• FY21 was a record year for Samudera Shipping Line (SGX:S56) as revenue and net profit are at its highest for the past 5 years. Higher freight rates and volume handled (+16%) drove revenue up by 52% to US$526.7m. Gross margin rose by 19.4ppt to 27.9% and was reflected in its net margin of 24.9%. Net profit surged 1678% to US128.6m.
• Samudera Shipping Line has declared a total dividend of S$0.14/share for FY21 which translates to a yield of 18.4%.
• Samudera Shipping Line has a net cash of US$169.5m. Of these, US$53.8m would be paid out as proposed final dividend.

Freight Rates Are Still Buoyant and Favorable to Shipping Companies as Capacity Imbalance Persists

• China containerized freight index was up 76% y-o-y as at 11 Mar 2022. Samudera Shipping Line has chartered in an additional 6 newly built vessels of which 2 have already been deployed and the rest will be delivered in 4Q22. Long term charter contracts has already been secured for these vessels. This brings the total number of chartered in vessels to ~24. (~71% of fleet size)
• Most of the vessels are chartered in for ~18 months. Although charter hire rate trends in line with freight rate, longer term charter-in has helped Samudera Shipping Line to preserve some margin as it is able to lock in at lower rate as compared to the spot rate.

Operating Margin Is Expected to Come Under Pressure

• Operating margin is expected to come under such, a JV is established with Samudera Shipping Line holding a minority stake and it will own Indonesia flagged vessels to be used for domestic routes. Contribution from domestic shipping will be captured under share of associates.

Source: SAC Capital Research - 15 Mar 2022