Braemar Shipping Services LON:BMS published its annual financial report for the year ended 28th February 2022 earlier this week (30th September). With pre-tax profits of GBP8.5m, up 66% against GBP5.1m the previous year, and revenue increasing by 21% year-on-year, company shares rose by almost 20% since the start of the week.
Braemar Shipping is one of only two publicly traded shipbroking companies on the London Stock Exchange, offering an attractive opportunity to both retail and institutional investors to invest in the shipping industry without needing to invest directly in ships.
The company’s share price at the mid-morning today (2nd September) stood at 337.5p and has ranged between 198p and 347p over the last 52-weeks, offering a year-to-date return of 24.8% and a one-year return of 17%. The current market capitalisation of the company is approximately GBP105m.
Growth through the ages
Braemar Shipping Services is the second largest shipbroker in the world, providing broking services to the dry cargo, deep sea tanker, specialised tanker and sale and purchase markets. Since its foundation in 1842, the company has experienced significant operational growth and today finds itself also addressing the fast-growing areas of offshore and renewables, securities and financial markets.
The global deep sea shipping fleet has been steadily expanding. A key driver has been growing international trade, which is likely to continue and should have a direct benefit on the shipbroking industry. While some charter rates are currently very high, others like the Baltic Dry Index are broadly within a historical average range and other indicators such as fleet age and low new vessel order books for certain key trades point to greater future demand, thus balancing risks and growth. In this regard, Braemar Shipping is well positioned to take advantage of the rapidly expanding shipping market.
Profits and Revenues Impress Investors
For the year ended 28th February 2022, Braemar Shipping reported an increase in revenue to GBP101.3m, which represents a 21% increase against the GBP83.7m achieved the previous year. The firm cited an increase in the size of its shipbroking operations as well as “generally favourable” market conditions for the strong annual results.
Braemar Shpping also issued a trading update for the start of the new financial year. The group said it expects the current year’s underlying operating profit to be at least GBP20m, as the “growing scale and breadth of its broking operations” have led to increased activity levels, with an extra benefit from the strong dollar. The board’s previous expectations were for GBP12m of underlying operating profit.
Promising Outlook
Braemar Shipping’s share price has risen by almost 20% since the company’s latest financial report, highlighting the fact that the announcement exceeded market expectations. Looking ahead, Braemar Shipping noted that capacity at many shipyards is now unavailable well into 2025. This, the company explained, has created “significant” opportunity for its Sales & Purchase desk.
In addition, Andy Murphy, director and research analyst at Edison Investment Research, claims that Braemar Shipping has recently completed a corporate transformation that will see it move away from being a widely spread shipping services company, to grow into a clearly focused shipbroking operation. Allied to the transformation is the company’s growth strategy, supported by growing global trade, and shipping’s status as the most energy-efficient and lowest carbon method of freight transport. This results in Edison “valuing shares at 400p, a significant premium to the current price”.
It is important to note, however, that the firm cites geopolitical uncertainty, exchange rate volatility, logistical challenges remaining from the Covid-19 pandemic and inflationary pressures as potential headwinds in the future.
