Braemar Shipping Services — Steaming purposefully into clear waters

Braemar (LSE: BMS)

Currency in GBP

Last close As at 25/01/2023

GBP3.15

−2.50 (−0.79%)

Market capitalisation

GBP104m

Research: Industrials

Braemar Shipping Services — Steaming purposefully into clear waters

Management action and strong markets over the last 18 months have led Braemar to a position where it is now free of non-core activities and is able to focus on its future growth strategy, as previously outlined. Furthermore, non-material accounting issues have been identified and resolved that explain the delayed preliminary results. The trading outlook is promising and Braemar will be able to leverage off its strong balance sheet in pursuit of growth. As a result, we have raised FY23 and FY24 PBT forecasts by 66% and 31% respectively and lifted our valuation from 400p to 520p per share on raised dividend expectations.

Andy Murphy

Written by

Andy Murphy

Director, Financials & Industrials

Industrials

Braemar Shipping Services

Steaming purposefully into clear waters

FY22 preliminary results

Industrial support services

30 August 2022

Price

290p

Market cap

£92m

US$1.18/£

Net debt (£m) at 2 March 2022, including disposal proceeds

2.8

Shares in issue

32.2m

Free float

100%

Code

BMS

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

10.2

5.5

0.0

Rel (local)

11.0

8.5

1.1

52-week high/low

289.0p

201.0p

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

Interims

November 2022

Analyst

Andy Murphy

+44 (0)20 3077 5700

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

Management action and strong markets over the last 18 months have led Braemar to a position where it is now free of non-core activities and is able to focus on its future growth strategy, as previously outlined. Furthermore, non-material accounting issues have been identified and resolved that explain the delayed preliminary results. The trading outlook is promising and Braemar will be able to leverage off its strong balance sheet in pursuit of growth. As a result, we have raised FY23 and FY24 PBT forecasts by 66% and 31% respectively and lifted our valuation from 400p to 520p per share on raised dividend expectations.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

02/21

83.7

6.7

16.2

5.0

17.9

1.7

02/22

101.3

8.9

23.1

9.0

12.6

3.1

02/23e

130.6

19.1

46.3

12.0

6.3

4.1

02/24e

112.5

15.9

36.9

13.5

7.9

4.7

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

FY22 results exceed management expectations

Generally favourable trading conditions and the disruption to global shipping markets were mostly supportive of activities and charter rates in FY22. As a result, most divisions reported strong revenue growth and the group was therefore able to report a 21% increase in revenue to £101.3m. Underlying operating profit increased 31% to £10.1m reflecting operational gearing and was comfortably higher than previously raised management guidance of ‘at least £9.8m’. The FY22 dividend was raised 80% to 9p/share.

Disposals and internal audit offer future clarity

2022 was a year of clearing the decks with Braemar delivering on its strategy to focus on its core shipbroking and finance activities. Consequently, it completed the disposal of three businesses, Cory Brothers, AqualisBraemar and Wavespec, and restructured the outstanding consideration of Braemar Naves, which is now the ‘Financial’ division. Furthermore, non-material errors in accounting in previous years were discovered, investigated and resolved, which has bolstered the accounting procedures internally and explains the deferred results timing.

Valuation: Revised DDM model suggests 520p/share.

We have materially raised our FY23 and FY24 estimates to reflect the better-than-expected FY22 results, solid underlying growth and, especially in FY23 to date, the strong US dollar, which materially adds to revenue but has little impact on costs, which are predominantly priced in local currency. For FY24, we expect underlying growth but take a cautious view on FX rates and assume a reversal to rates similar to FY22. This implies that after reporting underlying operating profit of £10.1m for FY22, our FY23 and FY24 operating profit estimates rise from £12.1m to £20.1m, and from £12.3m to £16.4m respectively. Higher profits lead to higher dividends and using our dividend discount model (DDM) our valuation rises from 400p to 520p per share.

Exhibit 1: Financial summary

£m

2019

2020

2021

2022

2023e

2024e

2025e

Year end 28 February

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

117.9

117.7

83.7

101.3

130.6

112.5

115.8

EBITDA

 

 

10.4

14.4

11.4

13.5

23.6

19.9

16.3

Normalised operating profit

 

 

9.1

11.0

7.7

10.1

20.1

16.4

13.8

Exceptionals

(12.5)

(3.8)

(1.5)

(0.3)

0.0

0.0

0.0

Other

0.5

0.7

0.0

0.0

0.0

0.0

0.0

Reported operating profit

(2.9)

7.9

6.2

9.7

20.1

16.4

15.8

Net Interest

(0.2)

(1.4)

(1.1)

(1.2)

(1.0)

(0.5)

(0.3)

Joint ventures & associates (post tax)

0.0

(0.3)

0.0

(0.0)

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

8.9

9.4

6.7

8.9

19.1

15.9

13.5

Profit Before Tax (reported)

 

 

(3.1)

6.3

5.1

8.5

19.1

15.9

16.5

Reported tax

(1.5)

0.0

(1.6)

(1.8)

(4.2)

(4.0)

(4.1)

Profit After Tax (norm)

7.3

9.4

5.1

7.0

14.9

11.9

10.4

Profit After Tax (reported)

(4.7)

6.3

3.6

6.7

14.9

11.9

12.4

Discontinued operations

(22.7)

(2.3)

1.0

7.2

0.0

0.0

0.0

Net income (normalised)

7.3

9.4

5.1

7.0

14.9

11.9

12.4

Net income (reported)

(27.4)

4.0

4.5

13.9

14.9

11.9

13.4

Basic average number of shares outstanding (m)

31

31

31

31

32

32

32

EPS - basic normalised (p)

 

 

23.78

30.19

16.23

23.06

46.32

36.91

38.21

EPS - diluted normalised (p)

 

 

21.79

27.28

13.43

18.79

38.15

30.41

31.49

EPS - basic reported (p)

 

 

(88.63)

12.88

14.45

45.56

46.32

36.91

41.30

Dividend (p)

5.00

5.00

5.00

9.00

12.00

13.50

14.00

Revenue growth (%)

14.4

(-0.2)

(-28.9)

21.0

29.0

(-13.9)

0.0

EBITDA Margin (%)

8.8

12.3

13.6

13.4

18.1

17.7

14.1

Normalised Operating Margin

7.7

9.4

9.2

9.9

15.4

14.6

11.9

BALANCE SHEET

Fixed Assets

 

 

91.7

114.7

106.6

99.8

97.3

94.7

92.2

Intangible Assets

86.0

86.2

86.1

80.9

81.1

81.4

81.6

Tangible Assets

2.0

11.9

9.8

7.1

4.3

1.5

(1.3)

Investments & other

3.7

16.5

10.7

11.9

11.9

11.9

11.9

Current Assets

 

 

71.9

68.3

51.7

52.8

78.2

76.0

83.9

Stocks

0.0

0.0

0.0

0.0

0.0

0.0

1.0

Debtors

37.1

39.5

34.8

38.8

49.0

41.6

44.0

Cash & cash equivalents

24.1

28.7

16.4

14.0

29.2

34.4

38.8

Other

10.6

0.0

0.4

0.0

0.0

0.0

0.0

Current Liabilities

 

 

92.0

78.9

51.9

42.8

59.4

52.5

54.5

Creditors

44.9

47.6

45.6

39.3

52.9

45.7

47.0

Tax and social security

1.4

1.3

1.3

1.6

4.0

3.7

3.9

Short term borrowings

35.8

25.1

0.0

0.0

0.3

0.6

0.9

Other

9.8

4.8

4.9

1.9

2.2

2.5

2.8

Long Term Liabilities

 

 

13.2

44.9

39.9

34.8

34.8

34.8

34.8

Long term borrowings

4.6

2.6

2.7

2.8

2.8

2.8

2.8

Other long term liabilities

8.6

42.2

37.3

32.0

32.0

32.0

32.0

Shareholders' equity

 

 

58.4

59.2

66.5

75.1

81.3

83.6

86.8

CASH FLOW

Op Cash Flow before WC and tax

(1.8)

9.7

8.8

12.0

22.6

19.4

19.0

Working capital

4.6

(0.4)

4.1

5.2

3.7

0.4

(0.8)

Exceptional & other

0.0

0.0

0.0

0.0

0.0

0.0

1.0

Tax

(1.1)

1.2

(0.8)

(2.2)

(1.8)

(4.2)

(4.0)

Other

6.1

1.4

1.8

6.2

0.6

0.2

0.0

Net operating cash flow

 

 

7.8

11.8

13.9

21.3

25.1

15.8

15.2

Capex

(2.4)

(1.7)

(1.1)

(1.2)

(1.3)

(1.3)

(1.3)

Acquisitions/disposals

(1.7)

(6.3)

3.7

(8.1)

1.3

1.3

1.3

Net interest

(0.9)

(1.5)

(1.2)

(0.8)

(1.0)

(0.5)

(0.3)

Equity financing

23.0

3.9

(28.9)

(2.5)

(2.5)

(2.5)

(2.5)

Dividends

(4.6)

(4.6)

0.6

(2.1)

(2.9)

(3.9)

(4.4)

Other

(2.4)

0.0

(0.9)

(7.0)

(3.5)

(3.5)

(3.5)

Net Cash Flow

18.7

1.6

(13.9)

(0.5)

15.2

5.2

4.4

Opening net debt/(cash)

 

 

2.4

11.7

20.0

8.9

9.3

(5.9)

(11.1)

FX

(1.1)

(0.8)

(0.7)

0.3

0.0

0.0

0.0

Other non-cash movements

(26.9)

(9.0)

25.7

(0.2)

0.0

0.0

0.0

Closing net debt/(cash)

 

 

11.7

20.0

8.9

9.3

(5.9)

(11.1)

(15.5)

Source: Braemar, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Braemar Shipping Services and prepared and issued by Edison, in consideration of a fee payable by Braemar Shipping Services. 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 2022 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.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Braemar Shipping Services and prepared and issued by Edison, in consideration of a fee payable by Braemar Shipping Services. 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 2022 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.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

More on Braemar

View All

Latest from the Industrials sector

View All Industrials content

Research: Healthcare

Quantum Genomics — A fresh take on cardiovascular medicine

Quantum Genomics is focused on the development of new classes of cardiovascular medicines. Firibastat, the company’s lead clinical asset, is in development for the management of treatment-resistant hypertension (TRH) and post-myocardial infarction heart failure (post-MI HF). We value Quantum Genomics at €701.3m or €20.3 per share, with 92% of this attributable to firibastat in TRH. In the near term, readouts from two Phase III trials in TRH are the main catalyst for the company. In our view, firibastat’s unique mechanism of action offers the potential for significant differentiation in the sizeable cardiovascular drug market. If results from Phase III are positive, the company could file an NDA with the FDA by end-2023. With a handful of licensing deals already in place, we see the timely signing of licensing deals in the United States and EU5 as essential to maximising the commercial success of firibastat. We estimate that, post the capital raise, end April net cash was c €20.5m, providing a runway into Q223.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free