Singapore Shipping Corp (SSC) announced their 2nd quarter and half yearly results this evening.
You can take a look at the results here.
Current Price: SG$0.30
Number of outstanding shares: 436 mil
Dividend per share: SG$0.01 ( US$3.11 mil @ 1.41 exchange rate)
SSC owns 5 main ships, with 3 delivered in the past year. They also own an agency logistics business which generate good cash flow based on their asset value. For more on the nature of the business, please refer to my past write up which I append below.
Revenue overall grew 52% year on year and net profit grew 136% year on year.
This is hardly surprising if you add 3 ships to a business with 2 ships and an agency logistics business.
The question is whether my previous estimation of the profits and cash flow is accurate.
This quarter’s statement contains the full contribution from all ships and agency logistic business with no dry docking. Thus we can do the lazy method of annualizing the result. Only the agency logistics business, which either contributes US$2mil to US$3 mil a year will fluctuate more.
Annualizing the US$4.2 mil profit, we get US$16.8 mil. This is better than the US$12.9 mil net profit I estimated.
Here are the Revenue, EBIT and EBIT margin for the ship business quarter by quarter, with the latest at the bottom:
The revenue is better than last quarter, yet the vessel operation cost is lower. The result published in the segmental is profit before tax, so we added the interest payment and arrive at 4.4 mil in EBIT. The margins look much better and I hope I didn’t get this wrong.
The new ships boosted margins, but we are also seeing corporate costs going up to US$2.844 mil.
The quarterly EBITDA is US$5.89 mil. Annualized, the EBITDA is projected to be US$23.5 mil.
The annual debt principal repayment next year will be US$12 mil and interest cost is estimated to be around US$3.2 mil.
The Free Cash Flow is projected to be US$23.5 – US$12 mil – US$3.2 = US$8.3 mil.
To pay a 2 cent dividend will require US$6.2 mil, which they have no problems paying. However, they have indicated that they will go for growth so US$5 mil retained will likely be going for opportunistic purchases.
Valuation and Leverage
The Market Cap of SSC is US$94 mil.
The Net Debt of SSC is US $93 mil. Thus the enterprise value is US$187 mil.
Based on net income of US$16.8 mil, the PE is 5.6 times, or inverted 17.8% earnings yield. The free cash flow yield is closer to 8.5%.
EV/EBITDA is 7.95 times.
I find EV/EBITDA to be a better judge here. 6 times is my gauge for very appealing. 8 times is not expensive but not cheap.
Net Debt to EBITDA is 4 times. While net debt to asset is 52%, I am comfortable with the Net Debt to EBITDA, where the loans are amortizing.
Cash flow looks good, debt level looks comfortable.
Results look good, but disappointing that they couldn’t increase the payout. However, in a climate where companies keep giving poor results, SSC shows the way for consistent cash flow.
SSC do have room to scale up, like what they indicated, but if you are looking for yield, you might have to wait further.
The growth opportunity would have to come from whether the next generation of management can deliver on what they have kept reiterating.
My past write-ups on this company can be found below:
- Singapore Shipping Corp
- Sells MV Singa Ace
- How much returns can you get from a ship
- Singapore Shipping Corp sells Nanyang Maritime
- Singapore Shipping Corp Full Year Results and Details of New ships
- Blaze acquisition trail with US$80 mil purchase New Build PCTC
- Q3 FY2015 results
- First contribution of the three acquisition together
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