the lower BDI for the 1st quarter of 2008. If I have not read wrongly, there was a mention of 2 more sales of vessels by their subsidiaries for almost USD 80 million, which sale was to be completed by March 2008. Now bear in mind this was written in the last quarterly report which was released somewhere around mid February 08. I'm not sure if this one-off gain would be reflected in the 1st quarter results of 2008 though.

Looking at it from the BDI point of view, it certainly is staying around this level for a while. A recent OSK research paper on Maybulk states that China steelmakers and Australian iron ore miners have not reach an agreement of price hikes of 86.7% which Australians are asking for. China already reach an agreement with South America iron ore producers for a 65 - 71% hike but South America is farther. According to the research, either way is good for the bulk shippers because if China agrees on Australian prices for the hikes, more orders might come from South America side which would also yield a longer shipping route which I assume would mean higher cost of shipping. If China-Australia agreements concludes, then more confident orders would be made by steelmakers which would also boosts shipping business. Either way, BDI is expected to have more upside.

So do I think it would be a good time to buy? Heh, I'm a small timer and have time on my hands so I rather wait for future dips in the market to buy the counter. So far missed a few good chances to ride the upside after a dip. Who knows, maybe another dip in the markets might actually tempt me to start accumulating. Buying now and enjoying the 6.8% dividend yield before tax is also an option however.