Brokers' take: Lim & Tan initiates coverage on Samudera at 'buy' with S$0.49 target

LIM & Tan Securities has initiated coverage on Samudera Shipping Line at "buy" with a S$0.49 target price, saying the counter is relatively undervalued compared to its peers.

In a Monday report, the researchers described Covid-19 as the "perfect storm for the recent boom in the container shipping industry".

The brokerage noted that on the demand side, lockdown measures have boosted e-commerce sales and consequently increased the need for container shipping. On the supply side, there has been reduced capacity due to port congestions and lack of manpower to work the docks.

This bottleneck has caused a surge in freight rates, a direct revenue driver for Samudera.

While some of its competitors' share prices have multiplied about 15 times from its year-long low, the research team noted that Samudera's share price has barely reached three times from market lows.

"We think that Samudera can and should trade at a much higher price as it has still room to grow," they added.

Lim & Tan is also optimistic on Samudera for its strong balance sheet. According to the researchers, the Indonesian shipping company is in a net cash position which represents about 50 per cent of its market cap, thus eliminating any immediate threat of solvency issues should another crisis happen. The brokerage further believes Samudera will continue to improve its balance sheet.

While the researchers noted that industry profits may revert to normal once Covid-19 measures have been lifted, they foresee Samudera performing well this year.

Shares of Samudera closed 12.5 per cent or S$0.035 cents higher on Monday at S$0.315.

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