Equity Analysis /

Thailand (Bualuang): Logistics - A sweet entry point!

  • PSL’s share price to rise further

  • RCL to potentially pitch a positive earnings surprise

  • Strong outlook for freight forwarders

Bualuang Securities
18 February 2022

The recent stock price slides in Logistics space—despite strong 4Q21-1Q22 profit growth profiles—open a window to buy on dips. Both container and dry bulk rates look set to stay high through 1H22. We expect high freight rates and strong shipping demand to also boost the earnings of freight forwarders. In the interim, positive results surprises should trigger stock price rallies.

PSL’s share price to rise further

PSL announced a huge 4Q21 profit, beating both our estimate and the consensus by a country mile. But its stock price has risen only 4.0% since its Feb 14 earnings release. The market seems concerned about recent falls in dry bulk rates, exacerbated by a slump in Chinese comm-odity imports. But the fall in the Baltic Dry Index is largely seasonal—the first-quarter of each year is typically the weakest—so PSL’s 1Q22 core profit is likely to jump YoY but slide QoQ. Lower Chinese commodity imports are largely due to reduced steel output in order to cut air pollution during the Beijing Winter Olympics and Paralympic games.

Dry bulk shipping’s weakest season is about to pass and the Beijing Games are about to end, so we see an opportunity buy on dips. Once dry bulk rates start rising, the market will start looking to the impressive outlook for the rest of 2022. And if dry bulk rates were to rise faster than we assume (we expect the mean BDI to decline YoY), there would be scope for upside to our current 2022 earnings forecast.