Samudera Shipping Line Ltd: Upgrade to Buy

Summary: We met with Samudera Shipping's management for an update. Management is still bullish about the container and industrial shipping segments in the longer term, with a view that consumption of raw materials like coal and manufactured goods by China, Europe and USA is sustainable in the longer term. Since January, management has acquired 3 more new vessels. The 2 bulk carriers would enable Samudera to gear up for the dry bulk boom, in view of the upsurge in demand for global resources. In addition, owing the vessels would help in providing some stability in approximately 60% to 70% of Samudera's overall vessel operating costs. As Samudera's operating environment has not altered significantly since our last report, we are maintaining our fair value at S$0.40. With the recent correction in the stock market, the stock last traded at S$0.35. Hence, we are upgrading our rating to a BUY (from Hold) from a valuation perspective.

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