Braemar — Diversification paying dividends

Braemar (LSE: BMS)

Last close As at 20/04/2024

GBP2.72

−4.00 (−1.45%)

Market capitalisation

GBP90m

More on this equity

Research: Industrials

Braemar — Diversification paying dividends

Braemar’s FY24 trading update was in line with expectations, with revenues of c £150m and underlying operating profit of c £18m. Underlying operations continue to expand and diversify and the company remains well-positioned to drive its future growth strategy. The trading outlook is promising and Braemar should be able to leverage its strong balance sheet in pursuit of strategic growth. We have maintained our underlying estimates for FY24 and FY25, but edge down the valuation based on the lower FY24 dividend expectations. The revised valuation offers nearly 100% upside.

Andy Murphy

Written by

Andy Murphy

Director, Financials & Industrials

Industrials

Braemar

Diversification paying dividends

FY24 trading update

Industrial support services

20 March 2024

Price

254p

Market cap

£84m

US$1.26/£

Net cash (£m) at 29 February 2024

1.0

Shares in issue, including ESOP shares

32.9m

Free float

85%

Code

BMS

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(6.5)

(6.1)

(12.9)

Rel (local)

(6.7)

(7.2)

(17.4)

52-week high/low

313p

224p

Business description

Braemar is the second largest shipbroker in the world, providing broking services to the dry cargo, deep sea tanker, specialised tanker and sale and purchase markets. It also addresses the fast-growing areas of offshore and renewables, securities and financial markets.

Next events

Prelims

End May 2024

Analyst

Andy Murphy

+44 (0)20 3077 5700

Braemar Shipping Services is a research client of Edison Investment Research Limited

Braemar’s FY24 trading update was in line with expectations, with revenues of c £150m and underlying operating profit of c £18m. Underlying operations continue to expand and diversify and the company remains well-positioned to drive its future growth strategy. The trading outlook is promising and Braemar should be able to leverage its strong balance sheet in pursuit of strategic growth. We have maintained our underlying estimates for FY24 and FY25, but edge down the valuation based on the lower FY24 dividend expectations. The revised valuation offers nearly 100% upside.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

02/22

101.3

8.9

23.1

9.0

11.0

3.6

02/23

152.9

18.0

45.5

12.0

5.6

4.7

02/24e

150.2

15.0

45.4

13.0

5.6

5.1

02/25e

150.2

15.8

46.6

14.0

5.4

5.5

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

FY24 revenue and profit in line

Braemar’s trading update for the 12 months ending 29 February confirmed a robust trading environment, with revenue expected to be not less than £150m (FY23: £153m) and underlying operating profit, before including £1.5m of the Madrid tanker desk costs, of £18.0m (FY23: £20m). Both figures are in line with our expectations as our forecast of £16.7m operating profit included the Madrid costs.

Year-end net cash lower, DPS up 1p to 13p

The group ended the year with net cash of £1m (FY23: £7m) after expensing c £2.6m on the previously announced internal investigation, tax payments and share buybacks. Braemar intends to recommend a final dividend of 9p/share (FY23: 8p/share), delivering a total dividend for FY24 of 13p, up from 12p last year and in line with its progressive dividend policy.

Outlook encouraging with c 100% valuation upside

The outlook is encouraging, evidenced by the underlying global trade situation (the IMF raised global GDP growth estimates by 0.2% to 3.1% in February) and the forward order book, which was up 47% to US$83m, driven primarily by activity in the Sale and Purchase division. FY24 results are expected to be released by the end of May. We have maintained our estimates for FY24 and FY25 but edged down our FY24 dividend expectations from 13.5p to 13.0p, which implies a modest reduction in our previous valuation of 520p to 500p per share, based on our dividend discount model.

Exhibit 1: Financial summary

£m

2019

2020

2021

2022

2023

2024e

2025e

2026e

28-February

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

117.9

117.7

83.7

101.3

152.9

150.2

150.2

150.2

EBITDA

 

 

10.4

14.4

11.4

13.5

23.4

20.1

20.4

20.8

Normalised operating profit

 

 

9.1

11.0

7.7

10.1

20.1

16.7

17.1

17.4

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

(12.5)

(3.8)

(1.5)

(0.3)

(2.5)

(2.6)

(1.3)

0.0

Share-based payments

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Impairment

0.0

0.0

0.0

0.0

(9.1)

0.0

0.0

0.0

Other

0.5

0.7

0.0

0.0

3.0

(2.5)

0.0

0.0

Reported operating profit

(2.9)

7.9

6.2

9.7

11.5

14.1

15.8

17.4

Net Interest

(0.2)

(1.4)

(1.1)

(1.2)

(2.0)

(1.8)

(1.3)

0.2

Joint ventures & associates (post tax)

0.0

(0.3)

0.0

(0.0)

(0.0)

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

8.9

9.4

6.7

8.9

18.0

15.0

15.8

17.6

Profit Before Tax (reported)

 

 

(3.1)

6.3

5.1

8.5

9.5

9.9

14.5

17.6

Reported tax

(1.5)

0.0

(1.6)

(1.8)

(4.9)

(2.5)

(3.6)

(4.4)

Profit After Tax (norm)

7.3

9.4

5.1

7.0

13.2

12.5

12.2

13.2

Profit After Tax (reported)

(4.7)

6.3

3.6

6.7

4.6

7.4

10.9

13.2

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Discontinued operations

(22.7)

(2.3)

1.0

7.2

0.0

0.0

0.0

0.0

Net income (normalised)

7.3

9.4

5.1

7.0

13.2

12.5

12.2

13.2

Net income (reported)

(27.4)

4.0

4.5

13.9

4.6

7.4

10.9

13.2

Basic average number of shares outstanding (m)

31

31

31

31

29

28

26

25

EPS - basic normalised (p)

 

 

23.78

30.19

16.23

23.06

45.48

45.36

46.57

53.28

EPS - diluted normalised (p)

 

 

21.79

27.28

13.43

18.79

37.85

36.39

36.97

41.82

EPS - basic reported (p)

 

 

(88.63)

12.88

14.45

45.56

15.85

26.89

41.51

53.28

Dividend (p)

5.00

5.00

5.00

9.00

12.00

13.00

14.00

15.00

Revenue growth (%)

14.4

(0.2)

(28.9)

21.0

50.9

(1.8)

0.0

0.0

EBITDA Margin (%)

8.8

12.3

13.6

13.4

15.3

13.4

13.6

13.8

Normalised Operating Margin

7.7

9.4

9.2

9.9

13.1

11.1

11.4

11.6

BALANCE SHEET

Fixed Assets

 

 

91.7

114.7

106.6

99.8

97.7

94.2

90.7

87.2

Intangible Assets

86.0

86.2

86.1

80.9

75.4

74.2

73.1

72.0

Tangible Assets

2.0

11.9

9.8

7.1

5.3

3.0

0.6

(1.8)

Investments & other

3.7

16.5

10.7

11.9

17.0

17.0

17.0

17.0

Current Assets

 

 

71.9

68.3

50.3

49.8

80.3

83.4

94.9

108.0

Stocks

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Debtors

37.1

39.5

33.4

35.8

43.3

49.4

49.6

49.6

Cash & cash equivalents

24.1

28.7

16.4

14.0

36.0

33.1

44.4

57.4

Other

10.6

0.0

0.4

0.0

1.0

1.0

1.0

1.0

Current Liabilities

 

 

92.0

78.9

54.0

43.4

65.8

63.8

67.0

69.9

Creditors

44.9

47.6

47.8

39.9

58.4

56.7

56.7

56.7

Tax and social security

1.4

1.3

1.3

1.6

4.1

1.8

2.9

3.7

Short term borrowings

35.8

25.1

0.0

0.0

0.0

0.0

0.0

0.0

Other

9.8

4.8

4.9

1.9

3.3

5.4

7.4

9.5

Long Term Liabilities

 

 

13.2

44.9

39.9

34.8

35.4

35.4

35.4

35.4

Long term borrowings

4.6

2.6

2.7

2.8

2.9

2.9

2.9

2.9

Other long term liabilities

8.6

42.2

37.3

32.0

32.6

32.6

32.6

32.6

Net Assets

 

 

58.4

59.2

62.9

71.5

76.7

78.4

83.1

89.8

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

58.4

59.2

62.9

71.5

76.7

78.4

83.1

89.8

CASH FLOW

Op Cash Flow before WC and tax

(1.8)

9.7

8.8

12.0

12.8

13.3

17.9

21.0

Working capital

4.6

(0.4)

4.1

5.2

4.1

(5.7)

1.9

2.1

Exceptional & other

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Tax

(1.1)

1.2

(0.8)

(2.2)

(4.4)

(4.9)

(2.5)

(3.6)

Other

6.1

1.4

1.8

6.2

11.4

2.9

2.4

1.0

Net operating cash flow

 

 

7.8

11.8

13.9

21.3

23.9

5.6

19.8

20.4

Capex

(2.4)

(1.7)

(1.1)

(1.2)

(0.8)

(1.6)

(1.6)

(1.6)

Acquisitions/disposals

(1.7)

(6.3)

3.7

(8.1)

5.4

1.4

1.3

1.3

Net interest

(0.9)

(1.5)

(1.2)

(0.8)

(1.8)

(1.8)

(1.3)

0.2

Equity financing

23.0

3.9

(28.9)

(2.5)

1.4

1.4

1.4

1.4

Dividends

(4.6)

(4.6)

0.6

(2.1)

(3.2)

(3.9)

(4.3)

(4.6)

Other

(2.4)

0.0

(0.9)

(7.0)

(6.8)

(4.0)

(4.0)

(4.0)

Net Cash Flow

18.7

1.6

(13.9)

(0.5)

18.1

(2.9)

11.3

13.1

Opening net debt/(cash)

 

 

2.4

11.7

20.0

8.8

9.3

(6.9)

(4.0)

(15.3)

FX

(1.1)

(0.8)

(0.7)

0.3

2.6

0.0

0.0

0.0

Other non-cash movements

(26.9)

(9.0)

25.8

(0.3)

(4.5)

0.0

0.0

0.0

Closing net debt/(cash)

 

 

11.7

20.0

8.8

9.3

(6.9)

(4.0)

(15.3)

(28.4)

Source: Company accounts, Edison Investment Research. Note: FY24 numbers will be updated following the release of full results.

General disclaimer and copyright

This report has been commissioned by Braemar and prepared and issued by Edison, in consideration of a fee payable by Braemar. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Braemar and prepared and issued by Edison, in consideration of a fee payable by Braemar. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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