Aljazira Capital has initiated coverage of The National Shipping Company of Saudi Arabia (Bahri) with an “overweight” recommendation, and a target price of SAR 35.2.
The investment arm of Bank Aljazira said while marine shipping demand and shipping rates are expected to increase this year, market oversupply is likely to keep the industry unbalanced.
“We believe that the expected expansions and increase in demand of VLCCs are partially priced in,” the report said.
However, it added, the company could witness earning growth on the back of expanding fleet. Additionally, an increase in global trade will be a key factor for the company to increase profitability.
Bahri Oil segment is the key growth catalyst in short-term on the back of further expansions in 2018, along with expected higher demand, Aljazira Capital said.
Meanwhile, Bahri Chemical is expected to show modest growth in revenues.
Upside potential in Bahri Logistics is limited due to lack of expansion, while Bahri Dry Bulk will increase its fleet for transportation of phosphate and other minerals.
“Higher than expected increase in shipping rates and expansion in Bahri Chemical and Bahri Logistics are the main upside risk to valuation,” Aljazira Capital said.
“Down side risk include continued pressure on shipping rates, delay in announced expansion and higher financing cost. In addition, geopolitical issues in the region are the main concern for the company,” it added.
Comments
{{DisplayName}}
{{ElapsedTime}}