All systems go for carriers

Shipping companies, land transport operators and Thai Airways International see brighter prospects for what has been a poorly performing sector

Charoen Kittikanya

Stabilised freight rates coupled with foreign-exchange gains are expected to improve revenues and profits of listed shipping firms and Thailand's national airline, while lower financial costs and a rise in expressway commuters will lift the revenue of Bangkok Expressway Co.

The signs point to improvement in the transport sector, which has been among the SET's poorer long-term performers, with total shareholder returns of -1% over five years and -14.3% over three years. In the most recent 12-month period to June 30, the returns were a healthy 51.8%.

All listed shipping companies were expected to experience another year of profitability this year given steady dollar-denominated freight rates, and the favourable foreign-exchange rate, said M.R. Chandram Chandratat, a shipping veteran and chairman of Thoresen Thai Agencies Plc.

``Income is likely to be stable until next year, though freight rates are expected to dip slightly from an average US$3,800 a day until next year,'' he said.

He said the industry was unlikely to experience any remarkable changes in freight rate, as occurred during the crisis years.

``We (shipping operators) are quite optimistic that the period of merely surviving has gone as most of the listed shipping companies have successfully adjusted their foreign obligations,'' he said. ``Now, it's time to think of their future.''

Thoresen itself has spent over US$22 million over the last 13 months to buy five new vessels ranging from 25,000 to 38,000 tons each, making it the country's largest general cargo ship operator and positioning it to handle an upturn in its segment of the shipping market.

Thoresen forecast net profit of about 500 million baht for its fiscal year ending Sept 30, on revenues of 3.1 billion baht. In its 2001 fiscal year, Thoresen recorded profits of 330.97 million baht on revenues of 3.74 billion, mainly due to foreign-exchange gains and a surge in freight rates.

The healthy revenue outlook was also contributed by the company's growing shipping services, M.R.Chandram said.

``Apart from cargo vessel operations, we also provide a wide range of shipping-related services including ship agencies, stevedoring, ship brokerage, ship repairs and various offshore activities. And the service segment plays up increased role in contributing to the company's revenues.''

Thoresen Thai led the Shareholder Scorecard with a one-year return of 157% and is also the five-year champion at 17%. Regional Container Line delivered 80% over one year, Precious Shipping 76%, BECL 69% and Thai Airways International at 45%.

Jutha Maritime was the only company with a negative return, shedding 23%.

RCL posted net profits of 900.38 million baht for the first six months of this year with an unrealised exchange gain of 482 million baht, against 67.13 million baht in the same period last year. Precious Shipping's net profit slipped to 187.68 million baht from 276.23 million in the first half last year. Unithai Line's net profit of 148.8 million baht was only two million baht lower than a year ago, while Asian Marine earned 2.5 million baht, compared with a net loss of 12.26 million in the first half of 2001.

Jutha Maritime was the only firm in the red, with a net loss of 29.10 million baht in the first half, compared with a net loss of 14.56 million a year earlier.

Huge foreign-exchange gains from the the baht's appreciation against the dollar also put Thai Airways International into the black in the nine months to June, with a net profit of 9.22 billion baht, compared with a loss of 194.47 million in the same period of its previous financial last year.

The airline was expected to generate at least 10 billion baht in net profit for the year, compared with a profit of 1.9 billion in the previous financial year.

But Kitichan Sirisukarcha, an analyst with Kim Eng Securities, said it would be difficult to forecast how Thai Airways would fare in the next few years, taking into account huge dollar-based debt, high interest expenses, ambitious investment plans and an uncertain business environment, particularly forex fluctuations.

Kim Eng Securities Plc has revised down its full-year earnings forecast for Thai Airways to 3.97 billion baht from 4.23 billion last year given higher fuel costs, and the baht's appreciation.

``It's rather tough to make a forecast of the company's profitability, as too many factors such as oil prices, foreign-exchange fluctuations and other unexpected external factors, particularly terrorism,'' Mr Kitichan said.

However, the profitability picture of the country's largest tollway operator, BECL, seems to be clearer, despite concerns that the company's future earnings could be hurt by moves by the Expressway and Transport Authority (ETA) to seek a flat rate of 40 baht for all expressway users.

Pongpan Apinyakul, another analyst with Kim Eng Securities said that the ETA's attempt to negotiate new tariffs, even if it succeeds, would have only a marginal impact on toll revenues, given that the change would likely be limited to a small part of the expressway system.

According to Supong Chayutsahakij, BECL's managing director, the company expected revenue to rise by 11-12% this year from 2001 thanks to booming traffic growth, as record-low interest rates had encouraged people to buy cars. Traffic on BECL routes grew 11% year-on-year in the first half of 2002.

BECL's annual interest expenses would also fall by 370 million baht this year from 2.5 billion baht, after the company successfully borrowed 37 billion baht to refinance existing debts in June.

The company registered revenues of 5.9 billion baht in 2001 with a net profit of 874 million baht. _Charoen Kittikanya

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