Pan Ocean’s fleet expansion is poised to pay off, with its second-quarter operating profit set to double, analysts said.
The South Korean shipowner has chartered in an additional 35 bulkers since the start of the year, a recent quarterly company presentation showed.
The Singapore-listed shipowner increased its bulker fleet from 186 at the end of last year to 221 at the end of the first quarter.
The additions include nine chartered-in capesizes, nine panamaxes, 12 handymaxes and three handysizes.
It has also added a capesize and a panamax to its owned fleet this year, with another panamax and two large handymaxes purchased on the secondhand market but still to be delivered.
The handymaxes are reported to be the 37,700-dwt Taiyuan and Tsingtao (both built 2016), acquired from China Navigation for $20.2m each, according to VesselsValue.
The Pan Ocean bulker fleet now comprises 46 capesizes, 45 panamaxes, 88 handymaxes and 42 handysizes.
Visible effects
In early May, the company reported a first-quarter operating profit of KRW 48.9bn ($43.3m), which was 14% down on consensus estimates of KRW 57bn.
Shinhan Investment Corp analysts Eo-Yeon Hwang and Young-Hoon Song described earnings from spot contracts as “weaker than expected”.
“Freight rate hikes are not reflected in spot contracts signed in late 2020 and early 2021,” they said.
The two Seoul analysts now forecast that Pan Ocean will report an operating profit of KRW 94bn in the second quarter thanks to the bulker additions.
“With charter rates on an uptrend at the end of 2020 and early 2021 ... the leverage effects of the charter contracts signed in the first quarter are already visible,” Hwang and Song said.
They said emerging market economies have only begun to recover and the Baltic Dry Index and the share price should “trend upwards going forward”.
“There are concerns that cargo volume could decline due to the surging inflation in May, but we believe such concerns will be short-lived, as demand will continue to fuel cargo volume growth.”
