Mercator Lines (Singapore) - A Good Buy???

Mercator Lines is a Asian dry bulk shipper with long term charter contracts.

I didn\'t expect MLS to report a 4Q profit exceeding US$13 million. A good set of results. Can\'t wait for their newly acquired vessel to begin contributing to the Company. Not vested currently MERCATOR SINGAPORE REPORTS A NET PROFIT OF USD 40.7 million FOR THE FULL YEAR 2009-10 Singapore, May 12 , 2010 – Mercator Lines (Singapore) Limited (“Company”), a leading Indian-owned international dry bulk shipping company focused on high growth markets such as India and China, today announced a decline of 46% in net profits to US$ 40.7 million for the financial year ended March 31, 2010 (“FY2010”), as compared to US$ 75.8 million for the corresponding period. Highlights: · EBITDA declines by 29% TO US $ 82 million · Full Year Revenue decreases by 22% to US$ 144.5 million · Fourth Quarter Revenue increased by 9% to US $ 39 Million · Proposed dividend of 1.16 Singapore cents per share - 25% payout ratio · Cash Balance of USD 35 million and Debt to Equity ratio at 0.66 The Group`s revenues for the full year FY2010 declined by 22% to US$ 144.5 million from US$ 186.1 million in FY2009. This decline is primarily attributed to decline in the spot market rates and renewal of long term charters at rates lower than FY 2009. The Time Charter Equivalent (“TCE”) rate per vessel per day, decreased to US$ 27,605 for FY2010 down by 34% from US$ 41,886 in the previous corresponding period. Total number of vessel operating days recorded a rise of 15% to 4,703 days in comparison to 4,084 days in FY2009. For the fourth quarter ended March 31, 2010, the Group`s revenue surged by 9% to US$39.3 million from US$ 36.2 million while the net profits dropped by 11% to US$13 million compared to fourth quarter ended March 31, 2009. The drop in profits is on the back of decline in TCE rates by 12% to US$ 29,681 which was due to renewal of new long term charters at rates lower than those in FY 2009. The Board of Directors has proposed a tax-exempt final dividend of 1.16 Singapore cents per share representing a payout ratio of 25%. compared with 12.5% payout last year. The dividend is proposed to be paid through Scrip Dividend Scheme. Under the scheme, shareholders will have the option to receive shares instead of cash dividends. The option can be exercised by shareholders in part or whole of their shareholdings. Issue price of shares is determined on a prescribed formula based on the market price. The scheme is applicable subject to statutory and shareholders approvals. Said Mr. Shalabh Mittal, Managing Director and Chief Executive Officer of Mercator: “We are happy to end the year with a Net Profit of USD 41 million with a strong balance sheet with USD 35 million in cash and lower debt to equity at 0.66. Considering the volatility in the last 12 months, Mercator did well with renewing contracts with existing customers while developing new ones. “We are happy to propose to share a much higher proportion of our profits with our shareholders this year by maintaining the same dividend of 1.16 SGD cents per share as last year.” concluded Mr. Mittal. With the markets stabilizing, Mercator is poised and ready to explore further growth opportunities and deploy its young and modern fleet in the high growth markets it serves . Continuing with the trend of hedging its risks against market fluctuations, the company recently renegotiated two of its contracts with existing customers. In a unique deal, the company capped the downside by agreeing on a floor rate while keeping the upside open by means of profit sharing above a certain level. As part of its expansion plans, the company acquired a modern gearless Panamax bulk carrier, ‘Gauri Prem’. The three year old vessel was acquired for a total consideration price of about US$ 38 million. The vessel has been fixed on a long term charter contract for three years with a reputed customer at a daily hire of USD 22,250 per day. The contract would generate revenues of about at USD 24 million. Mercator’s most recent accomplishment was winning the Best Annual Report (Bronze) award for 2009 in the \"$300 million to less than $1 billion market capitalization\'\' category for the second consecutive year. Mercator’s endeavors in maintaining high corporate governance was recently recognized by its 23rd ranking among 680 public listed companies in Governance and Transparency Index (GTI) in the Issue-3 exercise jointly conducted by The Business Times and the Corporate Governance and Financial Reporting Centre(CGFRC) at National University of Singapore (NUS), recently released in April 2010. The award and the ranking emphasizes our drive for excellence and our commitment towards better corporate governance. With this, we strive to extend and enhance our accountability and responsibility towards all our shareholders and to become an organisation of world class practices.