Docstoc

DRY BULK SHIPPING JAN 12

Document Sample
DRY BULK SHIPPING JAN 12 Powered By Docstoc
					January 30, 2012




          REGIONAL

          MALAYSIA
                                                        DRY BULK SHIPPING                                                     SHORT TERM (3 MTH)     LONG TERM


         SINGAPORE

         INDONESIA

          THAILAND

 CHINA, HONG KONG                                                                                                           Conviction


                      Notes from the Field
                                                        A long dry season ahead
                                                        The weak global outlook and slowing growth in China will ensure that
                                                        dry bulk demand stays suppressed. This is in contrast to the dry bulk
                                                        fleet which is in for another year of record deliveries. Rates are likely
                                                        to continue sliding before recovering slightly in 2014.

                                                          Figure 1: Baltic Dry Indices - long-term view
 Raymond Yap Kok Hoe CFA
 T (60) 3 20849769
 E raymond.yap@cimb.com                                     20,000
                                                                                  Baltic Capesize Index
                                                                                  Baltic Panamax Index
 For information please contact Calvin Yew at               15,000                Baltic Supramax Index
 (60) 3 20849964 or calvin.yew@cimb.com                                           Baltic Handysize Index


                                                            10,000
  “2012 has long been
  expected to be a difficult                                 5,000
  year because of the
  volume of new ships                                           0

  expected to be delivered.                                             M MJJAS DJF A AS N F AMJJ O F A
                                                                      JF A
                                                                     03
                                                                               ON M MJJ O DJ M
                                                                                 04       05
                                                                                                 AS NDJ M MJJAS DJF A AS N F A AS N F AMJJAS DJF A
                                                                                                     06
                                                                                                               ON M MJJ O DJ M MJJ O DJ M
                                                                                                                 07       08         09
                                                                                                                                            ON M MJJAS DJF A AS N
                                                                                                                                                      ON M MJJ O DJ
                                                                                                                                              10        11        12
  Surging ship deliveries is                                                                                                           SOURCES: CIMB, BLOOMBERG
  sinking the fortunes of dry
  bulk shipping firms.”
                                                        We maintain our Underweight sector
                                                                                                                   Record fleet deliveries
                          ─ Paragon Shipping            call. Our top pick is Pacific Basin on
                                                                                                                   2012 will see another round of
                                                        its extremely cheap valuations. Our
                                                                                                                   record vessel deliveries, leading to an
                                                        top sell is STXPO as it is expected to
                                                                                                                   average fleet growth of 13.2% which
                                                        be unprofitable. We have cut EPS by
                                                                                                                   will worsen the oversupply situation.
                                                        up to 40%, though we raise forecasts
                                                                                                                   The current order book still stands at
                                                        for PSL. Maybulk has been
                                                                                                                   a substantial one-third of global fleet
Highlighted Companies                                   downgraded from N to UP.
                                                                                                                   despite     last     year’s     record
Pacific Basin                                                                                                      newbuilding deliveries. We do not
Pacific Basin’s share price appears to have             China’s waning appetite for                                expect a huge volume of demolitions
reflected the negatives as it is trading at a massive
47% discount to SOP. At the current price, zero
                                                        iron ore in 2012                                           given the relatively young fleet. The
value has been assigned to its dry bulk fleet which     Bulk demand growth is expected to                          growing global supply of ships will
has an average age of just 7½ years.                    slow down from 4.5% in 2011 to 3.9%                        keep demand for bunker fuel high.
Precious Shipping                                       in 2012 as China’s iron ore imports                        High bunker costs will eat into bulk
We do not expect PSL to offer investors excitement      decline. For the first time in a decade,                   companies’ profits.
in the immediate term. But it has enough firepower
to purchase more than 20 secondhand ships in a
                                                        property starts in China are expected
declining market, which would enable it to reap the     to decline due to the tightening                           A recovery only in 2014
rewards in the next upcycle.                            measures       imposed       by     the                    The demand-supply imbalance is set
Maybulk                                                 government in 2011 and investors’                          to last at least until 2013. Even a
Maybulk is unlikely to be able to cover the loss of     pessimism on the property sector.                          recovery in 2014 is uncertain if
earnings from the expired money-spinning Tenaga
contract. This, plus the deteriorating fundamentals
                                                        China’s steel production has been                          global growth continues to stagnate.
of the dry bulk market, underpins our expectations      declining since mid-2011 while iron                        For 2012, supply growth is projected
of an earnings decline in the coming years.             ore stockpiles are at a peak. Away                         to outweigh demand growth by
STX Pan Ocean                                           from China, world economic growth                          nearly 3x. Our revised BDI forecasts
STXPO is expected to incur losses in 2011 and           is expected to slow, which is likely to                    are 1,228 points for 2012 (-20.8%
beyond. It is also the most heavily geared and has
a substantial portfolio of vessels acquired at high     result in lower demand for bulk                            yoy), 1,099 (-10.5%) for 2013 and
pre-GFC prices. We expect the share price to halve      commodities.                                               1,154 (+5%) for 2014.
as pressure mounts.




IMPORTANT DISCLOSURES. INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.
                                                                                                                                        Designed by Eight, Powered by EFA
DRY BULK SHIPPING
January 30, 2012




KEY CHARTS


High bunker price eating into earnings
In contrast to the low freight rates, the bunker fuel price is       800
                                                                                                                         Singapore Bunker Fuel (US$/MT) - LHS
                                                                                                                                                                          14,000

close to its 2008 peak. Fortunately, most bulk companies             700
                                                                                                                         Baltic Dry Index - RHS
                                                                                                                                                                          12,000
are still profitable, albeit earning thin margins. However, if                                                                                                            10,000
rates continue to fall, some bulk operators may not be able          600

to cover daily operating expenses.                                   500
                                                                                                                                                                          8,000

                                                                                                                                                                          6,000
                                                                     400
                                                                                                                                                                          4,000

                                                                     300                                                                                                  2,000

                                                                     200                                                                                                  0
                                                                                                                                O
                                                                            J FMAMJ JASONDJ FMAMJJASONDJ FMAMJ JASONDJ FMAMJ JAS NDJ FMAMJ JASONDJ
                                                                           07             08           09            10            11            12




China property new starts to decline in 2012
For the first time in a decade, China property starts are              2,000                                                                                              50%
                                                                                                    Total property new starts (m sq m)
expected to decline by around 10%, after growing at a                  1,800
                                                                                                    Growth rate (%)                                                       40%
10-year compounded rate of 17.7%. This has major negative              1,600

implications for steel production and consequently, the                1,400                                                                                              30%


demand for iron ore and coking coal imports, which could               1,200
                                                                                                                                                                          20%
                                                                       1,000
further depress freight rates.                                                                                                                                            10%
                                                                           800
                                                                           600                                                                                            0%
                                                                           400
                                                                                                                                                                          -10%
                                                                           200
                                                                               0                                                                                          -20%
                                                                                    99    00   01       02     03   04   05    06     07   08      09   10   11     12F




Bulk fleet has doubled in six years
The bulk fleet has grown to nearly 600m dwt currently                900
                                                                                   Bulk fleet (m DWT)        Bulk orderbook (m DWT)
from just 300m dwt at the start of the 2005. Based on the            800

current outstanding order book and assuming no further               700

orders, the bulk fleet could grow an additional 200m dwt             600

over the next 2-3 years. Newbuilding deliveries from orders          500

placed back in the boom years of 2007-08 have caused the             400

current oversupply situation.                                        300

                                                                     200

                                                                     100

                                                                      0
                                                                      2005                           2007                         2009                       2011




Second-hand vessel prices far off its peak
Bulk vessel values continued their descent in 2011 as freight         160
                                                                                                                                                  Capesize - 170,000 dwt
rates weakened. Vessel prices are now 58-75% below their                                                                                          Panamax - 73,000 dwt
peak in 2007-08 after falling by another 10-24% in 2011               120
                                                                                                                                                  Handymax - 45,000 dwt
                                                                                                                                                  Handysize - 25-30,000 dwt
alone. The bigger price declines are seen in the larger
segment vessels such as the capesize and panamax as they               80
have seen the greatest rate volatility.
                                                                       40



                                                                           0
                                                                                J MM J S N J MM J S N J MM J S N J MM J S N J MM J S N J MM J S N J MM J S N J
                                                                               05         06         07         08         09         10         11         12


                                                                                                                              SOURCE: CIMB, COMPANY REPORTS




                                                                 2
DRY BULK SHIPPING
January 30, 2012




  Figure 2: Sector Comparisons
                                                                       Price    Target Price    Market Cap    Core P/E (x)          3-year EPS         P/BV (x)                 Recurring ROE (%)              EV/EBITDA (x)    Dividend Yield (%)
  Company                    Bloomberg Ticker        Recom.
                                                                 (local curr)    (local curr)      (US$ m)   CY2011 CY2012            CAGR (%)      CY2011 CY2012           CY2011 CY2012 CY2013               CY2011 CY2012 CY2011 CY2012
  Malaysian Bulk Carriers            MBC MK      Underperform         RM2.65         RM1.62            871     26.6       36.5          -30.6%        1.54      1.54          5.9%       4.3%      3.8%          15.9      23.7     2.6%      2.6%
  Pacific Basin Shipping             2343 HK       Outperform        HK$3.60        HK$5.45            899     16.9       21.9          -25.5%        0.57      0.57          3.4%       2.6%      3.2%           5.4       5.8     1.6%      2.3%
  Precious Shipping                   PSL TB          Neutral       THB16.40       THB17.00            547     34.4       28.4           17.7%        1.00      0.97          3.0%       3.5%      6.2%          10.9      13.2     2.6%      2.5%
  STX Pan Ocean                       STX SP     Underperform         S$7.67          S$3.75         1,260        na        na         -266.5%        0.63      0.68         -9.4%      -7.5%     -9.7%            na    166.7      0.0%      0.0%
  Thoresen Thai                       TTA TB        Not Rated       THB21.40                -          488     29.2       23.6           18.8%        0.51      0.52          1.7%       2.2%      3.6%           9.2       7.4     1.9%      1.9%
  China COSCO                        1919 HK        Not Rated        HK$4.48                -        7,599      -6.7     -22.2          -34.4%          0.9      1.0        -11.6%      -4.5%      4.8%            na      38.5     0.0%      0.2%
  China Shipping Devt                1138 HK        Not Rated        HK$5.32                -        2,997     14.0       11.4             7.6%         0.6      0.6          4.9%       5.8%      8.0%          13.7      11.9     2.2%      2.6%
  Sinotrans Shipping                  368 HK        Not Rated        HK$2.03                -        1,045     10.1        9.5             1.6%       0.48      0.46          4.8%       4.9%      5.8%           1.3       0.9     3.4%      3.8%
  Sincere Navigation                  2605 TT       Not Rated      TWD26.00                 -          496       8.1       8.2            -4.5%       1.02      0.98         13.3%      12.2%   11.4%             5.1       4.7     7.6%      6.9%
  U-Ming Marine                       2606 TT       Not Rated      TWD44.65                 -        1,286     15.5       18.3          -28.0%        1.47      1.49          9.2%       8.1%      9.0%           8.6       9.9     4.7%      4.0%
  Dry bulk group                                                                                                 na       94.8           -24.9%       0.88      0.88          -2.8%      0.5%      4.4%          29.6      17.6     1.2%      1.2%

  China Shipping Container           2866 HK     Underperform       HK$1.80         HK$1.20          4,215         na       na          -193.8%         0.65        0.73     -9.8%      -12.3%      -14.6%          na          na       0.0%        0.0%
  Neptune Orient Lines               NOL SP      Underperform        S$1.32          S$0.87          2,722         na       na          -204.4%         0.94        1.09    -11.0%      -14.8%      -23.2%        78.7        87.8       0.0%        0.0%
  Orient Overseas Intl Ltd            316 HK          Neutral      HK$42.05        HK$33.80          3,392       31.6     64.8           -79.0%         0.81        0.81      2.2%        1.2%        0.2%         8.9        10.1       0.9%        0.4%
  SITC International                 1308 HK       Outperform       HK$2.12         HK$2.55            709        8.5      8.9           -10.9%         1.11        1.03     13.5%       12.0%       12.1%         3.3         4.5       4.1%        3.9%
  Evergreen                           2603 TT       Not Rated     TWD16.30                -          1,900         na    149.3           -31.1%         0.89        0.89     -0.8%        0.6%        7.1%        24.3        13.8       0.7%        0.5%
  Wan Hai                             2615 TT       Not Rated     TWD15.10                -          1,124       33.0     18.9           -22.9%         1.12        1.11      3.3%        5.9%        7.8%         7.4         6.3       0.8%        1.4%
  Yang Ming                           2609 TT       Not Rated     TWD12.25                -          1,159         na       na           -41.6%         0.99        1.04    -17.7%       -9.4%        6.4%       754.0        17.8       2.0%        0.0%
  AP Moller-Maersk               MAERSKA DC         Not Rated    DKK38,440                -         30,751       12.9     12.5           -11.7%          0.9         0.8      7.7%        7.2%        9.4%         3.3         3.5       1.9%        1.9%
  Container group                                                                                                15.5     16.7            -29.4%        0.84        0.82      3.6%        3.4%        5.5%         4.4         4.7       1.0%        0.9%

  MISC Bhd                           MISC MK     Underperform        RM5.96          RM5.48          8,743        62.3    27.3            -0.9%         1.30        1.30      2.0%        4.8%        5.7%        24.9        18.7       4.2%       4.2%
  Teekay Corp                           TK US      Not Rated       US$27.02               -          1,941          na      na                na        1.31        1.31    -26.0%       -3.1%        0.3%        10.7         8.5       4.7%       4.7%
  Frontline                           FRO US       Not Rated        US$5.16               -            402          na      na          -162.7%         0.88        1.22    -42.9%      -20.7%      -13.2%        13.0        13.1       3.1%       0.5%
  Tsakos Energy                       TNP US       Not Rated        US$6.56               -            302          na      na           -17.3%         0.32        0.34     -5.0%       -4.0%        1.4%        16.2        13.5       9.1%       8.1%
  Overseas Shipholding               OSG US        Not Rated       US$12.98               -            395          na      na                na        0.26        0.30    -12.5%      -12.3%       -4.4%        71.0        32.5      10.3%       6.8%
  Teekay Tankers                      TNK US       Not Rated        US$4.61               -            279        23.9   153.7           -17.9%          0.6         0.6     -1.7%        0.7%        2.0%         9.6        11.1      16.7%      12.9%
  Berlian Laju Tanker                  BLTA IJ     Not Rated       Rp196.00               -            252         2.1      na                na        0.24        0.27     13.9%       -5.6%       -0.6%         8.6         7.3       0.0%       0.0%
  Odfjell                             ODF NO       Not Rated       Nok40.40               -            601       -21.4    18.0                na         0.5         0.6     30.5%        2.7%        6.3%         9.8         7.6       1.8%       4.0%
  Stolt-Nielsen                        SNI NO      Not Rated      Nok129.00               -          1,426        13.0    12.6            14.1%         0.85        0.82      6.8%        6.6%        9.2%         9.0         7.9       4.6%       4.5%
  Teekay Offshore                     TOO US       Not Rated       US$29.43               -          1,848          na    18.0            13.1%         2.97        2.66     -5.8%       15.5%       15.6%         9.7         8.7       6.7%       7.2%
  Tanker group                                                                                                     na     95.0            38.4%         1.01        1.03      -2.1%       1.1%        4.1%        13.9        11.5       4.8%       4.7%

  Kawasaki Kisen Kaisha               9107 JP      Not   Rated        ¥144                  -        1,437        3.5      na           -178.9%         0.37        0.42     10.5%      -12.5%       -5.6%         4.9        44.1       6.2%        0.0%
  Mitsui OSK Lines                    9104 JP      Not   Rated        ¥291                  -        4,577        6.3      na            -41.0%         0.56        0.53      8.3%       -1.8%        1.7%         5.1        15.6       3.3%        1.3%
  Nippon Yusen KK                     9101 JP      Not   Rated        ¥195                  -        4,323        4.7      na                 na        0.51        0.51     10.6%       -3.4%        0.9%         5.1        13.1       5.1%        1.7%
  Hyundai Merchant Marine           011200 KS      Not   Rated   Won28,750                  -        3,667         na      na                 na        2.02        2.24    -21.8%      -10.0%        2.4%       515.2        25.6       0.7%        0.9%
  Diversified group                                                                                               8.4      na             -59.2%        0.62        0.63      7.2%        -4.8%       0.3%         6.2        17.4       3.5%        1.2%

  Average (all)                                                                                                  26.9     74.5            -27.2%        0.85        0.85       2.2%       0.8%        4.1%          6.9        8.3       2.0%        1.6%
                                                                                                                                                                                                             SOURCES: CIMB, COMPANY REPORTS




                                                                                                                                 Calculations are performed using EFA™ Monthly Interpolated Annualisation and Aggregation algorithms to December year ends


                                                                                                             3
DRY BULK SHIPPING
January 30, 2012




  Table of Contents
  1. REVIEW OF 2011
  2. OUTLOOK
  3. RISKS
                                                         p.4
                                                        p.12
                                                        p.18
                                                                   A long dry season ahead
  4. FINANCIALS                                         p.18
  5. VALUATION AND RECOMMENDATIONS                      p.19
                                                                   1. REVIEW OF 2011
                                                                   1.1 Bulk rates fell 36-52% in 2011
                                                                   The BDI fell 44% in 2011, from an average of 2,753 to 1,550 points. The rates for
                                                                   capesize vessels saw the largest decline of 52% due to massive fleet deliveries
                                                                   during the year and the impact of several catastrophes. Panamax rates were not
                                                                   spared either, plunging by 44% due to the floods in Australia which slashed coal
                                                                   exports and Japanese tsunami that damaged a major coal import port.
                   Notes from the Field
                                                                   At the start of the year, floods in Queensland disrupted coal exports which
                                                                   dented demand for bulk carriers due to the lack of cargoes. Queensland is the
 “2012 has long been                                               main supplier of the world’s seaborne coking coal exports. As the year
 expected to be a difficult                                        progressed and the water receded, exports gradually resumed. Then in March,
 year because of the volume                                        Japan was struck by an earthquake and then a tsunami. The event triggered a
 of new ships expected to be                                       number of shutdowns of nuclear power stations in Japan. Both capesize and
                                                                   panamax rates declined as it was apparent that Japan’s imports will fall in the
 delivered. Surging ship                                           coming months and it will take time before reconstruction efforts begin.
 deliveries is sinking the
 fortunes of dry bulk                                              From early August, capesize rates started to rally but rates for the small vessel
                                                                   segments did not similarly benefit. The capesize rally was caused by several
 shipping firms.”                                                  factors 1) strong iron ore restocking by Chinese steel mills, 2) resumption of
                              ─ Paragon Shipping                   Australia’s coal exports, and 3) rising coal and iron ore imports by Japan. Rates
                                                                   dipped in late October but rallied further in November and December as iron
                                                                   ore prices sank sharply, which encouraged Chinese mills to restock despite weak
                                                                   demand for steel. Capesize rates ended 2011 at US$27,500/day, higher than the
                                                                   year’s average. Rates for the other the vessel segments ended the year lower.

                                                                       Figure 3: Change in average BDI index and earnings (US$/day) for dry bulk vessels
                                                                                              BDI           Capesize              Panamax              Supramax                    Handysize
                                                                                             Index          US$/day                US$/day              US$/day                     US$/day
                                                                        Avg 2010             2,753           32,875                 24,858               22,359                      16,384
                                                                        Avg 2011             1,550           15,836                 13,940               14,351                      10,505
                                                                        Change (%)           -44%             -52%                   -44%                 -36%                        -36%
                                                                                                                                    SOURCES: CIMB, CLARKSON RESEARCH SERVICES




  Figure 4: Baltic Dry, Capesize and Panamax Indices                                                     Figure 5: Baltic Supramax and Handysize Indices

   10,000                                                                                5000             3,500                       Title:                                                   2,000
                                                                Baltic Capesize Index
                                                                                                                                      Source:                   Baltic Supramax Index (LHS)
                                                                Baltic Panamax Index     4500
                                                                                                          3,000                                                 Baltic Handysize Index (RHS)   1,750
                                                                Baltic Dry Index (RHS)
    8,000                                                                                4000                                         Please fill in the values above to have them entered in your report
                                                                                                                                                                                               1,500
                                                                                         3500             2,500

                                                                                                                                                                                               1,250
    6,000                                                                                3000
                                                                                                          2,000
                                                                                         2500                                                                                                  1,000
                                                                                                          1,500
    4,000                                                                                2000
                                                                                                                                                                                               750
                                                                                         1500             1,000
                                                                                                                                                                                               500
    2,000                                                                                1000
                                                                                                           500                                                                                 250
                                                                                         500

        0                                                                                0                   0                                                                                 0
             J F M A M J J A S O N D J F M A M J J A S O N D J F MA M J J A S O N D J                              J FMA M J J A S O ND J FMA M J J A S O ND J FMA M J J A S O ND J
            09                      10                      11                     12                             09                   10                   11                   12

                                                          SOURCES: CIMB, BLOOMBERG                                                                          SOURCES: CIMB, BLOOMBERG



                                                                                                     4
DRY BULK SHIPPING
January 30, 2012




  Figure 6: Baltic capesize and panamax TCE/day (US$/day)                                    Figure 7: Baltic supramax and handysize TCE/day (US$/day)

   90,000                                                                                     35,000                     Title:
                                                               Baltic Capesize TCE/day                                   Source:                          Baltic Supramax TCE/day
   80,000
                                                               Baltic Panamax TCE/day         30,000                                                      Baltic Handysize TCE/day
                                                                                                                         Please fill in the values above to have them entered in your report
   70,000
                                                                                              25,000
   60,000

   50,000                                                                                     20,000


   40,000                                                                                     15,000

   30,000
                                                                                              10,000
   20,000

                                                                                               5,000
   10,000

       0                                                                                          0
             J F MA M J J A S O N D J F MA M J J A S O N D J F MA M J J A S O N D J                     J F MAMJ J A S O N D J FMA M J J A S O N D J F MA M J J A SO N D J
            09                     10                     11                     12                    09                   10                    11                    12

                              SOURCES: CIMB, CLARKSON RESEARCH SERVICES                                                SOURCES: CIMB, CLARKSON RESEARCH SERVICES




                                                             1.2 Share price performance of bulk companies in 2011
                                                             Our Underweight recommendation on the bulk sector was spot on for 2011 as
                                                             none of the Asian bulk shipping companies that we track posted positive share
                                                             price returns during 2011. The best performer was Precious Shipping, which
                                                             recorded an 8% decline in share price. Precious Shipping has a strong balance
                                                             sheet and is ready to acquire cheap secondhand vessels that will position it well
                                                             in the longer term. The worst performer was China Cosco (1919 HK, Not Rated)
                                                             with a share price decline of 53% as the company has a large fleet of ships
                                                             chartered in at very expensive and unprofitable rates.
                                                             Our top pick for the sector in 2011, Pacific Basin (2343 HK, Outperform), was a
                                                             disappointment as its share price performance declined 37%. Despite its cheap
                                                             valuations and strong balance sheet, investors remain wary of the stock due to
                                                             the cyclical nature of bulk shipping companies. Precious Shipping (PSL TB,
                                                             Neutral) declined the least, matching the performance of the SET.
                                                             Our negative view on STX Pan Ocean (STX SP, Underperform) proved correct
                                                             as its share price fell a massive 49%, much more than the 17% decline of the
                                                             Straits Times Index. The company is exposed to all three underperforming
                                                             shipping sectors – bulk, tanker and container shipping. For Maybulk (MBC MK,
                                                             Underperform), we started the year with an Underperform rating but upgraded
                                                             it in May due to better-than-expected 1Q11 results. After our mid-year review of
                                                             the bulk sector in September, we reverted to an Underperform for the stock.
                                                             Maybulk’s price fell from RM1.70 to a low of RM1.39. We upgraded the stock
                                                             again to a Neutral on 9 December when it was below our target price. Since
                                                             early January, Maybulk’s share price has surged to a high of RM2.65 on
                                                             speculation that it will be taken private. In this report, we downgrade the stock
                                                             again to an Underperform as management has denied the speculation and we
                                                             think that the recent share price rally is not aligned with its fundamentals.




                                                                                         5
DRY BULK SHIPPING
January 30, 2012




                                                        Figure 8: Bulk stocks' share price performance for 2011
                                                          0%



                                                        -10%                                                                                                                   -8%



                                                        -20%

                                                                                                                                                       -23%      -22%

                                                        -30%

                                                                                                                                             -32%
                                                                                                                                -34%
                                                        -40%                                                      -37%

                                                                                                       -43%
                                                        -50%                               -49%
                                                                 -53%      -52%

                                                        -60%
                                                                 China         CSD        STX Pan     Maybulk     Pacific     Sinotrans    Average    U-Ming    Sincere        PSL
                                                                 Cosco                     Ocean                   Basin      Shipping                Marine   Navigation

                                                                                                                                                     SOURCES: CIMB, BLOOMBERG




                                                      1.3 Very modest seaborne demand growth in 2011
                                                      Based on Clarkson’s estimates, overall seaborne bulk trade volumes grew by
                                                      4.5% in 2011 (+158mmt). This was sharply slower than 2010’s growth of 12%
                                                      (+363mmt) and below the 2001-10 average growth of 6% p.a. 2010 had
                                                      benefited from a strong recovery in European and Japanese/South Korean
                                                      imports of iron ore and coking coal, after a steep drop in 2009. Thermal coal
                                                      imports had risen sharply in 2010 for Japan, South Korea, India and China. As a
                                                      result of the higher 2010 base, demand growth in 2011 was materially slower.
                                                      Iron ore which accounts for 28% of total seaborne trade turned in reasonable
                                                      growth of 5.8% in 2011, driven by demand from China. Minor bulks also grew
                                                      5.5%, the main constituent being steel products (279 mmt, +6.9% yoy), forest
                                                      products (178 mmt, +4.1% yoy), agribulks (126 mmt, +5.9% yoy) and scrap (104
                                                      mmt, +5.1% yoy).

  Figure 9: Proportion of dry bulk trade in 2011 (%)                                     Figure 10: Dry bulk seaborne trade (mmt) and growth (%) for
                                                                                         2011

                                                                                            1,400                           Title:                                              8.0%
                                                                                                                                                                    +5.5%
                       Others                                                                           +5.8%               Source:
                                                                                                                       +5.4%
                        24%                                Iron ore                         1,200                                                                               6.0%
                                                             28%                                                            Please fill in the values above to have them entered in your report
                                                                                                                                                      +2.3%                     4.0%
                                                                                            1,000

                                                                                                                                                                                2.0%
                                                                                              800
                                                                                                                                                                                0.0%
  Forest products                                                 Steam coal
        5%                                                           19%                      600
                                                                                                                                                                                -2.0%
      Steel products
            8%                                                                                400
                                                                                                                                                                                -4.0%
                                                                                                                                          -5.5%
                           Grains
                            10%      Coking Coal                                              200                                                                               -6.0%
                                         6%
                                                                                                  0                                                                             -8.0%
                                                                                                       Iron ore      Steam coal        Coking coal    Grains     Minor bulks


                                SOURCES: CIMB, CLARKSON RESEARCH SERVICES                                              SOURCES: CIMB, CLARKSON RESEARCH SERVICES




                                                                                     6
DRY BULK SHIPPING
January 30, 2012




                                                    1.4 Iron ore remains in the driving seat
                                                    Good demand for iron ore continues to support bulk shipping rates, mainly for
                                                    the capesize vessels. The biggest importer is still China, accounting for nearly
                                                    63% of global seaborne iron ore imports. Reversing a 1.5% contraction in 2010,
                                                    Chinese iron ore imports rose a healthy 11%, fuelled by a 9.4% yoy increase in
                                                    Chinese steel production in 2011. The steep drop in iron ore prices in November
                                                    and December 2011 also caused a surge in Chinese iron ore imports as Chinese
                                                    steel mills took the opportunity to increase their purchases.
                                                    Despite China’s contribution to growth, the growth pace of global iron ore
                                                    seaborne imports dropped from 10.6% in 2010 to 5.8% in 2011. The main
                                                    reason for this is slower growth of Japanese and European imports of iron ore
                                                    as a result of the Japan tsunami and a slowdown in the EU economies. While
                                                    Japan saw a strong rebound in iron ore imports during July and August 2011,
                                                    this increase was short-lived as imports fell in the following months.
                                                    Reconstruction activities have started but progress is slow. The global economic
                                                    slowdown, debt woes in Europe and the strengthening yen have dampened the
                                                    recovery process.
                                                    From a supply perspective, iron ore exports from India have fallen sharply
                                                    following the ban imposed by the state of Karnataka in July 2010. The ban was
                                                    lifted in April 2011 but a further inquiry by the Supreme Court delayed the
                                                    lifting to November. The mines are expected to be reopened in January 2012 but
                                                    the rise in export duties for iron ore fines and lumps to 30% since early 2012 is
                                                    set to curb foreign iron ore trade. Lloyd’s List estimates that the drop in iron ore
                                                    exports from India represents a loss of 50 supramax cargoes every month.
                                                    Fortunately, China’s continuous appetite for thermal coal has supported
                                                    demand for supramax vessels on the Indonesia-China route.

  Figure 11: China's iron ore imports (mmt)                                           Figure 12: Domestic iron ore production in China (mmt)

    60%                                                                      80         50%                       Title:                                                140
                                   Yoy (%)    China iron ore imports (mmt)                           Yoy (%)       Domestic iron ore production in China (mmt)
                                                                                                                  Source:
                                                                                                                                                                        130
    50%                                                                                 40%
                                                                             70                                                                                        in
                                                                                                                  Please fill in the values above to have them entered120 your report
    40%
                                                                                        30%                                                                             110
                                                                             60
    30%
                                                                                                                                                                        100
                                                                                        20%
    20%                                                                      50                                                                                         90
                                                                                        10%
                                                                                                                                                                        80
    10%
                                                                             40
                                                                                         0%                                                                             70
    0%
                                                                                                                                                                        60
                                                                             30
   -10%                                                                                -10%
                                                                                                                                                                        50

   -20%                                                                      20        -20%                                                                             40
           J FMA M J JA S OND J FMA M J JA S OND J FMAM J JA S OND                             J F MA M J J A S O N D J F MA M J J A S O N D J F MA M J J A S O N D
          09                 10                 11                                            09                     10                     11

                                                     SOURCES: CIMB, CEIC                                                                                  SOURCES: CIMB, CEIC




                                                                                  7
DRY BULK SHIPPING
January 30, 2012




                                                    Figure 13: China domestic iron ore prices versus spot prices in India

                                                        220
                                                                             India imports 63.5%spot cfr (US$/MT)                             7%
                                                                                                                     China domestic 66%incl. 1 VAT
                                                        200

                                                        180

                                                        160

                                                        140

                                                        120

                                                        100

                                                          80

                                                          60

                                                          40
                                                                J FMAM J JA SO NDJ FMAM J J A SO NDJ FMA MJ J ASOND J FMAMJ J A SOND J FMA MJ JASO ND J FMA MJ J A SOND J
                                                               06               07                 08              09               10               11                12

                                                                                                                                                SOURCES: CIMB, BLOOMBERG




  Figure 14: Japan iron ore imports (mmt)                                                  Figure 15: India iron ore exports to China (mmt)

    30%                                                                        13               50%                    Title:                                                  16
                                  Yoy (%)   Iron ore imports - Japan (mmt)                                             Source:                   Yoy (%)
    25%                                                                                         40%
                                                                                                                                                                               14
    20%                                                                        12               30%
                                                                                                                                                India iron
                                                                                                                                                           to have to China (mmt)
                                                                                                                       Please fill in the values aboveore exports them entered in your report
                                                                                                                                                                               12
    15%                                                                                         20%
                                                                                                                                                                               10
    10%                                                                        11               10%

    5%                                                                                           0%                                                                            8

    0%                                                                         10              -10%
                                                                                                                                                                               6
    -5%                                                                                        -20%
                                                                                                                                                                               4
   -10%                                                                        9               -30%
                                                                                                                                                                               2
   -15%                                                                                        -40%

   -20%                                                                        8               -50%                                                                            0
           J F M A M J   J A S O N D J F M A M J     J A S O N D                                        J FMA M J JA S OND J FMA M J JA S OND J FMAM J JA S OND
          10                         11                                                                09                 10                 11

                                                  SOURCES: CIMB, CEIC                                                                           SOURCES: CIMB, BLOOMBERG




                                                1.5 Coal trade choked off by floods
                                                Overall, coal trade expanded by a very modest 2.5% in 2011, led by a 5.4%
                                                growth in steam coal, offset by a 5.5% decline in coking coal. This performance
                                                compares poorly to the 15% growth in total seaborne coal trade in 2010, led by a
                                                25% rise in coking coal and 11.7% expansion in thermal coal trades.
                                                Coking exports from Australia were severely affected by the Queensland floods
                                                in early 2011 but from 3Q11 onwards, there was a marked improvement in
                                                Australia’s export volumes. Still, it was not sufficient to help place full-year
                                                coking coal exports in positive growth territory. Australia has, after all, 60%
                                                market share of the world’s coking coal exports, the majority of which is mined
                                                in Queensland.
                                                The constrained supply of coking coal due to the Queensland floods also caused
                                                a surge in prices which deterred many price-sensitive buyers. Because of this
                                                and the slower global economy, global ex-China steel production growth
                                                gradually declined throughout 2011, lowering coking coal demand as well. Due
                                                to the catastrophes that Japan suffered, many industries were temporarily shut
                                                down which affected demand for coking coal. As reconstruction efforts started
                                                and infrastructure/plants were restored, the demand for coking coal slowly
                                                returned.

                                                                                       8
DRY BULK SHIPPING
January 30, 2012




                                                  For the steam coal trade, OECD Europe is the largest importer (18%), followed
                                                  by Japan (16.6%), South Korea (13.6%) and China (13%). The strong trade
                                                  growth was surprisingly driven by OECD Europe, with a 10% volume expansion
                                                  mainly from the UK. The UK imported 8.4m mt more steam coal in 2011 (+49%
                                                  yoy), primarily from the US due to discounted US prices as a result of its high
                                                  sulphur content. Coal purchases by the UK have accelerated as British power
                                                  stations typically use desulphurisation technology.
                                                  However, the growth in the seaborne steam coal trade also slowed in 2011 vs.
                                                  2010, mainly due to a slower pace of increase in imports by China and South
                                                  Korea, and a small decline in Japan’s imports as a result of the tsunami which
                                                  had damaged major coal import ports in the Tohoku region.

                                                    Figure 16: Total coal exports by Australia

                                                      30%
                                                                                                                       Yoy (%)           Coal exports - Australia (Mt)   28

                                                      20%                                                                                                                26

                                                                                                                                                                         24
                                                      10%
                                                                                                                                                                         22

                                                       0%
                                                                                                                                                                         20


                                                     -10%                                                                                                                18

                                                                                                                                                                         16
                                                     -20%
                                                                                                                                                                         14

                                                     -30%                                                                                                                12
                                                             J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N
                                                            09                       10                      11

                                                                                                                                 SOURCES: CIMB, BLOOMBERG




  Figure 17: Japan coal imports                                               Figure 18: China coal imports

    40%                                                              18         100%                    Title:                                                           25
                Yoy (%)                                                                                 Source:                   Yoy (%)
                                                                                80%                                               China's coal imports (mmt)
    30%         Coal imports - Japan (mmt)                           17
                                                                                                        Please fill in the values above to have them entered in your report
                                                                                                                                                              20
    20%                                                              16         60%


    10%                                                              15         40%
                                                                                                                                                                         15

    0%                                                               14         20%

                                                                                                                                                                         10
   -10%                                                              13          0%


   -20%                                                              12         -20%
                                                                                                                                                                         5
   -30%                                                              11         -40%


   -40%                                                              10         -60%                                                                                     0
           J FMA M J JA S OND J FMA M J JA S OND J FMAM J JA S OND                      J F MA M J J A SO ND J FMA M J J A SO N D J FMA M J J A S ON
          09                 10                 11                                     09                   10                   11

                                                   SOURCES: CIMB, CEIC                                                           SOURCES: CIMB, BLOOMBERG




                                                                          9
DRY BULK SHIPPING
January 30, 2012




  Figure 19: Japan crude steel production (mmt)                                               Figure 20: Global ex-China crude steel production (mmt)

    30%                                                                             10          40%                    Title:                                                            75
                                                                                                                       Source:
                                                                                                30%                                                                                      70
    20%                                                                                                                Please fill in the values above to have them entered in your report
                                                                                    9
                                                                                                20%
                                                                                                                                                                                         65
    10%
                                                                                                10%
                                                                                    8
                                                                                                                                                                                         60
    0%                                                                                           0%
                                                                                                                                                                                         55
                                                                                    7
                                                                                                -10%
   -10%
                                                                                                                                                                                         50
                                                                                                -20%
                                                                                    6
   -20%
                                                                                                -30%                         Yoy (%)    Global crude steel production - ex China (mmt)   45
                                   Yoy (%)   Crude steel production - Japan (mmt)

   -30%                                                                             5           -40%                                                                                     40
           J FMA M J JA S OND J FMA M J JA S OND J FMAM J JA S OND                                      J FMA M J JA S OND J FMA M J JA S OND J FMAM J JA S OND
          09                 10                 11                                                     09                 10                 11

                                             SOURCES: CIMB, BLOOMBERG                                                                         SOURCES: CIMB, BLOOMBERG




                                                       1.6 Highest deliveries in history
                                                       The bulk carrier fleet grew by a staggering 75.1m dwt or 14% in 2011 to end the
                                                       year at 611.1m dwt. It grew by a similar 77.6m dwt (16.9% yoy) in 2010, despite a
                                                       materially slower pace of cargo demand growth in 2011. It is no wonder that
                                                       freight rates weakened considerably over the past 12 months.
                                                       Last year, the dry bulk market saw record deliveries of 95.9m dwt, 47% of which
                                                       consisted of capesize vessels. The capesize fleet rose by a staggering 17.5%.
                                                       Scrapping hit a record of 22.2m dwt, effectively removing 4.1% of the January
                                                       2011 fleet but still nowhere near enough to offset the 95.9m dwt of new
                                                       deliveries.
                                                       The record deliveries came despite a 28% delivery slippage based on the order
                                                       book at the start of 2011. The highest slippage rate was seen in the handysize
                                                       segment. Nearly 45% of planned handysize deliveries did not materialise in 2011
                                                       as the majority of the orders were placed by smaller shipping companies which
                                                       may have been unable to secure financing. The actual slippage statistic is
                                                       probably not as high as the numbers indicated above as some deliveries may not
                                                       have been reported to Clarkson Research yet.
                                                       The current order book accounts for 33% of the bulk fleet, down from a peak of
                                                       80% in October 2008, with the capesize orders accounting for 36% of the
                                                       existing capesize fleet and 40% for the panamax segment. There were very few
                                                       new vessel orders during 2011 as financing was tight and optimism among
                                                       shipowners deteriorated as rates continued to plunge. Still, we expect the pace
                                                       of ship supply growth to exceed cargo demand growth until 2013.




                                                                                         10
DRY BULK SHIPPING
January 30, 2012




  Figure 21: Bulk fleet and order book (m dwt)                                      Figure 22: Order book versus current fleet (m dwt) by vessel
                                                                                    type

   900                                                                90%                 300                         Title:
             Bulk fleet (m DWT)                                                                                       Source:
                                                                                                                                                     Orderbook    Current fleet
   800       Bulk orderbook (m DWT)                                   80%                                   36%
             Percentage of fleet (%)                                                      250                         Please fill in the values above % obook of fleetentered in your report
                                                                                                                                                      to have them
   700                                                                70%

   600                                                                60%                 200
                                                                                                                                40%
   500                                                                50%
                                                                                          150                                                         28%
   400                                                                40%

   300                                                                30%                 100
                                                                                                                                                                          21%

   200                                                                20%
                                                                                              50
   100                                                                10%

    0                                                                 0%                  -
    2005               2007            2009          2011                                             Capesize               Panamax              Supramax          Handysize

                           SOURCES: CIMB, CLARKSON RESEARCH SERVICES                                              SOURCES: CIMB, CLARKSON RESEARCH SERVICES




                                                   Figure 23: Demolitions (m dwt) by vessel type and quarterly BDI

                                                    9.0           Handysize                                                                                                  4,000
                                                                  Handymax
                                                    8.0           Panamax                                                                                                    3,500
                                                                  Capesize
                                                    7.0           Average BDI - RHS                                                                                          3,000

                                                    6.0
                                                                                                                                                                             2,500
                                                    5.0
                                                                                                                                                                             2,000
                                                    4.0
                                                                                                                  `
                                                                                                                                                                             1,500
                                                    3.0

                                                                                                                                                                             1,000
                                                    2.0

                                                    1.0                                                                                                                      500


                                                    0.0                                                                                                                      0
                                                              1Q 09   2Q       3Q         4Q       1Q 10     2Q       3Q        4Q       1Q 11      2Q       3Q      4Q

                                                                                                                  SOURCES: CIMB, CLARKSON RESEARCH SERVICES




                                                   Figure 24: Newbuilding contracts by vessel type (m dwt)

                                                     200
                                                                                                                                       capesize   panamax    handymax     handysize
                                                     180

                                                     160

                                                     140

                                                     120

                                                     100

                                                      80

                                                      60

                                                      40

                                                      20

                                                          0
                                                                  2005             2006              2007             2008               2009            2010             2011

                                                                                                                  SOURCES: CIMB, CLARKSON RESEARCH SERVICES




                                                                              11
DRY BULK SHIPPING
January 30, 2012




                                                             1.7 Secondhand vessel prices fell 58-75% from 2007-08
                                                             peak
                                                             As freight rates deteriorated, the demand for and pricing of secondhand vessels
                                                             continued to decline. The current freight rates offer thin margins (or even slight
                                                             losses) and the poor earnings prospects have dissuaded owners from investing
                                                             in these older vessels. During 2011, secondhand values have fallen 10-24% on
                                                             average, with the capesize and panamax values down the most. Newbuilding
                                                             prices also dropped in 2011 as the unexciting dry bulk fundamentals and tight
                                                             financing deterred new orders.

  Figure 25: Newbuilding vessel prices (US$ m)                                                Figure 26: Second-hand vessel prices – 5-year olds (US$ m)

                                                                                                                 Panamax - 73,000 dw t                         Handymax - 45,000 dw t
    45                                                                              90           45                              Title:                                                         65
                     Panamax 75-77k dw t              Handymax 56-58k dw t                                       Handysize - 25-30,000 dw t
                                                                                                                              Source:                          Capesize - 170,000 dw t (RHS)
                     Handysize 25-30k dw t            Capesize 176-180k dw t - RHS 80
                                                                                                                                                                                    60
                                                                                                                                 Please fill in the values above to have them entered in your report
    40                                                                                           40
                                                                                    70

                                                                                    60                                                                                                          55
    35                                                                                           35
                                                                                    50
                                                                                                                                                                                                50
                                                                                    40
    30                                                                                           30
                                                                                    30                                                                                                          45

                                                                                    20           25
    25
                                                                                                                                                                                                40
                                                                                    10

    20                                                                              0            20                                                                                             35
          J F MA M J J A S O N D J F M A M J J A S O N D J F MA M J J A S O N D J                      J    M   M    J   S   N      J     M   M   J   S    N      J   M   M   J    S    N
         09                     10                      11                     12                     09                           10                            11

                              SOURCES: CIMB, CLARKSON RESEARCH SERVICES                                                      SOURCES: CIMB, CLARKSON RESEARCH SERVICES




                                                                Figure 27: Changes in secondhand vessel prices – 5-year olds (US$ m)
                                                                                                           Capesize              Panamax                  Handymax                Handysize
                                                                Current price (US$ m)                         38                    28                       26                      23

                                                                Peak price pre-GFC (US$ m)                   154                       92                    75                           54
                                                                Peaked in                                   Jul-08                  Nov-07                 Nov-07                      Jun-08
                                                                Change, %                                   -75%                     -70%                  -66%                         -58%

                                                                Peak price post-GFC (US$ m)                   62                      41                      34                          28
                                                                Peaked in                                   Mar-10                 May-10                  Sep-10                      Jun-10
                                                                Change, %                                   -39%                    -33%                    -24%                        -20%

                                                                January 2011 (US$ m)                          50                       36                     30                          25
                                                                Change, %                                   -24%                     -24%                   -15%                        -10%
                                                                                                                             SOURCES: CIMB, CLARKSON RESEARCH SERVICES




                                                             2. OUTLOOK
                                                             2.1 Dry bulk demand growth to moderate
                                                             We are anticipating dry bulk trade growth to slow down in 2012 to 3.9%, slightly
                                                             lower than 2011’s 4.5% growth. This is a downward revision of our earlier
                                                             forecast of 5.2% as the recent slowdown in global economies will drag down
                                                             global trade. Clarkson is expecting only 3.1% growth for 2012.
                                                             China accounts for the majority (63%) of global iron ore imports. The property
                                                             sector makes up a third of China’s steel demand and the outlook for this sector
                                                             could heavily affect iron ore demand. Typically, the property sector is very
                                                             dependent upon the economy. Based on our in-house forecast, China’s GDP is
                                                             still expected to expand by 8% in 2012, a slowdown from the 8.9% GDP growth
                                                             during 2011.


                                                                                         12
DRY BULK SHIPPING
January 30, 2012




                                                              For 2012, China’s property sector is not expected to do well, especially in the
                                                              first half. Our property analyst, Johnson Hu believes that overall property sales
                                                              volume for 2012 will be flat compared with 4% growth in 2011. In addition, he
                                                              expects property starts to decline by 10% in 2012, which may also reduce steel
                                                              and cement demand growth. The forecast decline is supported by several factors
                                                              including weaker housing starts in recent months, the slowdown in growth of
                                                              real estate investment and the falling real estate investment climate index.
                                                              We have lowered our iron ore import growth assumption from an initial 7% to
                                                              4% for 2012. As global economies wrestle with slower growth, steel production
                                                              in the world including China has already shown signs of growth weakness in
                                                              2H11. We expect 2012 to fare worse. Chinese steel production reached its peak
                                                              in April 2011 and has been on the decline since May 2011. Production in
                                                              November registered a 0.6% yoy decline, the first decline since April 2009. This
                                                              is probably a result of policy tightening measures implemented by the Chinese
                                                              government to slow growth and the fragile global economic conditions.
                                                              Furthermore, iron ore inventories at China’s ports are currently at very high
                                                              levels.
                                                              However, there may be a tentative stabilisation in 2H12 as our analyst believes
                                                              that there could be some relaxation of the government policies that have held
                                                              back property sales. Typically, the correction in China’s property prices lasts for
                                                              a year. While it is likely that China’s appetite for iron ore in 2012 could decrease
                                                              due to the property slowdown, China’s economy is still expected to grow by
                                                              high-single digit levels over the next few years. The immense infrastructure and
                                                              housing development projects will continue to sustain iron ore demand from the
                                                              world’s second-largest economy. Johnson expects the property sector
                                                              environment in China to improve in 2013, with sales volume potentially growing
                                                              10-20%.

  Figure 28: China’s property sales (m sq m)                                                 Figure 29: China housing starts (m sq m)
                                                Property sales yoy% (LHS)
   80%                                                                            200          100%                       Title:                  Housing Start yoy%(LHS)      200
                                                Property sales (sqm mil)
                                                                                                                          Source:
   70%                                                                            180                                                             Housing Start (sqm mil)
                                                                                                                                                                               180
                                                                                                80%                       Please fill in the values above to have them entered in your report
   60%                                                                            160
                                                                                                                                                                               160
   50%                                                                            140
                                                                                                60%
                                                                                                                                                                               140
   40%                                                                            120

   30%                                                                            100           40%                                                                            120

   20%                                                                            80
                                                                                                                                                                               100
                                                                                                20%
   10%                                                                            60
                                                                                                                                                                               80
    0%                                                                            40
                                                                                                 0%
                                                                                                                                                                               60
   -10%                                                                           20

   -20%                                                                           0             -20%                                                                           40
           J F MA M J J A S O N D J F MA M J J A S O N D J F MA M J J A S O N D                         J F MA M J J A S O N D J F MA M J J A S O N D J F MA M J J A S O N D
          09                     10                     11                                             09                     10                     11

                                                                 SOURCES: CIMB, NSB                                                                         SOURCES: CIMB, NSB




                                                                                        13
DRY BULK SHIPPING
January 30, 2012




  Figure 30: Real estate investment (Rmb bn)                                                                 Figure 31: China’s real estate climate index

   40%
                Yoy (%)      Real estate investment - ytd (Rmb bn)
                                                                                               7,000           2.5%                             Title:                                                    108
                                                                                                                                                Source:             Mom (%)   Real estate climate index
   35%                                                                                                         2.0%                                                                                       106
                                                                                               6,000
                                                                                                                                                                                                     in
                                                                                                                                                Please fill in the values above to have them entered104 your report
                                                                                                               1.5%
   30%
                                                                                               5,000
                                                                                                                                                                                                          102
                                                                                                               1.0%
   25%
                                                                                                                                                                                                          100
                                                                                               4,000
                                                                                                               0.5%
   20%                                                                                                                                                                                                    98
                                                                                               3,000           0.0%
                                                                                                                                                                                                          96
   15%
                                                                                                              -0.5%
                                                                                               2,000                                                                                                      94
   10%
                                                                                                              -1.0%
                                                                                                                                                                                                          92
    5%                                                                                         1,000
                                                                                                              -1.5%                                                                                       90

    0%                                                                                         0              -2.0%                                                                                       88
           J F MA M J J A S O N D J F MA M J J A S O N D J F MA M J J A S O N D                                         J F MA M J J A S O N D J F MA M J J A S O N D J F MA M J J A S O N D
          09                     10                     11                                                             09                     10                     11

                                                                      SOURCES: CIMB, NSB                                                                                         SOURCES: CIMB, NSB




  Figure 32: China's crude steel production (mmt)                                                            Figure 33: China ports iron ore inventories (mmt)

    40%                                                                                            65          100                              Title:
                                         Yoy (%)          China crude steel production (mmt)                               China ports iron ore inventories (mmt)
                                                                                                                                                  Source:
                                                                                                               95
                                                                                                   60
    30%                                                                                                        90                               Please fill in the values above to have them entered in your report

                                                                                                   55
                                                                                                               85

    20%                                                                                                        80
                                                                                                   50
                                                                                                               75
                                                                                                   45
    10%                                                                                                        70

                                                                                                   40          65

    0%                                                                                                         60
                                                                                                   35
                                                                                                               55

   -10%                                                                                            30          50
           J FMA M J JA S OND J FMA M J JA S OND J FMAM J JA S OND                                                    J F MA M J J A S O N D J F MA M J J A S O N D J FMA M J J A S O N D J
          09                 10                 11                                                                   09                     10                     11                    12

                                                         SOURCES: CIMB, BLOOMBERG                                                                                         SOURCES: CIMB, BLOOMBERG




                                                                     For both steam and coking coal seaborne cargo demand, we are expecting 5%
                                                                     growth in 2012. As Australia’s coal production is almost back to its pre-floods
                                                                     level, the higher levels of supply should moderate coal prices, which could, in
                                                                     turn, attract more buyers. Steam coal demand will be supported by China’s and
                                                                     India’s growing economies, with Clarkson forecasting trade growth of 8.7% and
                                                                     16.8%, respectively for 2012. Also, Japan is likely to increase its steam coal
                                                                     imports for power generation purposes as nuclear plants remain offline and
                                                                     their viability is still uncertain.
                                                                     Japan’s post-tsunami rebuilding will also drive growth in 2012 for iron ore,
                                                                     coking coal and timber. Reconstruction activity in Japan may start picking up in
                                                                     March. Although progress has been slower than expected due to global
                                                                     headwinds, the Japanese government finally approved a ¥9.2tr (US$120bn)
                                                                     budget for reconstruction in November 2011. The reconstruction spending may
                                                                     boost housing starts significantly over the next couple of years.
                                                                     For the grain trade, Russian exports have resumed following the 10-month ban
                                                                     that was lifted in June 2011. According to Clarkson, Russia’s wheat exports for
                                                                     July-September 2011 reached a record 8.6 mmt, an increase of 72% yoy. The
                                                                     resumption of exports is good news for handysize vessels. Overall, we project
                                                                     total bulk demand growth of 3.9% for 2012, 4.2% for 2013 and 4.5% for 2014.

                                                                                                        14
DRY BULK SHIPPING
January 30, 2012




  Figure 34: Dry bulk trade volume (mmt)
                                                     2010                 2011                     2012F                  2013F                     2014F
  Trade (m tonnes)                                   mmt         yoy %    mmt           yoy %       mmt       yoy %        mmt           yoy %       mmt      yoy %
  Iron ore                                            995        10.6%    1,053         5.8%       1,095      4.0%        1,150          5.0%       1,219     6.0%
  Coking coal                                         235        25.0%     222          -5.5%       233       5.0%         245           5.0%        257      5.0%
  Steam coal                                          669        11.7%     705          5.4%        740       5.0%         777           5.0%        816      5.0%
  Grain                                               342         7.9%     350          2.3%        361       3.0%         372           3.0%        383      3.0%
  Minor bulk (incl. alumina/bauxite/phosphate)       1,251       11.2%    1,320         5.5%       1,364      3.3%        1,408          3.3%       1,454     3.3%
  Bulk demand                                        3,492       11.6%    3,650          4.5%      3,793       3.9%       3,952           4.2%      4,129      4.5%

  Trade growth (m mt)                                mmt         yoy %    mmt           yoy %      mmt        yoy %           mmt        yoy %      mmt       yoy %
  Iron ore                                            +95        10.6%     +58          5.8%        +42       4.0%             +55       5.0%        +69      6.0%
  Coking coal                                         +47        25.0%     -13          -5.5%       +11       5.0%             +12       5.0%        +12      5.0%
  Steam coal                                          +70        11.7%     +36          5.4%        +35       5.0%             +37       5.0%        +39      5.0%
  Grain                                               +25         7.9%     +8           2.3%        +11       3.0%             +11       3.0%        +11      3.0%
  Minor bulk (incl. alumina/bauxite/phosphate)       +126        11.2%     +69          5.5%        +44       3.3%             +45       3.3%        +46      3.3%
  Bulk demand growth                                 +363        11.6%    +158           4.5%      +143        3.9%           +159        4.2%      +177       4.5%

  Proportion of trade
  Iron ore                                           28.5%                28.8%                    28.9%                  29.1%                     29.5%
  Coking coal                                         6.7%                 6.1%                     6.1%                   6.2%                      6.2%
  Steam coal                                         19.2%                19.3%                    19.5%                  19.7%                     19.8%
  Grain                                               9.8%                 9.6%                     9.5%                   9.4%                      9.3%
  Minor bulk                                         35.8%                36.2%                    36.0%                  35.6%                     35.2%
                                                                                                              SOURCES: CIMB, CLARKSON RESEARCH SERVICES




                                                            2.2 Massive fleet expansion
                                                            For 2012, we are forecasting the dry bulk fleet to expand by 75.9m dwt (+13.2%
                                                            yoy), which is on par with the growth of 75.1m dwt (+15.3%) during 2011. The
                                                            still-large order book, at 33% of the current fleet, will ensure a heavy delivery
                                                            profile this year, despite our assumption of a 27% slippage rate. We are
                                                            expecting scrapping volumes to increase in 2012 due to weaker freight rates
                                                            although as a percentage of fleet, the figure remains around 4% as the bulk fleet
                                                            has grown in the past year. The heavy newbuilding deliveries will compound the
                                                            existing oversupply and force freight rates lower.
                                                            We are projecting an average fleet growth of 8.2% in 2013 and 4.1% in 2014.
                                                            Although half of the existing order book will be delivered in 2012, some of the
                                                            delayed orders from 2011 and 2012 could spill over to 2013. New vessels orders
                                                            are likely to be very minimal since freight rates are likely to trend lower and
                                                            financing remains scarce as banks tighten their purse strings. We expect
                                                            demolitions to slow down as the majority of the older vessels will be scrapped in
                                                            2011 and 2012. Our forecast assumes a scrapping rate of 4% in 2012, 2.6% in
                                                            2013 and 1.7% in 2014. At end-2011, 58% of the entire global fleet is below 10
                                                            years of age and capesize vessels accounted for 40% of the total fleet.



  Figure 35: Bulk fleet in December 2011 (m dwt)                                       Figure 36: Bulk fleet in December 2011 (% of fleet)
  Age                   20+       15-19      10-14      5-9        0-4    Total        Age                  20+       15-19          10-14    5-9       0-4     Total
  Capesize               26          37         24       35        121     243         Capesize            11%         15%            10%    14%       50%      100%
  Panamax                25          15         28       28         58     154         Panamax             16%         10%            18%    18%       38%      100%
  Handymax               18          11         16       23         58     125         Handymax            14%          9%            13%    18%       46%      100%
  Handysize              34           6          9        8         26       84        Handysize           41%          8%            11%    10%       31%      100%
  Total                 102          69         77       93        263     605         Total               17%         11%            13%    15%       43%      100%
                      SOURCES: CIMB, CLARKSON RESEARCH SERVICES                                               SOURCES: CIMB, CLARKSON RESEARCH SERVICES
      NOTE THAT CLARKSON DATA HAVE A SMALL DISCREPANCY OF TOTAL
    FLEET OF 605M DWT AT END-2011 AGAINST 611MDWT IN OTHER TABLES




                                                                                  15
DRY BULK SHIPPING
January 30, 2012




                                                 Figure 37: Bulk fleet development
                                                                                       TOTAL Bulk                            Fleet growth (dwt)
                                                                               No of vessels                DWT            Year-end     Average
                                                 End 2008                              6,964          417,890,000            6.6%          5.9%
                                                   + 2009 net deliveries                 550           43,238,758
                                                   - 2009 scrapping                     -272          -10,558,588
                                                   - 2009 conversions                     22            7,919,830
                                                 End 2009                              7,264          458,490,000            9.7%        8.2%
                                                   + 2010 net deliveries                 991           80,156,177
                                                   - 2010 scrapping                     -137           -6,401,214
                                                   - 2010 conversions                     18            3,815,037
                                                 End 2010                              8,136          536,060,000           16.9%        13.5%
                                                   + 2011 net deliveries               1,147           95,903,483
                                                   - 2011 scrapping                     -362          -22,151,762
                                                   - 2011 conversions                    -31            1,328,279
                                                 End 2011                              8,890          611,140,000           14.0%        15.3%
                                                   + 2012 gross deliveries             1,657          137,737,833
                                                   - 2012 slippage                      -478          -37,279,522
                                                   + 2012 net deliveries               1,179          100,458,311
                                                   - 2012 scrapping                     -440          -24,550,500
                                                 End 2012F                             9,629          687,047,811           12.4%        13.2%
                                                   + 2013 gross deliveries               781           66,325,511
                                                   - 2013 slippage                      -218          -17,683,385
                                                   + 2013 net deliveries                 563           48,642,126
                                                   - 2013 scrapping                     -318          -18,007,000
                                                 End 2013F                             9,874          717,682,937            4.5%        8.2%
                                                   + 2014 gross deliveries               428           39,436,467
                                                   - 2014 slippage                        -8             -257,564
                                                   + 2014 net deliveries                 420           39,178,903
                                                   - 2014 scrapping                     -211          -12,386,000
                                                 End 2014F                            10,083          744,475,839            3.7%        4.1%
                                                                                               SOURCES: CIMB, CLARKSON RESEARCH SERVICES




                                               2.3 Potential recovery in 2014?
                                               The fundamentals of the dry bulk sector have deteriorated and even a potential
                                               recovery in 2014 may be at risk. The recovery hinges mainly on China as the
                                               country is a major importer of iron ore and coal which drives most of dry bulk
                                               demand. For 2012, the average fleet growth of 13.2% far exceeds our projected
                                               3.9% demand growth. Even for 2013, the average fleet growth of 8.2% is nearly
                                               double the 4.2% demand growth.
                                               We expect rates to fall by an average of 20.8% in 2012 and 10.5% in 2013. Rates
                                               could rebound in 2014 but even so, the quantum should be very small at around
                                               5% on average. Our BDI forecasts are 1,228 points (-20.8%) for 2012, 1,099
                                               (-10.5%) for 2013 and 1,154 (+5%) for 2014. This is lower than our previous
                                               forecast of 1,255 points for 2012 and 1,219 for 2013. We expect secondhand bulk
                                               vessels values to decline by 20% in 2012 and another 5% in 2013.

  Figure 38: Dry bulk TCE rate (US$/day) and BDI forecasts
                Capesize               Panamax               Supramax              Handysize                 Average               BDI Index
               US$/day     Chg (%)   US$/day   Chg (%)     US$/day   Chg (%)     US$/day    Chg (%)       US$/day      Chg (%)            Chg (%)
  2008          97,699      -12.3%    48,876    -14.1%      41,113    -13.6%      29,083     -10.9%        54,193       -12.8%   6,353     -10.2%
  2009          39,065      -60.0%    19,298    -60.5%      16,946    -58.8%      11,345     -61.0%        21,663       -60.0%   2,602     -59.0%
  2010          32,875      -15.8%    24,858     28.8%      22,359     31.9%      16,384      44.4%        24,119        11.3%   2,756       5.9%
  2011          15,836      -51.8%    13,940    -43.9%      14,351    -35.8%      10,505     -35.9%        13,658       -43.4%   1,550     -43.8%
  2012F         11,877      -25.0%    10,455    -25.0%      11,481    -20.0%       9,455     -10.0%        10,817       -20.8%   1,228     -20.8%
  2013F         10,095      -15.0%     8,887    -15.0%      10,103    -12.0%       9,644       2.0%         9,682       -10.5%   1,099     -10.5%
  2014F         10,600        5.0%     9,331      5.0%      10,608      5.0%      10,126       5.0%        10,166         5.0%   1,154       5.0%
                                                                                              SOURCES: CIMB, CLARKSON RESEARCH SERVICES




                                                                        16
DRY BULK SHIPPING
January 30, 2012




                                                            Figure 39: Baltic Dry Index forecasts
                                                                  8,000
                                                                                                                    7,076

                                                                  7,000                                                      6,353


                                                                  6,000

                                                                                           4,505
                                                                  5,000


                                                                  4,000                             3,378   3,188
                                                                                                                                              2,753
                                                                                  2,639                                              2,602
                                                                  3,000

                                                                          1,145                                                                        1,550
                                                                  2,000
                                                                                                                                                                1,228    1,099   1,154

                                                                  1,000


                                                                     0
                                                                          2002    2003     2004     2005    2006    2007     2008    2009     2010     2011     2012F    2013F   2014F

                                                                                                                                                      SOURCES: CIMB, BLOOMBERG




  Figure 40: Demand-supply balance in the dry bulk sector
                                                           2011                              2012F                               2013F                                  2014F
  Trade (m tonnes)                                 m mt            yoy %             m mt              yoy %            m mt                yoy %              m mt              yoy %
  Iron ore                                         1,053           5.8%              1,095             4.0%             1,150               5.0%               1,219             6.0%
  Coking coal                                       222            -5.5%              233              5.0%              245                5.0%                257              5.0%
  Steam coal                                        705            5.4%               740              5.0%              777                5.0%                816              5.0%
  Grain                                             350            2.3%               361              3.0%              372                3.0%                383              3.0%
  Minor bulk (incl. alumina/bauxite/phosphate)     1,320           5.5%              1,364             3.3%             1,408               3.3%               1,454             3.3%
  Total bulk demand                                3,650            4.5%             3,793              3.9%            3,952                4.2%              4,129              4.5%

  Fleet at year-end (m dwt)                                2011                              2012F                               2013F                                  2014F
                                                  m dwt            yoy %            m dwt              yoy %            m mt                yoy %              m mt              yoy %
  Handysize                                        84.4             3.9%             85.5               1.3%            83.1                -2.8%              82.0              -1.3%
  Handymax                                        126.2            15.7%            142.1              12.6%            150.6               6.0%               154.9             2.9%
  Panamax                                         154.7            13.2%            176.9              14.3%            186.2               5.3%               194.8             4.6%
  Capesize                                        245.8            17.5%            282.6              14.9%            297.7               5.4%               312.7             5.0%
  Total fleet                                     611.1            14.0%            687.0              12.4%            717.7               4.5%               744.5             3.7%

  Average fleet capacity (m dwt)                   573.6           15.3%             649.1             13.2%            702.4                8.2%              731.1             4.1%

  Panamax-vessel equivalent growth                         2011                              2012F                               2013F                                  2014F
  (number of ships)
  Demand growth                                           +410                               +371                                +413                                   +461
  Supply growth                                          +1,151                             +1,138                               +803                                   +433
  Change in Supply-Demand balance                         +740                               +767                                +390                                     -28
  Freight rates                                         weaker…                            weaker…                             weaker…                                  flat…
  Average BDI index                                       1,550                              1,228                               1,099                                  1,154
  Average change in Baltic Dry Index (%)                 -43.7%                             -20.8%                              -10.5%                                  5.0%

  Notes:
  1. Supply and demand growth is in terms of Panamax equivalents
  2. Demand growth = trade growth converted into Panamax vessels based on: 55,000t cargoes x 6 trips a year
  3. Supply growth = net change in bulk fleet divided by 65,000 dwt.
                                                                                                                           SOURCES: CIMB, CLARKSON RESEARCH SERVICES




                                                            Figure 41: Year-end vessel prices (US$ m) and annual change (%)

                                                            Year          Capesize                 Panamax           Handymax                 Handysize         Increase/(Decrease)
                                                             2006            81                       46                40                       29                     41%
                                                             2007           150                       89                75                       44                     83%
                                                             2008            45                       26                25                       21                    -68%
                                                             2009            55                       36                27                       22                     21%
                                                             2010            50                       36                29                       25                      0%
                                                             2011            36                       27                25                       21                    -23%
                                                            2012F            29                       21                20                       17                    -20%
                                                            2013F            27                       20                19                       16                     -5%
                                                            2014F            27                       20                19                       16                      0%
                                                                                                                        SOURCES: CIMB, CLARKSON RESEARCH SERVICES



                                                                                      17
DRY BULK SHIPPING
January 30, 2012




                    2.4 Near-term outlook
                    While our annual rate forecasts suggest a continued decline in rates over the
                    next two years, volatility is the hallmark of the dry bulk sector. It is very likely
                    that freight rates will surge and dip frequently. Currently, the BDI is hovering
                    around 750 points, close to the December 2008 low of 663 points. Heavy rain
                    and mudslides have affected Vale’s iron ore production in south eastern Brazil
                    while cyclone activity in Western Australia affected shipping from the iron ore
                    ports of BHP Billiton and Rio Tinto. The limited iron ore supply has left capesize
                    owners scrambling for cargoes and forced them to accept lower and lower rates.
                    Capesize rates have fallen from the recent peak of US$31,000/day in
                    mid-October to a rate of just US$6,700/day now, even lower than current
                    handysize rates of US$7,100/day. Meanwhile, Lunar New Year celebrations will
                    keep industrial activity in much of Asia muted in late January and early
                    February. However, we expect rates to rebound from mid-February onwards
                    when iron output from Brazil is restored and the Chinese come back from their
                    holidays.


                    3. RISKS
                    3.1 Global economies stage a rapid recovery
                    Our dry bulk demand forecast incorporates an expected slowdown in global
                    economies as many developed countries struggle with debt woes and budget
                    cuts. Even developing countries like China and India are likely to experience
                    slower growth in 2012. However, if the global economy overcomes its problems
                    swiftly, demand for bulk cargoes could be more than we now expect.
                    3.2 No slowdown in China
                    If China’s economy continues to grow as strongly as it did in past decade or if
                    the Chinese government decides to reverse its monetary tightening measures,
                    real estate and construction activities will resume strong growth. This could
                    spur the demand for raw materials, especially iron ore.
                    3.3 Slower-than-expected fleet growth
                    We forecast that dry bulk fleet growth will far exceed demand growth. However,
                    should the fleet expansion fall below our expectations due to
                    higher-than-expected slippage, more-than-expected demolition or financing
                    issues, the demand-supply imbalance will improve and freight rates will not be
                    as low as we now expect.
                    3.4 Smaller effective fleet from congestions, weather, etc
                    Congestion at ports or weather-related delays could effectively remove part of
                    the dry bulk fleet. This could cause temporary spikes in freight rates as effective
                    supply is crimped.


                    4. FINANCIALS
                    4.1 Most bulk companies remain profitable
                    With the exceptions of STX Pan Ocean and China COSCO, all regional bulk
                    companies should have remained profitable in 2011. However, there is a steep
                    fall in earnings from 2010 due to lower freight rates and higher bunker costs.
                    For 2012, we expect companies’ earnings to remain in the black but profits
                    should fall further as freight rates are likely to trend lower. The situation for dry
                    bulk is at least better than for tanker shipping companies, of which nearly all are
                    loss-making.




                                       18
DRY BULK SHIPPING
January 30, 2012




                      Figure 42: Consensus net profit (US$ m)
                                                          2010         2011F         2012F        2013F
                      Malaysian Bulk Carriers *           62.4          27.7          20.6         19.4
                      Pacific Basin Shipping *           104.3          28.8          41.0         50.5
                      Precious Shipping *                 28.5          29.1          30.2         36.4
                      STX Pan Ocean *                     69.9        (139.2)       (144.9)      (171.2)
                      Thoresen Thai                       20.5          17.1          23.0         35.1
                      China COSCO                      1,194.6        (947.3)       (317.9)       337.4
                      China Shipping Devt                254.4         178.9         223.4        325.4
                      Sinotrans Shipping                 127.5         103.4         109.8        133.6
                      Sincere Navigation                  66.8          61.6          60.0         58.3
                      U-Ming Marine                      212.1          83.2          69.6         79.1

                      * Based on CIMB's forecasts
                                                                       SOURCES: CIMB, COMPANY REPORTS




                    5. VALUATION AND RECOMMENDATION
                    5.1 Not at the bottom yet
                    We maintain our Underweight call on the dry bulk sector in view of the
                    depressed outlook for the next 2-3 years. Bulk demand growth is expected to
                    slow due to China’s waning demand for iron and the anticipated sluggish global
                    growth. In contrast, bulk fleet deliveries for 2012 are expected to exceed the
                    peak deliveries recorded last year. It is very likely that freight rates and vessel
                    values will trend lower as well.
                    Our stock valuations are derived from the sum of parts, which incorporate an
                    expected 20% decline in vessel values during 2012. On top of that, we factor in a
                    20% discount to SOP to derive our target prices given the likelihood that share
                    prices will overshoot on the downside. We only make an exception for Precious
                    Shipping, basing our target price on the undiscounted SOP in view of our
                    confidence in a strong pace of vessel acquisitions ahead.
                    Our top pick for the sector is Pacific Basin with a target price of HK$5.45. The
                    stock is trading at an unjustifiably large discount of 47% to its SOP and the
                    entire dry bulk fleet has been accorded zero value by the market.
                    Despite our Underweight rating on the sector, there could be opportunities
                    during the year to trade the volatility. We think that an opportune time to relook
                    at the stocks could be sometime during mid-year, just before the Chinese mills
                    begin their restocking activities for the anticipated stronger property sales in
                    2H12.
                    5.2 Maintain Outperform on Pacific Basin
                    Pacific Basin’s share price appears to have reflected the poor outlook for dry
                    bulk rates as it is trading at a 47% discount to SOP. At the current price, zero
                    value has been assigned to its dry bulk fleet which has an average age of just 7½
                    years. At such an attractive valuation, Pacific Basin could be the target of a
                    takeover offer although there is no news of this at present. The stock remains an
                    Outperform despite cuts in our forecasts and target price (20% discount to SOP)
                    for lower bulk rate and vessel value assumptions.
                    The market is already well aware of the challenges facing its six RoRo ships and
                    has reflected losses into forecasts. Investors can take comfort in the fact that (1)
                    the business is still cash positive as the current spot rate of US$15,000/day is
                    enough to cover cash operating costs and interest expense (but not
                    depreciation), and (2) the RoRo asset values have been written down by 19%
                    and Pacific Basin is confident that no further writedowns will be needed.




                                             19
DRY BULK SHIPPING
January 30, 2012




                      Figure 43: Pacific Basin's SOP and target price
                      Value of dry bulk fleet (US$ m) - end-2012F                                           813.0
                      Add: Book value of tugs and barges (US$ m) - end-2012F                                199.6
                      Add: Book value of RoRo fleet (US$ m) - end-2012F                                     355.6
                      Add: Other fixed assets (US$ m)                                                         5.7
                      Add: Payments for newbuildings (US$ m)                                                188.0
                      Add: Valuation of operating lease earnings (FY13E 4x P/E)                             117.4
                                                                                                          1,679.3
                      Add: Net cash/(debt) (US$ m) - end-2012F                                             -128.3
                      Add: Other net current assets (US$ m) - end-2012F                                     141.5
                      Total (US$ m)                                                                       1,692.6

                      No of shares (m)                                                                    1,936.6
                      Per share value (US$)                                                                  0.87
                      Exchange rate (HK$:US$)                                                                7.77
                      Per share value (HK$)                                                                  6.79
                      Premium/(Discount) (%)                                                                -20%
                      Targe price (HK$)                                                                      5.43
                                                                                  SOURCES: CIMB, COMPANY REPORTS




                    5.3 STX Pan Ocean remains an Underperform
                    STXPO is the only dry bulk company in our universe that is expected to incur
                    losses in 2011 and beyond. It is also the most heavily geared and has a
                    substantial portfolio of vessels acquired at high pre-GFC prices. We expect the
                    share price to halve as pressure mounts. We retain our Underperform call, raise
                    our forecast losses for the next three years and slash our target price (still based
                    on 20% discount to SOP) as we expect secondhand vessel values to correct 20%
                    this year. The bulk, container and tanker divisions are all expected to be
                    unprofitable.
                    We are now forecasting losses for STXPO’s bulk shipping operations in 2012-13
                    instead of profits. The company requires a BDI of at least 1,500 points to break
                    even on long-term chartered-in vessels. But we are forecasting a range of just
                    1,000-1,200 points in 2012-14. As at 30 September 2011, STXPO had a total
                    chartered-in fleet of 237 vessels, of which 186 are chartered for a duration of
                    around two months and another 51 vessels are chartered for a remaining
                    duration of 5½ years. It is the latter that could make life difficult for STXPO in
                    an extended low-rate environment. The 50 bulkers that it owns similarly require
                    a BDI level of 1,500-1,800 points to break even.

                      Figure 44: STX Pan Ocean's SOP and target price
                      Value of fleet (US$ m)                                                              4,050.8
                      Add: Net cash / (debt) FY12F (US$ m)                                               -4,031.5
                      Add: Other net assets FY12F (excluding cash/debt) (US$ m)                             724.6
                      Total (US$ m)                                                                         743.9

                      No of shares - diluted for CB (m)                                                    205.9
                      Per share value (US$)                                                                 3.61
                      Exchange rate (S$:US$)                                                                1.29
                      Per share value (S$)                                                                  4.66
                      Premium/(Discount) (%)                                                               -20%
                      Target price (S$)                                                                     3.73
                                                                                  SOURCES: CIMB, COMPANY REPORTS




                    5.4 Stay Neutral on Precious Shipping
                    We do not expect PSL to offer investors excitement in the immediate term given
                    the weak dry bulk shipping rates. But PSL has enough firepower to purchase
                    more than 20 secondhand ships in a declining market, which would enable it to
                    reap the rewards in the next upcycle. We retain our Neutral call as investors are
                    likely to focus on the near term. Our target price has been cut for lower
                    secondhand values though we no longer factor in a 10% discount to SOP. We cut
                    2011 forecast for weak rates but raise 2013 for more aggressive vessel purchases.



                                              20
DRY BULK SHIPPING
January 30, 2012




                    PSL has more than US$100m in cash and US$400m in debt facilities for vessel
                    acquisitions, which is more than enough to finance the 20 secondhand
                    purchases that we have assumed for 2012-13. This is on top of the 19
                    outstanding newbuilding orders that PSL is due to receive. This should expand
                    PSL’s fleet from the current 26 vessels to 65 by 2014. This massive fleet
                    expansion will drive earnings.

                     Figure 45: Precious Shipping's SOP and target price

                      Dry bulk fleet second-hand value (US$ m) - end-2012                                        283.2
                      Exchange rate (THB:US$)                                                                    31.00
                      Dry bulk fleet second-hand value (THB m) - end-2012                                      8,779.2
                      Add: Value of shipbuilding advances (THB m) - end-2012                                  10,511.3
                      Add: Further second-hand vessel acquisitions (THB m)                                     6,083.1
                      Add: Net cash/(debt) (THB m) - end-2012                                                 -8,018.2
                      Add: Other net assets (THB m) - end-2012                                                   361.5
                      Total (THB m)                                                                           17,716.9

                      No of PSL shares (m)                                                                     1,040.0
                      Per share (THB)                                                                            17.04
                      Premium / (Discount) (%)                                                                   0.0%
                      Derived target price (THB)                                                                 17.04
                                                                                       SOURCES: CIMB, COMPANY REPORTS




                    5.5 Downgrade Maybulk to Underperform
                    Maybulk is unlikely to be able to cover the loss of earnings from the expired
                    money-spinning Tenaga contract. This, plus the deteriorating fundamentals of
                    the dry bulk market, underpins our expectations of a decline in Maybulk’s
                    earnings to decline in the coming years. We cut our EPS forecasts and
                    downgrade the stock from Neutral to Underperform as the recent share price
                    rally is not supported by its fundamentals. Our target price is based on a 20%
                    discount to SOP. De-rating catalysts include lower-than-expected dividends.
                    For 2012, Maybulk will be receiving another two leased bulk vessels. Since the
                    global financial crisis, Maybulk has grown largely via taking commitments for
                    chartered-in vessels. However, from this year onwards, Maybulk is likely to
                    purchase ships as asset prices have come off. In December last year, it took a
                    US$50m loan “in readiness for capital expenditure”. In our earnings model, we
                    have assumed that Maybulk will purchase two secondhand bulk vessels this
                    year.

                     Figure 46: Maybulk's SOP and target price
                                                                                Bulk            Tanker           Total
                      Second-hand fleet value (US$ m)                          174.7               42.5          217.2
                      Exchange rate (RM:US$)                                    3.09               3.09           3.09
                      Second-hand fleet value (RM m)                           539.7              131.3          671.0
                      Add: Chartered-in earnings at 4x P/E (RM m)                                                 67.7
                      Add: Vessel capex (RM m)                                                                   214.9
                      Add: Net cash FY11F (RM m)                                                                  62.9
                      Add: Other net assets FY11F (RM m)                                                       1,004.8
                      Total (RM m)                                                                             2,021.4
                      No of shares (m)                                                                           1,000
                      Per share RNAV (RM)                                                                         2.02
                      Discount for risk (%)                                                                     20.0%
                      Target price (RM)                                                                           1.62
                                                                                       SOURCES: CIMB, COMPANY REPORTS




                                            21
Dry Bulk Shipping HONG KONG
January 30, 2012




Pacific Basin Shipping
2343 HK / 2343.HK
                                                                                                                            Current                  HK$3.60    SHORT TERM (3 MTH)    LONG TERM

               Market Cap                                              Avg Daily Turnover               Free Float          Target                   HK$5.45
 US$898.7m                                                      US$2.04m                            100%                    Previous Target          HK$5.80
 HK$6,972m                                                      HK$15.82m                            1,937 m shares         Up/downside               51.4%
                                                                                                                                                   Convicti
                                                                                                                                                   on
                 CIMB Analyst                                                                    Entire dry bulk fleet for free
                                                                                                 Pacific Basin’s share price appears to have reflected the poor outlook
  Raymond Yap CFA
  T (60) 3 20849769
                                                                                                 for dry bulk rates as it is trading at a 47% discount to SOP. At the
  E raymond.yap@cimb.com                                                                         current price, zero value has been assigned to its dry bulk fleet which
                                                                                                 has an average age of just 7½ years.
                                                                                                 At such an attractive valuation,                     ample scope to take on debt and
                                                                                                 Pacific Basin could be the target of a               capitalise on the falling secondhand
                                                                                                 takeover offer although there is no                  ship values.
 Share price info                                                                                news of this at present. The stock
 Share price perf. (%)                                       1M            3M         12M        remains an Outperform despite cuts                   RoRo challenges known
 Relative                                                    8.7           -6.5       -15.2      in our forecasts and target price                    The market is already well aware of
 Absolute                                                   18.8           -2.4       -29.0      (20% discount to SOP) for lower bulk                 the challenges facing its six RoRo
 Major shareholders                                                                  % held      rate and vessel value assumptions.                   ships and has reflected losses into
 Companie de Navigation                                                                11.9                                                           forecasts. Investors can take comfort
 JP Morgan Chase                                                                        9.8      Steeply discounted                                   in the fact that (1) the business is still
 UBS AG                                                                                      7   Consistent with our sector-wide                      cash positive as the current spot rate
                                                                                                 assumption changes, we have                          of US$15,000/day is enough to cover
                                                                                                 reduced      our     handysize     and               cash operating costs and interest
                                                                                                 handymax TCE rate assumptions                        expense (but not depreciation), and
                                                                                                 and also assumed that vessel values                  (2) the RoRo asset values have been
                                                                                                 will drop by 20% in 2012 from                        written down by 19% and Pacific
                                                                                                 end-2011 levels. Still, with an SOP of               Basin is confident that no further
                                                                                                 HK$6.80, Pacific Basin’s share price                 writedowns will be needed.
                                                                                                 assigns no value to its high-quality
                                                                                                 and young bulk fleet. This situation                 Energy and infrastructure
                                                                                                 opens up takeover possibilities that                 business could surprise
                                                                                                 could quickly lead to a share price                  Pacific Basin is bidding for several
                                                                                                 rerating. We also expect the bulk                    Australian LNG projects which could
                                                                                                 operations to remain profitable                      provide additional employment for
                                                                                                 throughout our forecast period since                 some of its 35 tugs. Its contract with
                                                                                                 the company is primarily a handysize                 Gorgon LNG has been extended to
                                                                                                 operator and handysize rates should                  2014 while the Gladstone LNG is up
                                                                                                 be relatively resilient given the small              to end-2012 but likely to be extended
                                                                                                 order book and aged fleet.                           too. The building works for the Qatar
                                                                                                 Furthermore, Pacific Basin’s net                     World Cup 2020 may also open up
                                                                                                 gearing is only 7.6%, suggesting                     opportunities in the Middle East.


         5.5
                              Price Close                    Relative to HSI (RHS)
                                                                                        106       Financial Summary
         5.0                                                                            101
                                                                                                                                        Dec-09A       Dec-10A      Dec-11F       Dec-12F        Dec-13F
         4.5                                                                            96
         4.0                                                                            91
                                                                                                  Revenue (US$m)                             951        1,269         1,236         1,243          1,317
         3.5                                                                            86        Operating EBITDA (US$m)                  181.4        222.0         186.8         176.8          196.6
         3.0                                                                            81        Net Profit (US$m)                        110.3        118.8          28.8          41.0           50.5
         2.5
         30                                                                             76
 Vol m




                                                                                                  Core EPS (US$)                           0.046        0.063         0.027         0.021          0.026
         20
                                                                                                  Core EPS Growth                        (79.4%)       36.6%        (56.6%)       (22.7%)         23.3%
         10
                                                                                                  FD Core P/E (x)                           9.57         7.21         17.97         24.64          19.99
          Jan-11                   May-11          Aug-11            Nov-11                       DPS (US$)                                0.030        0.028         0.007         0.011          0.013
               Source: Bloomberg
                                                                                                  Dividend Yield                          6.48%        5.93%         1.61%         2.28%          2.82%
                                                                                                  EV/EBITDA (x)                             3.54         4.78          5.43          5.80           5.32
52-week share price range                                                                         P/FCFE (x)                                  NA           NA          8.58         46.24          32.25
                                            3.60                                                  Net Gearing                            (15.7%)       10.8%          7.6%          8.1%           9.3%
          2.82                                                                       5.16         P/BV (x)                                  0.61         0.58          0.57          0.57           0.56
                                                                                                  Recurring ROE                           6.42%        8.13%         3.41%         2.61%          3.17%
                                                                                        5.45
                    Current                                 Target                                % Change In Core EPS Estimates                                     (4.2%)       (17.9%)        (15.5%)
                                                                                                  CIMB/consensus EPS (x)                                               0.88          0.73           0.49

                                                                                                                                                                 SOURCE: CIMB, COMPANY REPORTS
IMPORTANT DISCLOSURES. INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.
                                                                                                                                                                         Designed by Eight, Powered by EFA
Pacific Basin Shipping
January 30, 2012




  Profit & Loss                                                                      Balance Sheet
 (US$m)                             Dec-10A    Dec-11F    Dec-12F    Dec-13F         (US$m)                            Dec-10A    Dec-11F     Dec-12F    Dec-13F
 Revenue                              1,269      1,236      1,243      1,317         Fixed Assets                        1,519      1,522       1,556      1,602
 Cost Of Sales                       (1,047)    (1,049)    (1,066)    (1,120)        Intangible Assets                   25.30      25.30       25.30      25.30
 Gross Profit                         222.0      186.8      176.8      196.6         Other Long Term Assets              159.9      124.1       122.1      120.1
 Total Operating Costs               (58.00)    (75.11)    (84.64)    (93.75)        Total Non-current Assets            1,704      1,672       1,703      1,747
 Operating Profit                     164.0      111.6       92.1      102.9         Total Cash And Equivalents            693        783         782        785
 Operating EBITDA                     222.0      186.8      176.8      196.6         Inventories                         39.90      39.44       40.09      42.12
 Depreciation And Amortisation       (58.00)    (75.11)    (84.64)    (93.75)        Accounts Receivable                 111.4      108.5       109.2      115.6
 Operating EBIT                       164.0      111.6       92.1      102.9         Other Current Assets                 7.10       7.10        7.10       7.10
 Net Interest Income                 (31.20)    (36.64)    (37.47)    (38.27)        Total Current Assets                  852        938         938        950
 Exchange Gains                         -          -          -          -           Trade Creditors                     127.2      125.7       127.8      134.3
 Other Income                        (12.00)    (10.00)    (10.00)    (10.00)        Short-term Debt                     165.7      165.7       165.7      165.7
 Associates' Profit                    1.60      (9.80)     (2.00)     (2.00)        Other Current Liabilities            9.10       9.10        9.10       9.10
 Profit Before Tax (pre-EI)           122.4       55.2       42.7       52.6         Total Current Liabilities           302.0      300.5       302.6      309.1
 Exceptional Items                    (3.10)    (24.20)      0.00       0.00         Total Long-term Debt                693.7      735.6       744.7      768.1
 Pre-tax Profit                       119.3       31.0       42.7       52.6         Other Liabilities                   14.70      14.70       14.70      14.70
 Taxation                             (0.50)     (2.21)     (1.71)     (2.10)        Deferred Tax                          -          -           -          -
 Profit After Tax                     118.8       28.8       41.0       50.5         Total Non-current Liabilities       708.4      750.3       759.4      782.8
 Minority Interests                     -          -          -          -           Shareholders' Equity                1,545      1,559       1,580      1,605
 Net Profit                           118.8       28.8       41.0       50.5         Minority Interests                    -          -           -          -
 Recurring Net Profit                 121.9       53.0       41.0       50.5         Preferred Shareholders Funds
                                                                                     Total Equity                        1,545      1,559       1,580      1,605




 Cash Flow                                                                           Key Ratios
 (US$m)                             Dec-10A    Dec-11F    Dec-12F    Dec-13F                                           Dec-10A    Dec-11F     Dec-12F    Dec-13F
 Pre-tax Profit                       119.3       31.0       42.7       52.6         Revenue Growth                     33.5%       (2.6%)      0.6%       5.9%
 Depreciation And Non-cash Adj.        87.6      121.5      124.1      134.0         Operating EBITDA Growth            22.4%      (15.9%)     (5.3%)     11.2%
 Change In Working Capital            (3.30)      1.89       0.78      (2.04)        Operating EBITDA Margin            17.5%       15.1%      14.2%      14.9%
 Tax Paid                             (0.50)     (2.21)     (1.71)     (2.10)        Net Cash Per Share (US$)            (0.09)      (0.06)     (0.07)     (0.08)
 Other Operating Cashflow             (4.10)     34.20      10.00      10.00         BVPS (US$)                           0.80        0.81       0.82       0.83
 Cashflow From Operations             199.0      186.4      175.8      192.5         Gross Interest Cover                 5.26        2.54       2.03       2.23
 Capex                               (541.0)    (159.0)    (118.1)    (139.8)        Tax Rate                           0.42%       7.12%      4.00%      4.00%
 Disposals Of FAs/subsidiaries        26.00      81.80       0.00       0.00         Net Dividend Payout Ratio          44.7%       50.0%      50.0%      50.0%
 Acq. Of Subsidiaries/investments       -          -          -          -           Accounts Receivables Days           29.05       32.48      32.05      31.16
 Other Investing Cashflow             53.00       0.00       0.00       0.00         Inventory Days                      12.87       13.81      13.65      13.40
 Cash Flow From Investing            (462.0)     (77.2)    (118.1)    (139.8)        Accounts Payables Days              41.66       44.01      43.52      42.71
 Debt Raised/(repaid)                (17.20)     41.93       9.11      23.39         ROIC (%)                           11.0%        6.1%       5.2%       5.7%
 Equity Raised/(Repaid)                0.00       0.00       0.00       0.00         ROCE (%)                           6.92%       4.89%      4.04%      4.40%
 Dividends Paid                      (50.00)    (14.40)    (20.48)    (25.25)
 Net Cash Interest                   (29.80)    (46.64)    (47.47)    (48.27)
 Other Financing Cashflow               -          -          -          -
 Cash Flow From Financing            (97.00)    (19.11)    (58.84)    (50.14)
 Total Cash Generated                (360.0)      90.1       (1.1)       2.5
 Change In Net Cash                  (342.8)      48.2      (10.2)     (20.8)
 Free Cashflow To Equity             (310.0)     104.5       19.4       27.8




                                                                                     Key Drivers
                                                                                                                       Dec-10A     Dec-11F     Dec-12F    Dec-13F
                                                                                     Average Baltic Dry Index           2,756.0    1,550.0     1,228.0    1,099.0
                                                                                     Average Bulk Rate (US$/day)       18,536.5   14,245.0    13,006.2   12,837.4
                                                                                     Bulk Rates (yoy Change %)            15.0%     -23.2%       -8.7%      -1.3%
                                                                                     Capacity (no. Of Calendar Days)     40,520     44,859      46,865     50,303
                                                                                     Bulk Capacity (yoy Change %)         10.3%      10.7%        4.5%       7.3%
                                                                                     Fleet Size (no. Of Vessels)          111.6      123.5       129.0      138.5
                                                                                     No. Of Dry Bulk Ships                  112        124         129        139




                                                                                                                             SOURCE: CIMB, COMPANY REPORTS


                                                                                23
Dry Bulk Shipping SINGAPORE
January 30, 2012




STX Pan Ocean
STX SP / STXP.SI
                                                                                                                      Current                     S$7.67     SHORT TERM (3 MTH)      LONG TERM

               Market Cap                                        Avg Daily Turnover               Free Float          Target                      S$3.75
 US$1,260m                                                  US$0.01m                          40%                     Previous Target             S$6.25
 S$1,579m                                                   S$0.01m                            205.9 m shares         Up/downside                 -51.1%
                                                                                                                                               Convicti
                                                                                                                                               on
                  CIMB Analyst                                                             Under heavy pressure
                                                                                           STXPO is the only dry bulk company in our universe that is expected to
  Raymond Yap CFA
  T (60) 3 20849769
                                                                                           incur losses in 2011 and beyond. It is also the most heavily geared and
  E raymond.yap@cimb.com                                                                   has a substantial portfolio of vessels acquired at high pre-GFC prices.
                                                                                           We expect the share price to halve as pressure mounts.
                                                                                           We retain our Underperform call,                       bunker is consumed by ships
                                                                                           raise our forecast losses for the next                 servicing COA contracts of under one
                                                                                           three years and slash our target price                 year and these typically do not have
 Share price info                                                                          (still based on 20% discount to SOP)                   bunker adjustment factors (BAF).
 Share price perf. (%)                                1M              3M         12M       as we expect secondhand vessel                         While the 25-year Vale COA to ship
 Relative                                             8.0            -5.3        -29.2     values to correct 20% this year. The                   iron ore from Brazil does have BAF,
 Absolute                                             17.1           -2.9        -38.6     bulk, container and tanker divisions                   the profit margin of the Vale COA is
 Major shareholders                                                             % held     are all expected to be unprofitable.                   only single digit. Any unexpected
 STX Group                                                                          34                                                            increase in bunker cost or delay in
 Korea Development Bank                                                             15     Bulk earnings slashed                                  BAF pass-through could quickly eat
                                                                                           We are now forecasting losses for                      up the margins. STXPO also has a
                                                                                           STXPO’s bulk shipping operations in                    heavy newbuilding programme that
                                                                                           2012-13 instead of profits. The                        will cost US$2bn in 2012-14 (70%
                                                                                           company requires a BDI of at least                     financed), which may push net
                                                                                           1,500 points to break even on                          gearing close to 300% by 2013 and
                                                                                           long-term chartered-in vessels. But                    exact a heavy toll in interest expense.
                                                                                           we are forecasting a range of just
                                                                                           1,000-1,200 points in 2012-14. As at                   Tanker and container also
                                                                                           30 September 2011, STXPO had a                         facing tough times
                                                                                           total chartered-in fleet of 237 vessels,               STXPO chartered in four VLCCs for a
                                                                                           of which 186 are chartered for a                       remaining period of more than three
                                                                                           duration of around two months and                      years at a cost of US$40k/day. But
                                                                                           another 51 vessels are chartered for a                 spot rates averaged only US$20k/
                                                                                           remaining duration of 5½ years. It is                  day during 2011 and are likely to
                                                                                           the latter that could make life                        remain low in 2012-14. As global
                                                                                           difficult for STXPO in an extended                     container liners focus on returning
                                                                                           low-rate environment. The 50                           the beleaguered Asia-Europe trade to
                                                                                           bulkers that it owns similarly require                 profitability, cascading to the Asia-
                                                                                           a BDI level of 1,500-1,800 points to                   Middle East and the Australasia
                                                                                           break even. High bunker costs may                      trades could hurt rates in the trades
                                                                                           also be an issue. Two-thirds of                        that STXPO focuses on.


          14
                              Price Close             Relative to FSSTI (RHS)
                                                                                   108      Financial Summary
          13                                                                       102
          12                                                                       97                                             Dec-09A         Dec-10A       Dec-11F         Dec-12F        Dec-13F
          11                                                                       91
          10                                                                       86
                                                                                            Revenue (US$m)                           3,637          5,593          5,448           4,775          4,597
           9                                                                       80       Operating EBITDA (US$m)                   (17.6)        173.2           (14.7)           31.0           41.7
           8                                                                       74
           7                                                                       69       Net Profit (US$m)                         (62.2)         69.9         (139.2)         (144.9)        (171.2)
           6
          80                                                                       63
 Vol th




          60
                                                                                            Core EPS (US$)                            (0.52)         0.18           (0.94)          (0.70)         (0.83)
          40                                                                                Core EPS Growth                         (117%)              na        (622%)           (25%)            18%
          20
                                                                                            FD Core P/E (x)                              NA         33.97              NA              NA             NA
           Jan-11                  May-11    Aug-11             Nov-11                      DPS (US$)                                0.075          0.076             -               -              -
               Source: Bloomberg
                                                                                            Dividend Yield                          1.22%          1.24%          0.00%           0.00%          0.00%
                                                                                            EV/EBITDA (x)                                NA          18.2              NA          166.7          141.5
52-week share price range                                                                   P/FCFE (x)                                 5.04            NA              NA              NA             NA
                                            7.67                                            Net Gearing                                66%           94%           151%            217%           283%
                                     6.31                                          12.50
                                                                                            P/BV (x)                                   0.61          0.59            0.63            0.68           0.75
               3.75
                                                                                            Recurring ROE                          (4.98%)         1.76%         (9.38%)         (7.55%)        (9.71%)
                    Current                        Target                                   % Change In Core EPS Estimates                                         5.3%           42.4%          40.3%
                                                                                            CIMB/consensus EPS (x)                                                   0.00            0.49          (0.00)

                                                                                                                                                              SOURCE: CIMB, COMPANY REPORTS
IMPORTANT DISCLOSURES. INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.
                                                                                                                                                                        Designed by Eight, Powered by EFA
STX Pan Ocean
January 30, 2012




  Profit & Loss                                                                          Balance Sheet
 (US$m)                             Dec-10A     Dec-11F      Dec-12F     Dec-13F         (US$m)                            Dec-10A    Dec-11F      Dec-12F     Dec-13F
 Revenue                              5,593       5,448        4,775       4,597         Fixed Assets                        3,380      4,260        5,137       5,697
 Cost Of Sales                       (5,405)     (5,448)      (4,732)     (4,543)        Intangible Assets                   23.90      23.90        23.90       23.90
 Gross Profit                         187.7         (0.1)       43.7        53.9         Other Long Term Assets              121.6      122.6        123.6       124.6
 Total Operating Costs               (122.3)     (129.2)      (134.9)     (153.0)        Total Non-current Assets            3,525      4,406        5,285       5,845
 Operating Profit                      65.4      (129.3)       (91.1)      (99.2)        Total Cash And Equivalents          554.0      241.2        164.8       127.9
 Operating EBITDA                     173.2       (14.7)        31.0        41.7         Inventories                         41.00      41.32        35.89       34.46
 Depreciation And Amortisation       (107.8)     (114.6)      (122.2)     (140.8)        Accounts Receivable                 247.9      241.5        211.7       203.8
 Operating EBIT                        65.4      (129.3)       (91.1)      (99.2)        Other Current Assets                904.7      904.7        904.7       904.7
 Net Interest Income                 (24.20)     (40.29)      (62.44)     (82.05)        Total Current Assets                1,748      1,429        1,317       1,271
 Exchange Gains                         -            -           -           -           Trade Creditors                     140.6      141.7        123.1       118.2
 Other Income                          3.10        0.00         0.00        0.00         Short-term Debt                     469.3      469.3        700.0       900.0
 Associates' Profit                   (0.70)       1.00         1.00        1.00         Other Current Liabilities           405.1      405.1        405.1       405.1
 Profit Before Tax (pre-EI)            43.6      (168.6)      (152.6)     (180.2)        Total Current Liabilities           1,015      1,016        1,228       1,423
 Exceptional Items                    32.80       54.40         0.00        0.00         Total Long-term Debt                2,096      2,796        3,496       3,986
 Pre-tax Profit                        76.4      (114.2)      (152.6)     (180.2)        Other Liabilities                   30.10      30.10        30.10       30.10
 Taxation                             (6.00)     (25.00)        7.63        9.01         Deferred Tax                          -          -            -           -
 Profit After Tax                      70.4      (139.2)      (144.9)     (171.2)        Total Non-current Liabilities       2,126      2,826        3,526       4,016
 Minority Interests                   (0.50)       0.00         0.00        0.00         Shareholders' Equity                2,132      1,993        1,848       1,677
 Net Profit                            69.9      (139.2)      (144.9)     (171.2)        Minority Interests                   6.10       6.10         6.10        6.10
 Recurring Net Profit                  37.1      (193.6)      (144.9)     (171.2)        Preferred Shareholders Funds
                                                                                         Total Equity                        2,138      1,999        1,854       1,683




 Cash Flow                                                                               Key Ratios
 (US$m)                             Dec-10A     Dec-11F      Dec-12F     Dec-13F                                           Dec-10A    Dec-11F      Dec-12F     Dec-13F
 Pre-tax Profit                        76.4       (114.2)      (152.6)    (180.2)        Revenue Growth                     53.8%        (2.6%)     (12.3%)      (3.7%)
 Depreciation And Non-cash Adj.       132.7        153.9        183.6      221.9         Operating EBITDA Growth               N/A      (108%)          N/A        34%
 Change In Working Capital             19.7           7.2        16.6        4.4         Operating EBITDA Margin            3.10%      (0.27%)       0.65%       0.91%
 Tax Paid                             (6.00)      (25.00)        7.63       9.01         Net Cash Per Share (US$)            (9.77)     (14.69)      (19.58)     (23.11)
 Other Operating Cashflow            (162.4)         (8.5)       12.2        8.8         BVPS (US$)                          10.36         9.68        8.98        8.15
 Cashflow From Operations              60.4         13.4         67.4       63.9         Gross Interest Cover                 1.09        (2.02)      (1.22)      (1.09)
 Capex                               (600.0)    (1,000.0)    (1,000.0)    (700.0)        Tax Rate                           7.85%       0.00%        0.00%       0.00%
 Disposals Of FAs/subsidiaries        134.9         38.0          0.0        0.0         Net Dividend Payout Ratio          22.3%         0.0%        0.0%        0.0%
 Acq. Of Subsidiaries/investments        -            -           -          -           Accounts Receivables Days           14.80       16.39        17.37       16.49
 Other Investing Cashflow             296.1           0.0         0.0        0.0         Inventory Days                       2.50         2.76        2.99        2.83
 Cash Flow From Investing            (169.0)      (962.0)    (1,000.0)    (700.0)        Accounts Payables Days               9.02         9.46       10.24        9.69
 Debt Raised/(repaid)                   616          700          931        690         ROIC (%)                           1.62%      (2.88%)      (1.70%)     (1.63%)
 Equity Raised/(Repaid)                  -            -           -          -           ROCE (%)                           2.30%      (2.12%)      (1.40%)     (1.43%)
 Dividends Paid                      (17.90)        0.00         0.00       0.00
 Net Cash Interest                   (513.9)       (64.1)       (74.6)     (90.8)
 Other Financing Cashflow                -            -           -          -
 Cash Flow From Financing              84.4        635.9        856.1      599.2
 Total Cash Generated                 (24.2)      (312.8)       (76.5)     (36.9)
 Change In Net Cash                    (640)      (1,013)      (1,007)      (727)
 Free Cashflow To Equity                (6.3)     (312.8)       (76.5)     (36.9)




                                                                                         Key Drivers
                                                                                                                           Dec-10A     Dec-11F      Dec-12F     Dec-13F
                                                                                         Average Baltic Dry Index           2,756.0    1,550.0      1,228.0     1,099.0
                                                                                         Average Bulk Rate (US$/day)       38,353.0   38,000.0     32,300.0    29,070.0
                                                                                         Bulk Rates (yoy Change %)            20.8%      -0.9%       -15.0%      -10.0%
                                                                                         Capacity (no. Of Calendar Days)    127,750    114,063      114,793     121,910
                                                                                         Bulk Capacity (yoy Change %)         30.7%     -10.7%         0.6%        6.2%
                                                                                         Fleet Size (no. Of Vessels)          389.0      382.0        399.0       420.0
                                                                                         No. Of Dry Bulk Ships                  322        313          326         342




                                                                                                                                 SOURCE: CIMB, COMPANY REPORTS


                                                                                    25
Dry Bulk Shipping MALAYSIA
January 30, 2012




Malaysian Bulk Carriers
MBC MK / MBCB.KL
                                                                                                                      Current                  RM2.65     SHORT TERM (3 MTH)    LONG TERM

               Market Cap                                         Avg Daily Turnover              Free Float          Target                   RM1.62
 US$870.9m                                                  US$0.67m                          31%                     Previous Target          RM1.65
 RM2,650m                                                   RM2.10m                            1,000.0 m shares       Up/downside               -38.9%
                                                                                                                                             Convicti
                                                                                                                                             on
                  CIMB Analyst                                                             A huge void to fill
                                                                                           Maybulk is unlikely to be able to cover the loss of earnings from the
 Raymond Yap CFA
 T (60) 3 20849769
                                                                                           expired money-spinning Tenaga contract. This, plus the deteriorating
 E raymond.yap@cimb.com                                                                    fundamentals of the dry bulk market, underpins our expectations of a
                                                                                           decline in Maybulk’s earnings to decline in the coming years.
 For information please contact Calvin Yew at
 (60) 3 20849964 or calvin.yew@cimb.com
                                                                                           We cut our EPS forecasts and                         expand via long-term leases as it
                                                                                           downgrade the stock from Neutral to                  held the view that vessel prices will
                                                                                           Underperform as the recent share                     decline further. This could be the
 Share price info                                                                          price rally is not supported by its                  year to start acquiring aggressively as
 Share price perf. (%)                                  1M            3M          12M      fundamentals. Our target price is                    tight financing and weaker freight
 Relative                                              85.3          36.1          -3.6    based on a 20% discount to SOP.                      rates could force many owners to sell
 Absolute                                              86.6          39.5          -4.0    De-rating      catalysts    include                  at much cheaper prices. At end-3Q11,
 Major shareholders                                                              % held    lower-than-expected dividends.                       Maybulk had more than US$100m
 Pacific Carriers Ltd.                                                             34.5                                                         cash. Assuming a debt-to-equity
 Bank Pembangunan
 Malaysia
                                                                                   18.4    Bulk earnings to plummet                             ratio of 80:20 and based on the
 PPB Group Bhd                                                                       14    We expect bulk earnings to fall in the               current market price of US$20m for
                                                                                           coming quarters due to weaker                        a five-year old handysize, Maybulk
                                                                                           freight rates and expiry of the Tenaga               can comfortably purchase 20 such
                                                                                           contract since mid-2011. The latter                  vessels, which would more than
                                                                                           was a major reason for the 68% qoq                   double its operating fleet. The
                                                                                           plunge in Maybulk’s 3Q11 EBIT. As                    company recently took a US$50m
                                                                                           we expect freight rates to decline, we               facility from HSBC for prospective
                                                                                           also cut our FY12-13 EPS forecasts by                capex and more financing could
                                                                                           8-25% because the demand-supply                      follow. Despite this long-term
                                                                                           gap is expected to widen as a result                 positive, earnings in the next two
                                                                                           of slower global growth. Although we                 years could remain depressed.
                                                                                           are already factoring in a drop in
                                                                                           DPS from 10 sen in 2010 to 7 sen in                  Unsustainable price rally
                                                                                           2011-13, even this may be at risk                    We are unclear why Maybulk’s share
                                                                                           given the current unfavourable                       price has gone up so much as our
                                                                                           shipping environment.                                checks with the company suggest
                                                                                                                                                that there is no intention to take it
                                                                                           Right time to buy vessels?                           private. In the absence of any
                                                                                           Market weakness in 2012 could give                   information suggesting otherwise,
                                                                                           Maybulk an opportunity to amass                      our fundamental call remains an
                                                                                           assets at discounted prices. Since the               Underperform.
                                                                                           global financial crisis, it has opted to

                            Price Close              Relative to FBMKLCI (RHS)
                                                                                    116     Financial Summary
                                                                                    108
         2.7
                                                                                    100                                           Dec-09A       Dec-10A      Dec-11F       Dec-12F        Dec-13F
                                                                                    93
         2.2                                                                        85      Revenue (RMm)                            303.7        404.2         267.8         311.8          370.1
                                                                                    77
         1.7
                                                                                    69      Operating EBITDA (RMm)                   105.3        206.7          96.9          72.9           71.1
                                                                                    62
                                                                                    54      Net Profit (RMm)                         243.8        238.4         100.3          72.6           65.9
         1.2
           8                                                                        46
 Vol m




          6
                                                                                            Core EPS (RM)                             0.17         0.21          0.10          0.07           0.07
          4                                                                                 Core EPS Growth                        (37.8%)       18.8%        (51.4%)       (27.1%)         (9.3%)
          2
                                                                                            FD Core P/E (x)                          15.35        12.92         26.59         36.48          40.23
          Jan-11                   May-11   Aug-11               Nov-11                     DPS (RM)                                  0.15         0.10          0.07          0.07           0.07
               Source: Bloomberg
                                                                                            Dividend Yield                          5.66%        3.77%         2.64%         2.64%          2.64%
                                                                                            EV/EBITDA (x)                            15.60         8.02         15.92         23.25          26.03
52-week share price range                                                                   P/FCFE (x)                               148.9         39.7          17.5            NA             NA
                                                                          2.65              Net Gearing                             (5.8%)       (9.6%)       (14.0%)        (3.5%)          7.5%
          1.39                                                                      2.87
                                                                                            P/BV (x)                                  1.48         1.57          1.54          1.54           1.55
                           1.62
                                                                                            Recurring ROE                            9.4%        11.8%          5.9%          4.2%           3.8%
                   Current                       Target                                     % Change In Core EPS Estimates                                     (0.0%)        (8.0%)        (19.6%)
                                                                                            CIMB/consensus EPS (x)                                               0.88          0.63           0.48

                                                                                                                                                           SOURCE: CIMB, COMPANY REPORTS
IMPORTANT DISCLOSURES. INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.
                                                                                                                                                                   Designed by Eight, Powered by EFA
Malaysian Bulk Carriers
January 30, 2012




  Profit & Loss                                                                      Balance Sheet
 (RMm)                              Dec-10A    Dec-11F    Dec-12F    Dec-13F         (RMm)                             Dec-10A    Dec-11F    Dec-12F    Dec-13F
 Revenue                              404.2      267.8      311.8      370.1         Fixed Assets                        615.3      532.3      716.0      892.1
 Cost Of Sales                       (197.5)    (170.9)    (238.8)    (299.0)        Intangible Assets                     -          -          -          -
 Gross Profit                         206.7       96.9       72.9       71.1         Other Long Term Assets              883.0      918.0      953.0      995.5
 Total Operating Costs               (31.90)    (28.69)    (31.21)    (40.20)        Total Non-current Assets            1,498      1,450      1,669      1,888
 Operating Profit                     174.8       68.2       41.7       30.9         Total Cash And Equivalents          316.7      398.2      306.0      209.1
 Operating EBITDA                     206.7       96.9       72.9       71.1         Inventories                         10.70       9.26      12.94      16.20
 Depreciation And Amortisation       (31.90)    (28.69)    (31.21)    (40.20)        Accounts Receivable                 27.20      18.02      20.98      24.91
 Operating EBIT                       174.8       68.2       41.7       30.9         Other Current Assets                144.4      144.4      144.4      144.4
 Net Interest Income                   1.70      (0.93)     (2.38)     (6.22)        Total Current Assets                499.0      569.9      484.3      394.6
 Exchange Gains                         -          -          -          -           Trade Creditors                     104.1       90.1      125.9      157.6
 Other Income                           -          -          -          -           Short-term Debt                     43.10      43.10      43.10      43.10
 Associates' Profit                   34.60      35.00      35.00      42.50         Other Current Liabilities            0.60       0.60       0.60       0.60
 Profit Before Tax (pre-EI)           211.1      102.3       74.3       67.2         Total Current Liabilities           147.8      133.8      169.6      201.3
 Exceptional Items                    33.30       0.70       0.00       0.00         Total Long-term Debt                107.0      107.0      200.0      300.0
 Pre-tax Profit                       244.4      103.0       74.3       67.2         Other Liabilities                     -          -          -          -
 Taxation                             (1.69)      0.00       0.00       0.00         Deferred Tax                          -          -          -          -
 Profit After Tax                     242.7      103.0       74.3       67.2         Total Non-current Liabilities       107.0      107.0      200.0      300.0
 Minority Interests                   (4.30)     (2.67)     (1.69)     (1.32)        Shareholders' Equity                1,686      1,716      1,719      1,715
 Net Profit                           238.4      100.3       72.6       65.9         Minority Interests                  56.60      59.27      60.96      62.29
 Recurring Net Profit                 205.1       99.6       72.6       65.9         Preferred Shareholders Funds
                                                                                     Total Equity                        1,742      1,775      1,780      1,777




 Cash Flow                                                                           Key Ratios
 (RMm)                              Dec-10A    Dec-11F    Dec-12F    Dec-13F                                           Dec-10A    Dec-11F    Dec-12F    Dec-13F
 Pre-tax Profit                       244.4      103.0       74.3       67.2         Revenue Growth                     33.1%      (33.7%)     16.4%     18.7%
 Depreciation And Non-cash Adj.       (4.40)     (5.38)     (1.42)      3.92         Operating EBITDA Growth            96.3%      (53.1%)    (24.8%)    (2.5%)
 Change In Working Capital            20.40      (3.42)     29.19      24.53         Operating EBITDA Margin            51.1%       36.2%      23.4%     19.2%
 Tax Paid                             (1.50)      0.00       0.00       0.00         Net Cash Per Share (RM)              0.17        0.25       0.06      (0.13)
 Other Operating Cashflow            (37.10)     (0.70)      0.00      (0.00)        BVPS (RM)                            1.69        1.72       1.72       1.71
 Cashflow From Operations             221.8       93.5      102.1       95.6         Gross Interest Cover                24.97       15.16       7.07       3.51
 Capex                                (87.3)       0.0     (214.9)    (216.3)        Tax Rate                           0.69%       0.00%      0.00%     0.00%
 Disposals Of FAs/subsidiaries        57.10      58.90       0.00       0.00         Net Dividend Payout Ratio            42%         70%        96%      106%
 Acq. Of Subsidiaries/investments       -          -          -          -           Accounts Receivables Days           25.33       30.82      22.89     22.63
 Other Investing Cashflow             17.50       0.00       0.00       0.00         Inventory Days                      16.17       21.32      17.01     17.78
 Cash Flow From Investing             (12.7)      58.9     (214.9)    (216.3)        Accounts Payables Days              171.5       207.4      165.5     173.0
 Debt Raised/(repaid)                (202.6)       0.0       93.0      100.0         ROIC (%)                           23.6%       10.4%       6.0%      3.7%
 Equity Raised/(Repaid)                 -          -          -          -           ROCE (%)                           8.94%       3.76%      2.29%     1.62%
 Dividends Paid                      (164.5)     (70.0)     (70.0)     (70.0)
 Net Cash Interest                    60.20      (0.93)     (2.38)     (6.22)
 Other Financing Cashflow            (3,466)    (3,230)    (3,138)    (3,135)
 Cash Flow From Financing            (3,773)    (3,301)    (3,118)    (3,111)
 Total Cash Generated                (3,564)    (3,148)    (3,231)    (3,232)
 Change In Net Cash                  (3,361)    (3,148)    (3,324)    (3,332)
 Free Cashflow To Equity               66.7      151.5      (22.2)     (26.9)




                                                                                     Key Drivers
                                                                                                                       Dec-10A     Dec-11F    Dec-12F    Dec-13F
                                                                                     Average Baltic Dry Index           2,756.0    1,513.0    1,255.0    1,219.0
                                                                                     Average Bulk Rate (US$/day)       25,993.0   16,895.5   14,868.0   14,347.6
                                                                                     Bulk Rates (yoy Change %)            36.3%     -35.0%     -12.0%      -3.5%
                                                                                     Capacity (no. Of Calendar Days)      4,191      4,320      5,760      7,020
                                                                                     Bulk Capacity (yoy Change %)         13.5%       3.1%      33.3%      21.9%
                                                                                     Fleet Size (no. Of Vessels)           15.0       16.0       21.0       25.0
                                                                                     No. Of Dry Bulk Ships                   11         13         17         20




                                                                                                                             SOURCE: CIMB, COMPANY REPORTS


                                                                                27
Dry Bulk Shipping THAILAND
January 30, 2012




Precious Shipping
PSL TB / PSL.BK
                                                                                                                    Current                  THB16.40     SHORT TERM (3 MTH)    LONG TERM

              Market Cap                                        Avg Daily Turnover              Free Float          Target                   THB17.00
 US$547.5m                                               US$0.24m                           39.5%                   Previous Target          THB17.65
 THB17,048m                                              THB7.30m                            1,040 m shares         Up/downside                  3.7%
                                                                                                                                            Convicti
                                                                                                                                            on
                 CIMB Analyst                                                            Limited near-term returns but
  Raymond Yap CFA
  T (60) 3 20849769
                                                                                         well positioned for future
  E raymond.yap@cimb.com                                                                 We do not expect PSL to offer investors excitement in the immediate
                                                                                         term given the weak dry bulk shipping rates. But PSL has enough
  Kasem Prunratanamala                                                                   firepower to purchase more than 20 secondhand ships in a declining
  T (66) 2 657 9221
  E kasem.pr@cimb.com
                                                                                         market, which would enable it to reap the rewards in the next upcycle.
                                                                                         We retain our Neutral call as                         opportunities abound
 Share price info                                                                        investors are likely to focus on the                  The loss of the seven time charter
 Share price perf. (%)                              1M              3M         12M       near term. Our target price has been                  deals was compensated by PSL’s
 Relative                                           -4.1           -2.8        -19.0     cut for lower secondhand values                       ability to wriggle out of high-priced
 Absolute                                           0.6             9.3         -9.9     though we no longer factor in a 10%                   newbuilding orders with ABG. PSL
 Major shareholders                                                           % held     discount to SOP. We cut 2011                          ordered 18 handysize and supramax
 Nishita Shah & family                                                            43     forecast for weak rates but raise 2013                vessels from ABG in 2007 but since
 Khalid Hashim & family                                                         17.5     for more aggressive vessel purchases.                 then, prices have declined 25-30%.
 Thai NVDR                                                                       5.3
                                                                                                                                               Due to execution issues, ABG has
                                                                                         Weak spot market to hit                               delivered only one ship out of the
                                                                                         rates in 2012                                         nine due by end-2011. PSL used this
                                                                                         The dry bulk spot market has                          golden opportunity to resell five
                                                                                         declined considerably of late and                     newbuildings at a profit. The
                                                                                         handysize TCE rates are now                           proceeds have been reinvested in
                                                                                         approaching global financial crisis                   eight other secondhand/newbuilding
                                                                                         levels. This is expected to hit PSL’s                 ships at much lower prices.
                                                                                         earnings     because its     contract
                                                                                                                                               PSL has more than US$100m in cash
                                                                                         protection for 2012 is now at only
                                                                                                                                               and US$400m in debt facilities for
                                                                                         26%, down from 57% in 2011. PSL is
                                                                                                                                               vessel acquisitions, which is more
                                                                                         reluctant to lock in contracts at
                                                                                                                                               than enough to finance the 20
                                                                                         current low rates. Furthermore, the
                                                                                                                                               secondhand purchases that we have
                                                                                         failure of ABG to deliver ships on
                                                                                                                                               assumed for 2012-13. This is on top
                                                                                         time has caused PSL to lose seven
                                                                                                                                               of the 19 outstanding newbuilding
                                                                                         lucrative time charter deals with
                                                                                                                                               orders that PSL is due to receive.
                                                                                         above-market rates. As a result, PSL
                                                                                                                                               This should expand PSL’s fleet from
                                                                                         is now more exposed to the spot
                                                                                                                                               the current 26 vessels to 65 by 2014.
                                                                                         market than anytime in the past
                                                                                                                                               This massive fleet expansion will
                                                                                         three years.
                                                                                                                                               drive earnings.
                                                                                         Secondhand purchase
         20
                             Price Close              Relative to SET (RHS)
                                                                                 106      Financial Summary
         19                                                                      102
         18                                                                      97                                             Dec-09A        Dec-10A       Dec-11F       Dec-12F        Dec-13F
         17                                                                      93
         16                                                                      89
                                                                                          Revenue (THBm)                           5,356          2,964         2,956        3,637          5,451
         15                                                                      84       Operating EBITDA (THBm)                  3,231          1,771         1,455        1,825          3,080
         14                                                                      80
         13                                                                      75       Net Profit (THBm)                        3,047            905           874          922          1,110
         12
         10                                                                      71
 Vol m




          8                                                                               Core EPS (THB)                            1.98           0.68          0.48         0.58           1.07
          6
          4
                                                                                          Core EPS Growth                        (57.8%)        (65.6%)       (30.0%)       21.4%          84.5%
          2                                                                               FD Core P/E (x)                           8.28          24.09         34.43        28.36          15.37
          Jan-11                  May-11   Aug-11             Nov-11                      DPS (THB)                                 1.62           0.78          0.43         0.42           0.48
              Source: Bloomberg
                                                                                          Dividend Yield                          9.88%          4.77%         2.61%        2.54%          2.93%
                                                                                          EV/EBITDA (x)                             4.65           9.68         11.34        13.40          11.32
52-week share price range                                                                 P/FCFE (x)                                3.88             NA          7.42           NA             NA
                                              16.40                                       Net Gearing                                (9%)           4%            0%          46%           101%
         13.00                                                                   19.40
                                                                                          P/BV (x)                                  1.00           1.02          1.00         0.97           0.94
                                                    17.00
                                                                                          Recurring ROE                           12.4%           4.2%          2.9%         3.5%           6.2%
                   Current                      Target                                    % Change In Core EPS Estimates                                       (9.3%)       (0.6%)         43.9%
                                                                                          CIMB/consensus EPS (x)                                                 0.79         0.60           0.61

                                                                                                                                                           SOURCE: CIMB, COMPANY REPORTS
IMPORTANT DISCLOSURES. INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.
                                                                                                                                                                   Designed by Eight, Powered by EFA
Precious Shipping
January 30, 2012




  Profit & Loss                                                                       Balance Sheet
 (THBm)                             Dec-10A    Dec-11F    Dec-12F     Dec-13F         (THBm)                            Dec-10A     Dec-11F     Dec-12F    Dec-13F
 Revenue                              2,964      2,956      3,637       5,451         Fixed Assets                       17,035      16,767      25,153     36,101
 Cost Of Sales                         (878)    (1,201)    (1,497)     (2,040)        Intangible Assets                     -           -           -          -
 Gross Profit                         2,085      1,755      2,140       3,411         Other Long Term Assets              662.3       674.3       686.3      698.3
 Total Operating Costs               (1,111)      (934)    (1,201)     (1,830)        Total Non-current Assets           17,698      17,442      25,839     36,799
 Operating Profit                       974        821        939       1,581         Total Cash And Equivalents          4,210       6,014       5,101      3,069
 Operating EBITDA                     1,771      1,455      1,825       3,080         Inventories                          5.70        7.17        8.66      11.33
 Depreciation And Amortisation         (797)      (634)      (886)     (1,499)        Accounts Receivable                 33.90       33.81       41.60      62.35
 Operating EBIT                         974        821        939       1,581         Other Current Assets                 86.9        86.9        86.9       86.9
 Net Interest Income                 (275.4)    (317.8)    (320.5)     (449.6)        Total Current Assets                4,337       6,142       5,238      3,229
 Exchange Gains                         -          -          -           -           Trade Creditors                     11.10       13.97       16.86      22.06
 Other Income                          0.40       0.00       0.00        0.00         Short-term Debt                     147.6       147.6       147.6      147.6
 Associates' Profit                   19.50      12.00      12.00       12.00         Other Current Liabilities           284.2       284.2       285.2      285.2
 Profit Before Tax (pre-EI)             719        515        630       1,143         Total Current Liabilities           442.9       445.8       449.7      454.9
 Exceptional Items                    196.8      378.2      320.4         0.0         Total Long-term Debt                4,782       5,939      12,971     21,340
 Pre-tax Profit                         915        894        951       1,143         Other Liabilities                    0.00        0.00        1.00       1.00
 Taxation                             (0.60)    (10.00)    (10.00)     (10.00)        Deferred Tax                         97.4        97.4        97.4       97.4
 Profit After Tax                       915        884        941       1,133         Total Non-current Liabilities       4,879       6,037      13,070     21,438
 Minority Interests                  (10.00)    (10.00)    (18.89)     (23.34)        Shareholders' Equity               16,715      17,093      17,534     18,088
 Net Profit                             905        874        922       1,110         Minority Interests                  34.60       44.60       63.49      86.84
 Recurring Net Profit                   708        495        601       1,110         Preferred Shareholders Funds
                                                                                      Total Equity                       16,750      17,138      17,597     18,175




 Cash Flow                                                                            Key Ratios
 (THBm)                             Dec-10A    Dec-11F    Dec-12F     Dec-13F                                           Dec-10A     Dec-11F     Dec-12F    Dec-13F
 Pre-tax Profit                         915        894        951       1,143         Revenue Growth                     (44.7%)      (0.3%)     23.0%      49.9%
 Depreciation And Non-cash Adj.       1,053        939      1,194       1,937         Operating EBITDA Growth            (45.2%)     (17.8%)     25.4%      68.8%
 Change In Working Capital           (250.4)       1.5        (6.4)     (18.2)        Operating EBITDA Margin             59.8%       49.2%      50.2%      56.5%
 Tax Paid                            (107.5)     (10.0)     (10.0)      (10.0)        Net Cash Per Share (THB)             (0.69)      (0.07)     (7.71)    (17.71)
 Other Operating Cashflow            (1,007)      (378)      (320)          0         BVPS (THB)                           16.07       16.44      16.86      17.39
 Cashflow From Operations               603      1,446      1,808       3,052         Gross Interest Cover                  3.23        2.39       2.70       3.36
 Capex                               (1,652)    (1,653)   (10,046)    (11,954)        Tax Rate                            0.07%       1.12%      1.05%      0.87%
 Disposals Of FAs/subsidiaries          827      2,172      1,602           0         Net Dividend Payout Ratio           90.0%       51.0%      47.0%      45.0%
 Acq. Of Subsidiaries/investments       -          -           -          -           Accounts Receivables Days             4.68        4.18       3.79       3.48
 Other Investing Cashflow              (925)      (350)      (350)       (350)        Inventory Days                        1.18        1.96       1.94       1.79
 Cash Flow From Investing            (1,750)       168     (8,794)    (12,304)        Accounts Payables Days               11.60        3.81       3.77       3.48
 Debt Raised/(repaid)                   638      1,157      7,032       8,368         ROIC (%)                             6.0%        4.9%       4.5%       5.1%
 Equity Raised/(Repaid)                 -          -           -          -           ROCE (%)                             4.6%        3.8%       3.6%       4.6%
 Dividends Paid                      (1,299)      (495)      (482)       (555)
 Net Cash Interest                    142.1     (473.4)    (477.8)     (592.4)
 Other Financing Cashflow            (5,124)    (4,416)     1,468       2,616
 Cash Flow From Financing            (5,643)    (4,227)     7,541       9,836
 Total Cash Generated                (6,790)    (2,612)       556         584
 Change In Net Cash                  (7,428)    (3,769)    (6,477)     (7,784)
 Free Cashflow To Equity               (367)     2,298       (431)     (1,477)




                                                                                      Key Drivers
                                                                                                                        Dec-10A      Dec-11F     Dec-12F    Dec-13F
                                                                                      Average Baltic Dry Index           2,756.0     1,550.0     1,228.0    1,099.0
                                                                                      Average Bulk Rate (US$/day)       12,304.0    11,499.2    10,232.3   10,256.0
                                                                                      Bulk Rates (yoy Change %)            -8.6%       -6.5%      -11.0%       0.2%
                                                                                      Capacity (no. Of Calendar Days)      7,801       7,848      10,950     16,973
                                                                                      Bulk Capacity (yoy Change %)        -35.1%        0.6%       39.5%      55.0%
                                                                                      Fleet Size (no. Of Vessels)           21.0        22.0        38.0       55.0
                                                                                      No. Of Dry Bulk Ships                   21          22          38         55




                                                                                                                              SOURCE: CIMB, COMPANY REPORTS


                                                                                 29
DRY BULK SHIPPING
January 30, 2012




                                                                                          DISCLAIMER
 This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where
 such distribution, publication, availability or use would be contrary to law or regulation.
 By accepting this report, the recipient hereof represents and warrants that he is entitled to receive such report in accordance with the restrictions set forth below and agrees to be bound
 by the limitations contained herein (including the “Restrictions on Distributions” set out below). Any failure to comply with these limitations may constitute a violation of law. This
 publication is being supplied to you strictly on the basis that it will remain confidential. No part of this report may be (i) copied, photocopied, duplicated, stored or reproduced in any form
 by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB.
 CIMB, its affiliates and related companies, their directors, associates, connected parties and/or employees may own or have positions in securities of the company(ies) covered in this
 research report or any securities related thereto and may from time to time add to or dispose of, or may be materially interested in, any such securities. Further, CIMB, its affiliates and
 its related companies do and seek to do business with the company(ies) covered in this research report and may from time to time act as market maker or have assumed an underwriting
 commitment in securities of such company(ies), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform significant investment
 banking, advisory or underwriting services for or relating to such company(ies) as well as solicit such investment, advisory or other services from any entity mentioned in this report. The
 views expressed in this report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or
 will be directly or indirectly related to the inclusion of specific recommendations(s) or view(s) in this report. CIMB prohibits the analyst(s) who prepared this research report from receiving
 any compensation, incentive or bonus based on specific investment banking transactions or for providing a specific recommendation for, or view of, a particular company. However, the
 analyst(s) may receive compensation that is based on his/their coverage of company(ies) in the performance of his/their duties or the performance of his/their recommendations and the
 research personnel involved in the preparation of this report may also participate in the solicitation of the businesses as described above. In reviewing this research report, an investor
 should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additional information is, subject to the duties of confidentiality,
 available on request.
 The term “CIMB” shall denote where applicable the relevant entity distributing the report in that particular jurisdiction where mentioned specifically below shall be a CIMB Group Sdn
 Bhd’s affiliates, subsidiaries and related companies.
 (i) As of January 29, 2012, CIMB has a proprietary position in the securities (which may include but not limited to shares, warrants, call warrants and/or any other derivatives) in the
 following company or companies covered or recommended in this report:
 (a) Malaysian Bulk Carriers, MISC Bhd, Neptune Orient Line|
 (ii) As of January 30, 2012, the analyst(s) who prepared this report, has / have an interest in the securities (which may include but not limited to shares, warrants, call warrants and/or
 any other derivatives) in the following company or companies covered or recommended in this report:
 (a) - |
 The information contained in this research report is prepared from data believed to be correct and reliable at the time of issue of this report. This report does not purport to contain all the
 information that a prospective investor may require. CIMB or any of its affiliates does not make any guarantee, representation or warranty, express or implied, as to the adequacy,
 accuracy, completeness, reliability or fairness of any such information and opinion contained in this report and accordingly, neither CIMB nor any of its affiliates nor its related persons
 shall be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance
 thereon or usage thereof.
 This report is general in nature and has been prepared for information purposes only. It is intended for circulation amongst CIMB and its affiliates’ clients generally and does not have
 regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. The information and opinions in this report are
 not and should not be construed or considered as an offer, recommendation or solicitation to buy or sell the subject securities, related investments or other financial instruments thereof.
 Investors are advised to make their own independent evaluation of the information contained in this research report, consider their own individual investment objectives, financial
 situation and particular needs and consult their own professional and financial advisers as to the legal, business, financial, tax and other aspects before participating in any transaction
 in respect of the securities of company(ies) covered in this research report. The securities of such company(ies) may not be eligible for sale in all jurisdictions or to all categories of
 investors.
 Australia: Despite anything in this report to the contrary, this research is provided in Australia by CIMB Research Pte. Ltd. (“CIMBR”) and CIMBR notifies each recipient and each
 recipient acknowledges that CIMBR is exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 (Cwlth) in respect of financial
 services provided to the recipient. CIMBR is regulated by the Monetary Authority of Singapore under the laws of Singapore, which differ from Australian laws. This research is only
 available in Australia to persons who are “wholesale clients” (within the meaning of the Corporations Act 2001 (Cwlth)) and is supplied solely for the use of such wholesale clients and
 shall not be distributed or passed on to any other person. This research has been prepared without taking into account the objectives, financial situation or needs of the individual
 recipient.
 France: Only qualified investors within the meaning of French law shall have access to this report. This report shall not be considered as an offer to subscribe to, or used in connection
 with, any offer for subscription or sale or marketing or direct or indirect distribution of financial instruments and it is not intended as a solicitation for the purchase of any financial
 instrument.
 Hong Kong: This report is issued and distributed in Hong Kong by CIMB Securities (HK) Limited (“CHK”) which is licensed in Hong Kong by the Securities and Futures Commission for
 Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) activities. Any investors wishing to purchase or otherwise deal in the securities
 covered in this report should contact the Head of Sales at CIMB Securities (HK) Limited. The views and opinions in this research report are our own as of the date hereof and are subject
 to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient
 therein are unaffected. CHK has no obligation to update its opinion or the information in this research report.
 This publication is strictly confidential and is for private circulation only to clients of CHK. This publication is being supplied to you strictly on the basis that it will remain confidential. No
 part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person
 in whole or in part, for any purpose without the prior written consent of CHK. Unless permitted to do so by the securities laws of Hong Kong, no person may issue or have in its
 possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the securities covered in this report, which is directed at,
 or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong).
 Indonesia: This report is issued and distributed by PT CIMB Securities Indonesia (“CIMBI”). The views and opinions in this research report are our own as of the date hereof and are
 subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such
 recipient therein are unaffected. CIMBI has no obligation to update its opinion or the information in this research report.
 This publication is strictly confidential and is for private circulation only to clients of CIMBI. This publication is being supplied to you strictly on the basis that it will remain confidential. No
 part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person
 in whole or in part, for any purpose without the prior written consent of CIMBI. Neither this report nor any copy hereof may be distributed in Indonesia or to any Indonesian citizens
 wherever they are domiciled or to Indonesia residents except in compliance with applicable Indonesian capital market laws and regulations.
 Malaysia: This report is issued and distributed by CIMB Investment Bank Berhad (“CIMB”). The views and opinions in this research report are our own as of the date hereof and are
 subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such
 recipient therein are unaffected. CIMB has no obligation to update its opinion or the information in this research report.
 This publication is strictly confidential and is for private circulation only to clients of CIMB. This publication is being supplied to you strictly on the basis that it will remain confidential. No
 part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person
 in whole or in part, for any purpose without the prior written consent of CIMB.
 New Zealand: In New Zealand, this report is for distribution only to persons whose principal business is the investment of money or who, in the course of, and for the purposes of their
 business, habitually invest money pursuant to Section 3(2)(a)(ii) of the Securities Act 1978.


                                                                                                  30
DRY BULK SHIPPING
January 30, 2012




 Singapore: This report is issued and distributed by CIMB Research Pte Ltd (“CIMBR”). Recipients of this report are to contact CIMBR in Singapore in respect of any matters arising
 from, or in connection with, this report. The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets
 Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBR has no obligation to
 update its opinion or the information in this research report.
 This publication is strictly confidential and is for private circulation only. If the recipient of this research report is not an accredited investor, expert investor or institutional investor,
 CIMBR accepts legal responsibility for the contents of the report without any disclaimer limiting or otherwise curtailing such legal responsibility. This publication is being supplied to you
 strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed
 or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBR.
 As of January 29, 2012, CIMB Research Pte Ltd does not have a proprietary position in the recommended securities in this report.
 Sweden: This report contains only marketing information and has not been approved by the Swedish Financial Supervisory Authority. The distribution of this report is not an offer to sell
 to any person in Sweden or a solicitation to any person in Sweden to buy any instruments described herein and may not be forwarded to the public in Sweden.
 Taiwan: This research report is not an offer or marketing of foreign securities in Taiwan. The securities as referred to in this research report have not been and will not be registered with
 the Financial Supervisory Commission of the Republic of China pursuant to relevant securities laws and regulations and may not be offered or sold within the Republic of China through
 a public offering or in circumstances which constitutes an offer within the meaning of the Securities and Exchange Law of the Republic of China that requires a registration or approval
 of the Financial Supervisory Commission of the Republic of China.
 Thailand: This report is issued and distributed by CIMB Securities (Thailand) Company Limited (CIMBS). The views and opinions in this research report are our own as of the date
 hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations
 owed to such recipient therein are unaffected. CIMBS has no obligation to update its opinion or the information in this research report.
 This publication is strictly confidential and is for private circulation only to clients of CIMBS. This publication is being supplied to you strictly on the basis that it will remain confidential. No
 part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person
 in whole or in part, for any purpose without the prior written consent of CIMBS.
 Corporate Governance Report:
 The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and
 Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed
 to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on
 inside information.
 The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that date. CIMBS does
 not confirm nor certify the accuracy of such survey result.
 Score Range                      90 – 100                    80 – 89                     70 – 79       Below 70 or No Survey Result
 Description                     Excellent                Very Good                         Good                                    N/A
 United Arab Emirates: The distributor of this report has not been approved or licensed by the UAE Central Bank or any other relevant licensing authorities or governmental agencies in
 the United Arab Emirates. This report is strictly private and confidential and has not been reviewed by, deposited or registered with UAE Central Bank or any other licensing authority or
 governmental agencies in the United Arab Emirates. This report is being issued outside the United Arab Emirates to a limited number of institutional investors and must not be provided
 to any person other than the original recipient and may not be reproduced or used for any other purpose. Further, the information contained in this report is not intended to lead to the
 sale of investments under any subscription agreement or the conclusion of any other contract of whatsoever nature within the territory of the United Arab Emirates.
 United Kingdom: This report is being distributed by CIMB Securities (UK) Limited only to, and is directed at selected persons on the basis that those persons are (a) persons falling
 within Article 19 of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (the “Order”) who have professional experience in investments of this type or (b) high
 net worth entities, and other persons to whom it may otherwise lawfully be communicated, falling within Article 49(1) of the Order, (all such persons together being referred to as “relevant
 persons”). A high net worth entity includes a body corporate which has (or is a member of a group which has) a called-up share capital or net assets of not less than (a) if it has (or is a
 subsidiary of an undertaking which has) more than 20 members, £500,000, (b) otherwise, £5 million, the trustee of a high value trust or an unincorporated association or partnership with
 assets of no less than £5 million. Directors, officers and employees of such entities are also included provided their responsibilities regarding those entities involve engaging in
 investment activity. Persons who do not have professional experience relating to investments should not rely on this document.
 United States: This research report is distributed in the United States of America by CIMB Securities (USA) Inc, a U.S.-registered broker-dealer and a related company of CIMB
 Research Pte Ltd solely to persons who qualify as "Major U.S. Institutional Investors" as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. This communication is
 only for Institutional Investors and investment professionals whose ordinary business activities involve investing in shares, bonds and associated securities and/or derivative securities
 and who have professional experience in such investments. Any person who is not an Institutional Investor must not rely on this communication. However, the delivery of this research
 report to any person in the United States of America shall not be deemed a recommendation to effect any transactions in the securities discussed herein or an endorsement of any
 opinion expressed herein. For further information or to place an order in any of the above-mentioned securities please contact a registered representative of CIMB Securities (USA) Inc.
 Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to professional, institutional or sophisticated
 investors as defined in the laws and regulations of such jurisdictions.




                                                                                  Recommendation Framework #1 *

                                            Stock                                                                                                       Sector
 OUTPERFORM: The stock's total return is expected to exceed a                          relevant              OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is
 benchmark's total return by 5% or more over the next 12 months.                                             expected to outperform the relevant primary market index over the next 12 months.
 NEUTRAL: The stock's total return is expected to be within +/-5% of a                 relevant              NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected
 benchmark's total return.                                                                                   to perform in line with the relevant primary market index over the next 12 months.
 UNDERPERFORM: The stock's total return is expected to be below a                      relevant              UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is
 benchmark's total return by 5% or more over the next 12 months.                                             expected to underperform the relevant primary market index over the next 12 months.
 TRADING BUY: The stock's total return is expected to exceed a                         relevant              TRADING BUY: The industry, as defined by the analyst's coverage universe, is
 benchmark's total return by 5% or more over the next 3 months.                                              expected to outperform the relevant primary market index over the next 3 months.
 TRADING SELL: The stock's total return is expected to be below a                      relevant              TRADING SELL: The industry, as defined by the analyst's coverage universe, is
 benchmark's total return by 5% or more over the next 3 months.                                              expected to underperform the relevant primary market index over the next 3 months.
 * This framework only applies to stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand an d Jakarta Stock Exchange. Occasionally, it is permitted for the total expected
 returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.
 CIMB Research Pte Ltd (Co. Reg. No. 198701620M)




                                                                                                     31
DRY BULK SHIPPING
January 30, 2012




                                                                                    Recommendation Framework #2 **

                                             Stock                                                                                                           Sector
 OUTPERFORM: Expected positive total returns of 15% or more over the next 12                                     OVERWEIGHT: The industry, as defined by the analyst's coverage universe, has a
 months.                                                                                                         high number of stocks that are expected to have total returns of +15% or better over
                                                                                                                 the next 12 months.
 NEUTRAL: Expected total returns of between -15% and +15% over the next 12                                       NEUTRAL: The industry, as defined by the analyst's coverage universe, has either (i)
 months.                                                                                                         an equal number of stocks that are expected to have total returns of +15% (or better)
                                                                                                                 or -15% (or worse), or (ii) stocks that are predominantly expected to have total returns
                                                                                                                 that will range from +15% to -15%; both over the next 12 months.
 UNDERPERFORM: Expected negative total returns of 15% or more over the next 12                                   UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, has a
 months.                                                                                                         high number of stocks that are expected to have total returns of -15% or worse over
                                                                                                                 the next 12 months.
 TRADING BUY: Expected positive total returns of 15% or more over the next 3                                     TRADING BUY: The industry, as defined by the analyst's coverage universe, has a
 months.                                                                                                         high number of stocks that are expected to have total returns of +15% or better over
                                                                                                                 the next 3 months.
 TRADING SELL: Expected negative total returns of 15% or more over the next 3                                    TRADING SELL: The industry, as defined by the analyst's coverage universe, has a
 months.                                                                                                         high number of stocks that are expected to have total returns of -15% or worse over
                                                                                                                 the next 3 months.
 ** This framework only applies to stocks listed on the Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily
 outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.




 Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2011.
 ADVANC - Excellent, AMATA - Very Good, AOT - Excellent, AP - Very Good, BANPU - Excellent , BAY - Excellent , BBL - Excellent, BCP - Excellent, BEC - Very Good, BECL -
 Very Good, BGH - not available, BH - Very Good, BIGC - Very Good, BTS - Very Good, CCET - Good, CK - Very Good, CPALL - Very Good, CPF - Very Good, CPN - Excellent,
 DELTA - Very Good, DTAC - Very Good, GLOBAL - not available, GLOW - Very Good, HANA - Very Good, HEMRAJ - Excellent, HMPRO - Very Good, ITD - Good, IVL - Very
 Good, KBANK - Excellent, KTB - Excellent, LH - Very Good, LPN - Excellent, MAJOR - Very Good, MCOT - Excellent, MINT - Very Good, PS - Excellent, PSL - Excellent, PTT -
 Excellent, PTTGC - not available, PTTEP - Excellent, QH - Excellent, RATCH - Excellent, ROBINS - Excellent, SCB - Excellent, SCC - Excellent, SCCC - Very Good, SIRI - Very
 Good, SPALI - Very Good, STA - Very Good, STEC - Very Good, TCAP - Very Good, THAI - Very Good, TISCO - Excellent, TMB - Excellent, TOP - Excellent, TRUE - Very Good,
 TUF - Very Good:




                                                                                                        32

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:47
posted:2/20/2012
language:
pages:32