Highest growth in profit after tax over three years: TRANSPORT & LOGISTICS: Shin Yang Shipping Corp - Rides out industry storm

This article first appeared in The Edge Malaysia Weekly, on November 18, 2019 - November 24, 2019.
-A +A

Shipping players have been facing rough financial seas, owing to global and regional economic uncertainties in recent years. Despite this, Shin Yang Shipping Corp Bhd has sailed through on the wave of resilience while growing its bottom line.

In the financial year ended June 30, 2018 (FY2018), Shin Yang recorded RM23.7 million in profit after tax (PAT). By comparison, its FY2017 PAT was RM5.3 million (FY2016: RM8.2 million; FY2015: RM5.2 million). Revenue fell from RM882.87 million in FY2015 to RM589.68 million in FY2017, but rebounded to RM619.05 million in FY2018.

The big leap of PAT in FY2018 meant that the company had grown its PAT by a compound annual growth rate (CAGR) of 12% over the period of review for The Edge Malaysia Centurion Club Corporate Awards 2019, making it a joint winner for the highest PAT growth in the transport and logistics segment.

The significant PAT increase coincided with Shin Yang’s entry into a strategic alliance with port operator Northport (Malaysia) Bhd and shipping conglomerate Harbour-Link Group Bhd in September 2017.

The strategic alliance was noteworthy, as the company derives about four-fifths of its revenue from shipping activities, according to the results of its latest financial year, FY2019. Its other activities are shipbuilding and repair.

In addition, the alliance came amid a generally difficult dry bulk shipping environment that has depressed freight rates, as well as a weak shipbuilding market for oil-and-gas-related clients.

Called The East Malaysia Network (TEAM), the alliance aims to create economies of scale among the partners by sharing resources, including vessels, terminal arrangements and networks, according to a statement released at the time.

In particular, TEAM allowed Shin Yang and Harbour-Link to align their shipping lines to increase shipping frequency and reduce operating expenses, among others.

Under the TEAM alliance, Shin Yang carried 111,621 twenty-foot equivalent units (TEU) of containers in FY2018 with its fleet of 14 container vessels. The volume represents a 13.81% growth from 98,075 TEU of containers lifted in FY2017, during which its fleet comprised 13 container vessels.

Its fleet utilisation also improved in FY2018 to 83% for container shipping, an uptick after several years of falling utilisation rates that hit as low as 80%.

It is worth noting that in early FY2019, the company expanded its shipping fleet. It purchased two container vessels with a carrying capacity of 800 to 1,000 TEU per trip, according to its FY2018 annual report.

It is far from plain sailing ahead for Shin Yang, however, as the general business landscape remains turbulent. In its FY2018 annual report, the company acknowledged that challenges remain.

“The challenge for the group is to further improve its efficiency and productivity in both fleet and shipbuilding consolidation activities. The group shall continue to work on achieving and realising the full use of its resources,” said the company.

In fact, FY2019 — which is outside of the period under review — proved the company’s expectations of rough seas ahead to be correct. While its full-year revenue rose 2.6% y-o-y to RM636.98 million, profits fell into an unaudited net loss of RM86.42 million.

To be sure, its cash flow from operations remained positive, generating a net RM98.35 million (FY2018: RM224.8 million) despite squeezed margins in its bulk shipping, among others. However, the company’s bottom line took a RM52.5 million hit in the form of receivables impaired during the financial year. The receivables were due from companies in the United Arab Emirates.

“The unrealised margin on production overheads of [work-in-progress during construction of new ships] also resulted in the losses incurred for the year,” said Shin Yang in its 4Q performance review.

Looking ahead, the company is confident that despite the challenging outlook for the industry in general, it is sufficiently prepared for ongoing economic uncertainties globally and regionally.

“The continuous improvement in terms of operational costs management, fleet efficiency and routes enhancement would be an important priority in the next few quarters ahead,” it said.

See the other winners in The Edge Malaysia Centurion Club Corporate Awards 2019 here.