Maybulk - sitting on RM276million in cash & investment

Market observers do not believe that a PACC Offshore Services Holdings (POSH Semco) IPO will further re-rate Maybulk.

During the 2003 to 2008 dry bulk super-cycle boom, Maybulk disposed of many of its ships as it treats its ships as tradeable commodities. This earned Maybulk handsome profits, which were then shared with equity investors via the payment of high dividends.

As a result, Maybulk is now (Aug 2013) sitting on RM276mil in cash and investments, against just RM86mil in debt.

Between 2008 and 2010, Maybulk acquired 11 ships, of which six were on long-term leases, because it did not believe that ship prices were yet at the bottom. This turned out to be another smart move.

However, at the moment (Aug 2013), Maybulk is waiting to take delivery of just six dry bulk vessels between 2013 to 2015. Given that second-hand prices are now (Aug 2013) rising, industry observers wonder if Maybulk has waited too long to make more aggressive acquisition moves.

Maybulk has been making losses in its dry bulk division for the past three consecutive quarters, because the charter hire on its six long-term charters is likely higher than the current low spot rates.

Estimate cash losses of some RM21mil over the past three quarters, which could persist as the charter periods are three to 10 years long. This unwanted cash drain erodes the firepower that Maybulk has to acquire ships, and is one of the key issues holding Maybulk back from reporting better earnings.
Based on estimate, the IPO is not likely to value POSH more than the above.