[Click eStock] "Pan Ocean, a Year Showing Operating Leverage Effect Due to Freight Rate Increase"

[Asia Economy Reporter Eunmo Koo] There is an analysis that Pan Ocean's operating profit improvement will expand this year due to freight rate increases and operating leverage expansion through fleet expansion.

NH Investment & Securities forecasted that Pan Ocean's annual operating profit this year will be 275.3 billion KRW, a 22% increase from last year. In a report on the 4th, researcher Yeonseung Jeong of NH Investment & Securities explained, "The factors for the increase in operating profit are the expected rise in freight rates due to the improvement in global bulk carrier supply and demand, the expansion of chartering (leased vessels), and the increase in owned vessels related to CVC (long-term transport contracts) (from 33 vessels in early 2020 to 38 vessels at the end of 2021), which increases the scale of operated vessels and thus expands the operating leverage effect."

This year, bulk cargo volume is expected to increase by 3.8% year-on-year to 5.3 billion tons, while the ship supply growth rate is only 1.5%, indicating a clear improvement in global bulk carrier supply and demand. Researcher Jeong explained, "Although raw material inventories are at low levels, the prices of major raw materials such as coal, iron ore, and grains are rising, which is accelerating the shipping demand from cargo owners."

The expansion of the LNG carrier business is evaluated as a factor reducing valuation discounts. Pan Ocean signed contracts for three new LNG carrier time charters in December last year. Considering one option vessel (which can be activated in June this year), Pan Ocean's LNG carrier fleet is expected to expand to five vessels, which are scheduled to be introduced sequentially in 2023. Researcher Jeong analyzed, "The IRR (internal rate of return) is estimated to be about 10%, enabling stable profit generation," and added, "Although there are concerns about a mid- to long-term decrease in bulk cargo volume due to a decline in coal cargo volume, this can be offset by expanding the LNG carrier business." This is expected to act as a factor reducing the valuation discount applied to bulk shipping companies.

This content was produced with the assistance of AI translation services.