The year have been a good one for shipping companies as well as for ship builders. For Taiwan based Courage Marine group, it is no exception.
- Profits improved 117%, buoyed by record rates last year.
- Revenue improved 59% from 2006
- Operating Profit After Tax improved from USD 49 mil to USD 58 mil.
- In contrast, cost of sales only increase by 22%. The management has done well keeping control of the cost.
- Total Cash is up to USD 64 mil from 43 mil. With a total asset valued at USD 120 mil, that represents half of total assets.
- The company does not have any interest bearing long term debt. Moreover, current liabilities is decreasing as well.
- The enterprise value stands at USD 176 mil.
- The return on invested capital is 113% vs 93% last year. Truly astounding figure but no surprise due to the bouyant environment.
- Based on 32.5 cents, if we were to discount the operating cashflow to perpetual with a WACC of 10% and growth rate of 3%, its present value based on cashflow is USD 585 mil. Thats 331% of the current enterprise value mentioned above. Do note: Cashflow don’t go up in a straight line. If you take the example of , you will see that challenging times would cause operating cashflow to be negative, thus rendering this valuation model to fail.
- Net Profit Margin improved from 49% to 66%. My take is that future cost would drastically increase. It very much depends on how reactive their pricing is. If rates can be readily raised, margins may be able to maintain.
- The operating cashflow yield is 24%! This would mean that the cash generated from operations allows them to pay a 24% dividend yield if they are not making capital replacements or expansion.
- Dividend payout ratio for last year is 26%. That is very good if you consider that they have 64% of the earnings to reinvest and grow. However, it is only good if the management have a sensible use for it. If not, they should pay it back to shareholders to be redeployed.
- My dividend yield on this is nearly 21% since the total 3 ct div is in USD. At current price your yield should be 12%
Courage Marine is a conservative yield play. It is especially worth it if your entry price is near rock bottom. The future for dry bulk shipping should be good. The results of courage marine follows the fate of the Baltic Dry Exchange Index. That index, is also an indirect indicator of the demand for commodities.
The future prospects for commodities should do well with the amount of infrastructures being constructed in both developing nations as well as infrastructure replacement in developed nations.
Courage Marine’s challenge is to keep cost of sales reign in while taking advantage of improving dry bulk pricing.