KUALA LUMPUR (Jan 29): Malaysian Bulk Carriers Bhd (Maybulk), which is controlled by tycoon Robert Kuok, has issued a profit warning ahead of the release of its financial results for the fourth quarter (4QFY15) and full year ended Dec 31, 2015 (FY15), saying that it is expected to record a "substantial loss" due to unfavourable market conditions.

Shareholders and investors are advised to exercise caution when dealing in the shares of the company.

"The dry bulk market continues to be weak and it is uncertain when the market will recover," it said in a filing with Bursa Malaysia today.

It added that the shipping company has reviewed its non-cancellable operating lease contracts for the chartered-in vessels and based on a preliminary assessment, the charter-in costs are higher than the current and likely market rates.

"Hence, a provision for onerous contracts has to be made," it added.

Maybulk also blamed the current depressed state of crude oil prices, which has had an adverse impact on the global offshore marine industry in which its associate company PACC Offshore Services Holdings Ltd (POSH) operates.

"The group carried out a preliminary assessment of its investment in POSH and is of the view that the fair value of the investment in POSH is likely to be lower than the carrying value and an impairment loss provision has to be made," the group said.

While the amount of the impairment is yet to be determined, Maybulk expects this to have a significant adverse impact on its 4QFY15 and FY15 financial results.

Nevertheless, Maybulk stressed that this announcement is based on the preliminary assessments due to the development of the market situations, of which it and POSH operate.

"These assessments have not been reviewed or audited by the external auditors," it said.

For the cumulative nine-month period ended Sept 30, 2015 (9MFY15), Maybulk slipped into the red, with a net loss of RM58.07 million compared with a net profit of RM33.94 million in 9MFY14.

Revenue for 9MFY15 fell 9.9% to RM176.76 million from RM196.16 million in 9MFY14.

The Baltic Dry Index, an indicator assessments for the dry and tanker shipping markets, continued its losing streak today, dipping 12 points to close at its historical low of 325 points.

Shares in Maybulk climbed 1.5 sen or 2.14% to close at 71.5 sen today, for a market capitalisation of RM715 million.

(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)