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Overpriced Shipping Corporation falls 6pc on DSE despite record profit

FE REPORT | February 27, 2023 00:00:00

Bangladesh Shipping Corporation (BSC) suffered a severe jolt as its share price plunged almost 6 per cent in a single trading session on Sunday despite the disclosure of its highest quarterly profit in October-December of the FY23.

The state-run ocean going vessels management authority logged a net profit of Tk 676 million in the second quarter of the ongoing fiscal year, up from Tk 601 million in the same period a year ago, according to a stock exchange filing on Sunday.

The Corporation's half yearly profit rose 1.6 per cent year-on-year to Tk 1.28 billion in July-December last year.

The revelation, however, could not push the stock price further up. Instead, it fell almost 6 per cent to Tk 125 on the Dhaka Stock Exchange.

"The Shipping Corporation's share price had already soared before the quarterly earnings disclosure, and that might be the reason behind the price erosion," said Mostaque Ahmed Sadeque, former president of the DSE Brokers Association of Bangladesh.

The stock jumped more than 32 per cent in just one month since January 5 following the news that the Corporation had been given near-exclusive right to carry government-funded cargoes.

The Ministry of Shipping (MoS) issued the Bangladesh Flag Vessel (protection of interests) rule on February 5, which incorporated a provision that the waterway shipment of state imports must be handled by the Shipping Corporation only.

The state-run entities usually import fertilizer, fuel oil, food items and motor vehicles. The exclusive right to carry state cargoes may help grow the business further.

The corporation had gained an impressive profit growth for the FY22 due to a significant rise in freight charges across the world before a reverse trend seen in recent times.

It posted a staggering 213 per cent year-on-year spike in profit to Tk 2.26 billion in the FY22, thanks to higher freight charges. It declared a 20 per cent cash dividend for the year.

Driven by high profit, the stock price peaked at Tk 173 on September 22 last year.

In the first half of the FY23, freight charges dropped 30-50 per cent year-on-year against the backdrop of the global slowdown in trades caused by a shrinking demand for goods, according to the Shipping Agents' Association.

The Corporation started its journey with only two ships in 1972 and got listed in the stock market in 1977. It owned only two ships until 2018 before the inclusion of six new vessels in its fleet. Three ships were added in 2018, and the rest in 2019.

BSC operated eight ocean-going vessels, of which, one Banglar Samriddhi came under attack in the Russia-Ukraine war. It has filed an insurance claim of around $22.8 million with Sadharan Bima Corporation, but has not yet received any payment against the claim.

The company, however, is going to purchase six more vessels from South Korea at $ 351 million for carrying bulk cargoes under a credit programme. The first two ships are set to be delivered by 2024 and the rest by 2026.

These ships are expected to expand the capacity of the Corporation.

Meanwhile, Bangladesh Export Import Company (Beximco) has deployed a board member in BSC by buying a 5.25 per cent stake at the expense of around Tk 1.18 billion last year.

The investment is part of a strategy applied across the business portfolio of Beximco, the group company secretary Mohammad Asad Ullah said earlier.

"The Corporation will purchase more ships to expand its operation, as decided by the government. That's why Beximco acquired stakes, expecting higher returns amid the surge in shipping charges," he said.

The corporation earns from two major segments - freight revenue and service revenue. It also has income from other segments, including interest income from FDR, service charge from its Dhaka building, and dividend income from investments.

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