This article was recently published on www.nracapital.com and is reproduced with permission.

Jaya Holdings reports strong Q1-2013 results as earnngs recovery continues.....but there could be more good news for my Stock Pick

Kevin_Scully_300
Kevin Scully, executive chairman, NRA Capital. NextInsight file photo

Jaya Holdings, one of my Stock Picks, has reported a good set of Q1-2013 results

In a recent investment seminar organised by ShareInvestor, I highlighted Jaya as one of a few companies which I expected would report improving earnings despite the gloomy outlook for the Global economy
.

Key highlights of the results:

a) revenue for Q1-13 rose 36% to US$36.7mn

b) gross profit was up 40% to US$12mn

c) Pretax profit rose 104% to US$10.3mn

d) net attributable profit rose 113% to US$10.13mn

e) the results were boosted by a reversal of an impairment charge of US$1.45mn

f) gross cash was US$183mn down from US$200.4mn in Q1-2012

g) Long term debt down to US$181mn down from US$196mn

h) EPS was US$ 1.31 cents while NAV was US$65.8 cents

Commentary

The recovery in the OSV charter market continues with only one vessel sold this quarter similar to Q1-2012.  But at the charter side on the same fleet of 28 vessels, charter utilisation was more than 84% compared to 65% while charter rates also improved.

This recovery materialised in the second half of 2012 and should continue into 2013 with a growing preference among charterers for newer vessels which favours Jaya.

JAYA_Shesh_quote

The company has also announced that its raising a new US$150mn loan facility.  This facility will allow Jaya to retire its existing debt - the existing long term debt was preventing Jaya from paying dividends to shareholders through its loan convenant. 

This is good news as investors can expect Jaya to start paying dividends as the new loan facilties do not have this restriction.  However, while there is no penalty for early redemption of the loan - the cost of funds for the new loan are higher than the old facility.

I think we can continue to expect good news from Jaya in terms of a steady business recovery from both utilisation and charter rates boosted occassionally by vessel sales and, finally, dividends. 

I have been recommending Jaya for some time because it's been significantly undervalued but a combination of financing problems and problems with its previous controlling shareholder have undermined its stock performance. 

The shares are now set to resume a steady recovery to match that of its peer group.  Retain in my Stock Picks - if you don't own the stock, its time to accumulate below the $0.60 level.  As to my price target - please check my Stock Picks section.

Recent story:  @ JAYA's AGM: Business transforming in the right direction


Comments  

0 #16 ask CC Low 2012-12-30 06:55
Hi CC Low,

Where do you retrieve the information for the delivery date of the 2 vessel?
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0 #15 CC Low 2012-12-23 08:50
Burned

An astute market trader shorts a counter when it's operations and financials are on a declining trend and facing unfavourable contingencies at the horizon, and will buy a counter on contra when it is on the ascendant. I hope your idea to "short" the counter was given in jest and that no such action was actually taken because Jaya's prospects are on the ascendency and at close of 21 Dec 12 it's price has already risen to 0.61 after DBS Vickers issued a BUY call to its clients (target price 0.85) on the same day.

On 29 Nov 12 the group delivered a 16,000 BHP high end technically specified AHTS (Jaya Supreme) to Canadian operator Atlantic Towing with another similar ship to be delivered in November 2013. Vessel sales for 2nd Q 2012 is expected to generate revenue of US$95m and a gross profit in the region of US$35m-40m, which will probably catapult its half year net earnings to at least US$50m. I am expecting management to declare an interim dividend, perhaps at even $0.05 in their coming announcement in early February 2013. However, given the sentiments and DBS Vicker's bullish call, the counter may have reached above 0.70 by that time.
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0 #14 HUAT 2012-12-23 06:18
U BURNED BEFORE BURN?
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0 #13 Joan 2012-12-23 02:49
Burned, it's 61 cents now! U are in the money ?
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0 #12 Joan 2012-12-08 08:53
Hello Burned, hope u got in at 54 cents, and made 3 cents already. The stock is 57 cents now. It's worth a lot more and in due time the market will re-rate Jaya to 70-80 cents
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0 #11 Burned 2012-11-23 06:57
HO ho ho .... 54 cents......

Whenever this person issues a buy call, the stock's price starts to decline. Not sure if it is co-incidentally or what. one thing, the next time he call for a buy, i will short the counter. We need more people like Muddy Waters .
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0 #10 Burned 2012-11-15 13:53
With so many companies trading at 50% of book value, Jaya is just one of them.

Cheap will get cheaper. I will buy more when the market decides that the shipping industry turn around. Doubt any soon.

Huat ah!
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0 #9 CC Low 2012-11-15 09:13
To all Jaya retail investors and shareholders out there who are still harbouring concerns about the group, perhaps they can draw some comfort in looking at a different perspective. There are 3 major areas they should note in the recent developments :

(1) The recent credit facilities of US$150m has a higher rate of interest than that which Jaya is paying under the soon to be replaced Debt Scheme. This is not necessarily a bad thing. In fact, that action is telling us that for the current financial year (and the years to follow thereafter) profitability will be greatly enhanced that the extra interest cost would become insignificant relative to the surge in profitability. The new management is confident enough to pay a higher price for the funds based on their profitability forecast and in exchange for a dividend yield (the majority institutional stakeholders needs to add on to their total composite ROI for distribution to their stakeholders).

(2) Q1 for YE 30 Jun 13 ended with a net profit of US$10.1m. It can safely be assumed that the figure will be maintained at the same rate at the minimum bearing in mind the group has a backlog of US$196m in chartering income to be booked. On top of the sale of 3 vessels at US$95m will be booked in Q2 figures. Another 3 vessels would be due for completion by Q4 and another 6 from 2014 onwards.

(3) Currently Jaya's NAV is standing at US$0.66 cents (S$0.80) per share. The 12 vessels under construction would add approximately US$250m in value making RNAV at US$0.98 (S$1.20) per share. Its current share price is between the 0.55 - 0.60 range which is at a discount of 25 % to its NAV and a tremendous discount to its RNAV. With a potential dividend in the pipeline (my anticipation is S$ 0.05 at the least) the current stock price is considered cheap when compared to its peers.

I hope to have answered Jeanne's query, especially the contents at point no. (3).
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0 #8 Peng Hock 2012-11-15 06:39
the previous CEO retired already.. but mid level management still same.. and they managed to recruit few very high technical managers to lead the teams.. these managers CV are quite impressive..

the previous CEO payroll more on fixed payment while current CEO payroll high percentage on bonus.. meaning if CEO can perform better, more bonus.. i think the CEO bonus somehow will link to their charter rate..
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0 #7 Burned 2012-11-15 06:37
Thank you for all for being positive.

I will buy more when it is below 50cents. down 4.3% today. Huat ah
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