Braemar Share Discussion Threads

[whittler100] 21/1/2022 11:59

We all have our reason to buy and sell shares in a company; after all, that’s what makes a market.

My thoughts on buying into BMS in early December 2021 are shown below; just sharing my reasoning and not a recommendation in any way:

When I first bought Clarkson CKN (I no longer hold), they and Braemar BMS were around the 200p mark: Clarkson had sound management that developed the business (now share price around £37). Clarkson has been a very well managed business yet Braemar has lurched from poor acquisition and lack of direction from a rather, now departed CEO.

Braemar has a refreshed team now leading the company with the previous head of the shipbroking service, James Gundy, taking over as CEO in January 2021, a new chairman in 2021, and a fairly fresh CFO as of 2019. Poor directors don’t become good directors so a refresh for a turnaround is IMO very important. The new CEO James Gundy does not strike me as a particularly charismatic type but seems to have a clear focus on the direction of the business.

The Bull Case:
The old management has been jettisoned and a fresh CEO with over 30 years experience in shipbroking, including time at Clarkson’s, is now in charge supported by what appears to be a competent CFO. We in effect have a new broom and let’s hope it’s as successful as Triggers Broom from Fools & Horses.

The non-core businesses which were often loss-making and acted as a handbrake on the company have been jettisoned & funds used to strengthen the balance sheet. The focus of the business under the strategy set out by the new CEO is on the core shipbroking and smaller corporate finance operations.

I do dislike nil-cost LTIPs but a careful analysis of the terms of the LTIP shows that the management will collect zero rewards unless there is substantial share price movement over the next 3 years measured from June 2021. In order for the full LTIP to be awarded, the share price will have to essentially double by 2024. I am comfortable with this.

Should the new strategy succeed then the valuation of BMS will hopefully get a decent percentage gap closer to that of the successful Clarkson which trades on a PE almost three times higher than that of BMS. A clear part of the strategy is the intention to double size of the business within four years via a mixture of both bolt-on acquisitions and organic growth

Margin: the current EBIT Margin is 8.6% and forecast to rise to 10.2% by 2024 yet if they are successful then maybe they will get a touch closer to Clarkson’s EBIT margin of 16%

Current trading in the subsector, essentially BMS & CKN, are buoyant. In the last 5 months BMS has issued two “Ahead” TUs and the most recent TU says in-line with recently upgraded expectations. In early December CKN issued an “Ahead” TU.

Skin in the game: The CEO Grundy owns just over 2% of the business & has recently bought a further 23,000 shares on 3/12/21 @ 210p & the CFO, Nick Stone, bought 10,000 @ 214p. Add to that the number of potential shares awards in the LTIP. I think they have every reason to drive the business and manage it like owners.

Any Share dilution? No, the share count has been fairly steady over the past 7 years

Dividends: currently set at a handy but not outstanding 2.5% & all being well, it should increase steadily but not IMO be the sole reason to own the stock.


The Bear Case:
Whilst the new management talks a good fight, they could prove to be as incompetent as the previous management.

What if for whatever reason there is a serious downturn in shipping demand and prices and thus commission fall.

The Free Float may not be attractive to some investors @ 53% & the spread is wider than that of CKN.


All just my thoughts and reasoning as to why I see BMS as a decent long term hold whilst we give the new management time to deliver hopefully following somewhat on the path of the very successful CKN

[edmundshaw] 21/1/2022 11:13

Longer term these look good to me.

I did in fact top slice myself at 270 and 280. However I don't really like to sell out when I like the long term (though I suspect I would have made quite a bit more money if I had been more aggressive like rivaldo...).

Look forward to rivaldo re-entering soon, very possibly with a modest trading profit.

[rivaldo] 21/1/2022 09:44

:o))

Most here will know I'm usually a very, very long-term holder of stocks. But sometimes people change their minds and take profits. Perhaps you'd have preferred to (a) not have known any of the useful info I've posted. Or (b) preferred me to not say anything about selling and then start posting again later saying what a brilliant investor I am in hindsight - as most posters do without any evidence - by saying I actually sold months ago and have now bought back in.

It seems honesty and gratitude are passé/unacceptable these days!

[spooky] 21/1/2022 09:08

Rivaldo puff, puff, ramp, ramp...............ooops i've sold them all. Not great.

[rivaldo] 21/1/2022 08:45

The sell-off is partly down to me, apologies! Had a look at the BDI now down massively to around its levels of a year ago. Knowing BMS' volatility and often illiquidity I decided to sell and take profits in case the market adjusted before me, particularly in these rotten markets.

Good luck all. I'm sure the trading update in mid-March will be good, but it's a while until then and there may be another buying opportunity before that.

[rivaldo] 20/1/2022 08:38

Kleinwort Hambros as the ESOP's trustee are certainly keen to mop up stock here - they now own 6.23% with just over 2m shares.

That's up from 1.57m shares on 21st December, so they've bought around 430,000 shares in a single month:

[rivaldo] 17/1/2022 11:07

The new issue of SCSW was out this weekend. In case anyone didn't know, BMS were one of the main new Buy tips in last month's issue. It should be OK to publish details now since the new issue is out.

Here's a couple of extracts from a long feature:

"Braemar Shipping - Plans to double in size in 3/4 years"

"The pandemic has reminded the world just how almost everything in our homes has, at some point, been transported by ship or lorry. About 80% of the goods we consume - including electronics, clothes, medicines and processed food products - are shipped in containers and average dry cargo charter rates (what it costs to ship a container from China to Europe) have tripled since the start of the year.
The pandemic led to changes in consumption and shopping patterns, which in turn resulted in changing trade patterns and imbalances. As some economies opened and others went into lockdown, empty containers got “stuck” on some routes where they were not needed, in addition to ongoing COVID-19-related delays in transport connection points, such as ports. I have just had one chief executive (IG Design - see page 8) bemoan not only the rise in freight rates for the boxes of greeting cards and crackers he has been shipping out of China but also that boxes have been taking 4-6 weeks to be released, whereas it would only have taken 48 hours previously. Fortunately, he says things are starting to ease.

Plans to double in size within 3/4 years

Braemar acts as agent to the owners and charterers of vessels and alongside shipbroking, it provides a comprehensive range of services in sale & purchase (S&P), new buildings and demolition. Going into the pandemic it wouldn’t have been considered a growth share investment; the industry is notoriously cyclical. But when charter rates and asset values rise, so too does its income and Braemar is ambitious; chief executive James Gundy, a life long shipbroker who joined two years ago, plans to double Braemar in size in the next 3-4 years through organic growth and acquisitions from a baseline of £112m sales and pretax profit of £8.1m (in the year to February 2021)."

"One of my questions to Stone was that given charter rates have recently gone into orbit, why has operational gearing not been seen in its recent results - after all, interims show Braemar’s diversified operation achieved only an 11% increase in Group revenue in H1 22 to £47.4m, a 10% increase in underlying operating profit to £5.6m and an 8% increase in underlying eps. Stone’s response was that there is a lot of noise in the numbers just published - next year will see a cleaner set of figures.

On top of this, Braemar is planning investments in the core business to meet a newly-stated aim of doubling the size of its shipbroking operations within four years. It intends to do this through a mix of acquisitions and organic growth, which will involve hiring new brokers covering not only existing segments and geographies but also new supplementary markets. It pays these incoming brokers cash upfront and they then join its team with a book of business. Stone says Braemar is strongest in tankers, specialised tankers, dry cargo and S&P but there are still opportunities to increase its US presence, develop European offices and grow its renewables capacity further.

Current forecasts obviously don’t reflect any such acquisitions or any potential growth in headcount and forecasts are unusually flat at 23p for each of the next three years, which reflects one segment waxing whilst the other is waning. The shares are cheap on a PE of 9x and Clarkson has just said trading is running ahead of market expectations - so it seems acquisitions, when they come, will fuel the fire. I am a buyer."

[rivaldo] 07/1/2022 12:09

Good to see the news wires picking up on my commentary :o))

"SMALL-CAP - WINNERS
----------

Braemar Shipping Services PLC, up 5.4% at 282.92 pence, 12-month range 145.00p-314.00p. The shipbroker rises in a positive read across from FTSE 250-listed Clarkson PLC, whose update on Friday paints a promising picture of the shipping industry. Clarkson says trading in December was stronger than anticipated. Clarkson's Broking division is among those to outperform expectations in December, company says. Clarkson shares are up 4.1%."

[rivaldo] 07/1/2022 07:09

CKN have once again released a trading RNS stating that they've outperformed, and one of the main reasons noted is the success of the Broking division, which should reflect well on BMS.

CKN will presumably do well today, but I'm invested here instead as the rating is so, so cheap compared to CKN and the potential upside that much higher:

[rivaldo] 06/1/2022 06:47

Cheers Tole - that should hopefully give BMS another push forwards.

[tole] 05/1/2022 17:52

https://masterinvestor.co.uk/equities/small-cap-comment-featuring-bms-alu-snws-and-flo/Braemar Shipping Services (LON:BMS) – at a discount to its peers The recent improvement in the share price follows on after the excellent results from its very much larger peer group player Clarkson. That company's figures have made certain investors realise the discount at which Braemar is trading currently. There should be a bullish Update on the current year's trading being announced within the next two months. The fiscal year ends on 28 February and what an eventful year it has experienced especially in its shipbroking business. After falling away to just 200p at the beginning of last month, the company's shares closed strongly at 271.5p by last night. Is the market now expecting to hear bullish news with its profit expectations being surpassed? I see them over the 300p level very soon, with last year's 323p peak an obvious objective.

[rivaldo] 03/1/2022 08:01

Happy New Year everyone.

This story in today's Telegraph indicates that BMS's Sale and Purchase desk will continue to be buoyant...(subscriber-only though):



"The Telegraph

Old ships sail on as prices soar on supply chain chaos

Ship owners are cashing in on global supply chain chaos as old container vessels soar more than 600pc in value and sales in a lucrative second-hand market rocket

etc"

[1knocker] 29/12/2021 16:30

Another good day. I want 315, and then I shall be out, and a very happy man.

[rivaldo] 24/12/2021 09:33

Responding well to decent early volumes today. But still only just on a double-figure P/E.

[1knocker] 23/12/2021 21:26

Nice to be above my 234 top up price, with more to come I hope.

[rivaldo] 21/12/2021 13:33

Good to see the share price consolidating and continuing to bounce upwards - hopefully soon back to 260p just for starters.

[irenekent] 17/12/2021 14:28

It must be as cheap as chips - they have just paid the lowest interim div since before 1998. I think this company may be a target next year and if I was management I would be anticipating retirement. Forced retirement.

[irenekent] 17/12/2021 14:28

It must be as cheap as chips - they have just paid the lowest interim div since before 1998. I think this company may be a target next year and if I was management I would be anticipating retirement. Forced retirement.

[rivaldo] 16/12/2021 08:23

David Thornton at Growth Company Invest has picked BMS as one of his Stock Ideas for 2022 as a "Cheap as Chips" company (from around 32 minutes in):

[rivaldo] 13/12/2021 13:37

Like you I prefer to read the paper version given the choice. I suspect many readers (particularly older ones!) aren't specifically aware of the actual publication date as it varies (and is sometimes changed late on) quite often, so their interest is flagged in these stocks when they receive the actual hard copy in the post.

[bull19] 13/12/2021 12:45

Incidentally, have I missed H2 NAP no.10? I'm guessing they just couldn't find a 10th stock to back with enough conviction

[bull19] 13/12/2021 12:43

I agree that this was the most interesting of the 3 but even this doesn't take my fancy tbh. Not that there is anything wrong with it, but I've already got too many holdings to keep track of! I got my edition on time but when it's been late before, I've read the online version instead which I'd expect most people do? I do prefer reading the hard copy, given the choice though!

[sphere25] 13/12/2021 11:39

Thanks 1knocker. It is too hard to get them all. I thought this one was going to consolidate for abit before the move higher, but that sneaky 16:59 director shareholding news release appears to have turned the tide.

Surprised this hasn't moved more for holders on the SCSW tip. That can clearly be said now... seen as well...yeah ^ :-)

Interestingly all three main tips have had a very muted response. That is as benign as I can remember, folk are normally falling over themselves to buy.

Quiet out there too...

It doesn't look like anyone wants to make big moves. Maybe more jitters on what the Scientist's and their erm.."models" are saying to Disco Boris.

Surely not another lockdown? Surely not another visit to U-turn City.

Ooerr...

The wait goes on.

All imo
DYOR

[rivaldo] 13/12/2021 09:19

Cheers amencorner.