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					                        Company Focus
                        Thailand Equity Research                                                                                                    8 November 2002
www.th-dbsvickers.com




                        Regional Container Lines                                                                                                    BUY
                                                                                                                                                    (Maintained)

                        Loan refinancing fees to hit 3Q02 results                                                                                   Bt48.25-L
                        We expect RCL’s 3Q02 results to be down both y-o-y and q-o-q due to one-time loan
                        refinancing fees. Excluding FX, normalized profits should be up both y-o-y and q-o-q                                        At a Glance
                        on the back of higher lifting and a sharp drop in interest expense. We expect RCL to
                        make a further 10% provision for the decline in the value of its property in Singapore                                      Price Target:
                                                                                                                                                    1-year Bt80.00
                        and Hong Kong in 4Q02. Despite such provisions, the company’s bottom line should
                        show significant growth compared with last year, which should allow RCL to pay                                              Stock Code:
                        dividend for its 2H02. RCL’s shares are trading at an attractive 2003 PE of 3x with a                                       Bloomberg: RCL TB
                        generous 2002 dividend yield of about 9.5%. Maintain Buy.                                                                   Reuters: RCL.BK
                        • Lifting grew 1% y-o-y in Sept 02. As a result, total lifting in 3Q02 and 9M02 expanded                                    Sector: Transportation
                        by 3.7% and 4.8%, respectively. Assuming flat freight rates, normalized earnings should
                        increase by 59% y-o-y and 8% q-o-q due to the sharp drop in interest expense.                                               SET: 357.46
                        Nonetheless, we expect RCL to record loan refinancing fees of around US$2m in 3Q02.
                        This could drag down net profit for 3Q02 to about Bt190m for a sizable decline both y-o-y                                   Stock Rating:
                        and q-o-q.                                                                                                                  HHHHI
                        • Bottom line to show a rising trend in 2002-4. With freight rates starting to rebound and
                                                                                                                                                    Sector Rating:
                        interest expense still on the decline, we expect RCL’s earnings to rebound over time. We
                        have cut our 2002 earnings forecast by 16%, assuming a 10% provision for impairment of                                      HHHII
                        RCL’s properties in Hong Kong & Singapore. Despite this, the company’s earnings should
                        remain in the black in 2002.                                                                                                Technical Rating:
                                                                                                                                                    HHHII
                        • BUY maintained. RCL is trading at a 2003 PE of 3x and EV/EBITDA of 4.7x, both of
                        which are still relatively low compared to its peers and growth prospects. Maintain Buy with                                Reason for Report:
                        a price target of Bt80, based on a 2003 PE of 5x.                                                                           Conference call with
                                                                                                                                                    management
                        Forecasts and Valuation                                                  General Data
                                                                                                                                                    Implications:
                        FY Dec (Btm)               2001A        2002E       2003F      2004F     Issued Capital (m shrs)                      66    Negative
                                                                                                 Market Capital (Btm/US$m)       3,199 /      74
                        Turnover                  13,416      12,525        12,579     13,191                                                       Earnings Revision:
                        EBITDA                      2,471      2,323         2,264      2,329                                                       FY02 down 16%
                        Norm. Profit                  890        992         1,062      1,085    Major Shareholders (%)                             FY03 up 17%
                        Net Profit                  (298)      1,009         1,062      1,085      Ngow Hock Co., Ltd.                      26.2
                        EPS (Bt)                     (4.7)      15.2          16.0       16.4                                                       Consensus EPS:
                                                                                                   Panjamitr Holding Co., Ltd.              10.7
                        EPS Gth (%)                   n.m.      n.m.            5.3        2.2                                                      FY02 Bt13.89
                        PE (x)                     (10.3)         3.2           3.0        2.9   Free Float (%)                             20.4
                                                                                                                                                    FY03 Bt16.32
                        P/Cash Flow (x)                2.1        1.8           1.7        1.7
                        EV/EBITDA (x)                  5.7        5.2           4.7        4.0   Avg Daily Vol ('000 shrs)                   187    DBSV vs Consensus
                        DPS (Bt)                       0.0        4.6           4.8        4.9                                                      EPS (% variance):
                        Div Yield (%)                  0.0        9.5         10.0       10.2                                                       FY02 +9.6%
                        Net Gearing (%)               216        143           107         79                                                       FY03 -1.9%
                        ROE (%)                      (5.7)      18.0          16.2       14.9
                        Book Value (Bt)               79.2      93.0         104.5      116.0
                        P/Book Value (x)               0.6        0.5           0.5        0.4

                        Share Price Chart                                                        Share Price Performance
                          Bt

                        60.00
                                                                                                                    Share         Rel         Rel
                        55.00          Regional Container Lines
                                                                                                                     Price       SET       Sector
THAILAND




                        50.00

                        45.00
                                                                                                 Past 1 mth          4%          -2%       -11%
                        40.00
                                                                                                 Past 3 mths        -4%          -3%         9%
                        35.00                         100-Day MA
                                                                                                 Past 6 mths         1%           7%        11%
                        30.00                                                                    Past 12 mths       53%          20%       -28%
                        25.00

                        20.00
                           Nov-01   Jan-02   Mar-02    May-02      Jul-02     Sep-02   Nov-02




                        Chanpen Sirithanarattanakul • 66 (0) 2657 7824 • chanpens@th.dbsvickers.com                                                                  1 of 3
Company Focus                                                                                                Regional Container Lines




Highlights
• Lifting grew 1% y-o-y in Sept 02. Consequently, total lifting in 3Q02 and 9M02 will expand by
3.7% and 4.8%, respectively. Assuming flat freight rates, normalized earnings should increase by
59% y-o-y and 8% q-o-q due to the sharp drop in interest expenses. Nonetheless, we expect RCL
to record loan refinancing fees amounting to about US$2m in 3Q02. This could drag down net
profit for 3Q02 to about Bt190m, resulting in sizable declines both y-o-y and q-o-q.
• 3Q02 results to be hurt by loan refinancing fees. While we still don’t have the lifting number
for Sept, we believe RCL’s normalized profit should continue to improve both y-o-y and q-o-q on
the back of the increase in lifting and the fall in interest expense. Nonetheless, net profit could be
dragged down by the FX loss on the back of the weak baht against the greenback in 3Q02. In
addition, we expect RCL to record loan refinancing fees amounting to about US$2m in 3Q02. In
early Aug 02, RCL and its subsidiaries successfully refinanced US$166m worth of loans with its
creditors. The deal should wipe out concerns about the bullet loans repayments during 2003-4, as
they are now spread out over a seven-year period.


3Q02 results preview

FY Dec (Btm)               3Q02E      3Q01          y-o-y   2Q02       q-o-q   9M02E         9M01    y-o-y

Normalized Profit               282       178        59%      260        8%          749       795   -6%
Forex Gain (Loss)              (12)       343      -104%      422     -103%          430     (207)   n.m.
Extra-ordinary Items           (80)         -        n.m.    (48)       n.m.       (128)         -   n.m.
Net Profit                      190       521       -64%      634      -70%        1,090       588   85%

Shares (m)                     63.7       63.7               63.7                   63.7      63.7
EPS (Bt)                        3.0        8.2               10.0                   17.1       9.2
Source: Company, DBS Vickers

• Further impairment of property assets expected in 4Q02. Property prices in Singapore and Hong
Kong are still down slightly compared to last year. Management said that some form of
impairment loss for this year is likely. However, we believe the magnitude of such losses should
not be substantial, as RCL has recorded quite large impairment losses over the last two years and
prices of property are close to market already. The following table shows RCL’s impairment losses
on its properties in Hong Kong and Singapore. We have assumed that the values of these properties
drop by another 10% from last year in our forecast. This means RCL could incur impairment
losses of about Bt260m this year based on our forecast. Nonetheless, the actual size of RCL’s
impairment losses will not be known until Dec 02 after RCL receives the appraisal report from the
independent appraiser.

RCL’s Properties Impairment

                                    Value of Properties                    Impairment Loss (Btm)
                                  2000        2001          2002E          2000        2001      2002E
Singapore (S$)
Value (beginning)                152.26           118.07     103.00
Impairment Loss                 (34.19)          (15.07)    (10.30)       (800)            (373)     (251)
Market Value (end)               118.07           103.00      92.70

Hong Kong (HK$)
Value (beginning)                 68.74            16.52      14.80
Impairment Loss                 (52.22)           (1.72)     (1.48)       (271)             (10)       (8)
Market Value (end)                16.52            14.80      13.32

Total impairment (Btm)                                                   (1,071)           (383)     (260)

Source: Company, DBS Vickers




                                                                                                                              2 of 3
Company Focus                                                                                                                                         Regional Container Lines




• Despite further impairment losses, we believe RCL’s bottom line will move into the black this
year. Despite its strong profit from operations during the past two years, RCL’s bottom line has
been dragged into the red by huge impairment losses on the value of its properties and the forex
losses from its US dollar loans. Nonetheless, with forex gains expected this year and with the
anticipation of smaller impairment losses, we believe RCL could see its bottom line move into the
black this year.

RCL – Likely to return to profitability this year

Unit: Btm                                                              2000              2001            2002E             2003E             2004E

Normalized profit                                                     1,031                890               992            1,062             1,085
Forex gain (loss)                                                     (479)              (804)               405                -                 -
Loss on impairment of assets                                        (1,012)              (383)             (260)                -                 -
Loss on disposal of assets                                                -                  -              (48)                -                 -
Loan refinancing fees                                                     -                  -              (80)                -                 -

Net profit                                                            (459)              (298)            1,009             1,062             1,085

Source: Company, DBS Vickers

• Launching a Korea-Thailand direct service. In conjunction with the expansion and promotion of
bilateral trade between Thailand and Korea, RCL and Korea-based KMTC will launch a weekly
Korea-Thailand Service (KTS) ocean transportation service from 4 Nov 02 onwards. This new
service will offer a direct link between Busan and Ulsan with Bangkok and Laem Chabang, catering
to the carriage needs of importers and exporters in both nations.

Action
• Forecast cut for 2002 but raised for 2003-4. We have cut our 2002 earnings forecast by 16% to
reflect our impairment loss assumption related to RCL’s property assets in Hong Kong and
Singapore. In contrast, we have raised our 2003 and 2004 estimates by 17% each, to reflect the
better-than-expected gross margin due to the company’s effective cost cutting and the drop in
lending rates.
• Maintain BUY. RCL is trading at a 2003 PE of 3x and an EV/EBITDA of 4.7x, both of which
are still relatively low compared to its peers. Assuming a 30% dividend payout ratio, the stock
offers a generous 2002 dividend yield of 9.5% (1H02 dividend of Bt2 per share already paid). We
maintain BUY with a target price of Bt80, based on a 2003 PE of 5x.




  DBS Vickers Research Star Rating System
  H H H H H - Strong Buy (>30% upside over the next 6 months)
  H H H H I - Buy (>20% upside over the next 12 months)
  H H H I I - Hold (10-20% upside over the next 12 months)
  H H I I I - Fully Valued (Trade within a +/-10% range over the next 12 months)
  H I I I I - Sell (>10% downside over the next 12 months)

  This document is published by DBS Vickers Securities (Thailand) Co., Ltd. (DBSV), a direct wholly-owned subsidiary of DBS Vickers Securities Holdings Pte Ltd. and an
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