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  • Writer's pictureMark Watson-Mitchell

Braemar and the Houthi’s, and Q1 Team Internet Update

Braemar ((LON:BMS) – Over 132 Houthi Attacks In 150 Days


Cancel my passage!


Did you know that the Houthi rebels have claimed that they have attacked, with more than 600 missiles and drones, shipping in the Red Sea and the Gulf of Aden in the last 21 weeks.


I understand from reports given by Lars Jensen, the shipping analyst, that there have been over 132 attacks by the Houthi rebels.


The Maritime Security Centre Horn Of Africa has an updated log on various attacks in the regions, and it is showing a very clear increasing trend in the number of attacks.


Even though a few vessels have been hit – sadly also with loss of life, as well as a sunk vessel – the amount of damage inflicted is modest compared to the number of attacks.


However, the ongoing stress created in re-routing shipping around the Cape has seen costs increasing for both the shipping companies and their customers.


That is when companies like Clarkson (LON:CKN) and Braemar (LON:BMS) become extremely important advisors and agents.


Volatility and uncertainty in shipping markets is usually positive for shipbrokers.


Clarkson stated at its AGM on Thursday of last week that it had made a positive start to the year, helping its clients to navigate the ongoing complexities and disruptions to global trade, by providing the expertise, data and insights to enable them to make the right decisions for their organisations.


For both groups their Forward Order Books must have seen some good uplift, the benefit from which will become evident in the second half of this year.


Rapidly rising freight rates suggest that fears of delayed goods have kicked off the peak season early this year.


Shippers fear major delays on goods due to new supply chain disruptions.


This has jump-started the peak season and sent spot rates soaring.


Elsewhere there are reports that the market for buying and selling second-hand dry bulk carriers is in the top 20% of the price development since 2000, while for tankers it is in the top 10%.


The past six months have seen significant price increases for used dry cargo ships and tankers.


However, I now really suggest that investors should keep their eyes on the shares of my favourite shipping services group.


Braemar provides expert investment, chartering, and risk management advice that enables its clients to secure sustainable returns and mitigate risk in the volatile world of shipping and energy.


In its Trading Update for the year to end February 2024, issued on 20th March, the group declared that it had already entered its 2025 Trading Year with a 47% increased Forward Order Book, providing confidence for the year ahead.


Last year the company conducted and concluded a costly internal independent investigation, with its shares being suspended at 233p for some five months before being requoted in the middle of last November.


They came back at 268p, touched 310.60p in early January before trading back to 253p by mid-March this year.


In the last few months, a couple of the group’s competitors have been acquiring stakes in the company – the Peter Dohle Group and Lightship Chartering, both declaring just over 3.0% holdings in the BMS equity.


The group should be announcing its 2024 results, which are not expected to see any surprises, before the end of this month.


At this stage expectations for the current year to end February 2025, are for £150.2m of revenues and £15.8m pre-tax profits, generating nearly 47p per share in earnings and easily covering an estimated 14.0p in dividend.


Last night the shares closed at 295p at which level they are trading on a miniscule 6.3 times prospective price-to-earnings ratio, while yielding a very healthy 4.7%.


I believe that they will soon be trading at levels far higher than on 8th January and I have confidence in my aim of early-May at 350p.


(Profile 05.12.19 @ 185p set a Target Price of 250p*) 

(Profile 20.05.20 @ 99p set a Target Price of 150p*) 

(Profile 07.05.24 @ 277p set a new Target Price of 350p) 


Team Internet Group (LON:TIG) – Earnings Quality, Growth, And Cash Generation


This group’s shares finally cleared both of my Target Prices following the Q1 Trading Update issued on Monday morning.


Having risen from 136p at the start of this month, they are now trading at around 158.20p, which is a good progression on its own merits and not being price-moved by the company’s recent share buyback programmes.


The global internet company generates recurring revenue from creating meaningful and successful connections: businesses to domains, brands to consumers, publishers to advertisers.


The three months to end March reported a 1% gross revenue increase to $195.9m, with adjusted EBITDA up 4% to $22.2m, and a 20% improvement in earnings to 5.35c per share.

CEO Michael Riedl stated that:


"I am pleased to report that the emphasis on holistically managing for earnings and cash flow continues to yield substantial benefits.


This holds true even as we tailor the growth of our Online Marketing sector to align with our enhanced focus on sustainability and customer experience.


We are laying the strong operational foundations which will best position the Group to go from strength to strength, as we execute on our strategy and deliver attractive returns for our shareholders.”


Analysts Bob Liao and Carl Smith at Zeus Capital consider that the group is considerably undervalued for its earnings quality, growth, and cash generation.


Their estimates for the current year to end December are for revenues of $943m ($837m), adjusted EBITDA of $105.4m ($96.4m), with adjusted earnings of 28.5c (23.2c) and a dividend of 2.2c (2.0c) per share.


For 2025 they go for $1.032bn revenues, $115.1m EBITDA, earnings of 31.5c and a 2.4c dividend per share.


Over at Edison Investment Research their analyst Dan Ridsdale has upgraded his current and next year earnings estimates.


He now looks for $983.6m revenues this year, with EBITDA of $109.8m, diluted earnings of 27.1c and a 2.3c dividend per share.


For 2025 he goes for $1.082bn revenues, $116.8m EBITDA, 29.0c earnings and a2.5c dividend.


His conclusion is that on a fundamental basis, he believes that the valuation remains too low for a business with Team Internet’s track record, prospects and cash generation.


After the recent share price strength, it would be reasonable to expect some profit-taking.


However, the ongoing push by the group’s Management continues to be impressive, which hopefully be more properly reflected in a much higher share price.

They closed last night at 158.20p.


(Profile 17.04.23 @ 123p set a Target Price of 150p*)

(Profile 18.01.24 @ 124.60p set a Target Price of 156p*)



 

(Asterisks * denote that Target Prices have been achieved since Profile publication)

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