[Click eStock] Pan Ocean, Strong BDI... Expecting Good Q3 Performance

Daishin Securities Report

[Asia Economy Reporter Minji Lee] Daishin Securities maintained a buy rating and a target price of 11,000 KRW for Pan Ocean on the 27th, expecting the company to deliver strong earnings.

According to Daishin Securities, Pan Ocean is expected to post results that exceed market expectations by 15% in the third quarter. Revenue is anticipated to reach 1.234 trillion KRW, and operating profit 160 billion KRW, representing increases of 94.6% and 154.3% year-on-year, respectively. Market consensus estimates were 1.171 trillion KRW and 139 billion KRW, respectively.

The core business segment, dry bulk, is estimated to achieve revenue of 977 billion KRW and operating profit of 146.6 billion KRW, reflecting increases of 123% and 156.4%, respectively. Ji-hwan Yang, a researcher at Daishin Securities, stated, “The strength of the Baltic Dry Index (BDI) and the profit leverage effect from 40 open hatch vessels with low costs and 27 time charter (TC) vessels are being reflected.” He added, “The higher KRW-USD exchange rate is also believed to have had an impact.”

Recently, the dry bulk market has reached record highs for Capesize vessels since September 23, 2008. The BDI is at its highest level since November 19, 2009, with the third quarter average BDI expected to exceed 3,600 points, more than 10% above the average of 3,200 points. The BDI is also projected to remain high in September and October, suggesting that fourth quarter earnings will surpass those of the third quarter.

The strength of the Capesize segment has been influenced by increased imports of Brazilian iron ore by China in the second half of the year. Other vessel segments are also experiencing strong market conditions due to increased demand for grains, coal, and other minerals. Researcher Ji-hwan Yang noted, “Rice, sugar, fertilizer, and grains that were previously transported by container are now being shipped by handy bulkers.” He added, “Supply reduction effects due to port congestion are also contributing to the strong market conditions.”