Jinhui Shipping and Transportation Ltd

OSE:JIN

Earnings Call Transcript 2020-Q4

[Wei Man Ching, Vice President]

Good morning, ladies and gentlemen, and good afternoon to those in Asia. This is Raymond Ching, Vice President of Jinhui Shipping and Transportation Limited. Welcome all to Jinhui Shipping and Transportation Limited Q4 2020 and 2020 Annual Results Presentation. If there's anybody who cannot hear me, please type a message and share on the screen so that we can fix it right away.I believe you have already seen the results announcement as well as have a copy of the presentation, which I'm sharing on the screen right now. So I shall begin. Let's dive right in. It has been a challenging year for everyone as well as for us across industry. Good news is I think we are seeing some light at the end of the tunnel.First, let me go through the Q4 2020 financial highlights. Revenue for the quarter was USD 15 million. We recorded a net profit of $8 million for the quarter. The earnings before interest, tax, depreciation and amortization was USD 12 million. Basic earnings per share for the Q4 is USD 0.069 per share.For the full year 2020 financial highlights. Revenue for the year $47 million. You can imagine, given that for the first 3 quarters of the year it was very, very tough. So for the full year, we recorded a net loss of USD 15 million.EBITDA for the full year is USD 3 million. And a basic loss per share of USD 0.14 per share. The gearing ratio as at 31st December, 2020 is 15%. The -- a consolidated net loss of $15 million for the current year was mainly due to a very, very poor business sentiment due to COVID-19. Shall I add that, it's a very, very poor global economic backdrop that leads to a reduction in chartering freight and higher revenue?In between, we recorded significant unrealized fair value loss of financial assets at fair value through the P&L, given the very, very volatile global financial markets. Glad to say, by today, it has recovered a lot. There's a general increase in shipping-related expenses mainly due to bunker consumption from positioning of owned vessels between time charter contracts and bunker-related expenses of USD 5 million. You would recall that the oil price has been very, very volatile, especially during the earlier part of this year. And the bunker, which is directly related to the oil price, of course, there's no exception.A net loss of USD 3.9 million from financial assets at fair value through P&L was recognized in the current year compared to a net gain of $1.5 million from last year. We have an increase in interest income of 34%, which was attributable to the stable interest income generated from known receivables during the year. During the year, we drawn a new secured bank loan of USD 19 million and repaid USD 45 million.In July 2020, we acquired a Supramax at a consideration of USD 4 million as well as we contract to dispose Supramax at a consideration of $5.5 million in December 2020, which was delivered to the new buyer in January 2021. An additional $2.1 million has been paid to the co-investment property project in Shanghai, with total paid amount of $9.6 million.I shall talk about this China property projects further. We received a further update from the investment manager of the co-investment property in August 2020, that due to the unexpected COVID-19 pandemic that has broadly affected different economic sectors, the vendor of Tower A has agreed to an extension on the closing of the acquisition and it was eventually completed in early December 2020.In terms of loan receivables, we have requested top-up payment of loans from our borrowers in accordance with the facility agreements and such top-up led to the decrease in loan receivables and a total of $12 million was repaid from borrowers during the year. This is the summary chart of the financial highlights. I think the numbers speaks for itself. So I won't go further into details.The key financial ratios as at the end of 2020 -- 31st December 2020. Our total asset now stands at USD 366.16 million. Secured bank loans have dropped to USD 108.345 million; current ratio 1.38:1; net gearing, 15%; working capital, $28.5 million; and available liquidity of USD 73.2 million.Next is the chart of the -- of how our fleet has evolved. We now sit, as of February, 18 vessels, all owned. And here is a list of the vessels that are currently under our ownership. And again, this is a table to give you an idea, the requirement of ballast water treatment systems of our fleet. So 2 will be installed during this year. The bulk of it will be -- we'll have to install it next year. And then we'll -- 1 in 2023 and 1 in 2024.The total debt as of end of December 31, 2020, is $108 million. 52% will be payable within 1 year. 13% will be payable within 2 years, 35% will be payable within 5 years. In terms of the cargo analysis, 70% were minerals carried by our fleet; 20% coal; 6% cement; and 4% steel products. 85% of the cargo were loaded in Asia ports, excluding China; 12% from Australia; 2% out of China; and then 1% from Africa. 94% of the cargoes that we have carried were discharged at Chinese ports and 6% in Asia, excluding China.For the time charter equivalent, I think that Q4, it's -- as shown in the numbers, we are seeing encouraging signs that the freight market is gaining strength. As of Q4 2020, our Post-Panamax fleet for Q4, the TCE is close to 12,000. Supramax fleet, 9,173. For the quarter, the average was 9,787. Now of course, because of the previous weak quarters, the overall average for the year 2020 is much lower, as you can see on the chart. But maybe I can share with you what we're seeing in the market are further encouraging signs that the freight market is gaining strength, so fingers crossed.The TCE, we will see -- hopefully, we'll see further improvement as we move into 2021. In terms of the daily vessel running cost of our owned vessels, for the quarter Q4 2020, our running cost stands at $4,271; depreciation, $2,158; finance cost, $174. And for the full year, averaging out for the full year 2020, the cost side of our business is still pretty much in check with the running cost at $3,851; depreciation, $2,141 and then finance cost of $242. We work very hard to keep this cost in check despite this very current challenging year.You can imagine that with nations across the globe, trying to prevent the virus from spreading, there are special protocols and process that we have to strictly adhere to when our ships go at ports globally. This will involve additional time, some additional budget and as a result, it does give us cost pressure, but we have been working very, very hard to keep that in check.This is a chart that I frequently look at and -- or the numbers that we frequently look at. The investment in new dry bulk vessels is at a very, very low point historically. Despite that, the global economy was heavily disrupted most of the year, but as the COVID virus -- pressure from the virus started to ease where -- various countries, I would say, most countries are beginning to get a grasp of how to put this virus under control. Economic activities, business confidence are slowly recovering.And given the backdrop where the supply is in check, we are getting more positive on the outlook of the dry bulk freight market. Again, this is the same perspective of looking at the supply -- just for that different set of -- different angle. Again, it points to encouraging signs where the supply is in check. So I think what's past is past. So 2020 is gone. We're looking forward into the year 2021. And with this in mind, our outlook are as follows. We see that the worldwide economy is on a recovery path, especially when the pandemic pressure is easing, with vaccines rolling out, there will -- it will always be a rocky path. There will be ups and downs, but the overall trajectory looks to us that the world is recovering.From our perspective, in the dry bulk shipping, we see business confidence certainly recovering. There are more inquiries. Freight market is slowly gaining strength. From the international more macro perspective, in terms of political landscape, it looks like the -- there's some easing in terms of political tensions. Well, hopefully, we are all correct on this front. I think the whole world, especially in the -- in terms of economy and business, it will benefit. Less argument and more activities.In terms of the monetary backdrop, it's very clear to us that the monetary policy will remain accommodative for the time being. Well, actually for a meaningful period of time. If you look at how the U.S. Fed is describing this at least until 2023. I don't think right now, as economy is beginning to regain strength, there's no -- there's not enough leasing for the easing environment to reverse.But I think from the past year, where the whole world is troubled by the pandemic, we see some interesting changes. In the past, when everything was working well, no problems in the world, from industrial, from factories to power stations, et cetera, et cetera, business which require stockpiles of commodities or goods, were all working based on a just-in-time inventory management. Pursuant to the past year of disruption by the pandemic, I think people are -- the world is slowly realizing that maybe they have taken this just-in-time management of stockpiles and inventory maybe a bit too much.Going forward, we expect there will be some meaningful restocking of inventory from the procurement of commodities for energy generation to industrial production as well as for food -- agricultural needs. We believe that there will be some meaningful restocking activity, which is beneficial to dry bulk shipping.Now, I have been asked specific questions on the Shanghai property. The party, of course, has been very, very challenging. It, of course, affects real estate industry as well. But I think we can see that the economic activity has recovered somewhat quicker in China. We are seeing signs that confidence also is restoring on a relative basis, a little quicker out of China and Asia. Good news is we have received an update as well as numbers from the co-investment manager.The Shanghai project, the value of -- the asset value of that project in accordance to our share is slightly above the investment that we have committed. We have committed USD 10 million and the value, as of latest valuation, is just about USD 10 million. In terms of the assets that is going on which the co-investment managers, of course, still seeking to fill up the tenancy.Right now, I think it's still low -- it's still the early stage of recovery. But I expect that as -- again, when people's confidence start restoring, virus is even more under control, I think the requirement of office space in one of the -- well, not one of the, I think Shanghai is probably the most vibrant city in China, I think there will be some positive progress on that front.In terms of the -- we have also been asked about the value of our listed securities. It's actually noted in Note 13 of our results announcement. We do not have any listed securities on the Shanghai Stock Exchange, by the way. We have been asked by a shareholder. 50% of this is in Hong Kong listed and 50% non-Hong Kong listed, mainly U.S. -- sorry, Singapore.

[Wei Man Ching, Vice President]

If you have any questions, please fire it. If you can unmute yourself [indiscernible].The TCE we're now realizing -- I don't think we can say what is the TCE we're now realizing, because many of them are still working on this existing contract coming to be renewed. But I think it's no secret that you can see in the market that the current prevailing market rates depending on where we're going, we're well into the mid-teens to high teens for Supramax.Well, it's hard to -- well, I think we -- okay. Thank you. In terms of ship-related expense, we always strive to keep it at around this level, sub $4,000 for our daily costs in -- going forward, I would expect that these special protocols and procedures from worldwide ports to continue. You can imagine in terms of exchange of crew, it will incur additional expenses. But we will try to keep that under check, but we have, of course, for example, budgeted additional -- well, we've factored in to allow additional budget for exchange of crew.A special thanks to our crew because a lot of them has not had a holiday, and it has been a very, very challenging year for them to be continuously working away from their families, okay? In terms of increased fleet going forward. Yes, we are very, very encouraged by the current freight environment. We have been and we will continue to look at possible additional tonnages. So -- and when we do, we will make an announcement to all of you right away, if we happen to add on a bolt-on acquisition.Increase. It's likely more to be an increase in tonnage, given this environment. But of course, somebody is -- if you're interested in buying a ship from us, give me an offer that we cannot refuse.The main focus going forward. I think I've said it. I've given enough hints. The freight market is very encouraging. We are looking to -- we have been patiently waiting for a recovery in our market. When you have the liquidity, of course, we have to maintain -- or that liquidity so that -- our war chest so that when we need to use it, we can use it.So I think I've said enough on that front and please watch out for any future announcements, could come very soon.Decrease in ship-related expense in 2020 given the harsh environment of 2020. I don't know maybe we are working too hard, if that makes you unhappy. We're just keeping an eye on every screw, tissue paper that our crew uses. But of course, we don't spare a penny. When -- for example, when they need, they do face some harsh environment in some areas which are more high risk, for example, loading commodities from Philippines and Indonesia, where the virus situations are known to be quite high, we don't spare cost eventually buying them the necessary facemask and preventive clothing.What confidence do I have for the pickup of [indiscernible] durable increase or short term? To be honest with you, I can't give you a real concrete answer. But on this front, apart from our -- our experience or our feel in the market, we have to be a bit more scientific. But if you go back to the presentation on those 2 very important charts where -- supply is the biggest devil in our industry. When I look at the supply of new vessels being very much in checked. It is -- it tends to be encouraging that this strengthening of the freight market will last longer than we would hope for.No, I didn't say I consider reducing the fleet now that the rates are high. No, I didn't say that. The market changes. What happened 1 month ago or 2 months ago, is there a difference to today? We live in the world of uncertainty. So if you ask me why did I -- why did we sell a vessel like 3 months ago or whatever and then when the rates are high right now, my answer is -- to you is that -- my answer to you is that we are not a wizard or a necromancer. We don't have a crystal ball. At any point in time, we just have to be prudent and make sure that we can manage what we have on our plate.Okay. If you don't have any further questions, let's look forward to a healthy and strong 2021. And hopefully, we will -- we should be able to -- I want to give you -- deliver good news to you guys. We hope that we can deliver good news to you guys in the coming year.Last answer to the question in terms of paying dividends in the future. I want to remind you guys that I'm the spokesman for the company, but I will pass the message on. But I'm sure that when we really reap in the cash with our assets, we will share the results with you, just be patient.Thank you very much, and I wish you a good day. If you have any further questions that you would like to take separately, you're welcome to your send me an email, okay? Thank you.