Braemar Share Discussion Threads

[woodcutter] 02/11/2012 08:34

Some interesting news commentry

A slew of economic data from China and the Pacific Rim show that orders are picking up and trade is rebounding after the industrial recession of the past few months. The Baltic Dry Index, measuring shipping rates for commodities – watched as a proxy for Chinese demand – has come back from the dead, rising 50 per cent since July. Container freight rates on Asian routes have started to recover. The Danish group Maersk raised its shipping rates two weeks ago, and the Chinese operator COSCO followed suit on Thursday. The HSBC/Markit index for Chinese manufacturing jumped to 49.5 in October. It is still below the expansion line of 50 – for the 12th month in a row – but domestic orders have risen sharply, suggesting that the world's second-biggest economy is at last generating its own momentum. "China's manufacturing sector has picked itself off the floor but it is not moving with anything like the speed we've been used to over the past few years," said Mark Williams from Capital Economics, The Telegraph says.

WC

[woodcutter] 31/10/2012 17:05

WJ

I think you have a fair point on the cycles but there is still overcapacity in the system and i very much agree with you that we are at or near the begining of the end. But, we may well bump along like this for some time and the longer we do the more margins will be squeezed and fixed costs will come under pressure to maintain eps. The question is at what point to enter. (in my case)

Not so long ago i was a holder from 330p and watched it rise and fall and i subsequently got out for a small profit. At that time i could see it was going to be a difficult period and thought it may well drop significantly below 300p, it didn't and i was wrong (we don't always call it correctly) it has continued to rise since those lows. IMO that has been helped by environmental.

As I've said it's a good business, great divi, great balance sheet and good cashflow. I could enter now and buy on any downturn as we both know it will, at some point when the BDI resumes normality, be a very good bet. As spob point out it's a good take over target too. I just happen to have a feeling that in 12 months time it will be a lot cheaper if my thinking is correct, it's a gamble but that's why we're here i guess.

Woody

[woodcutter] 31/10/2012 10:57

WJ

Well it's moved up today and looks like a breakout so you may be right;-)

WC

[spob] 31/10/2012 10:02

also there is the well covered 6.3% forward yeild to consider

plus you have companies like clarkson, with mountains of cash on its balance sheet, who could swallow this company whole with its loose change


i have added here, just recently

[spob] 31/10/2012 09:56

take the 17m net cash away from the current market cap

you then get a better idea of the TRUE pe ratio here

this company is cheaper than it looks

[wjccghcc] 31/10/2012 09:35

Woody, I think you need to factor in the huge swings in the shipping cycle a bit more. Brokerage margins suffer at the bottom of the cycle due to the element of fixed costs. If the BDI is still at an all time low in a year's time, then your worse case scenario is not impossible, although I estimate growth in technical and reduced investment in the brokerage side to compensate for at least 1mm of the envrionmental PBT. The point is that we are grinding along the bottom of the cycle and while there may be another 12 months before any lasting pickup, we are near the beginning of the end rather than the end of the beginning IMHO.

I see Westhouse has upgraded PBT forecasts by 15% for this year and 20% for next year.

[woodcutter] 31/10/2012 09:19

Looking at a worst case scenario for the next H1 results(i figure H2 will be fine as there is still the residue of the environmental contract)Assuming revenues and pbt for the other divisions remain constant (brokerage may be under further pressure to reduce margins as there is still over capcity in the system)

Then the total pbt would be
£2509+£1243+£967-£1695 (unallocated)+ say £100 finance income

total £3124 tax at 28% leaves £2230 profit which is 10.3eps

With an interim dividend at 9p this is tight except for the fact there is plenty of cash on the balance sheet, which incidentally could result in a special divi at some stage.

There's no doubt it's a sound business and the diversification is commendable even if the margins are a little less than brokerage but next year is going to be more difficult in terms of maintaining the eps imv.

Woody

[woodcutter] 30/10/2012 21:19

The segmental results from note 4 including amortisation PBT

This period in £'000
ship brokerage £2509
technical £1243
logistics £967
Environmental £2012

last year same period
ship brokerage £3246
technical £689 (excluding one offs)
logistics £1021
Environmental £59

Unallocated cost £1695 possibly spread across all divisions.

It's clear environmental is significant and so too is technical.

Revenue This period in £'000
ship brokerage £24193
technical £19129
logistics £18896
Environmental £17278

Revenue last year same period
ship brokerage £23951
technical £15539
logistics £19719
Environmental £2312


pbt Margins are this period:
ship brokerage 10.4% over 3% less than last year
technical 6.5% improvement of over 2%
logistics 5.1%
Environmental 11.64% big impact

pbt Margins are last year same period:
ship brokerage 13.6%
technical 4.4%
logistics 5.2%
Environmental 2.5%

You may have a case but then again i'm not sure. As the brokerage margins have decreased (i guess due to the cycle and current business climate) the technical margins have increased to make up for the loss of pbt and more significantly with environmental division help sustain the pbt.

However in the case of technical the margins are still someway below that of brokerage. What's interesting is the technical revenues have increased significantly but at those margins they'll have to go quite a bit to make up for the shortfall in environmental pbt assuming the brokerage margins remain the same and the logistics margins can be sustained with the environmental revenue becoming choppy.

This can only be achieved by reducing costs in the tech division or increasing revenue significantly. There has been no growth in logistics revenue either and their margins have remained static

I have made no provision for the unallocated cost which were about £600k difference betweem the periods, their impact on the margins i would assume to be limited or at least equal all round

The dividend yield is very good and maybe worth holding for but i still believe the difference in margins across the divisions is a significant issue and will have an impact in due course unless the brokerage revenues increase pro rata and/or margins improve.

One thing is for certain at some point in the cycle they will increase brokerage revenues and possibly margins will return to normal within the business and the share price will move north and given the small share base it's likely to move rapidly. The issue for me at present is not if to invest but when. I figure the share price is more likely to fall in the short term and i'll hopefully invest at a lover price, time will tell.

The interims next year will be very interesting.

Woody

Post note:
The BDI has just had it's worst qtr in 14 years so i don't hold much hope of improvement in margins for brokerage.

[wjccghcc] 30/10/2012 19:05

Not sure I agree.

Without the environmental contribution, PBT would have been flat on last year. Given the brokerage profits were down by 0.6mm due to investment and the lowest BDI for years that's actually not bad, particularly as the technical side grew PBT by 56%. It means that FY is likely to beat the current market consensus even with a smaller contribution from environmental.

It also seems that the shipping downturn is working its way through the system and while the cycle is grinding along the bottom, it is likely to pick up towards the end of next year. In a good year, operating profits from the brokerage side would be at least 3x what they are today.

And while you wait for the cycle, it has 20% of the mkt cap in cash and a yield of over 6%. I can be patient.

[woodcutter] 30/10/2012 14:42

With the H1 results out today i can't help feeling this has moved a little ahead of itself. Such a major contribution to turnover and profit from the Environmental division dealing with the MSC Rena incident in New Zealand, which will be wound down by year end suggests that going forward there will be a gap in turnover and earnings. As it says in the report these contracts tend to be very indeterminate in frequency.

I held for a while and still follow closely, it's had a good run on the share price recently but i think it's now a bit pricy. I confess i haven't done a real detail job on these interims but i think there's enough in the environmental division statement to be wary.

Nevertheless great cashflow and divi but as i've said before the margins on some divisions (which appear to be growing)are not as good as the main brokerage division so one to continue to watch.

WC

Post note:
Profit contribution from the Environmental division was £2m+ if you strip this out you can see the impact this might have when the NZ clean up is complete by year end.

[deadly] 13/8/2012 13:33

Big jump today, not obvious why.

[northernlass] 01/8/2012 09:53

Olympics Boost For Braemar

MAKE MONEY FROM BRITAIN'S SUMMER IN THE SPOTLIGHT

Alex Wright, UK Smaller Companies fund manager picked Braemar Shipping Services, which has the rights to a number of cruise ship berths in the Thames – and will benefit from cruise liners wanting to moor up in London during the Olympics.

Source:


Westhouse Securities reiterates its BUY recommendation for Braemar with a target price of 390p.

P.S.
Here's some of links about SCLP, one of the hottest stocks at the moment:

[legged over] 20/6/2012 07:58

James Kidwell (CFO since 2002) takes over from Alan Marsh as CEO.

[woodcutter] 15/5/2012 18:50

sold for a small profit, can't justify hanging in for the divi and do not see earnings for next year improving, indeed i see a drop in earnings and divi reduced so on further analysis i think 300p is possible tops and may see 270p in the next 12 months. Now on my watch list and will keep an eye out for the cyclical upturn with a view to buying then.

Woody

[jeavom] 08/5/2012 21:19

Shipping glut to persist, Braemar warns - FT.com - Shipping

[jeavom] 08/5/2012 21:16

IC update:

Overcapacity kept freight rates low last year, slicing margins at Braemar Shipping 's core broking business. Acquisitions and one-off salvage work aided profits elsewhere, but an eight-year run of rising dividend payouts has ended here and we see no need to rethink our sell advice.

Indeed, ship broking revenue fell 19 per cent and, despite a 5-10 per cent increase in chartering transactions, weak rates hit commissions, halving adjusted divisional operating profit to £7.1m. Moreover, the forward order book fell almost a quarter to £19m and Braemar admits tonnage surplus will continue to affect the industry "for a few years to come".

Still, other work now accounts for nearly two-thirds of revenue. Acquisitions added £10.5m to the top line at Braemar's technical division, too, and logistics was more profitable than expected - clearing up after the cargo ship Rena ran aground off New Zealand in October proved lucrative for the environmental unit. Revenue there doubled to £14.5m and profits jumped from almost nothing to £1.86m. Work is expected to wind down through the second half, but could go on "a lot longer" if the authorities choose to recover the now sunken stern.

Prior to these results, Westhouse Securities had forecast adjusted EPS of 39.1p for 2013 (2012: 39.05p)

[jeavom] 08/5/2012 11:26

Revenues were up 6% for the group but pre-tax profits were down just over 25%. EPS down 30% from 48.41p to 33.84p. I suspect this has a little more to fall still. No real catalyst for share price growth for a few years based on the statement.

As you say woodcutter, drift to 300p seems plausible. The price is down just over 30% since the beginning of the year, so most of the EPS fall is probably in the price now.

Technical chart over five years suggests 300p to 320p is where the recovery bounce might start. A worse case would be a drift to 275p (based on 12 month -2 sd from trend). I will probably look for a little bit of positive momentum before committing to BMS still.

[redips2] 08/5/2012 11:03

Cheers woody----totally agree with your thoughts---£3 was my entry point, and will be my re-entry point.

[woodcutter] 08/5/2012 10:05

Just a further note on the dividend, covered 1.5 times is not too bad when taking into consideration there is no debt to finance, would like to see it closer to 2 times though.

Woody

[woodcutter] 08/5/2012 09:42

Whilst these results aren't too bad the underlying decline in the ship brokering side of the business is of concern. This division is where the bulk of the profit comes and the margins are also best in this segment too(enviromental segment margins are comparable).

However much they grow the Technical and Logistics divisions they are unlikely to fill the profit gap lost in the brokerage division (margins 4% verses 12%) and the long term future of the current dividend does look at risk. On this basis i can see the share price drifting lower back to around 300p, (per historically about 8 or 9 at approx 34p earnings) at this point the shares would start to look good value on the basis that the ship brokering division would at some point return to normal.

It's basically a cyclical play and provided the dividend isn't hit too hard over the next couple of years it's worth buying on the dips just for the income imv.

Woody

[redips2] 02/5/2012 19:34

Not sure you have missed anything Mark----have funds ready if they go a lot lower, nothing wrong here imo, we will see what tomorrow brings.

[jeavom] 02/5/2012 17:21

Been looking at this for a while to buy but held off until the next results are coming out. Surprised to see the sharp fall today, as I thought most of the bad news was already out of the way. Wondering what I missed...

Mark

[woodcutter] 02/5/2012 16:53

Don't understand the drop today, no news and down nearly 10%. No other major falls in the sector, indeed ckn up slightly so very puzzling and their results weren't bad either. last few rns very positive and director buying too, although Marsh past purchases haven't always been very informative, more often than not they have been ill timed.

Can only assume possible rumour about results or outlook going forward. Anyway we'll know about that in the next week or so for sure. According to morningstar results due 9th May, though i haven't seen this confirmed anywhere.

Woody

Post note: Deadly more buys than sells so very odd

[deadly] 02/5/2012 16:48

Always trades with thin volume, and only takes a few sells to move it down sharply. Time to buy some back.

[robcoo] 02/5/2012 16:45

Anyone know what's happened here?