PSL rebounds to 10-week high

Singapore

SHARES in PSL Holdings rebounded to end near a more than 10-week high on Friday - the day when its 10-into-one share consolidation became effective. The rise also followed the completion this week of its acquisition of a stake in an Indonesia-based marine logistics business.

The stock traded between S$0.88 and S$0.36 before ending at S$0.82, up 17 cents or 26.2 per cent from S$0.65 on Nov 24 and close to the S$0.83 price in mid-September. The effective trading date of the consolidated shares was Nov 24, three market days before the consolidation effective date of Nov 27. About 590,000 shares changed hands.

Trading in the stock has been sporadic for months after the company first announced on March 17 the proposed acquisition of a 49 per cent stake in PT Momentum Indonesia Investama, an operator of tugs and barges based out of Indonesia. The generally downward momentum saw PSL shares hit a 52-week trough of S$0.55 on Nov 23. Its 52-week high is S$1.30.

PSL has paid US$11.5 million to the two stake vendors and extended another US$11.5 million shareholder loan to Momentum. The two stake vendors in turned pumped US$8.5 million as a loan to PSL. PSL has also secured specified personal profit guarantees from the stake vendors.

In a shareholder circular, PSL had said that all 12 sets of Momentum vessels are currently on hire. The Indonesian marine logistics player also secured through PSL five-year freight charter agreement valued at US$33 million for seven sets of vessels from commodity-focused Geo Energy Resources (GER) for shipping coal from Indonesia. While the anchor freight charter from GER would have backed up Momentum's fleet utilisation, doubts have been raised by industry observers over the health of the tug-and-barge segment in Indonesia, which is underpinned by coal transshipment demand.

Indonesia's National Ship-owner Association's committee member, Nova Mugijanto, told The Business Times that freight rates for these vessels have come under pressure, with a couple of hundreds of such vessels unemployed. The supply glut has built up as Indonesian Coal Prices Reference tumbled. Data from the Ministry of Energy and Mineral Resource show ICPR will continue to weaken until the end of 2015.

IHS Asian Coal Markets reporter, Diyana Putri Alain, noted "no improvement so far in Indonesian coal prices", but she said "the expectation is (the price) is close to the bottom for most miners, and already below cash costs for some smaller miners".

A key driver banked on for a coal market recovery was President Joko Widodo's Indonesia-wide 35 GW electrification plan. PSL had also said in its shareholder circular pitching the Momentum acquisition: "The (35 GW electrification) initiative will result in a corresponding increase in domestic coal consumption if it comes to fruition."

But some have questioned the extent to which Mr Joko will be able to see through the delivery of the 35 GW programme during his five-year presidential term, given the first tenders have just recently hit the market. The power plants will take four years to build and the construction process could see further delays on any land rights disputes, one coal expert said.

Momentum had a FY14 gross profit of US$2.1 million, against a loss of US$454,077 for FY13. Its vessel utilisation last year ranged from 60 to 85 per cent. PSL had a loss attributable to equity-holders of S$979,000 for the nine months ended Sept 30.

PSL's executive director Mark Zhou was formerly chief executive officer at GER. The company clarified in response to a BT query that, save for Mark Zhou, who worked at GER before, it has no connection with GER. "We are not aware GER or any of its directors have shares in PSL," it said.