Thursday, after market, CMB will report 4Q11 results.
Spot Capesize earnings averaged last year at $ 14,433/day, down from $ 30,587/day in 2010. Following an extremely weak first half, with rates even not covering operating expenses, the dry bulk market has firmed significantly during the second half. Rates bottomed in February at almost 0 and remained extremely volatile and low during the second quarter. Spot rates increased from levels at around $ 10k/day in July to close to $ 30k/day at the end of September and remained close to that level during the fourth quarter (Q4 average of about $ 28.6k/day).
However, rates have plunged in the early days of 2012 from levels over $ 30k/day end-of-December to below $ 10k/day currently (rates dropped by 47.7% last week to $ 7,839/day on Friday). Last year, the world dry bulk fleet expanded by 14.0% to 611.1m dwt, leaving an order book of 200.9m dwt (32.9%). The world Capesize fleet expanded by 17.6% to 245.8m dwt, leaving an order book of 87.2m dwt, equivalent to 35.5% of the current world Capesize fleet.
Given Bocimar’s extensive fleet cover, results remain relatively shielded from volatility in the spot market. In our scenario, we bank upon EBITDA, EBIT and net result for the quarter of respectively € 41.2m, € 22.8m and € 25.9m. With the US$ exchange rate firming from $ 1.339 to $ 1.296/€, we expect a positive impact from exchange rate differences on the Group’s cash US$ position of about € 8m.
In December, CMB announced to have reached an agreement for the termination of Bocimar’s counterparty insurance. Within the framework of this agreement, Bocimar has received an indemnity of $ 120m. This amount will be accounted for in the results over the remaining period of the previously insured contracts. CMB has recently (notification of 12 January) reduced its historical shareholding in Clarkson by 720,000 shares (worth about L 8.5m) to 2,519,650 currently (13.27% interest). We do not rule out CMB to further unwind its shareholding in Clarkson in a disciplined way.
Conclusion:
At current exchange rates, CMB’s NAV is estimated at approximately € 20.8 per share. The financial participations in FMG and Clarkson account for approximately € 4.9 per share. Rating and target price confirmed.