The average target price of 2343.HK is 2.0 and suggests 16% upside potential. Usually, this means a BUY recommendation among investment firms, or a recommendation to increase one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 2.4. This translates into 38% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 1.6. This is equivalent to 6% downside potential in the worst case. 

Pacific Basin Shipping Limited, an investment holding company, provides dry bulk shipping services worldwide. It also offers shipping consulting, ocean shipping, crewing, secretarial, and agency and ship management services; and engages in the vessel owning and chartering, and convertible bonds issuing activities. As of February 28, 2022, the company had a fleet of 130 Handysize vessels, and 124 Supramax vessels. Pacific Basin Shipping Limited was founded in 1987 and is headquartered in Wong Chuk Hang, Hong Kong.

Hong Kong

Pacific Basin Shipping Limited

Industrials

The company pays dividends most of the time. It has paid dividends in almost every one of the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are unclear. In the past 12 months, the dividend yield has been low and below its peers. At the same time, the average five-year yield has been significantly higher and exceeded nearly all its peers. The company distributes nearly all its profit as dividends (payout ratio above 90%, a negative factor). It will not be easy to sustain such an extreme payout ratio. It may also indicate a company's lack of profitable growth opportunities, which suggests doubtful prospects. On average, the company pays dividends twice a year. 

2343.HK reported revenue of USD 2 582mn in the last 12 months, up 12% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 0% from FY23 to USD 0.02. Market expects EPS to reach USD 0.02 in FY25.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). It has underperformed this peer group by 12ppts over six months and grown 5ppts faster in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported modest EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 10.6% in the last 12 months, a decline from 13.8% in FY23. 

Historically, 2343.HK has reported modest net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 3.4%, down from 5.1% in FY23. 

Pacific Basin Shipping Limited reported a return on equity (RoE) of 4.5% in the last 12 months, down from 7.1% in FY23. The market consensus projects an RoE of 8.1% in FY24, again behind its peers. 

In the last 12 months, the return on capital employed (RoCE) declined to 3.9%, below the peers. The consensus estimate for FY24 for RoCE is 8.8%, again behind the peers. 

Another important profitability metric, return on assets (RoA), amounted to 3.4% in the last 12 months, a decrease from 5.2% in FY23. The market analysts predict that RoA will be 6.3% in FY24, more robust than its peers in this period. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.7 in the past several years. This ratio implies a poor shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

2343.HK boasts high trading liquidity. The average private investor can sell his common position in the stock almost immediately. Liquidity is usually quite stable and remains favourable on the days with the lowest activity. However, please consider that under highly turbulent market conditions, the trading volume tends to decrease significantly. 

No other major risks have been identified.

The risk of default is moderate. We note strong debt servicing capacity, adequate interest coverage, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors, we point to slow historical revenue growth.

In highly turbulent market conditions, 2343.HK is moderately volatile. In other words, the stock will fall more than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be moderate. 

In normal market circumstances, 2343.HK is volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will move much wider than the index. The stock's losses on its worst days (less than 1-5% of the time) will range from significant to substantial. 

From both historical and forecast perspectives, the stock is underpriced compared to similar stocks. In particular, the stock is reasonably priced on P/E, 'cheap' on EV/EBITDA, undervalued on P/FCF. 

Pacific Basin Shipping Limited

HK$ 1.77

5

Pacific Basin Shipping Limited

HK$ 1.77

5

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

HK$ 1.77

About

About

About

About