Bahri’s Q1 beats estimate on revenue surprise: Al Rajhi Cap

The National Shipping Company of Saudi Arabia’s (Bahri) Q1 2017 net profit of SAR 379 million was higher than Al Rajhi Capital’s estimate of SAR 290 million and consensus estimates of SAR 320 million, boosted by higher-than-expected revenue, the brokerage said in a report.

Bahri’s revenue dropped 1 percent year-on-year (YoY) to SAR 1.94 billion, versus Al Rajhi Capital’s estimate of a 20 percent YoY decline.

The brokerage’s assumption of revenue decline was based on tanker rates falling over 30 percent YoY, partially offset by increased fleet size.

However, Bahri said its fleet expansion enabled it to capture incremental market share, softening the impact of lower spot tanker rates, the report said.

Looking ahead, the oil shipper’s revenue/ earnings trajectory mainly depends on two key variables: very large crude carrier (VLCC) tanker rates and bunker prices. Both factors affect the crude oil transport segment, which accounts for 72 percent of revenue.

“We believe there are headwinds to both these variables in 2017 and hence we remain cautious on the stock,” Al Rajhi Capital said.

The investment arm of Al Rajhi Bank maintained the stock’s target price at SAR 38.7 and upgraded rating to “Neutral”.