Brokers' Call

20 August 2005

Halim Mazmin Bhd recorded 2Q05 turnover and net profit of RM13.7mil and RM3.5mil respectively.
 
Comment by Mayban Securities: 2Q05 results were within expectations. We believe the quarter-on-quarter decline of 24.8% in turnover was largely due to the loss of shipping revenue arising from the disposal of the Meridian Polaris.
 
To recap, the group registered RM64.6mil gain on the disposal of the Meridian Polaris, which was recognised in 1Q05.
 
This also explains the significant decline in quarter-on-quarter earnings due to the absence of vessel disposal in 2Q05.
 
Currently, Halim has 5 vessels in operation compared to 7 in FY04. The group has RM260mil in cash (RM310mil if we included short-term investments) as at June 30, 2005, implying that it has the ability to extend its fleet if it so chooses.
 
However, Halim had indicated that it is unlikely to purchase any vessels in FY05, but instead, may look to sell more vessels to capitalise on the current high vessels prices.
 
We suspect that the group may look to dispose off a couple of its tanker vessels next.
 
These tankers are currently under a yearly contract with Petroliam Nasional Bhd, as opposed to its container vessels, which are currently under time charter arrangements till 2010 with Hamburg Sud of Germany.
 
Earnings impact would also be less severe should the group dispose off its tanker fleet as a bulk of the group's shipping income is derived from its container division.
 
Moreover, the age profile of its tanker fleet has exceeded 10 years, which may result in the group incurring higher repair and maintenance costs.
 
We estimated that the group can potentially realise between RM2mil to RM4mil gain per vessel from the sale, and may increase our FY05 earnings estimates by about 10% to 12% if the disposal was carried out this year.           

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