Braemar Shipping Services (LON:BMS) – supply chain hassles proving beneficial
I was very interested to note the comments from the Danish shipping group Maersk last week – warning of shipping chaos.
As if the pressures from Andrew Bailey’s Bank of England delayed directive were not enough, now we hear of the forecasts from the global group that handles over 15% of the container trade.
The group commented that the disruption in global supply chains will continue for quite a while yet.
Last week it informed the markets that it was upgrading, for the second time this year, its underlying pre-tax profit guidance from $24bn to $31bn.
There has been a gradual normalisation across ocean freight, with Maersk and its shipping sector rivals experiencing a boom over the last couple of years, due to the supply chain disruptions caused by Covid having sent container prices sky-high.
Hopefully good news for Braemar
Well that just has to be good news for my favourite international shipbroking group Braemar.
At the beginning of last month, it advised the market that trading in the new financial year continues to be very strong and ahead of management expectations, due to its increased scale combined with the current favourable market conditions.
The group provides expert advice in shipping investment, chartering, and risk management to enable its clients to secure sustainable returns and mitigate risk in the volatile world of shipping.
Its experienced brokers work in tandem with specialist professionals to form teams tailored to its customers' needs, and provides an integrated service supported by a collaborative culture.
New strategy causing some delays
The board's strategy, introduced by the new management team, has been to streamline the business to focus on its Shipbroking core.
That refocus has resulted in a number of corporate transactions and the complexities of which has led to the completion of the year end audit taking longer than anticipated, delaying the results to end February this year.
We are still awaiting a date for the completion to be announced.
Hopefully we are only days away from getting those 2022 results out.
The group has now sold all of its non-core assets and is reorganising around an integrated and streamlined offer.
It has invested in leading digital technologies, extended its global footprint and added highly capable staff.
Its aim is now to provide expert advice on shipping investment, chartering and also risk management.
James Gundy, Braemar's CEO, stated that
"The shipbroking division was always Braemar's driving force, and my vision for the Company since day one was to take the business back to its basics.
Our expertise is shipbroking and corporate finance, and we're going to stick to what we know because that's where we provide the most value to our clients."
The group has now established Braemar Offset, which enables shipowners and operators to easily track, measure, and offset their vessels' and cargoes' unavoidable emissions.
Through a portfolio of climate solutions vetted by ESG experts, users can reduce their carbon footprint efficiently and effectively by utilising Braemar Offset.
The Ministry of Defence Contract
In mid-May the group announced that it had signed a seven-year contract with the Ministry of Defence (MOD) to provide worldwide shipbroking services across all commercial maritime sectors.
It will provide the MOD with access to its market-leading and highly regarded ‘sale and purchase’, chartering and research departments across Braemar's 14 global offices.
The seven-year contract., worth almost £10m, encompasses all aspects of S&P, as well as spot and period chartering for routine and emergency response requirements globally.
Analyst Opinion – 400p a share
Analyst Andy Murphy at Edison Investment Research points out that Braemar is currently trading at a material discount to the only other quoted shipbroker, Clarkson.
The research outfit values Braemar at 400p a share and sees greater upside if the management can successfully deliver the growth strategy, which is to double the size within four years.
At the end of next week, I understand that Felixstowe, the country’s top container port handling half of the UK container trade, will see strike action, with 2,000 workers walking out for eight days from 21 August to the 29 August – that can not help supply chain hassles.
However, in the meantime, the Braemar business just continues to progress in its reshaping quite significantly.
While the indications from Maersk must give the group’s investors some real confidence that the group’s shares, at Friday night’s closing price of only 259p, remain massively undervalued.
(Profile 20.05.19 @ 185p set a Target Price of 250p*)
(Profile 20.05.20 @ 99p set a Target Price of 150p*)
(Asterisks * denote that Target Prices have been achieved since Profile publication)