Braemar Shipping Services – ready for a big recovery?

Braemar Shipping Services has a strong niche in its sectors and, importantly, it trades at a far cheaper rating than its larger peer Clarkson, writes Mark Watson-Mitchell. 

In late October last year, the share price of Braemar Shipping Services (LON:BMS) was looking very perky at 233.5p.

At the end of January, they were still trading at above the 220p level, but by 24 February they had fallen back to 160p.

Then Covid-19 broke loose and the shares collapsed to 98p a month later.

Last week they saw a slight pick-up to 103.5p, before easing back to a low of 93p on Monday night.

This morning they opened at 99p, after a number of sassy cheap buyers came in for the stock yesterday. In fact, Tuesday’s volume was almost double the average daily figure.

The company is already a favourite of mine, it has a strong niche in its sectors and, importantly, it trades at a far cheaper rating than its larger peer Clarkson.

Taking another look at the company’s fundamentals yesterday made me realise that those buyers could well have superb timing in their purchases.

Established way back in 1972, the group went public in 1997. Today it employs some 530 people across its 30 locations worldwide.

It is a leading international provider of shipbroking, financial advisory, logistics and engineering services mainly to the shipping and energy industries.

The shipbroking division offers spot and period chartering, sale and purchase, market research and freight derivatives brokering across all major commercial shipping sectors. It makes up some 64% of the group’s revenues.

The engineering side provides to the oil, gas and shipping industries, its expert engineering and technical advisory services related to facilities and ships. This is some 2.6% of group revenues.

Through its network of offices and trusted partners globally the logistics division offers worldwide services for port agency, liner and logistics. This side makes up some 27% of the total.

For shipowners, institutional investors and lenders around the globe its financial division provides a comprehensive range of smart and tailor-made corporate finance solutions. Around 7% is contributed to group sales.

The results for the year to end-February 2020 are due to be announced within the next few weeks. Brokers to the company, finnCap, are looking for revenues to have risen from £117.9m to £122.9m, with pre-tax profits coming in at £9.4m, worth 22.2p per share in earnings. Due to Covid-19 measures the company is not expected to pay a final dividend, but even so the interim was a healthy 5p per share.

The virus has impacted the company and first-quarter earnings will be hit. However, the brokers are estimating only a £4.3m fall in turnover and a £1.7m easing back in pre-tax profits to £7.7m for the year to end-February 2021 – that would still bring earnings in at a very appealing 18.1p per share.

The group has an increased order book currently and its liquidity position is robust, it is trading well within its facilities.

Considering that its shares are trading now at only 99p makes them a stand-out price recovery candidate.

Valued at just over £31m, the group has 31.71m shares in issue. Its leading investors include Hargreaves Lansdown Asset Management (6.36%), Chelverton Asset Management (6.07%), Horizon Kinetics Asset Management (5.01%), Hargreaves Lansdown Stockbrokers (4.83%), Barclays Bank (private) (4.22%), Downing (4.11%), FIL Investment Advisors (3.91%), Alliance Trust Savings (3.74%), and Unicorn Asset Management (3.61%).

A private individual from elsewhere in the shipping services sector, Quentin B Soanes, Chairman of Sterling Shipping Services, owns 1,288,900 shares, some 4.07% of the Braemar equity.

At just 99p the company is trading on a ridiculously low 5.46 times prospective earnings ratio, yielding a very attractive 5%. Clarkson is trading on 22 times earnings.

That is why these shares are bound to recover very quickly when the next item of good news is announced – could that be when the latest results come out in the next few weeks?

I see these shares rising to around the 150p level within months. The brokers have a 205p target price.

Those buyers yesterday really knew what they were doing!

Meanwhile… Could Bloomsbury start a new Covid19 trend?

With today’s excellent final figures to end-February this year, this publishing group has started something different in today’s markets.

Along with announcing a 9% increase in pre-tax profits on unchanged revenues of £163m, Bloomsbury told its shareholders that it had intended to declare a final dividend for the year of 6.89p per share. This would have resulted in a total dividend for the year of 8.17p per share, up 3% on the previous year.

As previously announced, Bloomsbury has decided in light of coronavirus to conserve cash and therefore will not be paying a cash dividend.

It has now proposed, subject to shareholder proposal, that the dividend is instead settled through the issuance of new ordinary shares by way of bonus issue to shareholders, with a value equivalent to the proposed final dividend.

Bloomsbury is proud of its strong track record of 24 years of consecutive dividend growth.

It has the declared intention to reintroduce cash dividend payments as soon as market conditions allow it to do so.

I welcome this sensible and confident move and hope that it could show Bloomsbury as starting a new trend – issuing bonus shares instead of current dividend payments.