Samudera could unveil steady first-half results this week

SINGAPORE - Mainboard-listed Samudera Shipping Line could be seeing a strong uptrend in earnings, thanks to a sharp pickup in freight rates since March.

Analysts reckon that earnings for the six months to end-June could come in better than the net profit of US$66.7 million (S$89.6 million) it posted during the same period in 2023. For that period, earnings were 62 per cent down from the US$171.7 million net profit it raked in during the first half of 2022, when supply chain congestion saw container shipping freight rates soar.

Could 2024 be an even stronger year for Samudera?

Global container freight rates have risen threefold since December 2023, with much of the take-off occurring from late March 2024.

The Containerised Freight Index has risen from 1,750 points in late March to as high as 3,750 points in early July. Meanwhile, spot rates on the Asia-Europe route have risen sharply in 2024 due to attacks on cargo vessels in the Red Sea by Yemen-based Houthi militants since November 2023 in a show of support for Palestinian Islamist group Hamas, which is fighting Israel in Gaza.

Listed on the then Sesdaq in 1997 and transferred to the mainboard in 2000, Samudera operates a thriving regional container shipping business which provides feeder services between Singapore, Indonesia and other ports in Asia and the Indian subcontinent. It also operates a bulk and tanker business which transports dry bulk, liquid and gas cargo. Its logistics arm offers freight forwarding, warehousing and agency services.

While freight rates have pulled back from their June peaks, they still remain at higher levels than they were during the second half of 2023, and are likely to show up on the bottom lines for many shipping companies, say analysts.

In an indication of what is to come, Danish shipping group AP Moeller-Maersk in June raised its full-year profit guidance for the second time in a month, citing strong container market demand. The shipping giant expects its underlying earnings before tax, interest, depreciation and amortisation to come in between US$7 billion and US$9 billion, up from its previous forecast of US$4 billion to US$6 billion.

Mr Nicholas Yon, an analyst at Lim & Tan Securities, said he would be watching to see how long Samudera has locked in its freight rates.

Said Mr Yon: “Usually the lock-in period is three to six months. So if its first-quarter results to end-March 2024 reflect 2023 rates, the second quarter to end-June should reflect higher and rising rates. Also, with rates remaining high, Samudera’s third and fourth quarters could be good.”

A first-half earnings recovery would be a welcome relief for the company after a challenging year, when falling rates saw its full-year profit dive 68 per cent to US$101.22 million for the year ending December 2023.

Since hitting lofty levels at around $1.45 in early 2023 after it unveiled strong 2022 results, the stock has drifted down to settle at around 85 cents to 95 cents for most of 2024. But it has risen slightly in recent days on expectations of better first-half results.

Mr Yon noted that the company usually pays dividends, and this could also help drive the stock price: “If the results are good, dividends could climb back to levels seen during the Covid-19 boom years.”

In 2021, Samudera paid a total of 14 cents in dividends. In 2022, this rose to 32 cents. And in 2023, its dividend was 11 cents. That’s a total of 57 cents in just the last three years.

Shareholders will be waiting to see how good the first-half results are this week, and hoping for another generous dividend payout, which in turn could also support the next leg-up for the stock.