This article first appeared in Corporate, The Edge Malaysia Weekly, on April 25 - May 1, 2016.

BILLIONAIRE Robert Kuok Hock Nien’s Malaysian Bulk Carriers Bhd (Maybulk) is understood to be selling one of its five post-Panamax dry bulk carriers — the 87,000 deadweight tonne Alam Pesona — for US$6.9 million (RM26.74 million), industry sources say.

While the buyer remains undisclosed, the price is said to be fair for the 11-year-old ship, built by IHI Marine United Inc in Yokohama, Japan. 

Post-Panamax ships are generally vessels that are too large to ply the Panama Canal.

It is not known whether there are similar plans for the company’s other four post-Panamax ships, its smaller 16 bulk carriers (Supramax and Handysize) or its three tankers.

To recap, Maybulk currently has a fleet of 24 ships, comprising 21 bulk carriers and three tankers. The company also has a 21.23% stake in Singapore-listed PACC Offshore Services Holdings Ltd (POSH), which provides offshore support services.

While the Baltic Dry Index (BDI) — which tracks the cost of carriage of dry bulk goods such as iron ore, grain and coal across sea routes — has gained momentum, oil prices have also been strengthening. West Texas Intermediate hit a record low of US$26.21 on Feb 11 but oil prices are now trading at above US$43 per barrel, up more than 65% from their low a couple of months ago.

Industry sources, however, are watching the sale of Alam Pesona for a possible indication of Maybulk’s view on the direction of the BDI.

“Pacific Carriers Ltd, a 34.46% shareholder in Maybulk, is a veteran dry bulk player and has been in operations since the early 1970s. Any move by it to dispose of or acquire vessels is often scrutinised by the market as a possible indication of where the BDI is headed,” the source says.

Since hitting a record low of 290 points on Feb 2, the BDI has gained more than 130% to tread around 670 points last Friday. 

Similarly, Maybulk shares, which hit a record low of 52.5 sen on March 7, have gained more than 75% and closed at 92.5 sen last Friday, giving the company a market capitalisation of RM925 million.

Trading volume in the shipping and oil and gas counter was also relatively high. For this month until last Thursday, 270.37 million shares, or about 27% of the company’s share base, changed hands. In March, the average trading volume for Maybulk was 5.51 million shares, but surged to an average of 18.29 million shares this month up till last Thursday.

Maybulk was even issued a rare unusual market activity query earlier this month.

For its financial year ended December 2015, it suffered a net loss of RM1.18 billion from revenue of RM241.50 million. For FY2014, the company raked in RM12.15 million in net profit from RM255.72 million in sales.

In the notes accompanying its financials, Maybulk explains that it had impairments of RM863.89 million from its vessels and its associate, presumably POSH, and provisions for onerous contracts of RM118.20 million.

In reviewing its performance, it says its dry bulk segment suffered an operating loss of RM104.16 million. “Dry bulk trade was static in 2015 largely due to the slower economic growth in China. Looking forward, China’s seaborne coal imports are expected to decline further in 2016. The increase in demolition activity, reduced dry bulk deliveries and increasing lay-ups should help to reduce tonnage overcapacity. 2016 is expected to be yet another challenging year for dry bulk shipping,” the company adds.

As at end-December 2015, Maybulk had cash and bank balances of RM150 million, long-term borrowings of RM383.05 million and short-term debt commitments of RM224.58 million.

It is interesting to note that Maybulk is bucking the trend by selling vessels. Others, meanwhile, are buying bulk carriers, indicating the worst may be over.

BW Group (formerly known as Bergesen Worldwide), a maritime outfit with expertise in the tanker, gas and offshore segments, set up BW Dry Cargo in mid-March, marking its return into dry bulk shipping after more than a decade.

Andreas Sohmen-Pao and Hong Kong-based Anna Pui Hing Pao are behind BW Group. Andreas, who runs BW Group, is the oldest son of Austrian national Helmut Sohmen and Anna is the daughter of the late Sir Y K Pao, who set up World-Wide Shipping Group, one of the world’s biggest shipping companies.

World-Wide took over Bergesen d.y. ASA in 2002.

Apart from BW Group, several other big names have been purchasing dry bulk assets lately.

Hong Kong-based Winning Shipping acquired three Capesize dry bulk carriers within one week recently while Greek shipping tycoon Nikolaos Vafias is said to have acquired two Capesize vessels. Idan Ofer’s Eastern Pacific bought the Capesize MV Aquacargo for US$33 million, and shipping magnate John Angelicoussis and John Fredrikesn have been snapping up new vessels from Scorpio Bulkers.

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