Strong share price gains expected. Initiate with Buy.
Mercator Lines (MLS) distinguishes itself from other dry bulk shipping
companies
we cover due to its significant exposure to the Indian market and its
aggressive
growth targets. We expect a continued strong rate environment in the dry
bulk
sector over the next 18 months and see MLS registering EPS growth of 147%
in
FY09 and 67% in FY10. We think P/Es of 2.6x and 1.6x FYMar09-10 and P/B of
0.8x versus 37% ROE for FY09 look attractive. The market has over-punished
this
stock because of the recent BDI decline, in our view.(See attached file:
Mercator 25 Jan 08 DB.pdf)
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