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Braemar navigates choppy waters

After some tough trading, the shipbroker looks to be on a more even - and profitable - keel
May 15, 2018

Neither Braemar Shipping Services (BMS) nor its seaborne customers can control the dark waters beneath their hulls. Amid depressed freight rates and a slowly recovering bulk market, the London-based firm has witnessed both top and bottom line erosion in recent years. Given these unfavourable tides – and the spectre of a trade war – one might question whether the ship-broking model is structurally sound below the waterline.

266p

Mindful of those pressures, Braemar spent its last financial year building its presence in the dry freight futures market and financial advisory work, via deals for Atlantic Brokers (£4.8m) and NAVES Corporate Finance (up to €35m) respectively. Happy with the early fruits of these strategic moves and a nascent recovery in the dividend, the market pushed up shares in the group by 7 per cent on the publication of preliminary results. Adjust for the cost of those deals, and you can understand the enthusiasm; despite a £0.75m hit from a historic legal claim, underlying profits nearly doubled to £8.2m.

On the publication of these numbers, analysts at Stockdale lowered their February 2019 year-end pre-tax profit forecast from £10.4m to £9.5m and EPS from 25.8p to 25.5p, but revised up 2020 estimates from £11.1m and 26.4p to £11.5m and 31p respectively.

BRAEMAR SHIPPING SERVICES (BMS) 
ORD PRICE:266pMARKET VALUE:£ 84m
TOUCH:263-267p12-MONTH HIGH:322pLOW: 236
DIVIDEND YIELD:5.6%PE RATIO:N/A
NET ASSET VALUE:298p*NET DEBT:2.6%
Year to 28 FebTurnover (£m)   Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20141269.021.426.0
20151465.110.026.0
201615910.023.226.0
20171360.2-1.714.0
2018133-1.5-9.715.0
% change-2--+7
Ex-div:21 Jun   
Payment:27 Jul   
*Includes intangible assets of £92.4m, or 294p a share.